26 January 2013

Less Work, More Holidays

Whenever I speak to people, I make no secret about the fact that I hate my job. It is not really the work that bothers me. Rather, it is the fact that I have to work for a boss. I have to report to a boss, update him on what I'm doing, and endure his speeches on how I should be doing my job. Because my dissatisfaction comes from being averse to being subjugated, I simply cannot go back to university and study a different course, as my father has suggested to me. I need to do something different. If I want to be my own boss, one option is to start my own business, but this option has its challenges. Will I have enough to money to start my own business? How much does it cost to run a business? What sort of tax and compliance processes do I need to follow, and are they burdensome?

The more I think about it, the more I realise that I probably need to start taking more holidays. Less than a month ago, I turned 29. I am almost thirty, almost sort of reaching the middle of my life, and I when I think back on my life, I realise that I really have not done much. I have been overseas but only twice. Most people go on a foreign vacation ever year. I have been reluctant to go on holidays because of the costs. I believed it was more sensible to save the money.

Given how stressful my job is, I believe it is best if I start taking holidays. It is not just my career where I am facing crisis. There is also chaos in my family life. Going to a different place and leaving your old life behind is a great way to clear the mind.

I will still continue to save money, mainly because I want to invest the money to make more money. One day I may be able to save up enough money to be able to be on holidays for, say, six-month periods at a time. When I come back to Australia, I can work part-time, and when I feel like it, I can just get back on the plane and get out. I am starting to realise that one of the greatest freedoms is the ability to just get out. I pity those who have committed too much into wage slavery, the people who have a mortgage, two children, and a car loan to fund. I have none of these, but pressure from friends and family to be normal is really starting to ramp up. It's as if all of society is trying to set a trap for me. I've reaches a point in my life where I need to make a fundamental decision about whether I want to embrace the culture of wage slavery or the culture of freedom. What is most cruel about life is that the price of freedom is a decade of wage slavery.

Too much holidaying can be unhealthy. I could get bored. I just don't know. I need to give myself the flexibility to move in and out of holiday mode and work mode.

20 January 2013

Why I Don't Block Ads

Link: AdBlock Plus has 4M users in France

I have both Chrome and Firefox installed on my computer and used to install programs that block advertising, but I don't do this anymore. I understand that many websites need advertising in order to generate revenue to pay for servers, writers, and so forth, so advertising actually helps keep good content on the internet that is available free for everyone. But another reason why I liked to keep ads on my websites was because, without advertising, websites suddenly have ugly white empty spaces. Sometimes advertising on a website integrates well with the content and make the website look good, but without the advertising, it just looks wrong.

19 January 2013

The Importance of Global Diversification

"Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land."
Ecclesiastes 11:2 (TNIV)
I have great respect of John Bogle, the founder of the Vanguard Group. I believe that if you are unsure how to invest your money, just do what John Bogle says. That being said, there are few issues I have with him. The first relates to his aversion to foreign (i.e. non-American) investments. According to John Bogle, if you invest in a mutual index fund that replicates the S&P500 index, given that most S&P500 companies are multinationals with operations all around the world, you are getting foreign diversification anyway.

This is wrong.

What Bogle completely ignores is the fact that, by investing in only American equities, you are limited to companies that list on a small and undiversified number of stock exchanges. Every stock exchange around the world has different listing requirements. Some stock exchanges have very strict listing requirements, demanding that companies meet demanding disclosure requirements. Other stock exchanges may have lax disclosure requirements. Furthermore, some governments or stock exchanges (or both) may be more corrupt than others. You simply don't know, and it is for these reasons that you need to diversify across stock exchanges and countries. It is not enough to invest in an index fund that replicates the S&P500. You need to invest in European shares, Asian shares, Australian shares, and so forth. And that is only looking at shares. You should invest in other asset classes as well, such as REITs, bonds, and commodities.

One good argument against diversification if it's just too difficult. For example, in my opinion it makes sense to invest in commodities like gold for the sake of diversification, but investing in gold is not simple. You can't walk into a bank and just ask for gold, and storage of the gold becomes another difficulty. However, diversifying your equity investments across different countries is easy. There are many mutual funds out there that automatically diversify across multiple countries.

Hide and Diversify Your Wealth

If I could give two pieces of advice on investing, it would be the following: 
  1. hide your wealth
  2. diversify your wealth.

The first piece of advice is due to safety. If you save up money and go around telling people how great you are at saving money, the risk of theft only increases. I don't even recommend you tell family or friends about money you're saving. If you spouse knows, the payoffs from divorce are so much higher, which would tempt him or her. Just keep it to yourself and, better yet, pretend that you are poor. If snobs don't want to be friends with you because they don't want to associate with poor people, it's probably better that you didn't know them anyway.

The second rule of investment is you must diversify. In fact, when I think about it, the first and second rule are similar in that they exist due to lack of trust. If you hide your wealth, it is because you cannot trust people who will tempted to steal. If you diversify your wealth, it is because you cannot trust those people who hold your money to destroy your wealth either due to corruption or incompetence.

The two rules above help protect your wealth.

08 January 2013

Cheap Houses (~$50,000) in South-East Asia

The Christmas and New Years holiday is coming to an end. I had some minor surgery yesterday and so had permission from the doctor to take today off to recover, but tomorrow I will need to go back to work. I am dissatisfied with my job at the moment. I'll try to fix this problem by finding a new job. I haven't been applying for job for about a year, so getting back into it is difficult, but I am motivated by the desire to leave my old life behind and try something new.

