Do you know how to spot a millionaire?

I've read an interesting article on The Star regarding some tips on how to spot a millionaire, though I truly believe this kind of millionaire is the millionaire next door, which means, they are very frugal in their spending and they most likely try to buy something to reflect their millionaire status or lead an extravagant lifestyle.

While I did some rough calculation before and I understand that having RM1 million is not tough, but surely it is not easy, not to mentioned accumulating up to USD1 million in Malaysia - the number itself is already three times more.  It took roughly a savings of RM2.8K per month for the next 30 years to reach RM1 million milestone, and requires three times the effort to become a millionaire in US dollar.

Anyway, the purpose of this post is not to talk about how to get there, but merely on how we can spot millionaire among our friends. You never know, your neighbour might be a millionaire, yet, he looks even poorer than you.

According to the article in The Star titled Do you know how to spot a millionaire? Here are some tips., there are seven ways of spotting a millionaire and the ways are as below:-

• He is only mildly impressed when you show off your Jaguar or your penthouse. He does not care what you think of him for buying a second hand car and living away from the city.
• He has been stashing a large percentage of his savings away without thinking ever since he was in his early twenties. He knows that if you keep spending less than what you earn, you are going to be able to spend more when you no longer earn. 
• He puts that savings to work in an investment which gives him a decent rate of return. His investments are in a simple portfolio in assets which he understands. 
• He knows his financial standing or looks at it once in six months. Growing his net worth is his aim. 
• He pays his credit card in full every month. He knows that if he can't afford to pay in full every month, he simply can't afford it. 
• He keeps himself busy with getting a second income or spending more hours into his current job. Both will likely improve his cash flow as these will normally translate to a pay rise. Besides, being busy keeps him from spending.
• He is relaxed as he is likely in a job he loves and has not much worry about money, as he has made a financial safety net for himself.

Do you agree with all the points? I only agree half of it - especially putting his savings to work through investment which give him a decent rate of return and paying credit card in full every month. I also agree that once a person has reached a financial freedom status, he or she will be more relaxed as the person only work because he or she loves the job, not because of needing the money to feed the family.

The first point might just be a sour grape, just because other people can afford doesn't make them less richer than the frugal millionaire. While spending less than what you earn in early days is a good habit, but it does not turn to be able to spend more when a person no longer earn, as the savings might just be swallowed by the inflation. Getting second income might good to improve cash flow, but spending extra hours in office will not necessary translate to a pay rise or promotion, but it does keep someone busy from spending.

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Buying endowment plans

Lately I have been looking at some of the insurance products in the company that I'm working for, Great Eastern. The main reasons for that was because of a friend of mine who encouraged me to learn more about these products.

Here are some of the right perspective that you must set in regards to Endowment plans. Unlike other savings plan, endowment plans in an insurance company comes with a protection. This is important for those of us who look at protection at the same time. The return of the plan is reasonable. Unlike other savings plans like FD, endowment plans force you to create a habit if saving a portion of your money. The plan that I was looking at is known as Great Wealth Accumulator.

By savings about 1800(minimal, depends on underwriting, your age and risk, as this is insurance related) per year, you will start getting a certain amount at the second year. (Guaranteed and non guaranteed portion). The non guaranteed portion depends a lot on the company performance. So far, the company has a nice record when it comes to the company performance.

Above is only a sample illustration. Please refer to the insurance agent or for the sales quotation by the company

Above is the sample quotation. The performance bonus that I used here is when the company performance earn 7% per annum. (Good performance).

So basically, you will be getting a bonus of about 1000 each 2 years, as you save the RM1800. Of course, you must understand the compounding effect of the RM1800 you put into FD. For the next 10 years, the FD will definitely bring a better rate of return, but what makes endowment plan attractive is at the maturity date, for your retirement and protection.

Besides that, you only need to pay for 20 years or 15 years...after that, you will be getting a yearly bonus.

Above is only a sample illustration. Please refer to the insurance agent or for the sales quotation by the company

By looking at the above, you can see that the benefits really start to become apparent at the later years. Because you will be getting a bonus of about 1000 yearly after that.

My advice: take a small portion of your salary, maybe about 10% or 5% of it to be set aside for this purpose. It will help to create a culture of savings and also planning. But do take note of this. This portion of money is mainly for savings. You may reward yourself with the bonus you are getting along the way or reuse it for our investment plan and strategy. Whatever it is, you must take the first step to manage. This endowment plan is low risk and comes with protection for your life. Very suitable for those who are working in Singapore without any EPF or people who are busy at work (couldn't find time for investment, savings, etc)

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