A Millionaire mindset is a Low SES mindset !

The genesis of this post came from an anecdote from a friend who attended a financial talk over a decade ago. This financial talk was conducted by a famous options trading guru ( who has since had a very disappointing day in court and is no longer giving talks on options trading today ). Halfway during the talk, my friend was either so bored or so offended by the presentation that he abruptly stood up along with his friends to leave the lecture hall and the speaker then pointed out to my friend's group and proclaimed that " These are the people who do not have the mindset to become millionaires."

There is something which I think has to be said about the mindset of the millionaire as possibly espoused by these trainer gurus, MLM or insurance salesmen types. These ideas are largely derivatives of the writings of Rhonda Bynes in  The Secret or some other mindset changing work of authors like Harv T Eker which in turn are derived from authors in the 1980s who talk about programming your mind like a computer or Psycho-Cybernetics.

If you have enough friends over the years who subscribe in wishful thinking and how a person's mindset can be tweaked towards earning more money, you will realise that somehow a lot of more of these people also tend to fail rather than to become actual millionaires. Perhaps they blew their savings on a nice car because frugality is for "middle class" folks. Or perhaps they had to "fake it until they made it".

Which is why I came to this realisation :

The Mindset of Millionaire is the Mindset of the Bankrupt !

Because the Millionaire takes greater risks than most people,  so they tend to end up with greater wealth. But those who take bigger risks also have a larger probability financial ruin. So the same mindset creates more bankrupts.

This is something we need to be cognisant of.

Compare this with mindset that the Financial Independence community espouses.

In our community, we rarely use words like "Millionaire" because it triggers a lot of lay people and hijacks their amygdala. People stop being rational when millions of dollars are involved in a conversation.

Instead we talk about earning, saving and investing your way towards financial independence where wealth targets are largely a function of your daily expenses. A single man who invests well can comfortably slow down when he has $400,000 invested in high yielding stocks and REITs. A family may need $1.2M.

Here's the deeply counter-intuitive idea : Even a millionaire who supports our approach towards Financial Independence should be well aware of how low a millionaire's real social economic status is.

Suppose your family has $1 milllion dollars invested in a popular SREIT ETF, this translates to perhaps $55,000 a year at 5.5% yield or $40,000 if you agree to a safe 4% withdrawal rate. This is well below the median income of a Singapore household ( which is around $100,000 these days ). A millionaire (who lacks an earned income) has to live below the means of the median income family.

This means that a millionaire household has to adopt the lifestyle well below that of a HBD dwelling family to sustain their well-being over time.

This is why the FI community supports the notion of frugality above all other concepts in personal finance.

The Art of the Good Life #16 : Tyranny of a calling

"Few people are as unhappy as those with a talent no one cares about." - John Gray.

The lesson in this chapter is that chasing after a calling is a recipe for a miserable life. Having an over-inflated expectation that we need a particular vocation that stems from something deep inside is a loser's game.

The chapter provides the example of writer John Kennedy Toole, who had his conviction about being a successful writer shaken to the core after numerous rejections from major publishers,  committed suicide by carbon monoxide poisoning. After his death, A Confederacy of Dunces sold millions of copies and was awarded the Pulitzer Prize.

Amazingly, the chapter neglects to offer an alternative to the tyranny of a calling which is provided amply by the works of Vicki Robin in her masterpiece Your Money or Your Life.

It is eminently more practical to view your vocation as a means of exchanging life energy for money.

No matter what we do, we are in essence, trading time for money.

Consider the efficiency of your use of your life energy by figuring out a number with the numerator being your salary minus all expenses associated with your job (such as transport or the cost of looking the part). The denominator consists of the time spent in the office every month plus expenditures of time outside office hours networking to get more business or commuting to the workplace.

If my fellow trainees perform the calculation, some, like myself,  may find that they have a lower efficiency than most domestic workers in Singapore.

Others, such as the financially independent crowd who have a value investing or dividends based focus, will find that they are more efficient with their life energy than members of the Cabinet.

