Financial freedom: Investing for the future, focussing on the present

I have discussed how the dream or reason that drives you towards financial freedom is important in focussing your hearts, minds and souls towards your financial goals.

Investing for the future, focussing on the present

You are not a robot following a program mindlessly and executing tasks repetitively. You are a human being filled with emotions, feelings and moods. In order for you to invest for the future, you need to focus on the present, to do the things daily that leads you surely and steadily towards your goals in financial freedom. You need to have a strong sense of purpose behind why you are pursuing the tasks and activities that move you towards financial freedom.

Let's recap what does financial freedom means to you:

To be able to have the targetted investible savings that generates passive income that exceeds our living expenses.

It's that simple. To be financially free you need to live within your means, save and invest and grow your means. This will help you generate sufficient investible savings over time which earns sufficient passive income to cover your living expenses. When you achieve that, you are no longer trapped in the time-money trade-off since you are free to spend your time to do whatever you want as your investible savings works for you to earn that income while you are sipping coffee watching the world go by during weekday mornings. ;-)

Focussing on the present means translating the financial freedom principle of living within your means, saving and investing and growing your means into daily achievable actions. Plans without action gets us nowhere. Action with plans gets us somewhere but not where we want to go.

Focussing on the present: getting you moving towards financial freedom

I like blogging because I have enjoyed writing and public speaking ever since I became a toastmaster. Blogging is also cathartic for me, i.e. it allows me to articulate my thoughts and at times vent off some frustrations in life. It also helps me to clarify my thoughts. I have made blogging my hobby because unlike other hobbies, blogging with AdSense helps me grow my means. I earn literally five cents ten cents everyday that adds up for my daughter's college tuition fund. This is one way where I am growing my means even as am a salaryman.

Living within my means comes from realising that materialism will only satisfy you briefing before the you hanker for the next "thing" to make you feel happy! Thus, a life spent chasing after materialism will never satisfy in my own experience. I realise that as the number of candles on my birthday cake grows, the more I realise happiness comes from the basics of health, happiness and family. Small luxuries now and then make life more enjoyable truly but they are to be sampled sparingly so as to preserve the delicate sweet flavour. Indulging in luxuries all the time spoils out palate and makes for one to live beyond your means.

Saving and investing comes from every small step. Yes, interest rates are pathetically low now. Singapore fixed deposits are yielding close to 1% plus. But that is no excuse to be saving even as inflation wipes out our savings, to mitigate the effects of inflation is just one way to take concrete action not to let our monies wither away at 0.25% in bank savings.

Investing in the future is to act in the present

You can achieve financial freedom. It is within our grasp by taking hold of our present and making small changes to our lives to align our mission, vision and values towards those conducive towards financial freedom. I took initial steps years ago and made a conscious decision to pay off my loan aggressively. Now I can concentrate on fatherhood and work-life balance and invest in the bringing up of my daughter as the roof over our heads belongs to us and not the bank! I am working for my daughter and family now and know that every bit of passive income I generate will go into building up financial freedom for my family and myself.

Be well and prosper.

Financial Freedom: Drinking Coffee While the World Goes By

My good friend once remarked that once he had achieved financial freedom, he would want to spend his time drinking a leisurely cup of coffee on weekday mornings and watch the morning crowd pass him by as they go about working for a living.

Such is his dream and to some extent it is mine as well! :-)

What is your dream that drives you towards financial freedom

I encounter many posts in internet investment and personal finance forums from people who ask for the best investment that yields the highest returns in the shortest possible time. Others ask how they can save and invest without sacrificing their lifestyle that involves shopping, eating at restaurants and supporting a car.

They have a dream to drive a fancy car, to dine in nice restaurants and to be RICH with a capital "R".

Your dream can drive you towards the pinnacle of success or it can drive you crazy with the frustration of impotence in achieving your goals of being RICH.

But just dreaming of being RICH does nothing for us unless it spurs us on to take concrete action. The dream does nothing for us if it is the mere accumulation of material possessions for us to show off that we have MADE IT and are RICH.

My dream is to be financially free. Being financially free doesn't involve wearing bling-bling and brandishing the latest Rolex watch. It is not about the car I drive or the home I stay in. It is about escaping from the time-money trade-off. It is about being able to spend quality time with my daughter when I choose to. It is about being in control of HOW I can maximise the life in my years.

your dreams are your goals in the ideal state

Your dreams are actually your goals in an idealised state. Every endeavour begins in the mind. It comes from the conscious and the sub-conscious mind. In order for you to achieve your dreams, you have to sacrifice and make changes for you to hit the ideal state. Along the way, we either lower our dreams or uplift our lives to meet the lofty targets that we set for ourselves.

