Financial freedom: Revisiting the Lessons Learnt

The more I travel along this journey towards financial freedom, the more the pieces are starting to click together.

What has happened in the last 4 years

My Excel worksheet skills are improving bit by bit as I use colour, conditional formatting, formulas and functions to jazz it up with both functionality and form to suit my approach towards tracking my networth and recording what are my investment returns (or losses!) for the last few years.

Hits and misses with stocks and shares

The journey is not always smooth. Some of my equity investments were more punts than long-term investments based on fundamentals and I had to take in some realised losses to trim my portfolio back to a more comfortable 28% cash and cash equivalents and 72% in equities as well as to remove under-performing shares bought at over-valued prices vis-a-vis the market and their fundamentals.

Developing small sources of alternate income

On the positive side, my forays into developing multiple sources of income is bearing modest fruit as AdSense helps defray the costs of broadband access. A bit of luck could be attributed to my foreign currency fixed deposit that yields a very high return relative to Singapore fixed deposit rates as I went in at a good exchange rate rather fortuitiously.

Understanding simple rules of thumb in finance

I also learnt more about the Rule of 72 which is a quick rule-of-thumb to determine how long your investment (or debt) doubles at a given interest rate. If you could get a return of 10% per annum compounded, it would take you approximately 7.2 years (72 divided by 10) to double your investment. If you could get a return of 2% per annum, it would take you closer to 36 years (72 divided by 2) to double your money. An 8% difference translates into 28 plus years to double your money.

Balancing between present wants and future needs

I also realise the importance of balancing my present wants against future needs and to live a little today and not be an absolute Scrooge when it comes to living within my means.

As I continue towards this journey towards financial freedom, it is with excitement and anticipation because my modest achievements have helped me gain a small degree of confidence about my ability to survive and thrive in Singapore Inc.

Paying off my housing loan

This is one of the most satisfying intermediate milestones in my journey towards financial freedom. I am thankful for my parents for their help in an interest-free loan which I have paid off in full. I don't claim to have been able to do it so quickly without their help. Their support advanced my plan to clear my loan by 2-3 years even though I have repaid them.

Understanding the fundamental principle behind financial freedom

There is no quick fix to achieve financial freedom. It is to live within your means. To save and invest prudently. To grow your means and ultimately to reach a stage where your passive income from your investment assets more than covers your living expenses. That is where you have "made it".

As with any endeavour worth pursuing, the reason why I have been able to achieve some of my intermediate milestones is focus. My home mortgage was cleared well before my retirement age because I was very clear that it was a high priority. Besides paying the daily living expenses, I channelled my savings, year-end bonuses and any form of windfall gains towards making periodic capital repayments. The cumulative effect of this was that with each capital repayment, the outstanding principle became lesser and lesser and the resultant interest expense also became lesser and lesser. Compound interest did the rest.

I had a clear time frame in mind and tracked my net-worth position from a consistent net liability all the way to the net asset position that I was in over those years I was repaying my loan. I did not own a car for more than a decade into working life and I continued to keep my living expenses low relative to my income level.

All this while I kept the concept of financial freedom in my mind. I filled my conscious with books on personal finance, on being frugal and sometimes bordering on stingy! ;-) I also focussed especially in the last year or so on health and to keep myself fit and healthy to enjoy a better quality of life and to keep medical costs low by seeing the doctor less.

Financial freedom is within my grasp. I am fairly confident that I can reach it with the support of my spouse, family and close friends who share my philosophy towards life. My time horizon is realistic. It is not a overnight journey. It is a journey measured by years. Measured by the growing up of my daughter (coming soon!). Measured by a corresponding improvement in the quality of life as financial burdens become less heavy over time.

I truly wish you can also join me in this journey, to find your own pathway towards your goal in financial freedom.

Be well and prosper.