On the hypocrisy surrounding War-chests and Leverage investing

Not everyone is a big fan of leverage investing using a margin the account. It is probably not coincidental that some of these detractors of margin financing also tend to employ a war-chest when describing their investing strategy.

In my opinion, margin investing and the employment of a war-chest are two extremes in investing.

Much like Law and Chaos in Michael Moorcock fantasy novels.

When you invest using leverage, you are trying to magnify your returns by borrowing money. If the cost of borrowing runs below the rate of return of the unleveraged portfolio, you are likely to succeed in getting better returns provided if the underlying investments generate positive returns. The problem of a leveraged portfolio is that there is a chance of complete and utter ruin, which to me is the odds of a margin call. In essence, you are trying to get higher expected return by flirting with the odds of ruin.

A war-chest is the opposite of a margin account. You hold a portion of your portfolio in cash so you are not subject to market risk at all. The downside is that if you calculate your rate of return, your cash component of the portfolio returns 0%, worse than buying government bonds.  You are trying to securing your portfolio from losses by lowering your expected returns.

Both camps harbor fantasies on investing outcomes.

Leverage investors harbor fantasies that they would be able to avoid ruin but the odds of ruin can be estimated if you use the right statistical model. I consider 1 in 40 odds to be generally acceptable in my margin account if I can extract 10% yields for my trouble.

War-chest investors also harbor fantasies. There is this belief that the investor can time the markets to produce returns that can overcome the deficiencies of cash drag that have been adopted by the investor. Right up till today, I have yet to see a modelling attempt to justify market timing using a war chest. All I see is a lot of chest thumping and vanity displays of personal results, very often in un-diversified portfolio which does not help readers who want to replicated the strategy.

As of now, I'm still waiting to back-test a model that incorporates market timing with a war-chest. I simply do not see leverage investing and having war-chest as something that mutually exclusive to each other.

If a good marketing timing strategy exists, a savvy investor can hold his portfolio in cash and make tactical leveraged bets in a margin account. 


 



   

The Art of the Good Life #15 : The Secret of Persistence

Old age and treachery will always overcome youth and speed.

This chapter is about persistence.

The secret to success is about taking steps to sustain your smaller successes and have them compound over time. This is why Warren Buffett is always used as some paragon of compound interest in many personal development books even though we ignored his earlier tactic of buying up cheap companies and forcing management to unlock value by board control. There is some quantitative backing to Warren's slow and steady form of wealth accumulation, the Sharpe ratio of Berkshire Hathaway was known to be between 0.7-0.8 when hedge fund strategists are using strategists that go north of 1.

The other example which I enjoy is the concept of a long-seller. Books like 50 Shades of Grey are bestsellers, but they may not persist over time. Lord of the Rings, however, and Jin Yong's works will be sold in bookstores so long as there are still bookstores left in this world.

How to come up with something that persists?

The general guideline is to pace your work and not work too hard to the point whereby you burn out. Personally, I think you should aim for small successes and then scale them into bigger ones without tiring yourselves.

This is why looking for dividend yields work in investing. No doubt high-yield strategies tend to under-perform quantitative strategies involving FCF/Price and EV/EBITDA, but seeing dividends trickle into your bank account is relaxing and therapeutic, and very often you become motivated to save more for the future. Eventually you may be able to sustain this form of investment whereas someone with a more formidable formula would have sold out in the next market recovery. 

Nicholas Taleb elegantly expresses the power of persistence by his concept of the Lindy effect. If a literary work is popular for one century, the rule of thumb is that it should be popular for another hundred years.

 

Thoughts on yesterday's Computation Law and Blockchain Event

There is nothing that a seasoned IT professional despises more than a lawyer who obstructs his projects in the corporate world. I should know, because I hated these corporate lawyers so much, I became one of them just to figure out how to prevent them from cock-blocking me at work.

