The Usefulness of Having Capital

Follow up on Money Can Buy Happiness, I will talk about two reasons why it is useful to have capital or a good amount of money, business/investment/portfolio-wise. They are also the main reasons the rich can continue to get richer and stay rich, IMHO.

Capital Provides Bargaining Power

Having money gives you bargaining power in dealings. People who have more money usually have or obtain more advantages and benefits in business dealings. How?

Here is the first scenario. Let’s say you are moving a good distance away and have to sell your house. The difference between having the money to buy a new place flat out and not having the money, thus have to wait for the sale of your previous dwelling is huge. If you have the money already, you can buy the new place and wait for a buyer who offer the ideal price for the old house. Otherwise, you maybe forced to accept whatever kind of offer you can get within a short period of time. I know you maybe think, “Oh, I can rent…” but this is just an example. If you insist, then let’s say you have to sell an item. If you are short on cash, you maybe forced to accept a crappy, low-ball offer. Otherwise, you have all the time you have to wait for an ideal offer.

Another scenario is one where you are considering about taking a loan for, let’s say, a mansion, but you actually have A LOT of money and therefore you can pay for it in full with cash. The bank, better than not having your business completely, may tempt you with a loan that has very low interest rate, for which is a good idea to accept so you can put your cash to work elsewhere. Now if you don’t have the money, you must take a loan in order to make the purchase, so why would they need to give you a low interest to lure you to into the loan?

Capital Allows Diversification

Anyone who has done some study into investment would run across the idea of diversification. Briefly, the main concept is that you spread your money out into many areas, and by doing that, you run less of a chance of losing all your money by betting in one place. Meanwhile, you hope that more of the invested areas would do well to allow for profits.

A company with more capital is able to invest in more areas or projects than one with less, and so long as one of those projects becomes a hit, or most of them do well except a few, they’re all set. The same thing applies for individuals. An individual with more capital is able to spread their money into more stocks, funds, and markets, and as long as most investment do above averages, or if one becomes a hit, he’s all set.

Consequently, people with more money have more flexibility in choosing and allocating their investment portfolio. On top of this, there are investment products that are only available to people with certain amount of money.

Originally posted 2007-10-24 00:44:40. Republished by Blog Post Promoter

Importance of Personal Finance

I struggled if I want to start this category here, feeling it will get too cluttered up with too many topics going on at the same time. However, I came to the conclusion that it is important to share about this part of my life also, just as important as joy, thoughts, singing… Well, I do not intend to blog so much about it like the guys doing at My Money Blog or PF Blog, nor do I have the knowledge and experience as many other people already blogging about their finance for a long time but I have to start somewhere :P I intend to share whatever I find interesting and useful from stuffs I read, and here’s a start.

As intro…

At the age of 23, I realized how important it is these days to know how to manage our own finance. Thanks to encouragement from a family member, I have started to monitor, control, and learn more and more about the topic since around when I graduate from undergrad. My interest is definitely enhanced by my situation of having to afford school and living independently. Now closer to my graduation, with the haunt of student loan and car loan, and seeing the insecure retirement future from a normal corporate career and a financially struggling goverment, it is ever more important to take control, learn how to take care of my money, how to spend less of it, and make more of it. To do so, I am learning from other people blogging about it, from other online resources, and from books on personal finance and investment. Piggy needs financial freedom to have a good life :)

As a reminder to myself, my current goal is to rid myself of those pesty loans and to accumulate enough to buy a place called my own in recent future.

To start out with, here are two reward cards that I use frequently these days. Neither of them has annual fees:

  • Citi mtvU Platinum Select Visa Card for College StudentsThis is probably the best card for a college student. Earn 5 points from restaurants, bookstores (and guess what, Amazon is considered bookstore), record/rental stores, and theathers. This equates to 5% cash back if you get their $100 giftcards or even a higher % if you wait for promotions. It also earn points for paying on time each month and having good GPA twice a year .
  • Citi Dividend CardEarn 2% cash back at gas station, grocery, and pharmacy. Earn 1% on all other purchases.

For more details on the cards, click on the links. You can combine the mtvU card with a Citi checking and e-saving accounts that earns Thank You points for using services, like direct deposits, online bill pay, etc.

Originally posted 2006-10-30 22:56:35. Republished by Blog Post Promoter

Temet Nosce — We cannot change anything unless we accept it — from Carl Jung lecture

Why “know thyself”? How do we handle ourselves and others and relationships in between properly? Why acceptance, of both good and evil? How to be compassionate? Why words are so futile? Why pretense never works? Why gives a shit? Even the question, how do we “save the world”?

In this world that is yet dictated by 19th centry Newtonian mechanics and Freudian psychological concept of libido (and thus the suppression of it), this powerful and refreshing Carl Jung excerpt provides hints that originated from a lecture a group of clergy .

Note: not answers.

Something to think about before launching a war (with drugs and psycho-analysis) against your own “libido” or some “wild unconsciousness”.
Something to think about before calling a fight against something “evil” out there from some “moral high ground”.
Something to think about before trying to save the world.


