HALF A MILLIONAIRE

My personal challenge is to amass $500,000 in cash, and I call it “the game” (please read the June 14, 2009 article: “The origin: A game within the game”). Although it has been only three months, I feel as though it has been three years because I have financially scrutinized myself. It has been very difficult, but I am determined to win it because I know that the greatest reward is waiting for me at the end of the rainbow.

My Expenses

Overall, everything has stayed the same except for one unexpected event that occurred in July when our air conditioner broke down on a Saturday. I was charged a total of $300 ($125 for emergency service and $175 for labor and parts). The technician advised me to trim the bushy shrubs surrounding the external unit because they were blocking airflow. The obstruction forced the unit to work harder and ultimately caused it to crash. 

My wife understands the reason why I am saving money, and she is very supportive. However, because she is a serious believer of branded products and organic food, it is very difficult for me to convince her to go with the cheaper ones. For example, we buy organic milk, eggs and cheese that cost twice as much compared to the regular products. I disagree, but I am willing to compromise because I simply believe that nothing in life is more satisfying than knowing that my wife and daughter are happy. I just have to find other ways to increase my take-home money.

My Income

About a month ago, I accepted a new position that would allow me to pocket $1200 more per month. The bad thing about this new job is that every morning I have to drive 25 miles to go to work (50 miles both ways). Usually, it takes me about 35 to 45 minutes depending on daily traffic, and I don’t drive fast at all. So far, I am happy with my decision because the new working environment is very good, and the company’s benefit is more lucrative. Also, I have a chance to see a larger and more technologically sophisticated operation that will definitely broaden my experience.

To create more money, I continue to invest in dividend-paying stocks because I believe that the stock market will bring me home in the long run. Currently, the total number of shares is 1505 compared to 1192 in June, 2009. My goal is to reach 2000 shares by the end of 2009, and I am waiting for the market to correct itself in the coming months.

On the other hand, my rental unit has been vacant for about two months. Basically, I am giving back the profit that I have collected when it is occupied. My goal is to hang on to it for five more years, and I will sell it. One can make money in this business, but it requires that one must take control of it and devote one’s time to it. And, time is what I don’t have because I am holding a full-time job. I believe that if one has money and wants to invest in real estate, now is the time.

My Debt

In June of 2009, the total debt was $365,485, and as of today it is $361,657, a 1% decrease. I know that I must be more aggressive in paying down my debt because it eats up a big chunk of my income. However, currently, I am favoring the stock market, so I am keeping my cash and waiting for the right moment to pull the trigger. Although I don’t believe in ”good debt”, I understand that it is alright to carry the debt because it is tax-deductible.

My Self-evaluation

Progress is slow, but I am getting closer to the finish line. I must keep on fighting to win, and I know that I will continue to fight because it has been fun for me. In the end, it is my game, and my enemy is myself.

Reality 1: A mother giraffe gives birth to two calves. After a few attempts, the first one is able to walk on its four legs. However, Wolly, the second calf, cannot stand up because he has a deformed leg. His mother becomes worried, so she pushes Wolly to keep on trying. With his mother’s encouragement, Wolly stands up and falls down multiple times. And, even though he is tired, he does not give up. However, his mother’s patience is running out because she senses that a pride of lions is approaching. To save herself and Wolly’s newborn sister, she must leave him behind. As the mother is leaving, my eyes are welling up with tears. That’s right. I cry while watching the Discovery Channel. I watch the lions eat Wolly. I cry and comfort myself, “it’s life”. I do not hate the lions because I understand that they must eat to live. I wonder if the mother giraffe and the surviving calf will remember Wolly. I wonder if they will hate the lions. I wonder if they will tell other giraffes about Wolly. I wonder if they will be happy without Wolly. I wonder if the lions feel guilty about eating Wolly.

Reality 2: When you invest, you must leave your emotional feelings behind. You must understand that everyone wants to win. No one wants to be Wolly. The investment institutions are like the lions. They will mercilessly eat you up even though you only have several thousands in your start-up portfolio. There is Uncle Sam who always wants a piece of your profit. The stock brokerage firms take money from you via fees. The CEO and CFO can steal money from the company, and you will end up with a worthless piece of paper. Certainly, you do not want to be one of the last passengers to jump off a derailed train. Therefore, you must do your homework. More importantly, you must have a strategy that allows you to keep on  playing the game. 

