Financial Freedom: Exploring and Trying New Frontiers

One of the key challenges of becoming financially free is to push beyond the confines of our existing boundaries. To be financially free is to adopt a mind-set that is somewhat different from the crowd. I remember some of the lessons shared by authors of "The Millionnaire Next Door" where they interviewed many millionnaires, i.e. those who had amassed $1million or more in assets other than their residential homes.

It was found that the majority of these were self-made millionnaires who owned their own businesses and were the typical frugal and thrifty hardworking folks who has some common characteristics.

One of the major characteristic (besides them being millionnaires!) was that most of them believed in saving and investing.

What does the crowd believe in?
Spending is sexy. Why are banks able to make money from pushing unsecured credit to you? Balance transfers, minimum payments, roll-overs all make it easy for you as the consumer to spend, spend and spend!

Look at the many advertisements in print, in television and on the internet. What do they encourage you to??? S-P-E-N-D...

Stretch your loan to the maximum. Conventional wisdom is for those with HDB concessionary rental rates of 2.6% to spread it out over 30 years. This is because you can "invest" to get a better return than 2.6%. I've discussed this topic whether to pay off your housing loan in an earlier post and it depends on computing your outstanding interest expense vs realised returns from investments at any point in time. Generally, if your interest expenses exceed your interest returns, you should generally try to pare down your debt within your means.

Get a set of wheels at the same time as you get your first job! Driving is cool, taking public transport sucks. I endured the sucky MRT, Bus and taxi services for a decade or more before I decided to buy a car because I was only responsible for transporting myself for the first phase of my life. But now I need to ferry 3 other persons besides myself from point A to point B and a car, while being more expensive than public transport, serves the transportation need better.

Going against the crowd

To go against the crowd is to save every month as far as possible. Delay your wants for today for tomorrow's needs. Saving is the new sexy attitude to have if you want to achieve financial freedom.

Paying down your loan or minimising debt. You need debt to finance our homes as you need a roof over your head. However, be aware of how fast the interest on this debt generates even more interest because of the power of compounding. I know of people who still owe the bank or HDB money even when they have retired from their jobs but they own cars. It is not unusual that even in 25-30 years if we do not make a conscious effort, we still end up being in debt because of the choices we make.

The attitudes and conventional wisdom presents itself as the boundary we have to break free of in order to get ourselves in the position to aspire towards financial freedom. If we continue to be trapped in the work-earn-spend-no savings-cycle then we doom ourselves to a lifetime of slavery to our jobs, our bosses and our financially captive lives.

Breaking free requires new mindsets.

Breaking free requires being an independent thinker.

Breaking free requires STRONG DESIRE.

Be well and prosper.