A Financially Empowered Person

According to the Merriam-Webster dictionary, to be empowered means having the knowledge, confidence, means, or ability to do things or make decisions for oneself.

When is the last time you feel the true meaning of the word "empowerment"?

For me, I felt it many times in my life. For example, the first time that I learn to ride a bicycle, the first time that I learn how to swim and the first time that I got my driving license. Those were skills that I pick up that I will make me experience life in totally new ways. I know I could go to different places. I feel a sense of hope and real accomplishment. Most of all, I gain confidence in doing it. And the more I engage with the skill sets, the better I become.

Just a few weeks ago, I was reminded again how empowerment looks like. My son just finished his PSLE examination, and like all kids in this generation, he likes to play with his mobile phones. My wife and I are concerned that he is simply spending too much time on the mobile phone. Therefore, I decided to bring him out for some physical activities that would be fun and challenging. I suggested going for a swim and then I will leave him to travel back home on his own. He would need to take a bus back on his own.

I have heard some horror stories of kids who do not know how to take the bus and public transport on their own. Today is going to be one of those opportunities for him to learn how to take a bus on his own without anyone's help.

The plan is that I will show him how to get to the swimming club, but he will have to find his way back, alone. I would not accompany him on his bus ride back. I pack my swimming gear and my running gear along.

Mostly, I deemed that as a simple task. He already has the skills set needed. All that is lacking is a little bit of confidence. He was worried at first, but then he was also thrilled about the whole idea. After the swim, I left him at the bus stop and observed from a distance. He was able to board the right bus, and I will just have to find out if he made it back home. I ran back home that day. It was a 12 km run that took me a little over an hour. When I reached home, I was greeted by a confident looking boy that ask me, " What took you so long to come back?"

"I was already home more than half an hour ago." He triumphantly proclaimed.

As a father, I was so proud of this milestone. I know he will need it soon when he goes to a new school next year.

What would empowerment look like for you in your financial journey?

In my more than two decades in the investment management business, I have come across many who have yet to acquire the skill sets and the confidence to manage their financial affairs. Many ended up making the wrong decision that cost them dearly.

Gaining the skill set to confidently manage your finances is a skill set that everyone should acquire. The skillsets are not difficult. They are not rocket science and certainly doesn't require a high IQ to do it. What is needed is an understanding of the language spoken—familiarity with some financial lingo and instrument. And opportunities to put those skills set to practice and you would have a gift for life.

Being able to understand the language of business is very empowering; I call it "accelerated financial transformation". It is the same with reading. The words that you are deciphering right now brings you to places, allowing you to pick up new skills and new experiences.

Fundamentally, accelerated financial transformation boils down to four distinct skill sets; they are:

Understanding the fundamental. Investors who are empowered understand the basics of financial measurement. They can read the financial statement, decipher the difference between profit and cash. They know what the things to look out for in a balance sheet are. They don't feel intimidated by the numbers on financial pages and annual reports.

Understanding the art. One of the first thing that I try to get my students to understand is the difference between finance and accounting. In some aspect, they are both an art as well as a science. The two disciplines rely heavily on rules, estimates, and assumptions. Empowered investors are able to identify where are the artful aspects of finance, and they know to apply them and draw conclusions from their analysis. They thus are prepared to question and challenge the numbers when appropriate.

Understanding analysis. Once you have the fundamental right and an appreciation between finance and accounting, you can use the information to assess an investment or a business. Financially empowered investors are comfortable using ratios, return on investment (ROI) analysis, and the like. They use these analyses to compute the odds that they are making the right decision.


Understanding the narrative. Finally, although I teach finance, and although we think that everyone should be financially empowered individual, being comfortable with the numbers and the lingo used do not complete the whole story. Empowered investors must also develop the ability to understand the narrative at play. Factors such as the economy, the investment marketplace, regulations, emerging trends and new technologies all affect how you should interpret numbers and make decisions.

Putting what you have learned into practice

Speak the language. Every day when you read the papers, you are sure to encounter business reporting, and you should make use of your new-found skills for practice.

Ask questions. Always be prepared to ask questions. It is important to understand the what, why, and how of how various investment works. And only by asking those questions can you start to do your own independent thinking.

Use the information in your job. A financially empowered person will also benefit a lot when he applies his knowledge to his working environment. If your company is listed, and you are on the company's employee option program, you would benefit a lot from reading your employer's annual report.

It is my hope that you will achieve great success, both personally and professionally.

Here is to a more empowered year ahead!

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