Five Cents Ten Cents

I recently had lunch to catch up with ex-colleagues from my very first job. It was a pleasant lunch as we caught up with the developments with the organisation and how each of us were doing.

Towards the end of the lunch, one of the colleagues started to talk about a business opportunity. It turned out to be an multi-level marketing opportunity.

Immediately, the red flags and hazard lights in my mind flashed repeatedly!

*Warning* *Warning* *Bullshit filters ACTIVATED*.

The reality behind MLM is that most people do not make money from it. The ones that do are those at the top of the MLM chain who started the entire business so that their downlines are the ones working hard for them. There are many references about MLM and you should make up your own mind. But my personal experience has been horrible.

My spouse was once recruited by an MLM outfit and for the week that she was with them, she was a totally transformed person. She was even “brain-washed” to expect objections from family members to her involvement with such a business.

As your travel along your journey towards financial freedom, have you stopped to take a look at some of the milestones and landmarks you’ve passed?

I was clearing one of my old personal finance files and noted my net worth statements back in 1999. Back then, my net worth was around $158,000 when I was 28 years old. This comprised savings, fixed deposits, some investments in unit trusts and Central Provident Fund (retirement account) monies that I had accumulated by then.

Since then, I’ve moved on to be own my home debt-free and am only servicing the remaining 8 months of my car loan which will be fully paid off by January 2010.

Planning for the future by learning from the past

As I browsed through old statements on fixed deposit balances, unit trusts etc, I realised that I can learn a few things from the past. I could get fixed deposits rates of 2%+ and even had HDB bonds paying as much as 4.25% interest. During times of low interest rates now (July 2009) where DBS and POSB is paying as low as 0.10% for your savings accounts, it’s really tough for the average saver whose investment universe consists mainly of savings deposits, fixed deposits and treasury bills.

Even for me, as some investments in my stock portfolio are suffering paper losses, their interest yield on dividend is at least 2% for most and as high as 8%+ for others. Thus, I’d rather keep my money in the stock market in blue chips because inflation at 6 to 7% per annum absolutely kills the returns of 0.10% on savings.

As I have some degree of holding power, I can keep about 70% of my investible savings in equities (stocks and shares) to at least earn a better interest on my savings. There is of course risk in that another stock market crash would make it tough to liquidate my equity portfolio but having lived through the 1997 and 2008 crashes, I’m in a better position to know how much liquidity I need for day-to-day expenses.

Growing net-worth

Because I have tracked my net worth in the past, I know for sure that my net worth has grown significantly over the years. While there’s still plenty of room to grow to my target of having sufficient investible savings to generate passive income to cover my living expenses, at least I know the growth is possible and I’m at the stage of life of exploring even more possibilities for financial freedom.

I am grateful for my family, health and career and do not take these for granted. Now I try to be reading a book to help improve myself in all aspects of life be it public speaking, personal finance or building creative thinking skills.

In the realm of health, I need to invest more time to exercise and also to balance relationships in the family as I pursue financial freedom. It’s important to chart out the milestones and landmarks that we want to reach in all aspects of our quest towards financial freedom.

Setting your own milestones and landmarks

Looking back, the reason why I achieved some of my goals such as paying off my home way before I hit 40 years was a deep burning desire to do so. I created my own milestone that paying off my home was a priority. This gave me more satisfaction than being able to own my own car within the first 13 years of my working life.

Other landmarks including planning for my targetted investible net worth to be financially free. I believe I can live on about $50,000 a year passive income. Thus, that drives me to seek out various alternate income sources other than my career to try to achieve this. I’ve given myself a target to do this by age 45. I may succeed or I may fail. What’s more important is that I put up that landmark that I want to get to and as long as it motivates me to do the things that I’m doing to move forward, it is a step in the right direction for me.

What are some of your own landmarks and milestones that you aspire to toward financial freedom?

Share with Panzer.

Be well and prosper.

Your career is still one of the most important ways to achieve financial freedom because it is how many of us generate income.

When you are first starting out in you career, the income your career brings helps you clear your study loans, pay for your expenses and generally allows you to save so as to be able to have sufficient money to invest for passive income.

Before the number of grey hairs on my head became more prominent, I believed that the path towards financial freedom is to work hard at your job and save money.

I was right for a while before it became apparent that working hard gets you only so far. I’m not saying working hard is not important because it is. But working hard but itself without applying the “smart” part sometimes result in you working for results that are unsatisfactory.

Why is that?

Working Hard

Working hard is important when you are first starting out. It is the main way for you to acquire skills and knowledge in the area you are working. When I first started out as an auditor, I worked hard in that most of the junior level audit checking, ticking, vouching, tracing to documents, asking client questions, digging through histories of transactions was part and parcel of my daily work.

Answering review points, and compiling neat working papers to substantiate balances and to document controls of the client’s system were everyday stuff that I did. It was like that for two years before I “graduated” to become a team leader managing other auditors.

Being a team leader, I worked hard as well, answering to my audit manager while getting my people to deliver on their portions of the audit assignment.

