Huat Seng Talks

This is how the employee and self-employed including professionals get trapped into Active Income.

A "mouse" was put at the top of a jar filled with grains
He was so happy to find so much food around him
Now he doesn't need to run around searching for food and can happily lead his life.

As he enjoyed the grains, in a few days' time, he reached the bottom of the jar. Now, he is trapped, and he cannot come out of it.

He must solely depend upon someone to put grains in the same jar for him to survive.

He may even not get the grain of his choice and he cannot choose either, If he must live, he has to feed on whatever has been put into the jar.

This is a reflection of the behaviour of the employee and self-employed who has income increase over years and at the same time, expenses and debt increase even higher, especially when they tend to spend money for self-comfort, and not to build some passive income for the future. When they lose their active income due to any reason, they are seriously trapped into high debt.

Here are my top four lessons from this:
1) Short term pleasures can lead to long-term traps.
2) If things are coming easy and you are getting comfortable, you are getting trapped into survival mode.
3) When you are not using your potential, you are losing it.
4) If you don't take the right action at the right time, you will finish what you have and will be in no position to come out.

- Do something now and start taking action to build your passive income when you have active income. If you are an ambitious employee or self-employed, you may start to explore building business asset or other asset thru investment to have your passive income.

Work 9-5 for 40 years?

You are doing something easy or worth the effort?
In life, when there are some opportunities coming to us, choose the one worth the effort, even it is not easy. Just like financial freedom, it is not easy, but worth the effort and achievable.

You only trade your time with money?

As Robert Kiyosaki discusses in the book “The Cashflow Quadrant” a table is divided into four areas. E and S quadrants are on the left side, and B and I quadrants on the right side. The diagram below better explains it. You can be in all quadrants, but most people are not. The goal is to progress through the arrows and become more on the right side of the table.

Active Income
On the left side of the table is active income. You are trading time for money. In order to make money you must perform something. Every day you start from zero.

Passive Income
On the other side, it is passive income. You do not have to be present to generate income. Things like real estate, stocks, bonds are sources of passive income. You are literally making money while sleeping.


E – Employee
Most individuals only live in this area. You work for a company and trade your time for money. If you want to earn more money, you must work more hours. Another option is work for another company that pays better. With this position in the quadrant there is no passive income. If you don't work, you don't make any money.

S – Self Employed
This is one step better than an employee, but in reality you still are trading time for money. You own your own business, but in reality the business owns you. The positive benefit you have more personal and financial freedom than an employee.

B – Business Owner
A business implies you have a system in place. You have others working for you as employees. You aren't selling your time for money, but rather selling a product or service. In other words, you don't have to be working for the business to generate income. It can also be things like trademarks, copyrights, and royalties. Things you build once and have a long (5-10 year+) timespan in payouts.

I – Investor
This is where you truly have passive income. Investments like stocks, bonds, and real estate generate an annual cashflow. These are the investments that will allow you to have passive income.

Conclusions
The goal then should be as to get in B and I quadrants as much as possible. So that we can achieve financial freedom and live the life we desire.

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Let's make it temporary to chase for the money. Let money chase for us the rest of our life! Challenges are growing our capability to achieve our freedom.

Financial Freedom or rat race?
I believe most people do not want to work 40 years for money. But 80% people are in this path, working 40 hours per week, 40 weeks per year, 40 years in their life, yet they can not retire. This is the biggest financial trap called RAT RACE. We can choose to avoid at young age by discovering some basic financial concepts and practices!

Asset – As defined by Kiyosaki, an asset is anything that you acquire that puts money into your pocket. Assets are what the rich use to generate wealth over time. They come in many forms, including real estate, businesses that don’t require you to work at them, and stocks and bonds
Liability – Any acquisition which takes money out of your pocket. Rich Dad, Poor Dad examines how many people consider owning a house as an asset, while Kiyosaki views a house as a liability. Home owners don’t always take into account the cost of maintenance for the house, the fact that the mortgage may not be paid off by the time they want to move again, and the fact that houses can depreciate in value.

Rat Race – The term for the financial situation of the masses. It describes a cycle in which a child excels in school, gets into a “good” college and earns a degree. As an adult, they find a secure, well-paying job with benefits and begin to save money. They get married, buy a house, have children, acquire debt and have increased expenses. They work hard for promotions and save for retirement, but as their income increases, their debts and expenses increase as well.

Cash flow – The movement of money from a business, asset, or financial endeavor. Cash flow can refer to money coming into or out of a business.

Financial literacy – Understanding basic financial concepts like accounting, how to invest, how markets work, and the law surrounding taxes, corporations, and money in general. Much of the book is devoted to stressing the importance of financial literacy in order to achieve success and lamenting the lack of financial education in the school system.

Financial IQ – A measure of financial intelligence in an individual. The ability to see opportunities even in a bad situation, such as a recession or plummeting housing market.

Once upon a time, I was poor.
I was poor when I was an undergraduate.
I was poor when I was an engineer with a good performance working at multi national company.
I realised I was really poor when I bought my first house.
Are you one of them?
My life started to change when I discovered FINANCIAL LITERACY!
20% people understand => what 80% people doing
80% people do not understand=> what 20% people doing
The fact is these 20% are the rich people who own 80% of the wealth!

Huat Seng Talks added a button to help you learn more about them.

Tuesday blue?
Monday public holiday is going to end. Just it is not the time to show our weakness, but to discover our strength to continue to pursue our goal!

Successful at young age is smart!
Do you want to be one of them? I believe the similarity of them are: DREAM BIG.

Which income statement you are in now?
Two common financial traps:
1. Purely depending on salary income only with minimum saving or no emergency fund or no second income.
2. Buy liabilities, but they thought it is an asset.
Rich Dad Poor Dad books mentioned:
Asset is to put money to your money. Liability is to take money from your pocket.

For any business in this world, from zero to be an asset that generates passive income to us, WORK HARD is a must, even we can work smart. Easy money only for those people who have done enough hard work and become expert on it.
Is it worth for you to work hard for 3-5 years to achieve financial freedom for you and your family?

3 Tips to increase Personal Cash Flow:
During this COVID19 crisis, when we talk about financial freedom, some people may think: now I do not even have enough money to pay the house and the car instalment, do not talk about financial freedom. The very 1st step to achieve financial freedom is to ensure we have positive cash flow for our daily or monthly living.
Depending how serious is the financial situation, these are 3 tips to survive financially for short term.
Tip 1:
Spend wisely. Spend on necessity, not the things needed in future. Minimise spending for entertainment. Avoid money game scam!
Tip 2:
One of your asset is your time. Trade your time and your profession with money for extra income. Find part time job? Food delivery? Helping some business for social media live? Many more you can contribute to earn money.
Tip 3:
You may have un-utilised house space or room to rent. You may have a car to rent out at certain time. You may have a motorbike to utilise to earn money. You have a wok to cook food for customers. You may have washing machine that can help people to wash their clothes. You may have many other things to rent out or utilise as tools to earn some income.

The ultimate goal to work is： Eventually no need to work for money！For you and your parents.
工作的目标是为了不再为钱而工作！为了你和你的父母。