“People forget that even doctors have moral scruples and that certain patients’ confessions are hard even for a doctor to swallow. Yet the patient does not feel himself accepted unless the very worst in him is accepted too. No one can bring this about by mere words, it comes only through reflexion and through the doctors attitude towards himself and his own dark side.

If the doctor wants to guide another or even accompany him a step of the way, he must feel with that person’s psyche. He never feels it when he passes judgment. wether he puts his judgment into words or keeps them to himself makes not the slightest difference. To take the opposite position and to agree with the patient off-hand is also of no use, but estranges him as much as condemnation. This feeling comes only through unprejudiced objectivity.

This sounds almost like a scientific precept and it could be confused with a purely intellectual abstract attitude of mind, but what I mean is something quite different.

It is a human quality, a kind of deep respect for the facts, for the man who suffers from them, and for the riddle of such a man’s life. The truly religious person has this attitude: he knows that god has brought all sorts of strange and inconceivable things to pass and seeks in the most curious of ways to enter a mans heart. He therefore senses in everything the unseen presence of the divine will. This is what I mean by unprejudiced objectivity, it is a moral achievement on the part of the doctor, who ought not to be repelled by sickness and corruption.

We cannot change anything unless we accept it. Condemnation does not liberate, it oppresses and I am the oppressor of the person I condemn, not his friend and fellow sufferer. I do not in the least mean to say that we must never pass judgment when we desire to help and improve, but if the doctor wishes to help a human being he must be able to accept him as he is, and he can do this in reality only when he has already seen and accepted himself as he is.

Perhaps this sounds very simple, but simple things are always the most difficult.

In actual life it requires the greatest art to be simple, and so acceptance of one’s self is the essence of the moral problem and the acid test of one’s whole outlook on life. That I feed the beggar, that I forgive an insult, that I love my enemy in the name of Christ; all these are undoubtedly great virtues. What I do unto the least of my brethren, that I do unto Christ.

But what if I should discover that the least amongst them all, the poorest of all beggars, the most imputed of all offenders, yay that the very fiend himself, that these are within me, and that I myself stand in need of my own kindness, that I myself am the enemy who must be loved, what then?

Then, as a rule, the whole truth of Christianity is reversed. there is then no more talk of love and long-suffering. We say to the brother within us: “raka!” and condemn and rage against ourselves. We hide him from the world, we deny ever having met this least of the lowly in ourselves, and had it been God himself who drew near to us in this despicable form, we should have denied him a thousand times before a single cock had crowed.”

Originally posted 2010-03-24 22:38:51. Republished by Blog Post Promoter

The Idea of Sunk Cost and Letting Go

Sunk cost is a most important idea I learned in a Decision Analysis class. In “technical” terms, sunk costs are costs that had already been incurred that is irrecoverable.

Why is this so important?

Sunk cost is an indispensable idea that enables you to have rational thinking and to make rational decision, and rational thinking and rational decision are what you need to prevail in many areas in life, such as investing, making business decision, deciding the next move in relationship/career/life, etc.

In a practical example of whether to sell your car, you can:

  1. Compare current selling price with how much you paid for the car and think about the loss (the difference) if you sell the car now. If the loss is too big, you keep the car.
  2. Think about how much you gain by selling (maybe use that toward a more fuel-economical car) and/or the maintenance and insurance you DON’T have to pay later, which will lead to more saving. And if those gain and savings do not provide more value than not selling, you will keep the car.

Now I didn’t cover every aspects and parameters involved in the decision of car-selling in real-life, but you get the idea.
Which do you think is a rational decision?

In the 1st scenario, you let something that has already happened in the past to drive your decision.
In the 2nd scenario, you consider all future potentials and base you decision upon those.
Pretty obvious.

The price you paid for the car is no longer relevant. However, you can imagine how people will choose not to sell like in the 1st scenario in real life.

Quickly, we can translate the same idea into making decisions in a business project and a personal relationship setting.

Instead of deciding whether a project should be continued with focus on how much money and human resources had been invested, you need to focus on how much potential investment return if the project is to be finished, the probability of the project failing, and how much more cost will be incurred, etc. You do not focus on those “wasted” resources because they are already sunk cost.

Now in terms of personal relationship, instead of deciding if you should stay with somebody based on the amount of time and effort spent, you evaluate about the current trust/confidence/comfort level you have with this person (that is a result of past experience, but NOT the past experience), the potential amount of happiness/sadness, whether he/she can change bad habits or if you can endure them, and many many other aspects involved in a intimate relationship looking into the future.

Those are just some very generic examples. But to put in more generic term of how sunk cost assist you to be more rational is that “what happened has happened and you should not let yourself get dragged down by the past”. I’m am not urging you to be completely rational and throw away the past, but it’s age-old wisdom that you do not let the past becomes the burden of future, especially the mistakes and bad experience. This is the same idea as we tell each other to “let go”.

Look into the future and based your decisions on those visions, my friends.

To have all the details and technicality on the idea of sunk cost, visit here.

Originally posted 2007-09-10 23:29:07. Republished by Blog Post Promoter

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