2009 February | Frugal Pinoy

My Investment Strategy

Posted by FrugalPinoy on Feb 25, 2009 in Earning and Income, Investing | 2 comments

Defining “investment”

For a simple definition, I’ll turn to Wikipedia:

Investment is the choice by the individual to risk his savings with the hope of gain.

What does this include? Most people think about stocks when they hear the word ‘investing’, but it could also mean a variety of things. This might include buying a very cheap second hand car for the purpose of selling it again. It’s also an investment if you buy old houses or apartments so you can fix them up and rent them out. The capital you use for a business can also be considered investments. In high school, my sister used her allowance to buy cheap sign-pen ink by the bulk and sell them at school for a profit – even that is considered an investment.

But there are also broader definitions of the word. Some people might say that buying a good suit to wear for a job interview is an investment.Taking part in a paid workshop or seminar might also qualify. The point is that the word “investment” can mean different things to different people, but for the purpose of this blog post, I’ll use the definition above.

My own investments

To give an example from my own background, let me list some of my major investments:

Businesses that I understand well. The first major venture I invested in was Web Content Wow, a web content provider. At that time (it was 2003), I spent around $10 for the domain name, $6 for the hosting, and around a total of $150 on other miscellaneous resources. I also hired some writers I knew who could work with me. Considering the low capital, I made a profit within the first month.
“Virtual” real estate. Domain names, blogs, and websites are the houses and condos of the internet. You can buy and hold, develop them, or sell them to others when they become more valuable. If you want this investment to be more passive, you can hire other people to do the maintenance for you.
Information products meant for sale. I recently got into selling information products as an investment. This includes e-books that I publish or e-books from affiliate programs. Someday, I hope to include audiobooks into the mix. This is an investment because I pay for some start-up costs, and unless I write the e-book myself, this includes hiring some writers to do the work.

Although some of those investments produce “active” income, such as services I have to provide or projects I have to run, I still prefer “passive” investments that require little or no maintenance. Why? Because if you have to work too much to profit from your capital, then it’s more of a job rather than an investment. Your income still depends on your participation and effort.

What I do is try to make the above investments as passive as possible. I may put in some initial effort, but there should be no or little maintenance involved on my part in the long run. This ensures that I’ll won’t just be trapping myself into new tasks/jobs when I start a new investment.

What should you invest in?

If you haven’t gotten the idea from my own investments, here’s the most important rule I apply:

I invest in ventures that I understand well. If I don’t know anything about a business, an investment vehicle, or an industry, either I don’t invest in it or I try to acquire above average knowledge about it.

This may sound like a limiting rule, but at least it keeps my investments in an area where I have more control. I’m less prone to being scammed and fooled because I always know more than the scammers do. Also, this means I’m not dependent on other people making these investment decisions for me. And what’s the result I got from sticking to this rule? All my investments have profited.

Of course, this rule is a personal choice. Many people I know invest in things they only have a vague understanding of, if they have any understanding of it at all. But my money is such a personal tool for me that I wouldn’t want to invest it in something that I had no above average knowledge of – such as stocks. There might come a time that I’ll be knowledgeable in such things, but until then, I’m sticking to the things I know I excel in.

How about you, what is your investment strategy? How is it working for you?

Image by Fran Priestley

Online money-making opportunities: Feb 13-20

Posted by FrugalPinoy on Feb 20, 2009 in Online Job Listings | 0 comments

Happy Friday, everyone Below are some online job opportunities this week.

Note: I try to list legitimate job opportunities as much as possible, but some illegitimate ones might fall through the cracks. Please use your best judgment when communicating with prospective clients, and make sure you get a signed contract before doing any work.

Blogging and Online Writing:

Internet/ blogging/ make money online blogger ($5/post)
Wedding style/fashion/products blogger ($30/post)
Blogger for health care blog ($15/post)
Web content copywriter
Tech writer ($250-$500 for project)
eHow seeks fiction writers ($10-$20/story)
Blogger for NonToxin.com (about how to change the world, $15/post)

Web Design & Development:

Professional graphic designer for customized Twitter backgrounds
PSD to Drupal expert
Looking for excellent web designer (ASP.Net 2.0/C#, HTML, CSS and JavaScript, can convert PSD to HTML and CSS)
Drupal Programmer/Designer for Startup Site
Need experienced PHP programmer to start immediately

Miscellaneous:

Link builder
Post retail coupons on the web
Looking for experienced freelance business and marketing pros (paid by commission)

That’s it for this week. Happy online job hunting!

