Hi there. If we haven’t met, my name is Mr 15HWW.
I am the oddball that has spent three years writing about personal finance and most recently unabashedly declared myself quarter-retired at the age of 30. By striving to be above average in most aspects of our lives, my wife and I managed to sock away $250,000 at age 28.
This amount allowed us to buy some of our freedom back when we left somewhat “miserable” but high-paying jobs (here and here) and even though a 15 hour work week is still not yet feasible, I have managed to transit to a 25 hour work week in my freelance role as a tutor and writer.
I feel rich even if this experience has reinforced my belief that money isn’t the be all and end all. The chase for higher salaries and promotions up the corporate pyramid regardless of (un)happiness on the job until the age of 65 holds little appeal, then and now.
And if you’re interested in doing something similar to the above, then this blog could prove to be of some value to you. Since there could easily be new readers stumbling onto this website from time to time, an article like this could provide the background and essence as compared to sifting though 250 published articles.
The road to Financial Independence starts very humbly with the first dollar saved.
I am a believer that more often than not, it’s much easier for 90% of the population to cut their expenses as compared to increasing their income. And that’s where the focus of my writing has been.
Before you raise your hands up to protest that you are already optimising your expenses, let me ask you, have you ever tracked your expenses for a few months in a row?
It’s almost imperative to be able to know where your money is going if you are going to ever have a chance of reducing them. One good method is to tabulate the somewhat fixed expenses for the year and then record the discretionary expenses separately each month.
For the majority of Singaporeans, the house will be the most expensive purchase in their lives. And it makes a lot of financial sense to almost always buy a BTO. Also, do your best to minimize accompanying wedding costs and renovations costs during this phase of your life and avoid getting into heavy debts. Otherwise, how to truly “celebrate” this milestone?
This is also the time when you would be piling on the insurances when you start a new household. Understand the basics of insurance, that insurance companies are profit-making enterprises, and aim to reduce insurance expenses or even self-insure whenever possible. Both of us feel that we are well-insured even though we are paying less than $70 each a month!
If one continues to wantonly indulge in or worse, be addicted to convenience and luxury, what I have mentioned above would seem like a nightmare. And seriously, what’s described below could be nothing short of the worst punishment.
But as for us, when we learnt to curb the urge to compare and compete, we realised that our mindset changed. Without the need to impress or justify to others, we only aim to optimise our lifestyle and saving money simply became more of a byproduct.
It helps that I am a big introvert. Instead of spending lots of money on smoking, drinking or clubbing, I prefer to spend the time reading. There are tons of great books to explore. And if books aren’t your cup of tea, how about movies at home? You don’t even need to spend a single cent on entertainment if you’re patient. with the awesome libraries we have that allows us to borrow Blue-Ray quality movies.
Think hard about whether you really need to own a car in tiny Singapore. I am tempted, of course. But admittedly, more for the social status (please don’t judge me). Recently, I realised I might not even need to rely on public transport on days since I did not mind walking a bit more sometimes.
One bugbear I constant have is the phones that my students carry. Some of them almost always have the latest iPhones just when they are released! And they cost a bomb?! I always ask “Why not delay the changing of your handsets?” And if you decrease the usage of your phone, you could even downgrade your data plan.
Are you optimising your utility bills? If given a choice, would you rather have a hot shower for a week or two hours of aircon?
Instead of lamenting the high costs in Singapore, why not spend some of your money in lower cost places like neighbouring Johor Bahru? It’s relatively safe to spend a day in City Square Mall across the causeway. Even though we don’t get discounts from our credit card purchases, the extra savings more than make up for it.
Making Your Money Work Harder
By being conscious of your daily habits and the money that you spent, it’s inevitable that your savings will grow. You will then be thinking about how to make your money work harder.
But chotto matte. Unless you have an iron rice bowl, it’s imperative to set aside some emergency funds before you begin to attempt to generate higher returns from your savings. Of course, if you start as early as possible, your obligations might be low and the need for a substantial emergency fund might be lower.
I do occasionally get emails from readers who wants my advice on how to start investing. I am not sure I can be a big help but the least I could do is share my experience.
When I was starting out, I got into a Regular Savings Plan and realised that volatility can be my friend through dollar cost averaging. Most of these savings were invested in the local index, the STI ETF. I actually did some hindsight analysis a year back when the stock markets started to correct.
This “passive” form of investment should suffice if you’re aiming for 6-8% returns from the stock market. However, if you’re aiming for higher returns and truly believe you’re in the top 10% (erhem…like delusional me), you can try out picking stocks with part of your portfolio.
If you’re the kind who doesn’t need to hold any cash to sleep well at night, congratulations! You can be 100% in stocks to reap the benefits of higher returns. However, a word of caution. One would need to have the stomach to stay the long haul and as an asset class, stocks have had a tendency to plunge by 50% at least once in two decades.
For me, I realise that I have overestimated by risk tolerance in the past and the trick to getting past this is investing in some other assets. For example, I actually bought some corporate bonds and government bonds like the Singapore Saving Bonds.
I even bought some gold. This is how I did it and honestly, I am thinking of buying more. This is because increasingly, I am more open to a passive investment strategy and the concept of a Permanent Portfolio.
Set Targets and Celebrate
If one could perform these 4 simple steps, it would help alot! But well, they are only simple and might not be easy to the majority.
The road to Financial Independence is often long and hard and if you’re lucky, it would take less than two decades. Therefore, remember to celebrate every small progress along the way. For me, I made Financial Security my first long term goal!
And maybe even if you can’t retire, having the first substantial pot of savings could enable you to take a good break. For example, a 6 month sabbatical before your next job?
Think of all the possibilities for you during that break if ever you need some motivation to earn more and save more to enable it.
The inspiration behind this post came from Mr Money Mustache over here.
Besides hopefully being a good read for you, this post is also to commemorate the 3rd year of my blogging journey and a few days ago, I actually parted with a few hundred bucks to renew the hosting of this blog for another 3 years!
I am grateful. (And nah, I really don’t think I am a “hero”, except maybe to the Mrs…)
Here’s a toast to the next three years of this blogging journey. It should be as good, if not better!