My strategy: My goal is to accumulate enough money so that I can spend more time with my loved ones. Therefore, I invest in companies that I believe will continue to generate cash for a long, long time. For example, I believe that we will keep on brushing our teeth for years to come. I believe that alcohol will always be part of our society. We will continue to wear clothes and shoes. We will always need to eat. Our energy demand will always increase. 

The next step is to choose my entry point. I believe that now is the best time to buy stocks because the market is correcting itself. Sometimes I wish for the market to go down more because I want to get more shares for my money. And, because I am a new investor with a long-term goal, bear market becomes the best entry point.

To add some fun, I also do short-term trades. I follow about fifteen solid companies whose stocks move sideway, meaning it goes up and down within a price range. If I see one that is currently at the low end and its business is still the same, I will buy and wait. After 9 to 12 months, it will go back to or near the high end, and I will sell. Sometimes, it will take longer than a year, but I am not worried because I know that the company will not suddenly disappear on the face of the earth. Again, I only invest in companies that I can understand. 

In my opinion, investment is more about mentality. I treat it like a game. The money that I make is the score. And, I love the idea of making money while I sleep because I know that my investment is growing. Although I love to have a lot of money, I do not allow it be the center of my life. I spend almost all of my free time with my loved ones because they are the reasons that I exist. And, because I place my life upon the foundation of my family, life becomes very simple. Therefore, I am able to love both, Wolly and the lions.

Scenario 1: It is June, 2004. Mary sells her house in California and makes $250,000. She wants to multiply her money quickly, so she purchases ten brand new houses in Texas and rents them out. Each house is priced at $120,000, so she puts down $20,000 and finances $100,000 at 6.25% for 30 years. She and her family also decide to move to Texas, so she uses the leftover money ($50,000) as a down payment to purchase a $250,000 homestead house. She has to finance $200,000 at 6.25% for 30 years. she does not have any problems finding a new job in the new state because she is an experienced manager. However, her husband does, so he stays home to take care of their kids. She brings home about $4000 per month.

Calculations for Mary’s real estate investment: The monthly rent per unit is $1200. The mortgage payment for each unit is $615. The property tax is $200 per month per unit. The property management cost is about 10% of the rent or $120 per month. The insurance cost is $65 per month per unit. The total cost per rental unit is $1000 ($615 + $200 + $120 + $65). The positive cash flow per unit per month is $200.

Calculations for Mary’s personal expenses: The homestead mortgage is about $1200 ($200,000 at 6.25% for 30 years). The monthly combined cost of property tax and insurance is about $400. The total cost of other personal expenses including food and utilities is about $1400 per month. Therefore, every month she has about $1000 leftover from her take-home money ($4000 - $1200 - $400 - $1400). Let us assume that her ten rental units are “always” occupied, so she would bring home about $2000 per month ($200 per month per unit x 10 units). Her monthly total take-home is about $3000 ($1000 + $2000).

Scenario 2: It is June, 2004. John, a more conservative investor, has $250,000 in cash. He pays $200,000 for a brand new house to live in and puts the $50,000 leftover money in an online saving account that offers a 3% annually compounded interest. Let us assume that John and Mary are in the exact situation. He works. His wife stays home with their kids. Therefore, John’s monthly total take-home is $2200 ($4000 from his job - $400 cost of property tax and insurance for his house - $1400 cost of food and utilities). I would like to point out that John’s homestead house is cheaper than Mary’s, but to avoid complex calculation I am using the same number, $400, for the cost of property tax and home insurance in both scenarios. John probably pays less for utilities because he owns a smaller house, but I would like to use the same number of $1400. Also, let us assume that John will not touch his $50,000 emergency money in the online account for 30 years. It will become $121,363.

To be a successful investor, one must foresee future risks. Let me reveal several things to you and you will understand my points. What if I tell you that in order to finance the ten rental units at the same time Mary has to use 5-year adjustable rate mortgages. Now, it is 2009. Will she be able to refinance them in the current situation? What if I tell you that currently five of her ten rental units are vacant. Where can she find the money to cover the mortgage payments? What if I tell you that she loses her job in 2009. Of course, she can always find another job, but it will take several months. How can she take care of her family during these months?

I am like John. I believe that wealth is accumulated gradually over a long period of time. To become wealthy, one must understand two concepts: cash flow and the value of time. Although Mary’s monthly total positive cash flow is higher than John’s ($3000 vs $2200), $2000 is produced by her real estate investment, which is not very stable, because it is based on the assumption that all of her ten units must ”always” be occupied. For John, he can invest his $2200 in the stock market, which of course has also gone down in the past couple of years, but his overall financial situation is still more stable than Mary’s in 2009.

Time can be a very difficult concept to understand. However, for me, time is life. One’s time starts when one is born, and it ends when one is dead. During this period of life, one must decide what is most important and what is not. Each person has his or her own perception about life. Therefore, each person assigns a different value to his or her time. Some believe that eventually they will die anyway, so why not live for the present. Others love to plan for the future even though they know that death is inevitable because they enjoy the feeling of being in control of life. There is nothing wrong with living for the moment. And, it is not always right to have a plan for everything in life because sometimes it is fun to just go with the flow. In other words, one must be fully aware of one’s past, present and future. What does it have to do with making money? When one understands and loves life, one will have an endless source of energy to pursue one’s financial goal. Gradually, as one becomes financially richer, one will understand that money is not the winning prize, but the quality of life is. I know that not all rich people are happy, but I also know that rich people do not have to worry about housing, healthcare, food and clothes. Because they have fewer worries, they spend the extra “time” seeking new ways to make more money. On the other hand, the poor spend their “time” working at minimum wage at fast food restaurants to cover their basic needs. I am not going to waste my time to explain why there is inequality in this world. However, I would like to point out that to win the American game one must understand the value of one’s time. One must have the desire to be wealthy because wealth will give one more “time”, not just money, to be with one’s family.

Several years ago, I met an insurance agent at a friend’s party. He was my friend’s cousin. He introduced his products to me and convinced me to purchase a whole life policy. I had to pay $300 per month for a coverage of $500,000. He explained to me that only about $35-50 would be used to pay for the insurance policy. The rest would be invested in stocks and bonds, and I would be able to take it out in the future. Although I was single, I thought it would be nice to leave something to my family if I died, so I bought the policy. At the time, I was clueless about personal finance. Also, the monthly premium did not affect my budget because I was bringing home a sizable amount of money. However, about 18 months later, while planning for our wedding, I began to look at my personal expenses because I wanted to gather up some money. After researching and reading about life insurance online, I realized that the $300 monthly premium was a waste of money because I was healthy and in my late 20’s, so I did not have to buy a whole life policy. Therefore, I immediately cancelled it. When the agent and his boss asked me for the reason why, I told them that “it is not financially smart to carry a whole life policy in my situation”. However, I knew that I needed to have life insurance because I was starting a family. Therefore, I purchased a 30-year term life insurance for about $50 per month. And, I decided to use the same agent because, in my view, he did not do anything wrong. I was just financially uninformed. After the incidence, my interest in personal finance grew because I learned that knowledge saves money. Although I only got about $800 of the $5400 total premium back, I knew that cancellation was the right thing to do. I lost $4600, but I will be saving about $90,000 in my lifetime ($250 per month x 12 months per year x 30 years). I am aware that my term life insurance will end after 30 years, but I am confident that I will have more than $500,000 when I am 60 years old because I am taking control of my money, now.

In order to control one’s money, one must learn about money. I have been educating myself about finance by reading about and paying attention to financial news. The 2008 financial crisis teaches me so much about how the economy as a whole works, and I have become more knowledgeable about the game and its players. Interestingly, it was a man-made event. In summary, to get the American economy going after 9/11, Alan Greenspan lowered the interest rate to encourage people to buy houses. when home building was strong, jobs were created. When demand for houses increased, the housing price went up. People became elated, so they took out money from their home equity by refinancing their loans to remodel their houses or to pay their credit card debts. In other words, people were on a spending spree. Also, people were flipping houses to make quick money. Mortgage loan officers approved anything and everything to earn a commission fee. Investment banks became creative. They bought these mortgages, good and bad, and bundled them together to create “investment securities or products”. These packages were sealed with a “healthy and good” stamp by financial rating companies based on a mathematical formula that assumed “the housing price will never fall” and then sold to investors, domestic and abroad. Eventually, when the subprime or bad-credit borrowers failed to make their monthly mortgage payment, the domino effect began. Most interestingly, no one questioned Alan Greenspan’s interest rate cut policy in 2001 because everyone just followed. 

Millions of American lost their houses because, in my opinion, they were just financially uninformed. They jumped into the game without understanding its rules and players. Probably, some of them are still hoping that the government will come up with a plan to save them. My advice for them is “cut your loss and learn to question everything in the future”. When someone says something is good, it does not mean that it is really good. Let us use the well-known investment vehicle, 401(k), as an example. It gives one a chance to save money for one’s retirement. One can get some free money from his company’s match. The annual contribution amount lowers one’s taxable income. What are the bad things about 401(k)? Is it a perfect way to secure one’s retirement? I do not have answers to these questions because I am not a financial expert. However, I am mindful enough to ask these questions. One thing that I don’t like about 401(k) is that I am not allowed to take out the money until I am 59.5 years old. Many things can happen in the next three decades. Why should I trust the manager who takes care of my money? What if I can keep the money and invest on my own and make more money now? I ask these questions because I want to find other ways to grow my money and play the game on my own terms. Personally, I do make 401(k) contributions, but I only put in enough to get the company’s match because at the moment I want to keep cash in my hands for other opportunities. I believe that if one wants to invest in the stock market, the time is now. The Dow is at 9000, but I am not excited because I want it to go down to 4000, so I can buy some more. Many are afraid of the bear market, but I see it as an opportunity because I am more knowledgeable about the investments that I want to put my money in.  

In life, sometimes, it is very difficult for one to take the less traveled road. However, when one arms oneself with knowledge, one will have the confidence to do it. In the end, money is just money. For me, it is a game. To win this game, I must amass $500,000 in cash.

Although I am not a fan of bicycling, Lance Armstrong’s performance has recently captured my attention. He is a seven-time, Tour de France champion. Even more impressively, he won the title seven consecutive years from 1999 to 2005. He took a four-year break. And, currently, in the 2009 Tour de France, he is third overall and only eight seconds behind the leader (www.versus.com). Lance’s performance shows that if one is prepared physically and mentally, one will reach one’s goal. Many question his integrity, but I don’t because I can imagine him fighting the mental demons who tell him to give up as he climbs the mountains. To me, he is a fellow human being who is testing his limit. As a competitive person, I want to see him win it again. However, the other part of me feels that it is more glorious that he does not win because he has already won it all.

I am not a professional athlete, but I do understand what it takes to overcome my fears and weaknesses. When I was in college, I used to run five miles everyday to maintain a strong body and a fresh mind. However, it was not easy in the beginning because I did not have the stamina to finish five miles. First, I ran two laps. Then, after several days, I added an extra lap when I felt that I could do more. As I was running, I realized that mental toughness was the key to finishing my twenty laps. For example, sometimes, I did want to give up after the fifteenth lap because my legs were heavy and I was out of breath. My mind wandered off with excuses. And, I did stop a few times. However, I kept on fighting the next days. Eventually, I achieved my target of twenty laps.

Building wealth is much more difficult than running laps because it takes decades for one to reach the finish line. At the moment, I am feeling discouraged because the goal seems so far away. I feel that I am running a marathon backward. In this “financial” marathon I should expect to feel tired in the beginning and that the end will be easier. I must stay with my plan which is to “grow money, eliminate debts and control expenses”. In the past month, I could not do anything to my expenses because they were very fixed. However, I did deploy $2150 to the stock market to work for me. The market has been heading south in the last four weeks, so I am happy because it is a good opportunity for me to buy more shares. Again, strategically, I have chosen to invest in the stock market because it is one of the necessary routes that will lead me to my financial goal. In terms of reducing debts, I paid $300 extra toward the principal of my home mortgage. Although I felt that the amount was like “a raindrop in the Pacific ocean”, I wanted to pay because it brought me an inch closer to my finish line.

Lance won Tour de France because he prepared himself. He won because he had a game plan and followed through with it. He won because he enjoyed defeating his demons. He won because he was able to free himself from winning. He won because he understood that there was no one left to defeat but his weak self. I have not reached the same level of self-confidence in finance as Lance has in his bicycling career, but I know that I eventually will. In the meantime, I am enjoying my time with my loved ones.

In college, I had three roommates. We shared a studio-loft apartment. We put two standard bunk beds in the upstair loft, and we used the downstair studio for studying. They often went home during weekends because their parents lived in nearby cities. Sometimes, they teased me by demanding that I should pay higher rent because I used the unit more than they did. One weekend, I had the flu. I was very tired, so I immediately went to bed after having taken some Theraflu. I woke up on Saturday and felt better symptomatically, but I knew that I was still sick. Without an appetite, I stumbled to the kitchen and filled up my stomach with a bowl of instant noodles and went back to bed. I woke up and fell back to sleep several times without eating anything because I was too weak to get out of bed. When I saw sunlight again, I knew that it was Sunday. I allowed my lifeless body to slide off the top bed and onto the floor. I began to crawl down the stairs. As I was lying on the floor of the studio, the front door opened. Vince, one of my roommates, came back to campus early because he wanted to catch up with his reading assignments. I told him that I was hungry and asked him to make a glass of milk for me by mixing condensed milk with boiled water. He did. A couple of weeks later, I recovered fully. And, a decade later, I am still talking about my friend.

The foundation of our society is individualism. Each of us has the right to “life, liberty, and the pursuit of happiness”. We have the freedom to express our own individuality. We have conservatives and liberals. We have the rich and the poor. I will never trade our system for anything because it is an accurate representation of life. Only through struggles and competition we can grow and improve. Personally, I believe that the purpose of my life is to fight and thrive because I do not want to waste the chance that America has given me. In other words, I do not want to lose. And, unfortunately, in this fight, there is no tie. Some complain that the system is unfair. Some gripe about being born at the bottom of chain. And, perhaps, there is some truth in these cries. However, life is more interesting when we accept its challenges. We shall not rely on the government to solve our problems for us because it cannot even take care of itself.

As of July 4th, 2009, our national debt is approximately $11.4 trillions (U.S. National Debt Clock). Many financial experts argue that it is not a big problem because we are still capable of paying the annual interest of about $450 billions. We scold our uninformed Americans for taking out interest-only mortgages, but we have been allowing the Federal government to do it for more than two centuries. Personally, I don’t think the politicians know how to solve the problem because it has ballooned so quickly. And, none of “the patriots” is willing to take a political risk. Tomorrow, President Obama will whisper sweet birthday-wishing words into our Mother’s ears. He will retell us the stories about how our great founding fathers defeated a powerful king 233 years ago and how we freed slaves. And, we will applaud with our wrists and ankles shackled by debts.

Tomorrow, I will celebrate the 4th of July with my family because to me it symbolizes freedom. I am free to express my individuality. I am free to take care of myself first. However, besides freedom, individualism requires compassion to flourish. I do not want to credit our founding fathers for having created one of the most compassionate country in the world, but it seems that they did everything right. They did not ask us to be compassionate. They only gave us freedom, and, somehow, when we all strive to search for our own “individuals”, and when we truly understand the meaning of individualism, we automatically become a compassionate people. Perhaps, during the fight to become who we are, we discover the tasteful fruit of compassion. Personally, I think that individualism has pushed me to become more compassionate. For example, I want to help others understand the meaning of individualism, too. It is not selfishness. It is self-improvement. When one is independent, one feels empowered. And, when one is powerful, one will offer others “a glass of hot milk”.

A farmer lost a white mare, so he put on a sad face wherever he went. His neighbors comforted him with nice comments when he complained about his bad luck. A few months passed by, and the man seemed to have forgotten about his misfortune. Amazingly, one morning, while feeding his cattle, he heard horses neighing. He quickly ran to the front gate, and his white mare was standing next to a black stallion. Apparently, the lost horse had brought home a boyfriend. The farmer felt blessed, so he shared his fortune with his neighbors. Some were happy for him, but a few of them were jealous. His son loved the black stallion and begged him for it. The happy father gave his only son the black stallion and instructed him to take good care of the animal. One afternoon, neighbors knocked on the farmer’s door and told him that his son had broken a leg because he fell off the black stallion. The farmer became sad and started to complain about the misfortune that the black stallion had brought to his family. A few years later, a war broke out in the region, and the farmer’s son was exempt from the draft because he had a broken leg. The farmer was joyful, so he shared the good news to everyone.

The above story teaches us a few financial lessons. For example, when one invests in the stock market, one must have the determination to cut losses and move on. Learn from mistakes, but don’t dwell on them. Do not complain about one’s misfortune, but do something to change the situation. Do not tell your neighbors everything about your life because some can become jealous.

