Historical article note: This article was originally published on 2018-05-22. Rates, policies, home prices, statistics, product names and qualification standards reflect the environment at that time and may have changed. This archive is for historical record and general education only. It is not mortgage approval, investment, legal or tax advice.
The need for financial management will arise only when income-expenditure ≥ 0. Financial intelligence refers to financial wisdom, that is, how to transform existing resources into resources that can be used in the future. If your income is not high enough, there is no need to discuss the topic of financial management. Financial intelligence has little to do with people with low incomes. The biggest flaw in financial intelligence is lack of money. Do people with high incomes automatically have financial intelligence? If you have the opportunity to chat with some people with high incomes, you will know that, especially some professionals, most people are limited in financial intelligence by their profession. Very few high-income earners have financial intelligence themselves. Most of them leave their money to be managed by financial advisors whose income is lower than their own, or they buy whatever assets "others" tell them to buy. What is the investment effect? This is the second bruise, because people who follow the crowd are scarred.
Can the value of life be converted into market price? sure. There is a formula: your annual income divided by 5% is the market price of your life value. If a person A has an annual income of 50,000 yuan, divided by 5%, it is 1 million. We say that the market price of person A is 1 million. Another person B has an annual income of 100,000, and the market price of B is 2 million. When B wants to retire and stop working, he needs to have 2 million financial assets. When the principal does not move, he can still maintain an annual income of 100,000. Replacing yourself with financial assets takes many years, financial intelligence, delayed gratification and accumulation. People who have been slacking off for many years, not accumulating, and not improving their financial intelligence will not be able to stop working no matter how high their income is now. If you don't build a money-making machine, you yourself are a money-making machine. When you get sick, have an accident, or are unable to work, the machine stops making money. The money-making machine is built with personal assets, and you have to draw the drawings and assemble it yourself.
There is a group of people in the Chinese community in Canada who drew the wrong drawings and took the wealth map upside down. The harder they work, the farther away they are from wealth. This group of people, I call them people with "malignant financial injuries." "Mr. Wang, you know, we are self-employed, so we rarely file taxes. Do you think there is any way to help us apply for a loan?" I have heard this sentence for more than 8 years, but every time I hear it, it is still as harsh as the sound of foam cleaning the glass. You run a company and give yourself an income of 20,000 yuan a year. Your market price is 400,000 yuan. You want to borrow 500,000 yuan. How is this possible? Which bank can trust your ability to repay the loan? The company's net income is 100,000, but there are many people who pay themselves a salary of 20,000. The euphemistic name is to avoid taxes. Come on, there are no state-owned enterprises in Canada. To maintain the normal operation of the country, it depends entirely on taxes. If no taxes are paid, how can the country operate? If you think I'm exaggerating, let's change the angle. How much do you think you are worth? If you worked for someone else, how much salary do you think would reflect your market value? How can you make a bank think highly of you and dare to lend you money if you despise yourself? Smart business owners with financial quotient greater than zero raise their own wages every year, turn the money in the company into personal assets, and start accumulating personal wealth early. Of course, the tax burden must be considered, which is also part of financial quotient. The money used for company development cannot occupy the business owner’s personal income. It needs to be invested and borrowed from OPM, that is, other people’s money. It is wisest to take loans to develop enterprises. Look around the world and see which country has no inflation. The money borrowed today will be repaid in devalued currency tomorrow. This in itself is a means of making money. It is a pity that in the Chinese community, financial intelligence is negative, but there are too many people who work hard to run small businesses. The money retained in the company is not subject to personal income tax, so it can only be used secretly for personal consumption. The biggest hidden danger is that these business owners hope to save themselves and use their well-earned income to invest in the business, hoping to get a good price when they sell the business in the future, but it usually backfires. Look at how fast the world is changing. Kodak Film and Motorola cannot keep up with the changes of the times. The value of the company can be wiped out in a year or two, and there will be no bones left. It is very dangerous if business income is not converted into personal assets as soon as possible. It is very common for people to live to the age of 70, and few companies have a life span of more than 70 years. Stop being blindly confident and delaying yourself. Faced with the loss of time and wealth caused by one's own pedantry, if one can repent before it's too late and continue to persist in wrong practices, it can be said that there will never be a day of retirement. People with this vicious injury include all kinds of self-employed people who earn commissions.
The inequality between income, tax and mortgage amount is as follows: for every additional 50,000 yuan from company income as personal income, the personal tax rate is 46% vs. the corporate tax rate of 16%, and the tax is 30% more, that is, an additional 15,000 yuan in taxes is paid, but if the 50,000 yuan of personal income is used to apply for a mortgage, an additional 250,000 yuan in loans can be borrowed. Loan amount: tax = 16.7:1. Obviously, not taking income out of the company is not a matter of mathematics, but a matter of mental immaturity. According to Dr. Scott Pike, mental immaturity is characterized by an inability to self-discipline, delay gratification, take responsibility, respect facts, and maintain balance. Recommended reading "The Road Less Traveled". I once watched a TV interview with Wang Jingbo, the founder of Noah Wealth. She said that she recommended this book to everyone who knew her. I didn’t understand the relationship between this book and financial management at the time, but now I gradually understand that people who don’t start to accumulate wealth lag behind their peers in terms of psychological maturity.