Most people think they need $1 million before they can retire. They base it on the assumption that they would need to earn about $50,000 a year to have a reasonable retirement. In order to generate $50,000 per year from an investment that provides 5% per year, you'd need $1 million. But saving $1 million could take decades. Assuming you earn the average $50,000 per year, and then assuming that after deducting taxes and living costs you can save $30,000, then it will take you 33 years to save up $1 million (assuming, for simplicity, your savings produces no interest). In other words, you need to slave away for 33 years! I have gone through only four years of full-time work and I'm ready to throw in the towel!

There needs to be a better way.

One solution is to retire in South-East Asia. A normal two-story house with three bedrooms in an east-coast city in Australia will cost about $500,000. With aggressive saving, this will take about 15 years to pay. With a mortgage that adds interest charges and other fees, it may take longer, say, 20 to 30 years to pay off your mortgage.

However, according to the YouTube video above, a normal two-story house with three bedrooms near Chiang Mai, Thailand costs around $30,000 to $50,000. That is ten times less! Therefore, instead of working 20 to 30 years before you can afford retirement, you can afford retirement after two or three years of aggressive saving!

According to JC, there may be laws in Thailand or other Asian countries that prevent foreigners from owning real estate. Another option may be, instead of using your savings to buy a house, to put it inside a savings account in Australia (or the US or Europe) and then transfer the interest income to Asia to pay for the rent. This will often work because interest income on savings accounts tend to more or less be the same as as rental yields. Renting may be a safer option because, if you live in Chiang Mai for a while and don't like it, renting provides you with flexibility to move away whereas buying real estate normally comes with massive moving costs. If you have equity in your home, you can convert that into an income stream by renting the house out. This rental income stream, in addition to stream of income from interest on savings, can be combined to fund living costs in Chiang Mai.

What this means is that, for me, I could retire right now, even though I am still in my late twenties. For those who don't have any money, all it takes it two or three years of aggressive savings before you can afford to retire in Asia. There is hope.

07 January 2013

What about Distributism?

I have been browsing websites and came across http://distributistreview.com

This website advocates an economic philosophy known as Distributism. I had to check Wikipedia to figure out what Distributism was, but it can be summed up as follows:
According to distributists, property ownership is a fundamental right and the means of production should be spread as widely as possible among the general populace, rather than being centralized under the control of the state (state socialism) or by accomplished individuals (laissez-faire capitalism). Distributism therefore advocates a society marked by widespread property ownership and, according to co-operative economist Race Mathews, maintains that such a system is key to bringing about a just social order.
The means of production (or capital) include anything that can make money, e.g. land, machines, or money itself. I prefer to use the term "wealth" as people tend to not know what you are talking about if you use the term "means of production."

Land is a unique form of wealth in that is is fixed, immovable, and illiquid. Therefore, assuming a benevolent dictatorship or a strong democracy, if you wanted to spread wealth as much as possible across the population, it's better to spread land rather than money or machines because land cannot be stolen whereas money and machines can.

Assuming there is a world government, one option is for the government to legislate that all land in the world is divided equally among the world's population. According to my rough calculations, if all land in the world were to be equally divided among the world's population, each person would get a field that is 70,000 square meters. If an individual had a child, the government would need divide the land up to give the child a portion of the parents' land. For each, woman A and man B had child C. Originally woman A and man B each had 70,000 square meters of land. After they have child C, each of them have 46,666 square meters of land.

Different land has different value. Desert land is less valuable than fertile farmland. Therefore, when the government divides land, there will be arguments. The fairest and most transparent fix this problem that I can think of is if the government allocates land randomly.

Although this is nice in theory, in practice it would be almost impossible. Legal structures already exist. To take all land and redistribute it would mean the government would need to coercively take land from those who have more than normal. If the top 10% owned 80% of all land, the government need to use force to remove land from the top 10% so that they would only own 10%. This is not realistic. A more familiar and less controversial way to transfer wealth and achieve similar goals is to use taxation to target the rich and spread wealth to the poor.

What the government should do is tax the rich, e.g. through income tax, land tax, or any tax, and place the money into a trust fund that is managed by, say, the world's top 100 fund managers (performance can be based on returns net of fees over a long period of time). The income from the trust fund in the form of rental income, dividend income, or interest income can be use to fund soup kitchens and bread lines to ensure the poor do not starve.

02 January 2013

Running a Guesthouse in Cambodia

Happy 2013!

During the break, I've been thinking about my life. When I finished high school, I spent seven years in university. I did an administrative job for a bit before becoming a public servant. I have been a public servant (or a policy analyst) for about four years now, and I must admit I am tired of my job.  I just don't know if I can work in a job where I am at my desk all day. Pressure from management doesn't help either.

During the break over Christmas and New Year, I've been lying on my couch, looking out at the backyard, and thinking about what to do for the rest of my life.

With help from Google, I've found that there are many beautiful guesthouse businesses for sale in Siem Riep, Cambodia for about US$100,000. They can normally be leased on five-year contracts for about US$1000 per month. Some of these guesthouses look like luxury homes, with pools, deckchairs, and palm trees. Even if nobody came, I'd be happy living by myself in a place for only US$100,000.

I think what this highlights is that running your own business does not need to be expensive.  I have some savings, but I feel that I should be able to start my very own guesthouse in Cambodia after a few more years of thrift. I imagine it will be a beautiful job. I will get to run my own place. I will get to be a boss rather than be bossed around by bosses.

I currently live in the family home with my mother and grandmother. If I really wanted to start this business right now, I could probably convince my mother and grandmother to rent the family home out and with the rental income we could all move to Cambodia and run the business. I would love to run my own guesthouse. I think I'd be great at it as well. I would create a website for the business, put it on Facebook, TripAdvisor, and so forth. I would pay my staff a fixed salary plus bonuses based on customer satisfaction based on anonymous surveys. Given that I can speak English well, the guesthouse can target for English-speaking people.