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Wednesday, March 11, 2009

Spend Smart and Invest Wise

Over the weekends, I discussed with my brother on the money topic again. As always, I prefer healthy brainstorm session so that I can learn more. As we all know, learning is a continuous process. Anyway back to the money topic, we were discussing on what to do with some cash in hand. I am the kind of people with the philosophy - "Savers are always the losers". Now why did I hold on to this principle. A lot of reason. One of it being inflation will eat up our savings.

I always encourage to continue invest, and not trade in times of uncertainty. When we invest, we are actually buying a business or at least pass on the inflation to the consumer. Imagine a scenario. If the cost of a product increase due to material cost, are you going to priced it lower than the manufactured price? Of course we will pass on the inflation to the consumer, no? Unless business is very very bad, else we definitely will pass on the inflation to the consumer. So in other words, buying business will at least guarantee something that will be able to counter inflation, provided we are buying the correct management, as when we buy stocks, we are only have business in-directly. So, a transparent and trustworthy management is crucial.

Anyway, I do have to agree with my brother that while we invest wise, we need to spend smart at the same time. He told me that he will invest, but only if his cashflow is not clogged. Seems like he is growing up as well. Invest wise is actually investing something with lower risk. This includes invest within your mean and invest in good companies.

What about spend smart? What do spend smart mean to me? Well, spend smart meaning spend on necessity and buying what is worth to buy. One of the criteria is to get bargain. Like shop when you see there is sales, though I know most retails will jack up the price before giving shopping depends on skills and some basic information on the price.

Another good example on spend smart is when we decided on insurance premium. Why I am using insurance is because I was sort of forced to decide on the insurance premium recently. I see that a lot of people either over insured or the other way round. I do not have the best advice on buying insurance, but I do believe that we should neither over insured nor under insured. I see that a lot of people that I know tend to have a common idea on insurance....which is insurance is part of investment. I do not agree that insurance is part of investment, because insurance is ....well, just insurance. Thus, over insured is a very bad idea. It will lead to less capital for investment and savings for rainy days. And when we are out of job, then we will definitely stop one or some of the insurance payment and end up getting nothing.

Seems like I write a lot on this post. I think I should post the insurance related stuff on the next or future post. Signing off as for now :)

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