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9 wealth building blog posts for the LWE.

Saturday, July 26, 2014


"Most people believe the key to wealth is a high-paying job. Yes, it's easier to amass assets if you have more money coming in each month, but the true secret to increasing your net worth is to spend less than you make.

"It is a cliche; but it is the fundamental, absolute, non-negotiable reality of money. To escape this trap, you need to understand that income is not wealth
. The level of your wealth should be measured by the length of time you could maintain your standard of living without an additional paycheck." J. Kennon


I see, I want, I buy?

Want to see how someone in his 20s is becoming wealthier by the day? I am talking about Matthew Seah. The chart he shared with me will blow your mind away: Becoming a millionaire next door.

It is about saving as much money as we can by keeping expenses low. This means that we should not buy luxury goods especially not in order to impress people when we have made some money!

I understand that we are human and sometimes we need to pamper ourselves a bit but, please, don't go  Buying a $500,000 watch after 3 years of work to make a point. The long and short of it, If we are not rich, don't act rich. Chances are that once we are rich, we won't bother.

Finally, don't get tempted by the dark side. Learn The secret to avoiding financial ruin.

On that sombre note, have a happy long weekend.

Related posts:
1. Two questions to help us build wealth.
2. An essential habit to becoming richer.
3. The millionaire next door.
4. A fast track to wealth building.
5. From rich to broke?

8 comments:

Capricon said...

After I realized the importance of above, I do spread to my friends, however some thought that we need to pamper ourselves after working so hard or it is once a lifetime enjoyment or we might not live after tomorrow, and regret later. True in some way, but my stand we won't know whether we live till tomorrow but we need to prepare ourselves for tomorrow as we might just lose our job tomorrow.

Unfortunately I realized this too late ( I m one year senior than AK) . Trying to catch up in last 1-2 years, war chest probably around 200k including emergency, just wonder when opportunity would come and whether sufficient to achieve my goal. I am targeting to be financially free in 10years time, that's about the time I can withdraw my cpf too. I am single like AK and do not own a property as staying with parents. In dilemma too whether to invest in property but that means locking up all my funds. If setting aside emergency funds, balance to invest also reduced and that means need to work harder to the goal.

AK71 said...

Hi Capricon,

Older readers sometimes get a bit demoralised by my blog posts saying that we should start as early as possible because it takes time to grow wealth.

A starting age I like to use is 25 just because that is probably when gainfully employed male fresh graduates could start saving some money regularly. OK, AK is sexist. Bad AK! Bad AK! -.-"

Seriously, however, people who started on the journey to financial freedom in their early 40s are not too late in the game, only later. ;)

Like you have said, people starting in their 40s will just have to work harder and for them, because their income is probably higher than someone who is 25, all else remaining equal, it is just a matter of reducing expenses relentlessly. They can grow their savings relatively faster.

All the wants go out the window. Try to economise on the needs.

Being single and staying with parents is generally a huge advantage in personal wealth building. I know. I was doing it too. :)

I think you are doing the right thing now by building up cash while waiting for opportunities to invest for higher income. There is nothing wrong with sitting on cash but try to maximise returns from your most liquid of assets as they stay liquid. ;)

Lastly, I will encourage you to calculate what a year's worth of expenses is to you and put aside enough money to cover at least 2 years worth. Don't keep the emergency fund in your war chest. There is a good reason why and I think you know this.

All of us have to start somewhere. It is better to start than to stay put. I hope your friends will realise this and join you on your journey one day (soon). :)

Capricon said...

Thanks AK !
Last year i transferred some OA to SA to meet the Minimum Sum to maximise the compounding effect for next 10years. Open a SRS on last day 2013, use the funds to invest in Croesus and happy with the returns.

I am really glad I stumbled onto your blog, it changes my perspectives not just investing but also how we can increased our wealth ( cpf,srs) besides the earned income and my views on cpf.

AK71 said...

Hi Capricon,

I am glad that you are glad you stumbled onto my blog. I will try to make the paths more even so that readers can find my blog without stumbling in future. ;p

Thanks for the encouragement. It gives me that little push to continue talking to myself here and I hope many more will benefit from this. :)

pf said...

Keep reading abt saving money is no fun. Makes me feel like life is passing by without any participation.

I find that if i spend money investing in myself, to attend classes and learn something, i hv no time and money to spend on frivolous things. At the same time, i increase my income. Sounds like a more fulfilled life, no? :)

AK71 said...

Hi pf,

A case of different strokes for different folks, perhaps? LOL. ;p

Well, as long as we are able to increase our level of savings, we are in the right direction, be it increasing revenue without increasing expenses or maintaining revenue while reducing expenses or, the best choice, in my opinion, increasing revenue and reducing expenses. :)

I am not dogmatic about which avenue is chosen. ;)

Tony said...

I started the plan at 33, now still on track but long way to go.

My lifestyle is quite heavy in food, travelling, etc. For those who want to enjoy life, I would recommend to plan a portfolio of expenses the same way as your investment. For example, I spent a lot on MBA education recently, so I cut heavily on fine dining. Only after that I increased it again.
Because compound interest investment required 1st 3-5 years to be critical to build up a base, your expense should be low when younger and higher when older to let your capital run faster.
Btw, recently opened ocbc 360, suitable for war chest :-)

AK71 said...

Hi Tony,

Sounds like you have a balanced approach to wealth building, maintaining a good quality of life as your journey towards financial freedom. :)

I agree that building a strong base earlier on will help immensely if we are relying on the magic of compounding. It is just like how I transferred all my OA money to my SA in the first 4 years of my working life. Then, simply let time and the government do the rest. ;p

OCBC 360 is definitely a great war chest. Earning up to 3.05% for our most liquid of assets while waiting for opportunities. How wrong can it go? LOL.

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