Do you sometimes feel that "money is not enough"? Actually, most people share the same feeling. A recent study on retirement planning found that 69% of the survey respondents felt that they either have not started planning or have not adequately prepared for their retirement.
If you’re aged 40 and plan to retire at age 60, and assuming an average life span of 85 years, then you only have 20 years’ time to prepare for 25 years of retirement. If currently you only have S$50,000 savings and hope to have a retirement income of S$1,000 per month when you retire at age 60, how much do you need to save each month assuming that your savings can achieve annual returns of 5% and inflation rate is 3%? The answer is you need to save S$724 per month, and by age 60, you would have accumulated a total of S$434,319. You can go to www.cpf.gov.sg
which provides a useful retirement calculator for you to try out and calculate your own numbers.
However, if you can start saving 10 years earlier, at age 30, then every month you only need to save S$439, or 39% less savings than starting to save at age 40. Thus, it can be clearly seen that the earlier you start planning and saving for your retirement, the easier it is for you to achieve your retirement savings target.
The Singapore Government realised that most people do not have enough money to retire, and thus decided to recommend the increase in retirement age from 62 by 3 years, to 65 years old. Do you really need to work till age 65 in order to have enough money to retire? 3 years ago, at age 39, I managed to reach one million dollars, assuming getting a 5% annual yield, I can continue to have S$50,000 of passive income per year even if I stop working.
In other words, I reached Financial Freedom, i.e. you have enough money coming in every month to meet all your expenses even if you stop working. How did I manage to achieve Financial Freedom at age 39? I achieved Financial Freedom at age 39 not because I have rich parents or because my income is extremely high, in fact my monthly household income is about S$6,000, an average middle class household income in Singapore. I reached Financial Freedom because I learned how to “master my finances”. The good news is if you also learn to master your finances, you can also reach Financial Freedom as well.
Learn to make your money grow
How did I become a multi-millionaire by age 42? How am I different from most people in Singapore? Most people know how to save money, but they do not know how to grow their money.
They put most of their savings into bank deposits. According to the rule of 72, we use 72 divided by the annual rate of return you earn on your money to estimate the number of years needed to grow your money by 100%. Thus, if the interest you earn on your bank deposits is 1%, it means that it would take you 72 years to double your savings. If you think about it, if inflation rate is 3%, and you earn 1% on your savings, so over time, are you becoming Richer or Poorer?
You’re losing money every year due to inflation without you realizing it, now you understand why most people face the problem of “money not enough”?
If you want to reach Financial Freedom, you need to learn how to invest, learn how to grow your money. For instance, if I were to stop work today, with S$3,000,000 accumulated capital to date, and assuming annual yield of 5%, I can easily earn an annual passive income of S$150,000, and can afford to stop working, if I choose to.
Enjoying the freedom to choose what I do everyday because I am financially free is a joyous and fulfilling feeling that I cannot describe in words. I no longer work for money anymore, nowadays, I only work for fulfillment and to contribute to the society by sharing my financial knowledge/experience.
Last year, just counting realised capital gains on stocks alone, I made over a quarter million dollars. All these additional wealth is not possible if I did not learn how to invest.
I’m not sharing this to boast to you, I hope my sharing and personal experience can inspire and encourage you, that it is indeed possible for an average person earning a middle class income to reach financial freedom even by age 39!
If you observe carefully, you will realise that all the wealthy people have investments, but most people do not have investments. Nobody is born knowing how to invest, I myself lost half of my wealth in 1998’s Asian Financial Crisis and knew nothing about investing before age 29, I only started to learn how to invest from age 29 and reached Financial Freedom 10 years later, at age 39. If I can do it, so can you!
Lastly, I like to share with you the words of wisdom by Henry Ford, the founder of “Ford Motors”, he said: “whether you think you can or you cannot, you’re right!”
The good news is if you want to learn from me, there are many ways to do so. You can visit our free internet discussion forum at www.MasterYourFinance.com
, subscribe to my public updates at www.facebook.com/DennisNgKW
. You can also get a copy of my latest book “What Your School Never Taught You About Money” which is available in most bookshops in Singapore and even Malaysia.
Message from IM$avvy Admin: Visit www.cpf.gov.sg > Calculators/Games to better plan and manage your finances via the various calculators.
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