My dream is simple but yet challenging. It is to escape the time-money trap that engulfs all of us who work for a living. The escape route is laid out in front of me through my goals set in being financially free. I know how much investible savings I need to be able to sustain my current standard of living. I know what it takes to get there. And I know it takes me time, effort and perseverance to reach my dream.

I will get there because I am focussed, determined and patient. I will get there because that is what I dream about. I will get there because I am willing to do what it takes to live within my means, save and invest and to grow my means to get there.

You can do so too, if you truly believe in your dream.

Be well and prosper.

Guest Post by Sgmusicwhiz: His thoughts on financial freedom

As part of making my blog more interactive and to invite views from other bloggers passionate about financial freedom, I have asked musicwhiz, an online blogger who follows my blog (as I do his), to do a guest post by featuring his comments into a post in today's entry.

He shares my passion in financial freedom and is also striving like many of you to reach your dream of achieving financial freedom way before the statutory retirement age.

Here are his insightful comments!

Enjoy.

Be well and prosper.

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musicwhiz said...

 

Hi Panzer,

Another good post and it is good to have a constant reminder of our goals. It is good that our goals are aligned on this aspect, except that I do not have any child arriving whereas you do ! Haha.

 

By the way, let me take the opportunity to congratulate you on your soon-to-be-parent status ! It cannot be easy to be faced with the prospect of a radical change in lifestyle but I can see that your goals are firm, so you will be able to achieve financial freedom someday soon.

 

Come to think of it, not many of my friends use this term "financial freedom". Most of them tend to talk about tomorrow, next week or next month and what they plan to do with their time. But none of them really seriously discuss several years down the road and how they would like to expand their wealth. Some talk of migrating, others about having kids while still others wish to enjoy life by spending on depreciating assets.

 

Yet I would implicitly assume that each of these decisions should be supported by adequate financing, otherwise they may (literally) fall flat on their face !

One thing I have noted is that my friends have a lackadaisical attitude towards investing and treat it as a "if it works, good ! If not, then heck it" matter.

 

Yes, some are very thrifty and save a substantial chunk of their income; but the true way to attain financial freedom is more than saving. It's about using money to grow more money and investing is one of the best methods for this. It may sound preachy but I have realized this the hard way after struggling for 7 years to build a decent savings balance.

 

Just by investing for the last 3+ years, I have managed to almost triple my total assets, though my mortgage loan still remains my single largest sole liability. Without investing and saving, I think I would not have managed this; thus I would like to provide a living example of how saving, living within your means and investing can help to grow money more quickly.

 

In a time of falling rates (SIBOR is around 1.44% as I type this), we cannot rely on FD or savings accounts to beat inflation. Thus, I choose to place my money in equities and high-yield instruments to maximise returns. Time will tell if I had made the right decision, but it sure beats being "safe" and leaving my money to rot in a bank account. 
 

To end this long comment, I would like to reiterate that if only more people would be serious about investing and make capital preservation the central tenet in their investing philosophy, then they would discover that they can make money by NOT losing money.

 

Sorry for the long "essay", but hope that I managed to share something useful for you and your readers.

Cheers,

 

Musicwhiz

Tis the season to be jolly falalala-lalala...Budget day is here

Finance Minister has announced the slew of "goodies" that the Government will be giving to citizens back much of the taxes it has taken for us for FY 2007. Instead of the deficit of $0.7 billion, the excellent economic growth coupled with the Singapore property boom resulted in a SGD 6.4 billion surplus. The Government definitely "huat" for 2007. So why quibble about SGD 2-3 million for each minister? The dream team managed to conjure up SGD 6.4 billion surplus.

Of course, in good times, the Government should spend on its citizens. Some netizens commented that GIC and Temasek can pour easily SGD 10 billion into US and European financial institutions hit by sub-prime but only gives its own citizens a miserly SGD 1.8 in sharing of the surplus.

How does the 2008 budget benefit you PERSONALLY?

The discussion below is not meant to be comprehensive but to give you a "feel" of how the budget impacts you.

1) Growth dividends

All citizens aged 21 and above who have signed up for the GST credits will automatically receive this. It ranges from $100 for higher income earners and higher property type owners to maximum of $600. NSmen, ex-NSmen and NSFs get $100 more but I don't think many qualify to get $600+$100=$700 because you would have to have a home with annual value < $5,000, annual assessable income of <$24,000 and be aged 60 and older. So perhaps ex-NS regulars who have retired?