After a week of training, the last thing most trainees want to do was to attend a full-day seminar with other legal professionals but this event is not just any ordinary event. This is a small tribe that I feel I really can relate to over the longer term, and I can build a lot of strategic friendships moving forward.

Here are my random thoughts on the event.

A more coherent view on how Technology will disrupt the Legal sector is quite a few years away.

a) Lawyers and Programmers can work together but it may not be practical to do so

The most impressive segment in the event is by Kommerce headed by my old friend Karen Teoh who is COO of this initiative. In her company's segment, a full fledged lawyer was talking about his experience working with a programmer on building a Smart contract. My IP law professor David Llewellyn has taught me that this has been done before, but I have always found the idea impractical because the uncertainty of the Agile methodology and ridiculous lawyer billing fees would make the software ridiculously expensive.

So naturally I acted all snarky and asked about whether this was practical moving forward given that lawyers are so expensive. I also asked if the price of programmers and lawyers would converge over the long term. It was such a troll question, the audience was laughing at me after I was done.

b) LegalTech will fail in Singapore without Government intervention

Another harsh truth I realised about LegalTech is how fragile it is in a place like Singapore.

There is absolutely no way law firms will welcome disruption in their space because they really want to preserve their hourly billings. Even SAP consulting has moved into fixed project billing eons ago. Furthermore, lawyers are also protected by the Legal Professions Act. If you wish to provide legal advice you need to make sure you're qualified to do so. So LegalTech only has a very small area to play in if they do not wish to flout local laws.

The other issue is that Computer Scientists tend to be extremely hubristic and think that the world can change if we can build a distributed ledger around anything that they would like to disrupt or launch an ICO.

Two groups of highly intelligent, hubristic and arrogant professionals are going to have a really bad time relating to each other. It's like a couple destined for divorce unless the Government injects a lot of tax payers money to fund startups that have a 95% chance of failure. The government also needs to create a safe sandbox where IT guys can disrupt the legal industry with fewer consequences. Unlike FinTech, there is also less money to go around because of the localised nature of our laws. Law firms do not scale globally as well as banks.

Also, as I've spent time as an IDA officer and used to be one of those Barcamp groupies, I prefer to discount everything shared by accelerators since all ROI gains figures are unrealised as of now.

If local accelerators have a big exit story to tell, they'd be in your face by now, but all we're seeing is a lot of "pivoting".

c) There is negligible attention on the real problems faced by small law firms.

I am a lowly trainee in a boutique law firm, I have a lot of skin in this game. If access to justice is a problem in our society, then more junior lawyers need to be able to do independent research and give more strategic advice to clients. But instead, junior lawyers are too busy supervising paralegals who have to do the real heavy lifting in disputes. Photocopying, scanning, e-Lit submissions and typing.

There is too much paper involved in legal work and OCR scanning tools are not perfect. Documentation management involves windows folders and Word.

A trainee can spend an entire evening creating table of contents, making references and preparing documents for submission into the courts. As I'm on the frontline right now, I also witnessed how dangerous outsourcing this work can be and why smaller law firms prefer to avoid negligence liability so they do the work themselves.

In IT you can outsource because programming code can be corrected by a an IDE or a compiler. In legal work, the compiler is a human being with decades of experience.

d) Anyone getting into LegalTech need to ensure that they have other avenues to escape to when they fail

Some law student friends asked me whether they should heed the call of the accelerators.

Startups are sexy, startup exits and IPOs are sexier still. If you make it, you will be in the same category as the  Razer CEO. Always remember that there is one Razer CEO but many startup founders who failed. Many have spent their youths working on small, agile corporate firms that are informal and have a different social capital from the corporate MNC suit. This has negative implications on their net worth and prospects of finding a spouse.

If anyone wishes to go LegalTech, the most important priority is to work out a plan B. If you are a lawyer, ensure that you complete Part B and can run into a smaller law firm with your buddy's help after your startup tanks. If you are programmer, you have to keep picking new technologies or find a way to teach part-time in a Poly so that you can have multiple sources of income.

Oh yes, you also should read financial blogs so that you can develop passive income to make yourself more anti-fragile. The last thing you want to do is to have all your stock equity invested in one start up that may not be around 5 years later when you are closer to starting a family or having children.

Anyway, I think this is a new beginning for me. I will somehow get into LegalTech one way or another over the long term, but for now, I will observe and learn.

This sector has a long way to go before it can be taken seriously.

On Nicholas Taleb, leverage and ruin

Skin in the Game by Nicholas Taleb is not finance book per se but some of its ideas are interesting enough to challenge some of my ideas of leverage. I think Taleb's ideas are worth grappling with because they can potentially change your approach towards personal finance.

One particular idea is that ensemble probability is very different from time probability. If the model reflects the ruin of a few participants out of many, it is conceptually very different from the reality where there's only one participant who has to stop permanently the moment he is ruined by the markets.

One of the better things I did last year was to open a margin account. I wanted to continue to obtain high yields from REITS but I also wanted to buy higher quality REITs with a good story and stable management. The only way to resolve this paradox is to borrow $1 for each $1 I have and invest it in the better REITs on SGX.

When I talk about my approach towards leverage, I usually begin with a back-test. The models I ultimately employ for leverage always have a yield which exceeds on average 6.5%. After accounting for the borrowing fees, I tend to get 10% yields on my invested capital.

The more interesting feature of the models I employ is that I use semivariance which I combine with the expected return to figure out what happens in a 1 in a 40 year freak market. In a typical model involving REITs, I can backtest a modest 10% return with around 13% semivariance. So there is a 2.5% chance that I will drop 2 standard deviations down on a freak year or (10 - 2 x 13)=16% lose about 1/6 of my portfolio. ( But of course, market returns are non-normal so this will happen more frequently than what my models predict. )

As a 16% drop is only about half of the margin call of 30% ( Since I  limit my leverage to 200% ), I should not have to worry so much about hitting a margin call anytime soon as the probability is less than 2.5%.

Which brings us to the problem : So long as I maintain this leverage, there will be a chance that I will bust one day. Over time, this probability is 100%. Taleb says that "in a strategy that entails ruin, benefits never offsets risks of ruin."

This is where Taleb's insight comes in useful. If I am ruined, or gets a margin call, I can't play anymore. This is what Taleb calls the uncle point. Millenials will just say GG.

The moral of the story is this. If you leverage, you will definitely be ruined over time. In your universe, there is only you ! Your ruin may even drag down members of your family if you are not careful.

But I only leverage less than 20% of net worth and can comfortably live on the dividends of my un-leveraged portfolio. Furthermore, a margin call will only wipe out 60% of my original cash outlay into my margin account.

So the moral of the story is this : Leverage only your excess portfolio. Otherwise have a plan to eventually wean yourself out of a margin account.

The Art of the Good Life #14 : Circle of Competence

The last chapter was easy to read because Fuck You money agrees with me so much.

This week's chapter is the opposite because it really exposes just how dumb my latest career moves are.

The harsh truth is this  - Most of us have a really small circle of competence and this chapter reminds us that we should really just stick to it. If we know what we're good at, we should just focus on it and build a career around our personal strengths.

I think in the absence of passive income, this is something which I would have done. I would slowly retool myself into an IT Compliance professional and possibly try to stay that way for as long as possible. There are endless IT certifications to attain, in fact just before Law School, I got TOGAF certified so I am able to talk convincingly about Enterprise Architecture ( Most epic bullshit in the IT world which I'm glad did not catch on ).

But Fuck You money sometimes make you do really dumb things, often because you can and most folks, well, can't.

Legal work is so disjoint from my circle of competence as an engineer and a personal finance hobbyist, that I think I've been striving to promote my incompetence and being a sucker for punishment.

So, this chapter has a good point. I've been too focused on my deficiencies. But a lot depends on how you see what your circle of competence is.

