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

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 : 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.

We want it all and we want it now!!!

Many websites and "get rich schemes" abound in the internet because we human beings tend to want to make more money and make more money now! But as I travel along this road of personal investments and finance. I realise the road is long and the journey is hard, and that is part of the reason why I started this blog-- to write down those small five cents ten cents nuggets of information that I learnt from experience, from listening and from reading.

The further I travel along this road to financial freedom, the more I realise the "secret" and "magic formula" is there for all to see. There is no quick road to financial freedom. There is no quick way to riches. There is no quick way to be financially free. BUT... there is a way to develop our own individual methods to financial freedom by reading, understanding and internalising some of the fundamental principles that many know, some share but few practice!

What are these principles?

Live within your means
Firstly, live below your means. Some people take offence at this principle. Some of you feel that having worked so hard, you should enjoy the fruits of your own labour. I have no arguments with that, but I am of the view that by all means enjoy the finer things in life, subject to your income levels. There is no point enjoying a rich lifestyle funded by income that leaves you with little savings unless you are 100% sure that the world will end tomorrow. But if that tomorrow never comes, what will you live on then? You can choose to accept this principle or not. My experience has been that those who have become financially free typically are not the one-off lottery winners but rather, the frugal workers who earn a average wage but by leveraging on the power of living within their means, saving the remainder and investing it in relatively safe yielding investments, they grow their money slowly but surely until they can retire on their passive income.

Save and invest consistently
Savings and investment comes naturally if you develop the propensity to save. Savings left in the bank savings account does nothing much. Savings invested into fixed deposits, treasury bills and some equities, unit trusts or investment property helps to grow. The choice of investment is a function of your risk profile and your level of sophistication as an investor. The more savvy you are, the more able you are to balance the risk-reward trade-off for investments. For those who do not understand the different between a blue-chip and a potato chip can leave their money in treasury bills and/or time or fixed deposits. Let the power of compound interest then work for you.

Take responsibility for your finances
No one except for yourself is responsible for your own financial situation. Your choices in your lifestyle as reflected in the food you eat, the places you shop, the things you buy all percolate down and register themselves in your financial circumstances. Do not say blame the rising cost of living, do not blame COE/ERP rates, and do not blame your pay for the choices you make when you spend. Take a step back, think for a moment. Why do you NEED that Louis Vuitton bag, why do you NEED to drive a car, why do you NEED that big house? Are you sure it is a NEED and not a WANT? There are no right or wrong answers. Your choices determine your financial situation.

Enjoy the journey
The road to financial journey is long and hard. But enjoy the journey. I found that my own journey has been filled with ups and downs. I learnt some painful lessons in poor investments and lost money. I also took responsibility for my losses and started to read up, to learn and to invest. Now, I am in a much stronger financial position and understanding than I was when I first stepped into the working world. Enjoy the ability not to worry about your financial security, enjoy knowing that YOU are in control of your finances. Enjoy the process of being a good steward and guardian of the resources that are at your disposal. Enjoy being financially free, one realistic step at a time.

Financial Literacy: Are We Teaching Enough?

Financial literacy is relatively uncommon in Singapore. When I speak with my friends, colleagues and surf forums populated by young people, I realise the level of financial literacy in Singapore is quite low. What do I mean by that?

In my formal education from primary 1 up to university, I never learned about personal finance. About how to plan for my finances, understanding about different types of investment instruments that would be useful to me personally. The most ironic thing is that I am an accountant by training and I should be the one who has picked up the most about financial knowledge. Err... Yes and No.

Yes --in the sense that the financial management modules in the university taught concepts that were useful as someone who would work in an organisation and manage their finances but not your own!

No --in the sense that 95% of the personal finance knowledge useful to me as an individual has come from reading books on personal finance and investments and NOT from my textbooks in school.

Many of us encountered questions about financial planning only when we got the first cold-call from a insurance agent or financial planner. That is not the best introduction to the world of personal finance as the financial planner has an interest to sell a product to you to make a commission. So is there really sufficient training in financial literacy?

I feel that there is insufficient financial literacy skills being taught in schools and that more unbiased consumer education should be made available. A quick search on the internet reveals that the MoneySENSE national financial education program was only launched in 2003! Only 4 years ago? For a country that prides itself as a financial hub, it appears that consumer education has taken a backseat for too long.

The MoneySENSE website quotes,

"The MoneySENSE programme covers 3 tiers of financial literacy:

• Tier I - Basic Money Management - which covers skills in budgeting and saving, and provides tips on the responsible use of credit;
  
• Tier II - Financial Planning - to equip Singaporeans with the skills and knowledge to plan for their long-term financial needs; and
  
• Tier III - Investment Know-How - which imparts knowledge about the different investment products and skills for investing."

That sounds interesting and those of us who are total newbies it would be worth our while to go there. The schedule for May includes the following:

"MoneySENSE Talks in April and May 2007

1) Topic: Financial Planning For Families
jointly organised by Singapore College of Insurance (SCI) and the Securities Investors Association, Singapore (SIAS)

- Mountbatten Community Centre, 12 May 2007, 2:30pm - 4:30pm (Mandarin)

- Chinese Development Assistant Council (CDAC), 26 May 2007, 3:00pm - 5:00pm (English)

To register, please call 6227 2683"

While MoneySENSE's initiatives are commendable. I am of the view that we should incalcuate in our children and youth sufficient financial literacy lifeskills to be able to navigate through this murky waters known as personal finance. The overload of information available requires an educational curriculum that gives a clear framework on how one views personal financial management

The Association of Banks in Singapore and MoneySENSE have tied up to come up with this program, "Savings - the Sensible Habit" to inculcate savings habit amongst primary school students. Squirrel savers program anyone? For those of you who were studying in primary school around the 70s and 80s will remember POSB's role in helping children save. Is this sufficient? Should we be doing more?

The internet has opened up more channels of information available to the e-savvy generation. I hope that more people avail themselves to the excellent online resources and also invest in educating themselves in personal finance as the rewards we reap are for the rest of our lives.

Be well and prosper.