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Tuesday, November 27, 2007

Gratitude Journal

A little bit late for a Thanksgiving thought, but better late than never...

Belated Happy Thanksgiving to folks in the US. I was just wondering whether this holiday is exclusive to the North Americans. Wouldn't it be a nice idea to have an International Thanksgiving Holiday? For one, I'd be thankful that I wouldn't have to go to work.

But seriously, having a personal thanksgiving habit I think is good for the soul. I once watched an episode in Oprah as she talked about the idea of having a gratitude journal. The idea is simple: get something to write on, and everyday find at least three things you are grateful for, then write it down. They don't have to be something spectacular; sometimes it's the small things we take for granted that would make up the list. The point in the exercise is being able to see, in spite of the daily stress, what good things you've received for the day. It gives us a chance to realize that we're actually more fortunate than others; that it's just that we're too tired and distracted with worry that we fail to see the nice things done for us, and around us.

Sadly I don't practice what I'm preaching here, but I think I should start setting aside some time for it (probably like every Mondays, or every first day of the month). A good time would be during the commute to the office. What's in it for us? A happier, more grateful and positive disposition no less. And I bet the person I say thanks to would also appreciate it.

Let me start a quick one:
  1. I'm grateful for my industrious wife for the best homekeeping work ever. I virtually don't have to do a thing at home!
  2. My pretty daughters who dance my stress away.
  3. My parents and family for an always wacky and feastful get-together.

There, that felt good! Try it out some time... if you're not too busy.

Oh, and in case you feel you're way behind financially, you bet you are! Check this out.

In our daily lives, we must see that it is not happiness that makes us grateful, but gratefulness that makes us happy. --Albert Clarke

Thank you for reading.

Monday, November 12, 2007

Buffett's Philanthropy

This was a story of last year, but it keeps resonating in my head whenever the name comes up.
Buffett donates $37bn to charity

Warren Buffett says he was "wired at birth to allocate capital"

Billionaire investor Warren Buffett has said he was waiting for decades to make a huge charitable donation.

He said he was overjoyed as he spoke for the first time since revealing he would donate about $37bn (£20bn) to Bill Gates' charitable foundation.

"This has been coming for 50 years," Mr Buffett said. "There's never really been any other plan in terms of where the money should go."

The donation is thought to be the largest charitable gift ever in the US.

We've seen Forbes' world's richest, but wouldn't it be a better idea if they publish "The World's Biggest Givers"? I think it's time to give more credit to those who have the biggest of hearts. Secondly, if a wealthy guy is in the richest list but not in the top givers' list, wouldn't he feel obliged to give away more to charity?

If you can't take it with you, you might as well buy yourself immortality. The rich are admirable, but philanthropists are sublime.

Now, I got fresher news (as fresh as June 2007), but before that, allow me a brief intro... When we talk about bridging the gap between the rich and the poor, the answer seems very simple: just distribute wealth more evenly. I think that's the concept that socialism is built upon (if kids ruled the Earth, that would be called "sharing"). For capitalist economies, however, that couldn't be done. Capitalism says, to be fair we must reward the smart and the hardworking. Unfortunately, such a system has a downside: it promotes wealth inequality.

So, why not higher taxes for the rich? Robin Hood legitimately taking money from the rich to give to the poor? Not really exactly new.

But what's more interesting is, Mr. Buffett seems to have found some flaws in US tax laws which uncovers that the average Joe seem to be paying at higher rates. If you're in the Forbes 400, you will hate the following article. If you're not, you probably won't like it too. Looks like the playing field isn't that level.

Warren Buffett: Tax the Rich!

Warren Buffett's cry of 'tax the rich!' is being heard across the Atlantic. Warren Buffett Watch highlighted his comments to CNBC's Brian Shactman the other night, in which he said the gap between the 15% tax rate for public partnerships and the 35% rate for public corporations seemed "illogical." (That's become one of the more contentious issues in Washington following Blackstone's big IPO.)

In his appearance at Hillary Clinton's fund-raiser later that same night, he spoke more generally, in effect complaining that he, and very rich people like him, should be paying a higher percentage of their income in taxes.

You really have to admire Mr. Buffett's altruism.

Friday, November 2, 2007

A Crystal Ball That Predicts Your First Million

So you like magic and mysteries, fantasies and fairy tales, eh? Sorry, but this blog is nothing about the sort. But when it comes to talking about having one million, it never fails to bring anybody to enter into some dreamy state. Imagining the places you can go to, stuff you can buy and whatever else you can do with it, who wouldn’t want one million? A short while later, you snap back to reality and get back to your job. The scene is just too familiar.
Nothing wrong, of course, with this habit of daydreaming. After all it’s a nice way to motivate yourself to keep on doing, or being better at, what you do. But one practice that’s probably being overlooked along with this habit is asking yourself one important question… “How do I get my first million?” (Is that a blank face?)
There are lots of answers out there, but what I’m going to explain here is probably the most simple, yet most powerful tool you’ll ever come across. It’s called compounding. (Rich folks are laughing at us, 'cause this concept is like the alphabet to them.)
This is how Webster defines it:
to pay (interest) on both the accrued interest and the principal

Don't be too scared, it’s less complicated with an example. Say you have 100 and deposit it in a savings account that earns 10% per year. For three years, this is what you get:
100 x 1.10% = 110 (first year)
100 x 1.10% = 110 (second year)
100 x 1.10% = 110 (third year)
Total interest: 30
With compounding, you put back your interest or profits so that it helps increase your deposit amount. Here’s what it looks like with compounding:
100 x 1.10% = 110 (first year)
110 x 1.10% = 121 (second year)
121 x 1.10% = 133.1 (third year)
Total interest: 33.1
Can you see that difference?! With the same 100, compounding generates far better profits than you could ever imagine. Unbelievable!
OK, that really shouldn’t convince you just yet. To demonstrate how powerful compounding really is, I made an Excel sheet where you can put in your current age, how much you can save monthly, how many years you want to save and how much annual interest you can get.
In the example below, a 25-year old who commits to saving 2,000 monthly for five years at an annual interest of 10% can reach his million by age 50 (without compounding, at age 67). With just a measly 2,000 with consistent effort for just five years, it's written in the stars that you're going to be a millionaire by age 50!
And if you came late in the game, say at age 35, all you need to do is double your monthly savings and you’d be a millionaire too at about the same age.
This is so simple, why hadn't I known this before?!
So if that got you curious as to when you’ll get your very own million, feel free to download this crystal ball compounding calculator (virus free, but scan it nonetheless). Play with it and see what age should you start, how much should you save monthly and for how many years for you to reach that goal.
For those who are familiar with pension plans and other insurance products, this is the same concept why you get a significant amount of money at the end with the little contribution that you make.
There’s really no magic, just math folks doing a trick with numbers.
When you’ve downloaded the calculator, try this one: monthly savings = 0, annual interest = 50%. You get very neat results.
So start saving, investing and compounding now! If I had embraced this concept ten years ago, imagine what difference that would’ve made. Well, daydreaming is over… Plan your future accordingly!

Please check these other articles about compounding:
For where you can get high interest rates, there are available bank deposits and mutual funds around where you can invest in. Check these PinoyMoneyTalk threads for some info: