You are working hard in your career, in exchange for an income, hence it’s called hard earned money. It’s an exchange of a labor from you. Once you start earning money, you got to start deploying these money into the right place, so that it starts to earn money for you. Otherwise you might have to slog your whole life for money.

“If you don’t find a way to make money while you sleep, you will work until you die.”

Warren Buffett

If you want to retire, or even have a choice to do so, you have to find ways to make those money work for you.

Hence, when we are looking at money, I prefer to look at 2 things; the existing money which I had at this moment, and the future cash flow which I’m expected to have, predominantly from my working income. Therefore, it’s all about deploying these 2 money into the right assets which will eventually make money for you. You want to make sure you have a good balance with right optimization, such that all those money are working hard enough for you risk adjusted, and at the same time, you achieve a decent liquidity to cover for 99% of major catastrophe which may happen to you and your family.

First, you may want to look at your own personal balance as of today;

Non current and current assets

Non current and current liabilities

If you add all these up, it’s called your worth. If you subtract assets from liabilities, that’s your net worth.

What are the numbers? How about the ratios?

How much cash to worth are you holding? In cash, I’m referring to money holding in bank account, including your fixed deposit.

What I realize in many people’s balance sheet is, they are holding a lot more cash than they suppose to. As Asians in particular, we are cautious by nature, and hence that nature result in lots of cash piling in the bank and not working hard enough for us.

Imagine you own a property sitting on a leasehold land, and you vacate it all the time. This kind of asset is bound is depreciate over time, and not earning you anything at all. I doubt any one of us is going to do that if we do own such property, but that’s exactly what we are doing to our cash in the bank!

If you have $500,000 lying in the bank and doing nothing much for you, other than providing you a sense of security, the security fee that bank charges you is minimum $20,000 a year and compounding. This $20,000 is the opportunity lost for not doing anything. Put it there for 10 years, and we are talking about $200,000 lost in 10 years!

Therefore, you might want to start thinking about this sense of security and liquidity which the bank provide. Is there any other platforms which provide these 2 things for me? Have they existed for a long time? Are they credible? How do they make money? Is it sustainable? Just because everyone is doing so, doesn’t mean that you have to do same. Start doing some independent research for yourself, and you be amazed that there are other more reliable platforms for you to park all these cash and allow you to earn upwards of 5% p.a., and at the same time providing you with the sense of security and liquidity.

Sense of security is derived by knowing something. Humans often fear the unknowns. However, once you know the subject, and understand how it works, fear shall fade away and replaced with confidence!

How much cash should I leave in bank then? If you understand how the other platforms work, you literally would want to leave nothing in bank account, and perhaps, expense out all your purchases via credit cards.

Let’s start today by looking at your balance sheet now, and your expected net future cash flow, and start allocating your hard earned cash into the right assets!

PS: if you are someone who go nuts over numbers, the next best thing to do is to engage a professional financial adviser to give you the relevant advice.