Financial freedom: A Picture Paints a Thousand Words

The more I write about financial freedom, the more I believe that the framework behind it is simple in theory but difficult in practice.

It is encompassed in the diagram above and has been mentioned many times in Five Cents Ten Cents.

The challenge facing many of us in terms of achieving financial freedom is in trying to work on all these three areas in our lives successfully. It is tough to tackle each of them but to be able to juggle all of them and to have successes in all requires patience, hardwork and a little bit of luck.

Live within your means

If you earn $1,000 a month, try to live within this amount. If you earn $3,000 a month, try to live within this amount. If you earn $5,000 a month, try to live within this amount. If you earn $100,000 a month (why would a Minister need to read my blog?!), try to live within this amount.

As a general rule, the more you earn, the more you should be able to save assuming your lifestyle habits do not change drastically. But the reality can be different as we suffer from lifestyle inflation where our expenditures quickly increase in the same if not higher proportion that our salary or business income increases.

Living within your means requires you to make conscious choice of NOT increasing your lifestyle expenditures drastically when your income increases. This is difficult for most people as many earn to spend and are trapped in this work-earn-spend-work-earn-spend cycle unconsciously.

Save and invest

In a period of low interest rates for fixed deposits and treasury bills, it is indeed hard to find risk-free or virtually risk-free investments that give you high returns. Nowadays 1% to 1.5% is the name of the game until MM Lee's "golden age" promise is fulfilled.

The save and invest part of financial freedom requires you to both live within your means to generate the investible savings. To some that is the easy part. The hard part is the investing. Too many of us have experienced realised losses in stocks and shares and other riskier assets. Investing successfully is HARD. Bad investment decisions can set you back YEARS in achieving financial freedom. But it can be done if you invest in learning as much about investments as you would into your favourite hobby.

Grow your means

Study hard. Get a good qualification and earn more money. That is still true to some extent in paper conscious Singapore. However, growing your means also requires you to develop your own inate talents, skills and abilities to the apex of your development potential. Learn more about your career prospects, the industry you are in. If you are in business, the external environment, the Michael Porter SWOT (strength, weakness, opportunity and threat) analysis to see how your business can survive and thrive given the operating parameters in front of you.

For those who are in employment, globalisation brings with it risks and rewards. Lifelong employment is gone. Look for lifelong employability or better yet, multiple streams of income.

What does it mean for you

Like an organisational excellence journey towards Singapore Quality Class or Award, we need to benchmark ourselves to the best standards for achieving our dreams of financial freedom. This benchmarking and more importantly, continuous learning needs to see us growing in all three areas:

1. Live within your means
2. Save and invest
3. Grow your means

There is no shortcut. There is no magic bullet. There is no quick-fix.

We need to continue to live, breathe and dream financial freedom through the framework given.

It is continuous. It is a journey. It is within your realm of possibility.

Be well and prosper.