Saturday, 30 April 2016

The Most Important and Overlooked Personal Finance Tip

Surprisingly, most Singapore personal finance blog only talk about equity and maybe a little bit more of other things. However, most didn't touch on the secret to achieving financial independence in the "easiest and surest" way. Living your best life, enjoying every single moment of your life, doing things because you want to, spending time with your loved ones...Are these not the reasons for you to have more money? Or it is about showing wealth to others, comparing gadgets with your peers, eating and facebook what overpaid food you just had or that overpaid travelling?


To begin with, you don't really need to have a lot of money to live well and with dignity in Singapore. Knowing what makes you happy and what your family needs will speed up your financial wealth. In another words, more saving from your income. This is provided your income is at the median range or above. Here is the news that reported on median income in Singapore: click here

If you think the amount is high, please note that it could have included bonuses and employer's cpf. Since this is household income, you will have to divide the $8,666 by 2 or 3 persons. For simplicity, let divide by 2.5 and minus off a bit of bonus and employer's contribution. So, it should be about $3,000 per month. If you are reading this blog and you are not a fresh graduate or students, this figure shouldn't be that overwhelming? I was told fresh graduate nowadays earn more than this figure.

I will do a simple calculation to illustrate my points why most people, including financial bloggers, think too much. Of course, there are some assumptions needed.

Age
Monthly Income
Yearly Income with only 1 month Bonus
Total Income for 2 persons
Saved 70% of income
Total Cashflow Saving at 3% Interest
24
2,800.00
36,400.00
72,800.00
50,960.00
52,488.80
25
2,884.00
37,492.00
74,984.00
52,488.80
106,552.26
26
2,970.52
38,616.76
77,233.52
54,063.46
162,237.63
27
3,059.64
39,775.26
79,550.53
55,685.37
219,593.56
28
3,151.42
40,968.52
81,937.04
57,355.93
278,670.17
29
3,245.97
42,197.58
84,395.15
59,076.61
339,519.07
30
3,343.35
43,463.50
86,927.01
60,848.91
402,193.44
31
3,443.65
44,767.41
89,534.82
62,674.37
466,748.05
32
3,546.96
46,110.43
92,220.86
64,554.60
533,239.29
33
3,653.36
47,493.74
94,987.49
66,491.24
601,725.27
34
3,762.97
48,918.56
97,837.11
68,485.98
672,265.83
35
3,875.85
50,386.11
100,772.23
70,540.56
744,922.60
36
3,992.13
51,897.70
103,795.39
72,656.77
819,759.08
37
4,111.89
53,454.63
106,909.25
74,836.48
896,840.65
38
4,235.25
55,058.27
110,116.53
77,081.57
976,234.67
39
4,362.31
56,710.01
113,420.03
79,394.02
1,058,010.51
40
4,493.18
58,411.31
116,822.63
81,775.84
1,142,239.63


Your family became millionaire family at 39 years old just like that. Do you need to stare at the annual report day in day out to get that wealth? Don't get me wrong, if you enjoy doing that, please go ahead. Also, it is good that you are capable to do investment, it is a bonus and it is a great skill. Not to use more time to buy money, and use more money to buy time later. 

There are people who think that being frugal must be living a miserable life trying to save money for that end goals. Actually, it is reverse. I spend my time and money the way I want with total freedom and I don't need to justify to anyone. I could be way happier than buying that new "toy" to show off to friends, you know. And, my lifestyle, is not anything less than an average Singaporean's. If you still think my income is "high" that why I can achieve early financial independence, look at my illustration again.

Here, I am wishing you a happy long weekend and may one day, we don't need to "labour" for our basic needs. Pampered? I earned it, not inheriting a single cent!

12 comments:

  1. Hello FD,

    I wholly agree with you that a frugal life does not necessitate a miserable life. It is all in your lifestyle and consumption habits.

    That said, saving 70% of income can be a stretch, especially for younger couples who have just started work. A significant portion of my earned income goes into insurance and hospitalization policies for me, my father and my two kids.

    Btw, fresh graduates nowadays have a much better headstart. I know my employer pays $5,000 for entry level positions.

    ReplyDelete
    Replies
    1. Hi SS

      Been a while since I see your online presence. Hope you are doing well :)

      Saving 70% is indeed a stretch, and also depending on your income too. If you are earning 2-3k, 70% seems exponentially difficult. If you are earning 5k, it look easier, and so forth. With a family, maybe more.