If I see my circle of competence as IT, then I'm probably a real idiot for running to SMU to do my JD program. If I see my strength as learning new things and find synergies in different disciplines regardless of what kind of career I will eventually have, then I might have something to console myself with.

But still, thank god for Fuck You money. Nothing make idiocy viable as much as passive income.

A training contract is tough and pays less than what a domestic help gets, but I can survive this !

And I think there's a seminar on Legal Tech this weekend.

Maybe I'll find my niche there...

Why Singaporeans tolerate inequality.

You see that parade of academics and rhetoricians rail about inequality in Singapore. Social commentators, however, are less willing to discuss the actual solutions to reduce the effects of inequality.

My personal belief is that Singaporeans on the whole are fine with inequality.

Yes, some Singaporeans will become scholars and yet some turn out to be merely statistics.

Nicholas Taleb's latest book Skin in the Game shed some light about the kind of inequality that we tolerate against the kind of inequality that should not be tolerated.  As it turns out the gap between the rich and the poor is a distraction that liberations employ to justify massive wealth transfers between the rich and the poor.

The is a more insidious kind of inequality at work. The concept Taleb employs is ergodicity.

Singaporeans can tolerate inequality so long as access to the upper classes is not blocked. Another words, the son of a taxi driver or a single parent family can rise up in society to become a Minister today.

This not only means allowing smart and capable guys like Chan Chun Sing to rise, it also must allow the so-called rich to fall.

Four years ago I retired because I was effectively financially independent. As a deliberate tactic, I ensured that my monthly dividend flows were about the same as the Singaporean household income statistic when my whole family got off the salary bandwagon. Four years later,  after law school, my dividend flows have gone up and so has my portfolio size ( thanks to some of my dabbling with leverage ).

At this juncture, I can imagine a liberal reading this and declare that a passive income investors will need to be redistributed to the poor.

But as it turns out, my dividend flow has been dropping relative to the household income for the past 4 years. There is a steady $1000 gap between what I collect and what most households earn every month now. This is one of the reasons I want to return to the workforce in spite of spending well within my investment income, Singapore society is the kind of society that does not let it's people rest. Even financial independence mean a gradual dropping of one's ranking relative to others.

So I have to pick up a McJob to remain average and respectable in this society !

So while our system introduces a substantial gap between the haves and have nots. Membership of the haves is open to everyone.

Which brings us to solutions which can make us uncomfortable and require the sacrifice of political capital.

The government cannot just create a system where the poor can rise to the ranks of the rich.

The rich must be able to fall.

Like many of you investors, wealth redistribution is something I would never support. I earned my wealth and my family has been becoming "poorer" over the past 4 years while I retooled myself to become a lawyer. Getting rid of assortative mating and mandating RGS girls take on ITE husbands is also impossible given that assortative mating contributes to 40% of inequality.

For a start, I can think of two subtle changes :

One possibility is that legacy admissions must be banned in Singapore. It does not make sense for the ACS boys who bullied me in the 1980s get a free pass to admit their kids to the ACS franchise and continue to benefit from being part of such an illustrious and well-connected alumni. This has to be earned and should not be a right based on a person's bloodline.

Another possibility is that Government Gebiz system limit some bids to companies of a specific range of sizes rather than favour larger companies. If some tenders are so big that a company needs to meet a paid up capital threshold to bid for the project, we have to accept that some projects can be so small that only a company that is small is allowed to bid for it. Readers in government can confirm with me as to whether this practice already takes place.

You see, you don't see Kuik Shiao Yin fighting to discuss these reforms in Singapore society.

It's always about the problem, never about solutions beyonds raping our reserves.

Two abuses of words and labels

Let's go back to Budget Debate and how much Western educated liberals are working so hard to convince policy makers to start opening up our coffers spent the monies painstaking raised by the Singaporeans who came before us.

My first example is this stinker from the LKYSPP.  It is disgusting that this drivel is even associated with the name of our first Prime Minister.