2) Medisave top-ups

Mainly for those aged 51 and older. Sorry, if you're younger you're on your own.

3) LIFE Bonus

Again, this applies more to those aged 46 and above.

4) Tax Reliefs for CPF Top-ups and Tax Rebate of 20% (subject to cap of $2,000)

The tax reliefs for top-ups are nice but the tax rebate of 20% means you final tax payable is reduced by the lower of 20% of $2,000. This is quite a big saving for those who pay income tax. The difference between a tax relief and a tax rebate is that tax reliefs reduce your chargeable income i.e. income subject to tax BUT tax rebates are a direct discount off your tax bill.

5) Tertiary Education

More bursaries if you qualify under the lower income categories. But if you don't qualify it doesn't affect you so much.

6) Post-Secondary Education Accounts (PSEAs)

$150 to $600 per child that varies with age (older 13 to 20 get double that of 7 to 12) and those who stay in homes with annual value >11,000 get less.

7) Estate Duty Abolished

This means that if you have investible savings that exceed the previous cap of $600,000, you no longer need to consider parking your funds in a residential dwelling (whether owner-occupied or not) as previously you would get hit with 5% estate duty for value of movable property in excess of $600,000. The cap for residential dwellings is $9 million. So do continue to live within your means, save and invest because you can bequeath ALL of it to your children WITHOUT estate duty. Unfortunately, this benefits the rich more than the rest but hey, Singapore is a CAPITALISTIC society and it is every man, woman and child for himself or herself.

Panzer's Wrap-Up

Considering the huge surpluses chalked up by the Government from the resurgent property market as well as GST increase coupled with economic growth, the Government has to give something back to the people to assuage their anger, dissatisfaction and dismay at how inflation has reared its ugly head on our fair shores with price increases for virtually EVERY household expenditure. You name it, its price has gone up.

Even my neighbourhood economical rice stall has raised its price from $2.50 to $2.70 (8% increase). Of course, the Minister for Finance will quote you statistics to tell you that on average, real wages have gone up but *ahem* guess WHOSE wage has gone up much more than inflation. As Michael Jackson sang in the song, "Man in the Mirror", he goes, "Take a look at yourself and make a change....ange...ange....ow...."

Oh, side note. The addtional top-up for NSmen of $100 is pathetic. It is quite a big insult because what the Government is saying is that for the 2.5 years (now 2 years) of full-time National Slavery coupled with 10 years of annual In-Camp Training is only worth a miserly $100 extra. I think I have bought more than $100 worth of army related gear from beach road during my 2.5 years + 10 years of reservist. But hey, why complain when the Government is giving SO MUCH back to citizens after taxing us left, right up and down with income, property, goods and services, ERP and other fees and charges levied at us?

Enjoy your Growth Dividends and Majullah Singapura.

Financial Freedom: You are Your Greatest Asset!

Valentine's Day is just around the corner and PanzerGrenadier would like to wish all my readers a Happy Valentine's Day filled with joy, peace and love for significant other, family and friends.

In line with the Valentine's Day theme, today's topic is about that someone you see every morning when you wake up in the morning and before you go to sleep. No, I am not talking about your spouse or girlfriend/boyfriend or pet dog... I am talking about the man or woman in the mirror you see in the morning when you brush your teeth or before you sleep at night.

Yes... I am talking about YOU.

You are your best asset

In our journey towards financial freedom, we talk about living within your means, saving and investing and growing your net worth day by day, month by month, year by year.

Who is going to achieve it? It is yourself. You are the one who will make your vision of financial freedom come true. You are the one who will reap the benefits of being financially free and you are the one who sacrifices present wants for future needs.

It is about you!

So what about you?

Valentine's Day is associated with love and sometimes we love money, our spouse, our pets more than we love ourselves. But we must be careful not to neglect  ourselves because it is within us that lies the power to do the things necessary for us to achieve our goal of financial freedom.

How to invest in yourself

Build up your ability to increase your means

Formal and informal education that is relevant to your career or your business is important because you are the money-spinner, the rain-maker and the provider. If you do not provide the means, how will you then achieve financial freedom. Safe-guarding your means i.e. through required insurance for medical and other needs should be considered. Developing alternate or multiple sources of income is another way to increase your means. Investments in dividend or interest yielding assets such as stocks and shares, treasury bills and fixed deposits or even rental income from investment property are ways to increase your means.