      Wow, $5,000! unbelievable. Inflation will be real high if that is average starting point.

      Delete
  2. Hi FD, it may indeed be possible, but most of the savings will be stuck in housing I believe. Fellow Daddy

    ReplyDelete
    Replies
    1. Hi Fellow Daddy Serendib

      Thanks for dropping by.

      It is just an illustration but it is possible of course. If minus CPF, unlikely but cpf is a saving? Ok, you can adjust here and there a bit, 14th month bonus, promotion, job hop, etc. Shouldn't be too far off if you are that able to save.

      Buy a cheapest as possible yet satisfying housing as possible, no choice actually for residential. Unless you can live with that without being feeling miserable. haha.

      Delete

  3. Investment bloggers like to think that everybody need to learn to invest; but not true that everybody needs to invest.

    Read? Save more than 60%. No need to invest??? (3)

    ReplyDelete
    Replies
    1. Hi CW

      Hope you are not really sick as you mentioned in your blog :)

      Invest is good, but moderate. Some people too extreme, I felt. Even it is a hobby, also need to strike a balance. Just like if we like playing computer game, we can't be staring at it 12 hours a day right? How am I to judge? To each his own.

      Delete
  4. Frugal Daddy,

    Just like that, the counterbalancing dots in the Tao symbol have gotten slightly bigger ;)

    LOL!


    The big elephant in the room is wage inflation.

    Many financial bloggers with X amounts in Y years goals will be frantically moving the goal posts no matter how "SMART" the goals are.

    What's the point of achieving something when almost anyone and everyone can do it?

    Time will solve everything.

    For in the long run, we will all return back to star dusts ;)

    ReplyDelete
    Replies
    1. Hi SMOL

      I only wish for contentment and calm, I don't bothered much with getting endorsements from others actually.

      Delete
  5. Hi FD,

    I do not think learning investment in financial assets is a must like most financial bloggers here advocates. For me, first thing first, investing in financial assets is a hobby because of my love in learning more about businesses and learning to beat the market. Then again, if hobby can make financial sense, why not. So the sequence must be right!

    Instead, to me, the all-important is "Investing in yourself".

    Yes, if you want to lead a simpler life, then you can say it is even not important in investing in yourself. You can argue a lot about being yourself in ultimate simplicity but we cannot neglect the society we live in.

    It is easier if you are single and alone.

    If not, the sad truth is we are surrounded by people. People affect people emotions, can make you happy or angry, regardless of whether you care or not! Leading a simple life in today's society is not as easy as before anymore, because of the meritocracy, fast pace, and eventually your kids will be facing competitions even if you do not care.

    If you are enlightened, chances are you can ignore easier.

    In my humble opinion, it is better to be wise, knowledgeable and with little financial burden, before we lead a simple life. Rather than living a simple life from day one, because then without experience and lacking knowledge will translate to lack of wisdom which means INEVITABLE BAD decision in life, which can cause you even more. Maybe not just financially, but also many other things including the way we handle things in life, relationships etc.

    ReplyDelete
    Replies
    1. Hi Rolf

      As usual, your comments are painful to read but come with wisdom!

      As i mentioned above to CW, Invest is good, but moderate. Some people too extreme, I felt. Even it is a hobby, also need to strike a balance. Just like if we like playing computer game, we can't be staring at it 12 hours a day right? How am I to judge? To each his own.

      Simplicity is only part of the equation. Another catalyst is being efficient in your money management. 3rd is being self aware. 4th is being self assurance. 5th is your charisma to let your family see the points. Many more points. It is easy to be frugal to some, but extremely difficult to most. Some people, in the path to look for frugality, lead to being cheap. It is different. Some can't even save. All walk of life.

      My next generation, my next next generation, and 100th generation later? If I am so "fortunate"? Seriously, it is the value that matters. We can't be leaving wealth that last generations, it is another heavy topic altogether because there are too many variables.

      Delete
  6. Hi FD,
    Don't forget because there were people who were extreme in their thoughts and actions, that we can fly in the air, we can turn night into day, that China has a Jack Ma, .........etc
    Maybe i am a bit extreme in financial matters because i am always worry about being old and poor, the vision of some people can't even afford a BIG MAC,......etc....

    ReplyDelete
    Replies
    1. Hi Temperament

      Most people don't live life for simple pleasures. I can understand their mentality. Back to square one, those extravagant spendings can only gain pleasures for that short moments. It is the experiences that counts.

      Delete