6 Signs That You're Living Beyond Your Means

Posted by FrugalPinoy on Feb 17, 2009 in Earning and Income, Financial Tips, Saving | 2 comments

“Live within your means” is one of the first rules of personal finance. If you think about it, this is common sense. Still, most people forget this and spend more than what they earn, getting themselves into financial trouble.

Not sure if you’re living beyond your means? Then read on to find out if you have any of the following 6 symptoms:

You don’t know how much you spend each month. If you can’t answer the question “How much are your monthly expenses?” then now’s the best time to compute it and find out. Guessing isn’t allowed. You need to know the ballpark figure for sure.

Why is this important? So you can compare it with your income and know for sure that you’re spending less than what you earn.

You’re dependent on your credit card. Whenever money’s tight, you find yourself using your credit card and just paying for those expenses after your next paycheck arrives. Usually, your credit card bill is more expensive than you thought, too. Because of that, it’s possible that you’re also afraid of opening your bill each month.

You regularly dip into your savings, if you have savings at all.Your income isn’t enough so you have to pay for some purchases with your savings.

This used to be one of my mistakes. I had “savings” but I didn’t know what they were for, I was just saving up money to be spent later. This means that whenever extra expenses came around, I would spend my savings on them whether they were needs or wants.

Your savings need to have a purpose. Are they for your emergency fund? Retirement? A new house? Without that purpose, you’ll be taking money from your savings indiscriminately.

Speaking of savings, you’re saving up less than 5% of your income on retirement or emergencies. Saving more is especially important if you want to maintain your lifestyle during times when your income is lower, you’ve lost a job, or you’re ready for retirement.

You live from paycheck to paycheck. There was a time when I would eagerly await my next paycheck – because I’d already run out of money before it arrived. This is a very stressful way to live.

You need to be confident enough about your spending habits to know that you can wait a bit longer for that next paycheck. You can only feel this way if you know for sure that you’re spending much less than what you earn.

You use new loans to pay off existing loans. It may be common for people to borrow money to pay off other loans, but it’s a clear symptom of living beyond your means. Think about it for a second – getting into more debt to pay for other debts. Not really a sign of financial health.

Have you ever experienced any of these symptoms? What have you done about them?

Image by Steve Woods

Money Myths: Frugality means sacrificing fun

Posted by FrugalPinoy on Feb 16, 2009 in Frugality, Money Myths | 5 comments

Why don’t you just enjoy your money?

This is something people ask me when they hear about my frugality. Whenever I hear this, it seems like people have the following misconceptions:

that I deprive myself from enjoying life,
that I always choose the cheapest products,
and that I can’t pay for the things I want.

The thing is, I do enjoy my money. I get to spend my money on hobbies like carpentry, gardening, model airplanes, and art. I also have the money to travel for more than a week at a time, and to splurge on ingredients for culinary experiments here at home.

Still, I consider myself frugal because I try to get a bargain whenever I can, and I shop wisely. I also know that if I had zero income (and had no emergency fund), I can support myself and the 4 people living in my house for under P10,000/month. But obviously this doesn’t mean I’m not having fun.

Frugality is about achieving balance between your enjoyment of the present and the security of your future. It’s about ensuring that you can afford financial emergencies, retirement, and big purchases such as a house or a car. In other words, you have to prioritize.

What I’m actually doing is saving on the things that are less important to me and channeling them to my hobbies, travel expenses, emergency fund, and retirement fund. Here are some ways that I practice my frugality:

I buy only food items which I know I’m going to use.
I only dine out when necessary.
I don’t buy signature clothing.
I don’t call or text more than I have to. (Also, I don’t buy expensive cellphones.)

In other words, spend less whenever you can and don’t spend on something that isn’t important to you, or something you don’t need. If you’re not a photography buff, why spend P20,000 buying a new camera? If you only have two children and don’t plan on having more, why buy a 5-bedroom house?
Another way to be frugal without destroying your “fun” is to trim extra expenses rather than eliminate them completely.

If you find that your coffee habit is costing you over P1,000 pesos a month, you don’t have to quit cold turkey. You can cut back on one cup a week, then two, until you find the number of cups you can drink which allows you to get a caffeine without overdoing it. In fact, you might want to try brewing your own coffee at home, if you have the time. These things may seem like a sacrifice, but it’s nothing compared to quitting your fun habits completely.

You don’t have to give up the things that you enjoy or that make you happy. After all, your hobbies, favorite food, activities, and trips should be a source of enjoyment and not a source of financial stress.

Of course, I’m not telling you what to do. I’m just demonstrating that yes, it is possible to enjoy your hard-earned money without sacrificing your financial independence and security. It’s up to you to find your own way of doing that.

How do you balance frugality with enjoyment?

Image by Richard Sweet from sxc.hu