Get used to living within your means

The key to living within our means is to differentiate between needs and wants. Our wants are unlimited but our needs can be moderated with discipline, focus and willpower. If you start living within your means now, you will find it much easier to adapt whatever your income level.

Save and invest prudently

You need to continually have cash flows from your career or business to generate positive cash flows to save and invest. You are your own gold mine. The gold ore that is mined for your gold (i.e income) is limited by the number of years of your working career or business. Careers nowadays tend to have a finite lifespan and hence we need to protect our gold mine i.e. our health as well as our jobs if this gold mine is to continue to yield bountiful returns for us to build up our private gold stockpile for our retirement!

Spend on what matters to us

What you spend on is a personal choice that reflects your approach and attitude to life. I realise that as my daughter will be born soon, she is going to represent the future of Panzer. My spouse and I have someone who can continue to build upon the foundations we have laid for financial freedom for our family. Spending on ourselves is still important because while my daughter is our dependent, we need to maintain our ability to generate cash flows for the future. Thus, an occasional luxury to pamper ourselves and keep us motivated for the continued journey towards financial freedom is important. But important too is the ability for us to provide for our own retirements that we can later choose to retire earlier and to spend more time with our daughter.

As Valentine's Day approaches, fret not no matter what your relationship status as personal fulfilment in life cannot be contingent purely on your marital or relationship status. It is more important for you to invest in yourself as you are your greatest asset in your journey towards financial freedom.

Be well and prosper.

Financial freedom: Your Protection Against Longevity

You are going to live longer (on average) than your parents because the Straits Times says so. The Department of Statistics says so and so does our beloved gahmen. What do you think? Do you think you can hit 78 for a male or 82.8 for a female?

Coincidentally, the National Longevity Insurance Committee has also submitted its report to the gahmen for the hotly debated annuity scheme now renamed to a more palatable term "Longevity Insurance".

Why are these two articles being mentioned in this post?

Longevity can be a blessing or a curse

The fact that on average, we live longer than our parents has serious implications for us in terms of financial freedom. Looking at the positive aspects, living longer means that you have more time for the compounding effect of interest to allow your investments to grow. The flip side is that uncontrolled debt will bury you before you can clear it before your time on this earth is up.

Living longer can be viewed in a positive light if we are healthy. One of the reasons I promote healthy living as part of financial freedom is that without health, our new found status of being financially free is totally wasted as we enjoy not the fruits of our consistent living within our means, saving and investing as well as being prudent in conducting our financial affairs.

Giving the upward increase of healthcare costs, longevity without adequate health would be both a financial as well as emotional burden.

Assuming that we will reach the targeted age in reasonably good health, what should we consider in our plan for financial freedom if we are going to live longer?

Develop multiples sources of income

I believe even now more than ever that developing multiple sources of income as well as developing skills for a second career become even more critical as our life expectancies increase. This is because when you have multiple streams of income flowing, with adequate time and even if you are in your 40s, living to 78 means you have 38 more years to go. That is a lot of years given that companies can ask us to retire at 62 (now) and 67 in the future. Thus, if our dream is to reach financial freedom by 55, then we need to ensure that our passive income can sustain us for another 23 years i.e. 2 decades for us to enjoy the next 23 years doing all that we wanted to do without having to go to work.

Investing for the future

Our time horizon nowadays has to be far because on average we can expect to live until our 70s-80s. Unless you relish having to flip and serve burgers at 70, you have to give serious thought to growing your money now.

Remember the rule of 72 I talked about? In general, any investment doubles by 72/rate of return. So if you invest in treasury bills at 1.5% now, you treasury bill will double in 72/1.5 = 48 years. But if you invest in 1 lot of SPC now at $6.30 with a final dividend of $0.40 declared, that's a return of 6.3% which using the rule of 72 would double by 72/6.3 =11.4 years.

Imagine, shaving off 36+ years for a difference in return of 4.2%. That is what compound interest does for or against you.

Living within your means

If you believe the statistics and believe in what the gahmen says, then it only makes sense if you continue to live within your means NOW so that should your job stop before your heart does, then you are able to continue to fund your lifestyle through passive income from your investments or from the CPF plus CPF Life ('annuity') scheme.

Even as this post is written, news about the CPF Life aka ANNUITY scheme is being published on the Straits Times website as well as through Channelnewsasia. I will take a good look at what more schemes the gahmen dreams of making us responsible for funding our own retirement while GIC and Temasek invests our reserves in bailing out US/European banks hit by sub-prime.

