My thoughts?
When you want 5 star hotel wedding, take 30 year loan for million dollar condo, buy big car, go annual vacation to Europe/US, change latest iphone every year, how to save for retirement?
Chinese have this saying: No so big head, don't wear so big hat. If you are a peasant (and earn a peasant income), don't try to live an elite life.
No doubt there are people truly living in poverty in Singapore (don't earn enough to even put 3 meals on table, much less save), but also got lot of cases is people die die want to buy something they can't afford (throw all their savings/take on big debts for car and house) and then claim they nothing left for retirement.
I don't deny the cost of living in Singapore is extremely high, but I think that gives us even more reason to be prudent with our earnings.
"Rich people stay rich by living like they're broke. Poor people stay poor by living like they're rich."
I can only shrug my shoulders when I see people who are lazy to even write a form to credit their salary to a higher interest account (a one time effort and gets you free money).
-----------------------------------------------------------------------------------------------------------------------
Instead of the article, I would like to propose an alternative.
The below assumes you have the privilege to pursue financial independence. Generally, this means:
- You and your dependents (family), are generally healthy and does not have long term and huge medical bills.
- Your family does not depend on you for survival, and you do not have to spend a huge portion of your income on them.
- You income is not too low (Subjective, but I would say below 2.5K)
In my opinion, most graduates from middle income family would have no problem meeting these criteria.
1. Study hard, get a good degree, earn a median income and try to have as high of a saving rate as possible, especially in your 20s (the first 5 year is crucial).
2. If applicable, clear all your debts ASAP, do not rack up credit card or any other debt, and do not waste money on useless shit. Do not take debt to go on vacation, buy liabilities and other non-income producing crap.
3. Save up emergency fund of 6 months, and put them in a high interest account. Then start saving for your warchest. Try to hit 1 year annual saving before 30s. This immediately gives you passive income of $1.2K per year (or ~$100 per month).
4. Start investing properly and correctly. Even if you are extremely conservative, you should get around 5% return over the long term.
5. Earn money -> invest -> collect dividends -> re-invest your dividends. Keep repeating this for the next 10 years.
6. If you decide to get married, have a simple wedding, simple honeymoon, buy an affordable house. Do not buy a car. If you have a child, be prepare to delay your retirement if you want to send your kid to expensive enrichment and tuition. If you really want to leave a legacy for your child, try starting a portfolio for him/her instead. He/she will have additional 20 years of compounding.
7. If you follow this diligently, by the time you're in your 40s, your investment (passive income) can easily cover more than half of your expenses (saving rate ~50%). If your saving rate is truly insane (>70%), you might even reach financial independence here. If you haven't, continue doing step 5 for the next 10 years and you would achieve the same. It's all up to your saving rate at this point.
8. As a guideline, aim to have minimum 1 year annual income of savings by 30s. 5 by 40s, 10 by 50s.
If you are willing to even put in a little effort to learn right investing, optimize your savings, and don't over indulge in luxuries, I am very sure most can achieve FIRE within 20 years. Many local bloggers have achieved it much much earlier on median income, in their 30s even. So 20 years is a really conservative estimate already.
Problem is, are people willing to put in the effort?
No comments:
Post a Comment