Personally, I once acted like the farmer. It was raining cats and dogs, and I decided to drive home after a long day because I did not live very far from work. Unfortunately, my car dipped in a pool of water on the road, and the engine was dead. I quickly escaped as the water rushed in from the engine compartment. It was dark, and I was soaked. I spent a few hours working with Geico to report the claim and to direct him to where he should tow my brand-new car. I was very angry, so I cursed at my stupidity for leaving work in the rain. I blamed every single drop of rain in the sky. Financially, I knew I was in trouble because I still owed money on the car. A month later, the insurance company gave me a check for about $10,000. It was a total loss. I had to finance $24,000 to buy the car in the beginning. I had sent in my car payments for more than two years, so I owed about $12,000. The estimated value of my car at the moment of the accident was about $22,000 because the traveled milage was about 30,000 miles. I knew that I had lost money, but the situation was not so bad. I told the sky that I was sorry for having pointed “the finger” at it. I had to find a way to take advantage of the situation. What should I do with the money?

I spent several days contemplating the problem. I decided that I would not buy an expensive car, and my first choice was Honda Civic because it would burn less gas and was known for durability. I went for a brand-new Civic because a used one was only a couple of thousands cheaper. I paid about $14,000 for it because I bought it from an online fleet. I financed the entire amount at 3%. For my previous car, I had to pay $450 per month, but for the new one my monthly payment was just above $300. I saved about $150 per month, and I had a vehicle to move around. I was elated.

I did think about using the entire ten thousand dollars to pay for the new car, but I felt that I needed to invest it in something. And, I did. I used it as a downpayment for my first rental property. I bought a small, but brand-new house located in an expanding city where there are two large universities and new business developments. It generates about $200 per month when it is occupied. However, because the renting market has become very competitive, I am just making even in the past several years. Although it brings in $2400 per year when rented out, a few months of vacancy will drain all of the profit. My plan is to hold on to it for about ten years, and then I will sell it. Sometimes, I thought if I had made a mistake by investing in real estate when at the time I did not know much about the industry. I have learned so much since then, but this current financial crisis has taught me the most valuable lesson of all, “don’t be too greedy”. I felt lucky because I bought the house in an area where the housing market had bottomed. The price could not go lower than what I paid for.

Regardless, I feel that I have become a smarter investor, who researches before investing. I feel that I am able to take any monetary loss because I have found the source of happiness, which is hidden within life itself. We all carry boulders of burden in life. The secret is to identify and to let go, and life will become more simple and beautiful. When one is truly happy, a million or half-a-million, it does not matter anymore. For the game at hand, my target is $500,000.

Having a monthly budget is very crucial because it keeps one’s spending habit in check. The monthly expenses listed in the below table are very much constant. The areas that we can cut back are cell phone, cable, internet and home phone. Our family’s cell phone plan is the cheapest one. We need our home phone for international calls. We do follow our favorite shows on television. We use the internet for everything. In the future, we will probably cancel our landline phone because we can use the internet to communicate with our friends and family abroad. However, sometimes it is more convenient to phone someone directly than to wait for each other to get online. Therefore, we are still undecided about the issue.

It is totally true that a budget can help one see and understand one’s monthly expenses. However, I would like to direct this topic toward one’s internal self. It is all about focusing on the right areas of life. For me, my health is my first priority because I love life, so I exercise to strengthen my body and mind. A strong spirit keeps mental diseases away and guides one toward true happiness. When one is truly happy from the inside, materialism vanishes. Therefore, the risk of overspending decreases. It is like driving a car. A first-time driver always meticulously follows the lanes on the road because he wants his car to be perfectly in the middle of the two white lines. However, for an experienced driver, he is able to navigate freely and safely on the road without focusing on the white lines. Personally, I believe that keeping a monthly budget is important because it gives a summary of one’s expenses and prevents one from overspending. The numbers in my budget are my white lines, and I am an experienced driver.

A friend tells me that money is the most important thing in life, and he just wants to concentrate on making money because without it he cannot support his life. I agree with him that we all need to have money to support our lives, but it does not have to be first on our list. Life is a number line that starts with birth and ends with death. Along it, one will have to make the right choices to be truly happy. My goal is to be half-a-millionaire. 