Be well and prosper.

Financial freedom : the freedom to choose

 

Financial freedom means many things to many people.

If you were to stop the average working person at the bus interchange, the MRT station or the car park and asked him/her what does financial freedom mean to him/her, you will get many different answers. That is perfectly normal as you and I are unique. There is only one of you and there is only one of me in this world. In our uniqueness, there are similarities. The similarity comes when we are posed this question:

"What would you do if you had a million dollars?"

This question is still as relevant today but perhaps due to inflation we should bump up the amount to 5 million dollars to make it interesting. :-)

What would you do if you had 5 million dollars?

I bet you that many of us would say we would quit our jobs right there and then and do whatever we fancied as making a living trading our 8-10 hours a day for a monthly wage no longer appeals.

In that response, there is a commonality that connects us. Many of us really dislike our jobs or would rather be doing something else.  The world is a practical place, we need to work for a living and quite a number (myself included) work at a decent job at a decent wage but we would rather be doing something else if we won the $8million Hongbao draw that is coming on 28 February 2008.

Some of you would want to go travel the world if you have $5 million in your piggybank. Some of you would photocopy your winning TOTO slip and attach it with your resignation letter to your boss. Some of you may even just disappear to another country overnight. Whatever you choose, the possibilities start to become endless and I believe many are salivating at the prospect.

Now what if I told you that you could get $1 million dollars if you truly focussed on the slow and steady path towards financial freedom by saving and investing, living within your means and developing multiple sources of income?

CHOOSE TO BE FINANCIALLY FREE

I'm sure you would be excited and energised by the prospect. However, there is a catch. You would have to work hard at:

1) Developing multiple sources of income

2) Continue to live within your means and save

3) Invest prudently and wisely

4) Repeat 1 until you reach your target

That is what is happening for myself. I too dream of hitting that magical $1million in my lifetime and to do it using the tried and tested methods of what is shown above. It will take time, effort and a little bit of luck for me to achieve my target and I intend to do so eventually.

This blog is a small step for me in trying to develop multiple sources of income, in time to come, this blog will also serve as the genesis for a book that I would want to write about financial freedom from Panzergrenadier's perspective and to allow me to connect with others who have similar dreams.

As we embark on the Lunar New Year period, it's time for us to choose to dream, choose to take action to start on our journey towards financial freedom and choose to be proactive.

Be well and prosper.

Financial Freedom: Time for Reflections

I had an interesting reminder this weekend about why we should at times pause and reflect on our motivations for pursuing financial freedom.

Outreach in Batam
I was in Batam over the weekend for a one-day trip organised by my church to do outreach to two villages over there. Our role was to organise games and activities as well as to lead songs for the village children. The villages were quite poor. Their homes were made of thin cement and board while zinc roofs provided the protection against the elements. The pavements were dirt paths that became very muddy whenever it rains.

However, despite the relative poverty, the children were happy to see us, to get involved in the group games that we organised and sung heartily along with us to the bahasa Indonesian songs that we selected. Their happiness showed through even when some of them did not have shoes or slippers and their clothes were not the modern togs that children nowadays spot in Singapore.

A time to reflect
In the midst of my quest for financial freedom, I do at times get overly immersed in the world of investments, equities, treasury bills, saving money and making money. I look at my statement of net worth and track what is my year-to-date returns and compare this against the fixed deposits and treasury bills yields as benchmarks. I prepare, plan and plot how I can move myself ever a step nearer to my ultimate goal of being able to choose how to spend the 24 hours given to me without worrying about providing for myself and for my family.

There is nothing wrong in being focussed on achieving financial freedom. But at the end of the day, each one of you has to determine the reason why you are doing all this. Achieving financial freedom so that you can stop working is a decent reason, but it sometimes does not fulfil as much as considering about how you can touch others' lives in more powerful ways should you have the luxury of time that financial freedom gives you when you have achieved it.

Community Service can be satisfying
So far I realise from my own volunteer activities that community service is something that satisfies intrinsically like no other thing can. I have to strike a balance now to spend more time with my family and on growing my investments and passive income so that I can one day decide for myself whether I need a regular job for my paycheck. But as I traverse along this journey, I realise that the ultimate goal, after providing for family's needs (and some wants) is really to touch more lives in whichever ways we can for the better.

You can only eat that many bowls of sharksfin or adorn yourself with that many Rolexes or BMW cars. After a while, we need something more intrinsically satisfying.

Be well and prosper.