The thought experiment is simple : Three children are fighting over a flute. Child A can play the flute. Child B made the flute. Child C cannot play or make flutes. The idea is that different people have a different ideas as to who should own the flute.

My personal belief is that the flute can either be given to Child A or Child B, but if given to Child A, then Child A is obligated to play sit o that all children can get to enjoy the music.

What I took offence about is that the analogy uses children implying that all policy decisions made by the powers to be impact only innocent parties.

Humanity is seldom innocent and blameless. I know because I now spend time in Family Court.

Find me a poor person struggling to overcome their personal circumstances and I will find you an irresponsible father who spends his days in Geylang and then complains that his children do not want to look after him.

I could have used a different thought exercise. You have three tumours but only the budget to remove one. Tumour A is benign. Tumour B is benign but awful to look at. Tumour C is cancerous and awful to look at. Which tumour do you eliminate ?

This evokes a different set of emotions entirely.

My second example is Kuik Shiao Yin who probably thinks that real life is as easily solvable as simply writing a GP essay. Some articles on her latest speech can be found here.

My beef is that allocating 50% NIRC is an arbitrary figure. Who died and gave Kuik the right to say that decreasing spending on the present is pragmatism whereas the opposite is being idealistic ?

I think no one has right to arbitrarily label a mathematical exercise. I think decreasing the NIRC cap to 40% is prudent and increasing it to be irresponsible. Does that make my label better than Kuik Shiao Yin?

Anyway, win or lose, we can always duke it out at the ballot box during the next elections.

Oh, except that Singaporeans never did elect Kuik Shiao Yin.

And Happy International Woman's Day !

So liberals, can we stop encouraging the rape of our reserves for a change ?

See the use of words matter !

The Art of the Good Life #13 : Fuck You Money

Because this is a financial blog, I would say that this chapter is the only disappointing one so far.

The author positions fuck-you money as having one year of living expenses so that you can say "Fuck You" to your asshole boss and then storm out of the office never to come back to a dysfunctional workplace. 

What a horribly bad idea. In this age of tech disruption, some knowledge workers may be unemployed much longer than a year and this idea might only work in a welfare state. Alternatively, you can get an Uber license.

A better solution is to accumulate enough fuck you money so that your dividend income is equivalent to the salary where future salary increases lead to diminishing returns in personal happiness. This translates to about $75,000 in annual income. As it turns out, investing a million dollars at a return of 7.5% will be able to do exactly that which is why it is unwise to scoff at people who aim to become millionaires in society today.

A million dollars is not very meaningful, but $75,000 in annual income without lifting a finger is quite a remarkable

For most ordinary people who are not investing superstar, thanks to Budget 2018, the Lion-Philip SREIT ETF no longer pay 17% taxes, so you can invest your money tax-free and receive dividends of more than 5% with a reasonable prospect for capital gains. To generate $75,000 a year, you will need a portfolio size of $1,500,000. This is challenging for a single person but for a working professional couple.

The rest of the chapter has some down to earth advice for people :

a) Don't react to minor fluctuations to income or assets. I think it's easier to avoid thinking about market volatility if you have a day job and a large asset pool.
b) Don't compare yourself to the wealthy. Also hard because you are trying to become wealthy. I think its better not to compare yourself with the poseurs because the truly wealthy are quite frugal and have very little to show.
c) Live modestly. Which I thoroughly agree.

The Influence of Religion on Personal Finance

Today's topic is going to be a teensy bit controversial, so I put up a picture of controversial person. Some other financial bloggers have commented that I am a Kong Hee like person when I give my talks, I am quite flattered by that remark. In fact, I followed Kong Hee even as an atheist when he talks about modern topics like postmodernism. There is something mesmerising about his speaking quality, something I was unable to experience even after spending 10 years with the Toastmasters movement.

The working paper is entitled Randomizing Religion : The Impact of Protestant Evangelism on Economic Outcomes by Bryan, Choi and Karlan. This paper is making huge waves in social science circles and have been mentioned by Tyler Cowen and the Economist.