The current economy pushes the poor back while for the rich it is a great chance to get richer. The poor man has to worry about food, rent and healthcare cost while the rich sits silently and waits for the right moment to snatch the first opportunity of making a profit. In America, that is how the game is played. The poor man can: 1) complain about his fate, or 2) find a way to become rich. My choice is obvious.

When one is at the bottom of society, education is the only lifeline. My strategy is to study something that I enjoy and at the same time make enough money to support my life. No one wants to work for someone else, but sometimes one needs to take this necessary step to strengthen one’s financial position before venturing entrepreneurship. In other words, I must, first, build myself to become a cash machine because no one will hand me a house or money. I believe that investing in oneself is the best investment because the rate of return is infinite. Besides the money that I make, education has expanded my knowledge of life. I am able to understand its value and beauty.

Although we have some extra money left over after having paid our bills every month, saving it will take decades to reach half-a-million. If I am to put $1000 per month in a box, I will win this game in about 42 years. If I put the same monthly amount in a saving account with an initial amount of one dollar that offers a 2% annual compounded interest rate, it will take 30 years to reach $486,818 (based on simple savings calculator at http://www.bankrate.com). If I invest $1000 per month in the stock market and ”assume” a 5% rate of return, I will earn approximately $400,000 in 20 years (initial amount: $1). I don’t see myself opening a business in the near future. Therefore, I am going to invest in the stock market despite its volatility.

My plan is to invest in dividend-paying stocks. I will focus on consumer staples, healthcare and energy sectors because I believe that people will continue to use gasoline, drink, smoke, eat, brush their teeth and take medications regardless of what condition the economy is in. Therefore, I believe that these three sectors are good for my long-term investing style. I can be a short-term investor at anytime. However, to achieve my objective, I want to put my money in the game as soon as possible because I have to rely on the power of compounding. These boring, dividend-paying stocks will become my cash machines. Currently, I own 1192 shares, which will produce about $1000 per year in dividends (see below table).

Real estate is good investment, but it requires much more energy input. It can generate a lot of positive cash flow if one knows how to do it. At the moment, I am not ready to undertake the risk of real estate investment although I have a rental property, which I use as learning experience. However, in the future, it is a good place to build new cash machines that will propel me closer to my financial goal.

Death is inevitable. I choose to be rich, not because of the money, but to show myself that I have the courage to play the game. You have the right to choose to stay poor for whatever reasons. As a reminder, this financial game is just a game within the game.

These debts have always been in the back of my mind for years. However, believe it or not, tabulating them has given me a sense of liberation because it provides a total picture of my situation. The numbers (see below table) do scare me, but at the same time they motivate me to fight. I realize that it will take decades for me to win this battle. Therefore, it is very important that I focus on the good things.

The house, located in one of the best neighborhoods, has been a wonderful place for my family and me. Although it is small, it has sheltered us and our memories. Despite the current financial crisis, its value has modestly appreciated. With the above reasons, I feel that the mortgage is a good debt.

Several years ago, I bought another single-family house to rent out. I hire a managing company to lease and maintain it. Although it generates a positive cash flow when occupied, it does not give me a good feeling at all. Perhaps, being a landlord is not one of my likings. I like to invest in real estate, but I feel that I am not ready for it because I am not always in control. In terms of investment, the mortgage for the rental property is a good debt. However, I will get rid of it when the opportunity comes.

My educational investment was one of the best decisions that I have made. It gives me a professional career that I enjoy and at the same time make some money to support my family and myself. I have no doubt that the student loan debt is a good one because education has opened many doors for me. Most importantly, it has armed me with analytical and critical thinking tools or techniques that I employ daily in the decision making process.

Credit card debt is bad, but in my situation it is acceptable because the interest will stay at zero for three more years. Although I am able to pay it off, I choose not to because I want to keep the money in my saving account to earn a few more coins. If one is financially disciplined, a credit card can be a good tool because it is convenient and can provide some free cash.

Although I have shown that my debts are good ones, I believe that it is much better to be free of financial obligation. If I had $500,000 in cash, I would pay off my debt immediately and restart. However, in reality, money does not fall down from the sky. I do know that I can eliminate my home and rental-property mortgages by selling both houses and, as a result, decrease my total debt by sixty-five percent, but I will not do it. To live is to make choices, and I feel very blessed to have choices in my life and the ability to choose. I must keep on fighting.