Yvonne Lim

What you treat with devotion, grows.

Recently, I have been becoming more curious about people’s attitudes towards money & life in general. And I think I came across a phrase that sums it all up – What you treat with devotion, grows.

In fact, whatever you treat with devotion grows. And while devotion is technically a noun, I think it also represents as a verb. It is what you put into action until eventually, one side of the spectrum wins.

Most people understand this concept for relationships. We know that when we treat relationships with devotion (time & effort), it flourishes. But the thing, this really applies for most other aspects in life too- business, career, education and money (financial well being) too.

Take for example, if you have a low devotion towards money and do not treat it with care, you are likely to spend more or be more careless on spending it. At the end of the day, you may find that there has not been much growth in your wealth.

If you have a high devotion towards earning money, you are likely to navigate yourself on course for that. You grow, your ability grows, your earning potential grows.

If you have a low devotion towards investing your money, then of course your portfolio is unlikely to grow. In fact, it would be more likely that you lose your capital.

If you have a high devotion towards financing/donating money, then you would always find your position to give. And those whom you give and treat with devotion? They grow.

Be a nineteen six.

By Wilkins Micawber in the book David Copperfield, Charles Dickens. He knew better than most then.

This is perhaps the least sexy concept in personal finance… and in our time, you probably will not even be able to retire comfortably by simply saving. But that being said, failing to save at all is the most definite way to fail because it is not just about the money, but the opportunities that you buy yourself.

After all, no one lends to people who cannot pay and few would invest in businesses which cannot manage their cash.

The sunk cost fallacy

The one thing that stuck with me from my biz module back in NTU was the concept of sunk cost, and the sunk cost trap.In economic/business terms, a sunk cost is a cost that has already been incurred and thus cannot be recovered. And the sunk cost trap is about the psychological need to protect these past choices (and protect our prior monetary/emotional commitment). Here are some examples of this sunk cost fallacy.

1. Imagine you go see a movie which costs $10 for a ticket. When you open your wallet or purse you realize you’ve lost a $10 bill. Would you still buy a ticket? You probably would. Only 12 percent of subjects said they wouldn’t. Now, imagine you go to see the movie and pay $10 for a ticket, but right before you hand it over to get inside you realize you’ve lost it. Would you go back and buy another ticket? Maybe, but it would hurt a lot more. In the experiment, 54 percent of people said they would not. The situation is the exact same. You lose $10 and then must pay $10 to see the movie, but the second scenario feels different. It seems as if the money was assigned to a specific purpose and then lost, and loss sucks (www.youarenotsosmart.com)

2. On the same example of movie ticket, let’s assume you have bought a non-refundable ticket for the evening. When evening arrives, you realise that you no longer feel like watching the movie – but you still drag yourself to the theater because you have already paid for the tickets. It doesn’t really make sense because the money has already been spent. The real choice was a) be happy by staying at home b) put yourself in a worse mood by going for the movie.

3. Now imagine you are a business owner who have invested a substantial amount to build a factory. Due to unforeseen circumstances, the company will need to pump in more money to complete the construction. It is easy to justify the additional capital because without it, the initial investment and plans would go to waste. However, the more important question is if the future income will justify that additional capital. If not, the loss would simply be bigger

4. Of course, the same trap often happens in investment decisions. Time to time, I come across investors who would adamantly stick to their initial investment choices so as to avoid locking in losses (sometimes, even when it is just paper loss). This is in part due to the emotional commitment to the investment itself. But truth is, If you are holding on to a sinking stock, it would be much better to get out fast and get into another asset class/stock which is better positioned for recovery.

5. The sunk cost fallacy also happens in relationship. Imagine this: You are now 30 years old and have invested 7 years of your life to the man/woman you used to love. Both of you have gone through various experiences together and have invested much time and emotions to each other. Then at some point, you start getting the feeling that he/she may not the one you want to spend the rest of your life with… But you stay in the relationship anyway. Because of the aversion of loss – you do not wish for that 7 years to ‘go to waste’. Though in reality, what is really at stake is not the 7 years that have passed but the 50 years ahead.

It’s not easy to avoid the sunk cost trap.., But if we are able to, we would consistently be making better financial, business and life choices for ourselves and hence, likely to be much happier 😉

Medisave: Outpatient Vaccines

2014-06-06 Medisave cervical vaccine

If it has slipped your mind, here’s a gentle reminder that you can use Medisave to pay for your outpatient vaccinations, including Human Papillomavirus (HPV) Vaccinations against cervical cancer. This is applicable for females between the age of 9-26. So for my female friends who are turning 26 and who have yet gotten their vaccine. Do it quick. Time is ticking.

And since I am on the topic, here’s some info I learnt about HPV from various sources and from my doctor when I went for my Chicken Pox booster jab

9th most common cancer in Singaporean women
Human Papilloma Virus (HPV) can infect the cervix, causing the cells to change. In about 90% of the infection cases, the virus clears by itself and the cells return to normal.In some cases, the infection can persist and cause the cells to grow in an abnormal way, developing into cervical cancer.
Many people will contract HPV in their lifetime, most will not know about it (HPV typically shows no symptom)
Sexually-transmitted HPV viruses are spread through contact with infected genital skin, mucous membranes, or bodily fluids, and can be passed through intercourse and oral sex.
Researchers say that virtually all cervical cancers — more than 99% — are caused by these high-risk HPV viruses.

Source: 1 2 3 4

Build your assets

So I am back from my trip to China/Inner Mongolia and like always, the Chinese saying 读万卷书不如行万里路 rings true. This time round, there are two things that stood out for me

1.To always build your asset

An asset is simply a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit (Investopedia). Or to put it in simpler terms, something you own that provide you with a benefit (either current or future).

The month of May is still considered the pre-tourism season for inner mongolia and because of that, I got the opportunity to speak to some of the locals, understand a little more about them and also saw the preparation work involved for the season ahead – the construction & renovation in progress, the concerted effort & rehearsals to provide the experience that tourists are looking for.

And this is what it is. For towns whereby tourism is the main or sole source of income, the preparation is what matters because 3 months is all they have to determine their quality of life for the remaining year. Just a 3 months window period to earn their keep. And because of this precious window period, every single choice they make now and every single ounce of effort that they put in is meant to build their asset such that when tourists swamp the place, their homes will be able to offer the experience that tourists want.

So build your asset, make it work, and stay relevant.

2. It is not just the Financial/Material Assets that we need to devote attention to. Social Assets & Value Creation Assets matter too.

In general, Singaporeans are very much aware of the traditional Financial/Ownership Assets. This includes Property, Investment & Equity in Business. Then we have personal Value- Creation Assets whereby economic value can be derived from you providing your Skill, Intellect, Experience or Advice.. And we have our Social Assets consisting of our social influence and relationships with others.

In Beijing, we met a bus conductor who suggested that we alighted at a different stop from where we intended to. He subsequently became the driver who brought us to the Great Wall. Perhaps we should have been offended because we were kind of being cajoled into alighting at the stop where his car was parked, but we were not because we liked him enough. Maybe because from the moment we boarded the bus, he had build up his social asset (I honestly do not know if it was deliberate but he was really sincere and friendly throughout). More importantly, he was indeed able to provide value to us – bringing us around the (other) tourist traps and offering to help us bargain for souvenirs.

And I guess this is it… Beyond the usual dollars and cents, it is important to build our own ‘personal assets’ – to constantly find a way to provide value to others and to have healthy level of social capital. Not only for a wealthier life, but for a happier and more fulfilling one.