Internal Care Ministries (ICM) collaborated with a team of economists to spread religious teachings to 6000+ Filipino families, then based on what was taught, the economists tracked their economic outcomes. This study would confirm the impact of religious values on economic outcomes.

To a personal finance geek like me, this is seriously awesome shit !

The religious values curriculum is covered by a pastor. There is also a livelihood segment on what good works should be where some common sense advice of money is taught. The researchers are highly meticulous and a large part of their work was done to disentangle the effects of religious values against livelihood advise.

The results are a goldmine that can lead to future study :

Having stronger religious values do, indeed, lead to higher incomes largely because it makes religious followers grittier. However, this effect does not translate to greater wealth, the researchers argued that there was no time to measure this effect.

However, religious values training made participants more aware about their relatively economic statuses and made believers a lot more discontent with their lot in life. Religious training reduces a participant's perception of well-being. ( These are poor Filipino villagers, after all. )

I am going to just stop here because I don't want to kick a hornet's nest and draw any conclusion that is not written in the working paper.

I leave it you readers to think about how your personal values has affected your relationship with money this weekend.

The effects of your religion and values cannot be discounted when you think about how they have shared your economic destiny.

The Influence of Language on Personal Finance

This is the single most momentous event in Fantasy Literature with Legend of the Condor Heroes being successfully translated into English. Translation of this work is so difficult and thought to be previously impossible, even the Economist published a book review last week. I was never able to watch a complete series on this storyline so I was kept mostly in the dark when it comes to Jin Yong's work, having only completed the Duke of Mount Deer series which starred a young Tony Leung Chiu Wai in the 1990s.

Reading this in book form is epic. Imagine the possibilities - we could read the same book as part of English Literature class but also as part of Higher Chinese. This will resolve the issue of CL2 being boring. Dream of the Red Chamber is about an effeminate man-child and his side chick, nothing can make you lose interest faster than being forced to read this kind of drivel. Legend of the Condor Heroes features non-stop Kung Fu fighting that pits the Seven Freaks of the South against the Twice Foul Dark Wind. Even Tolkien is boring compared to Jin Yong.

I see my daughter's love for Mandarin being killed slowly by the current education system where every mis-stroke is being cruelly penalised in Primary 1. This is slowly driving my daughter to become a banana person like me.

Ok, let's talk about language and personal finance.

The impact of language on personal finance is profound and social science is only coming to grips to this new reality. In a working paper entitled The Effects of Language on Economic Behaviour : Evidence from Savings Rates, Health Behaviours and Retirement Assets by Keith Chen of Yale University, thinking in particular language can shape your savings behaviour.

Some languages, like English and French, have a specific grammatical framework to mark out a future event. eg. I will be going to a seminar. Clearly the seminar will happen in the future.  Other languages like Mandarin, do not have a future tense, Wo3 Qu4 Ting1 Jiang3 Zuo4 does not clarify whether the speaker is going to seminar right now or in the future. You preface it with Ming2 Tian1 if you want to specify the time as tomorrow.

Social scientists discover that people who think in a language like English and French have a tendency to distinguish their future selves from their present selves. As a consequence of that, the savings rate and accumulated assets of these people are low. In contrast, folk who think in Mandarin, German or Malay have higher savings rates and larger accumulated asset base because the delineation of the future self with the present self is less clear. Even within a country like Switzerland, German speakers were found to have higher savings rates than French speakers.

The current explanation is that we will take action that will benefit our future selves if the future does not seem to distinct from the present.

Some findings within the paper is really surprising.

There are larger proportion of English speakers in Singapore compared to Malaysia. And as a consequence of that the paper reports that the savings rate of Malaysians exceed Singaporeans !

I'm sure the folks who are most excited about this finding might be the old school Nantah Graduates because it vindicates the bilingual policy. 

But can making your children act and function in Mandarin or Malay make them more conscientious and money savvy?

This is, indeed, a possibility.

Hopefully, this weekend, we can explore the influence of religion on our personal finances.