In 2016, some guy at an insurance event told the audience which I was part of, that his grandfather told him to save 20% of his income, and he’ll be set for life, or something like that. At the time, I had some extra money to save, but I didn’t know how much is an appropriate amount. So I thought, why not start with that figure, it sounded about right. After all, I’m self employed with no regular EPF contribution.
After some months, I told myself, let’s try increase this to 30%, and later to 40%, and then to 50%. Today, I save between 70-80% of my income. I still didn’t have the framework of how much I should save and what to do with the money. But I knew it had to do with my paranoia of not having enough money which has happened in the past.
I stumbled upon the FIRE movement on reddit and I got interested. There were other people like me. They had a way of thinking about this, and they were focused. And it was for all types of income and lifestyle, so there are examples to suit every kind of individual/family profile.
Being financially independent doesn’t mean you should automatically retire. In fact I’m convinced that it’s detrimental. But it does open up the possibility of not having to work for the money, and being able to take more risks in life, like starting something bold which may or may not work out.
Some of the things I learnt:
- Cutting down on big ticket expenses. Accommodation and transport are usually the biggest expenses. I learned house-hacking on YouTube, and that brought my rent and subsequently my mortgage to $0. As for transport, you only need something that does the job, it doesn’t have to be expensive.
- Save before spend. It’s so much easier to do this and being able to spend the balance without tracking it too closely.
- Earn more. There’s only so much a person could do with their money if earning a small income. Start a side hustle or learn a new skill to find a better paying job.
- Invest your money consistently by dollar-cost averaging and benefit from compounding interest. You can start by opening a Stashaway account.
- Take up 0% EPPs whenever possible. It’s free money. But you should do this if you’re able to purchase for the item cash anyway.
- Open a Singapore bank account and hedge your risk against government stupidity, currency devaluation, or both.
- Have adequate insurance. Shit sometimes happen in life, and don’t let that drain your hard-earned savings.
- Reduce your taxes. If you are self-employed or run a business, find a good accountant.
- Dual income household. For most people, it’s important that both partners are earning as the combined savings amount would be much more, instead of the reverse where one would have to subsidize the other.
- Don’t stop learning. People continue to come up with better ideas on the internet, and we can improvise our ways by keeping our minds open to change.
Cheers! - wan