How do you live?

You work. You save. You invest.

What does the savings and investment do for you?
What does your money do for you?
Why do you work, save and invest?

Understanding the time-money trade-off
This fundamental question is key for us to understand the time-money trade-off. Most of you work for a living. Some of you run businesses or own investments that generate income for you. No matter how your money is earned, it is used to do something for you.

You trade time for money. The 42 to 60 hours you put in a week into your jobs or businesses yields a return in the form of a monthly paycheck or profits from your business. You then spend that money to buy some time in the form of dining out, having a car to save travelling time and outsourcing your leisure needs.

Only when we have accumulated sufficient wealth in the form of investible savings that can yield cash flows exceeding our living expenses then are we truly free of this time-money trade-off.

What you do with your money
Some of you adopt a consumerism lifestyle. You live to eat, you live to shop, you live to spend. You enjoy this lifestyle, it is why you work hard and earn money to fund such a lifestyle.

Some of you adopt a ascetic lifestyle. You live to save, you live to set aside something for a rainy day, you live to store up your wealth.

You determine the lifestyle you lead knowing the consequences and the impact of the choices you make. One of the challenges many of us will face when we travel on our journey to financial freedom is understanding the true impact of our choices.

Live for now approach
The supporters of live for now approach who adopt a high living high spending lifestyle is that we won't know when we will die either through accidents, old age or lifestyle diseases. So we might as well make merry while the sunshines and so long as our incomes continue to support our lifestyles. Why worry?

I make no judgements on whether this lifestyle is "right" or "wrong". It is a lifestyle that works for those who really see life as something to be experienced to the full using the wealth they have on hand. It works when your retirement can be funded through CPF or through your children supporting you. It can be funded if your job is secure and your income continues to flow. It can work if you die relatively young, i.e. before retirement age of 67. It works if you are able to continue to work or find some form of income even after your main career comes to a close.

Live for tomorrow approach
The supporters for this approach adopt a live within their means and save the rest way of life. They live simply and plan to live a long life funded by a retirement nest egg beyond the CPF. They do not assume that their job will be secure and hence use their time during employment to maximise savings and minimise debt. They invest prudently knowing that compound interest helps them grow their investible savings to the time when they escape the time-money trap or the rat-race.

Their lives can be too simple for some. Those who take these to the extreme become miserly and do not share in the good things in life that can be bought using their income. Some make themselves so miserable and curse their lifestyles without thinking about why they are doing this besides avoiding job insecurity and fearing to be broke and homeless.

Deferring today's wants for tomorrow's needs helps you to save and invest. But without a balance in allocating some to meet today's wants, those who take this approach to the extreme feel unhappy each day because their happiness is contingent upon them achieving financial freedom.

How do you want to live - You Choose!
The two approaches I have painted are deliberately extreme and most of you do not live at either extremes. Most of us tend to one or another at different points of our lives and our upbringing, our own individual personalities and philosophies towards life gear us one way or another.

How you want to live is really a choice, but no matter what choice you make, happiness does not have to be dependent on you reaching your financial freedom. Life is a journey to be savoured for the sweet and the bitter, the highs and the lows, the exciting to the boring. Each day's experience is unique in itself and each day is a blessing to be alive.

Choose how you want to live and choose well.

Above all, be well and prosper no matter how you choose.