Low income and no money are also shortcomings of working-class people. There are always two contradictions in the job market: overestimation and underestimation. Some people have the problem of overestimating themselves, and some people have the problem of underestimating themselves. People who overestimate themselves feel that their employers do not appreciate their abilities and contributions. If you slack off because of this, you are a fool. In every company, there are students who pack their schoolbags early to get ready for class 10 minutes before getting off work. The income increase of these students is basically a delusion. Salary workers have two employers, their boss and themselves. Only when you grow through hard work can you be worthy of yourself. There is only one way to improve efficiency, which is to do parallel tasks. While working for the boss, you also work for yourself. Only in this way can you have two incomes, one is salary and the other is growth. Only when you grow up to the point where you are underestimated can you be qualified to ask for a salary increase. Only when you are not given a salary increase can you be able to change jobs. There are also cases of being overestimated. A company hires you with a high salary, but your ability is not worthy of your income. At this time, your boss will be punished. Because his eyesight is not good, the cost is higher than that of his peers, so sooner or later he will be killed by competitors, and you will be unemployed. You will return to the job market and wait for a price. Can you be overvalued again? Haha, you are not so lucky. People who are deeply underestimated usually end up choosing to start their own business. Canada stopped federal investment immigration in 2012. The government feels that it no longer needs wealthy immigrants. What it really needs is skilled immigrants and experience immigrants. If you want to immigrate to Canada, first show the immigration bureau what unique skills you have. The job market is constantly flooded with new immigrants with high-quality and low-cost skills. If you want to increase your income, you can only continue to learn and improve yourself. There is no such thing as underappreciation of talents in Canada. Low income can only be one reason: there are not enough talents. Work more overtime, underestimate yourself a little, and cherish the precious opportunity of paid learning.
Most people’s “lack of money” in financial management is caused by themselves, not by genetics or social injustice. The distribution of resources in this world is always uneven. The distribution of resources is normally distributed. How much you want is related to the level of effort and the ability to delay gratification. If you put in the same effort as others, you will get the same resources as others. You can only get more by working harder than others. Many people do not have corporate annuities as retirement funds, and they only hope that the government will provide relief after retirement. The pension that the 71-year-old couple can get from the government is only 28,000 yuan per year, 1,167 yuan per person per month, and this is taxable income. In this kind of life, the longer they live, the more they suffer from the pain of being homeless. When you grow old in Canada, there will be no surprises at the end, but many people still turn a blind eye, thinking that "others" are just as unprepared as themselves. This kind of herd mentality is unacceptable because everyone's lifespan is different.
A high-income earner who has not learned financial management knowledge for a long time will do what he will do when he finds out that it is too late. By the way, blindly believe in investments with high income and guaranteed capital, follow the herd, ask others what they are investing in, what is popular, and put money in immediately. No one who follows the herd in investment will end well, because they all enter at the highest point, suffer losses, and then sell at the lowest point. "A psychological group can show amazing characteristics. No matter who the individuals who make up the group are, regardless of whether their lifestyle, occupation, personality and IQ are similar, once they form a group, they acquire a collective psychology, so that their thoughts, feelings and behaviors all tend to be consistent and become completely different from when they were alone." "There is no doubt that groups are always unconscious." "Rationality is only a recent attribute of human beings, and it is not yet perfect enough to be able to Uncovering the laws of the unconscious takes a long time to take hold. The unconscious has a very important influence on our behavior, and the role of reason is pitiful. "In addition to destruction, groups can play no role." These words I quoted are all from the same book, "The Crowd", written by (French) Gustave Le Pen. This book is not about the stock market, nor is it about the property market. It is just a masterpiece of group psychology. However, these words are simply too appropriate to describe the herd psychology of the stock market and property market. Starting in September 2016, people across Canada paid attention to real estate. By April 2017, intervention policies were introduced, and the real estate market was so hot that you would be embarrassed to have dinner with friends if you didn't talk about real estate. Now, no matter whether I can get a loan or not, or whether I have a down payment, I don’t dare to buy a house. Investment requires independent thinking. Those who follow the trend are the prey in the hunting ground, while those who think independently are the hunters.
Templeton, the contrarian investment mentioned by Buffett means investing against the trend, rather than following the trend. If you don't dare to invest in the opposite direction, it doesn't matter. This is just a failure to seize the opportunity, but don't follow the trend, because when novice investors hear that the stock market and real estate are very popular, it is time to leave the market, not enter the market. If you find out what people who have never invested are buying, flee the market immediately. Just remember one sentence: "Groups can do nothing except destroy." Anything with a group of people involved is ruining the thing, no matter how good it originally was. Think about the most serious mob incident that happened in China, the Cultural Revolution, and you will know how large and long people can be in group unconsciousness and concentrate their efforts to destroy a beautiful thing without doing anything useful. Therefore, you must have the ability to identify "mass behavior" and use the direction of herd behavior as the opposite and conduct reverse operations. On the contrary, you will be coerced by "mass behavior" and become a member of the mob and become the prey of independent thinkers.
I recommended 10 books at the first financial and business forum, and "The Crowd" was the only non-financial book. Because group psychology is so important. During the stock market crash and after the real estate crash, countless people had the benefit of hindsight. No one knows when the next time will be, but there are signs to tell when the disaster will happen. Yes, when everyone walks in unison, the bridge is about to collapse. The so-called market means that there are buyers and sellers, and everyone has different views on the future. If everyone believes that it will rise or everyone believes that it will fall, the market is very close to collapse.