It was a necessary step for me to understand how audit worked and it was part of the price to pay for earning my Certified Public Accountant (non-practising) certification.

Working Smart

For your hard work to be recognised, you need to work smart. This means getting the people who decide your promotion, bonuses and overall career development to understand what you’ve done for the organisation. It means to network, to get to know people from all levels within the organisation as well as to be able to determine what type of projects and assignments get you climbing the career ladder and not stagnating over time.

I saw examples of people who were technically as competent or in some cases less so than me but who got ahead in terms of promotion or prospects because of their ability to network or connect with the bosses.

I also saw how if you met your key performance indicators, sometimes it didn’t really matter how you did it so long as no obvious rules were broken. This was clear during my stint in the private sector where the bottom line explained 95% of your performance and customer satisfaction was not as critical so long as the customer didn’t make a complaint to your bosses for your delivery.

Working Hard and Smart

Working hard and smart is the way to go. Work hard on things that MATTER. Things that matter are stuff that will get you promoted. Things that the organisation values. Things that make a contribution and can be seen.

The pareto principle or 80-20 rule teaches us to focus on things that matter. What are your targets and indicators. How can you achieve them in the most efficient manner?

Being a knowledge worker and internal auditor, my value is not in ploughing through 100 samples to test if controls are working but in first identifying whether the system or process is reasonably instituted from the start.

If the system is poorly designed from the controls perspective and fails to align its operators to the organisational goals, then there’s no point in going through the details when the big picture is flawed.

Working hard and smart requires one to first understand the context in which one operates. What’s important to this organisation. What are my goals and objectives within this context and how can I maximise my outputs and outcomes by leveraging on the most economical inputs?

By doing so, we leverage on our limited time to have a big, positive impact to the organisation and to push ourselves nearer to financial freedom from progressing in our careers.

Remember, developing your career to earn more money helps you become financially free IF you remember to save the additional income and keep lifestyle inflation at bay.

How do you work smart in your own environments?

Be well and prosper.

Have you attended any training, read a new book or learnt something new recently?

If you haven’t then, that’s a warning sign that your horizons may be stagnating and it could be slowing you down in your quest for financial freedom.

1. What I got from attending conferences

I recently attended a two-day conference and was also a speaker for one session. I used to do presentations a couple of years back when I was an IT security auditor and consultant and am starting to slowly get back into the speaking circuit.

If you know the business conference industry, you’ll realise that speakers are generally not paid. They speak for free in order to attend the event for networking, promoting their company or brand and to build up their reputations and thought leadership in a particular field or topic.

I was asked to speak at this conference as I’ve spoken for this conference organiser before and it was a topic that I had some familiarity.

What I got from this conference are benefits that you can derive for yourself by engaging yourself in a learning environment where you can make connections in your brain with new ideas and concepts as well as connections in person with people who know more about things you are interested in.

You should always be reading, listening, interacting with things that are new and refreshing in order to grow your horizons towards financial freedom. This can done in the following ways:

1. Read a book, listen to a podcast or seminar about something you don’t already know

I’m reading Guy Kawasaki’s “The Art of the Start” that talks about entrepreneurship and the process of bootstrapping your start-up. While I’m now in a stable job and have no plans do a start-up as an entrepreneur, the tips and techniques that Guy shares in his book are equally relevant to me in trying to implement new initiatives in my own department within the organisation.

Learning about pitches, getting support and funding and how to deal with different types of people in any type of “start-up” initiative are useful topics.

Most of my own knowledge about personal finance and financial freedom were also from books. With the spread and availability of information on the internet, there’s no reason why you cannot access podcasts, youtube videos, websites and blogs about topics that you have an interest.

I picked up many useful ideas and concepts relating to my area of interest from the other speakers. Their own ideas have rubbed off and now I have some new ideas generated due to their inputs.

2. Network and talk to people by asking questions

The other important thing I gained from attending the seminar was to network with like-minded professionals. Now I have a loose link that I can cultivate over time to tap on a network when I want another view on any initiative.

Networking is two way. You also need to consider what you can offer others. I was a speaker for this conference so it gave me an easier time to demonstrate some degree of competence in my area of expertise which is IT related. This allows me to be able to first be of service to others before asking others for help.

3. Seeing other types of opportunities and building skills

During the conference, I met a retired professional who now spends his retirement doing training and consulting for very decent fees. This has given me ideas on future post-career plans to be a consultant cum trainer as I’ve invested 5 years in toastmastering and will continue to invest the rest of my career to speak at conferences to build up credibility and add value.

You have to build up your own expertise over time in order to be able to leverage on it in the future. Start to build the required skill-sets now before you hit your retirement age. This is how I approach “retirement planning” in that besides savings and investment, I invest in skills that can see me leverage on my experience to be of value even at the age of 60 or 62.

How have you expanded your horizon lately towards financial freedom?

Share with Panzer.

Be well and prosper.

The key to achieving financial freedom is to learn how to distinguish between genuine investment opportunities as opposed to financial scams, frauds and schemes.

I’ve recently discovered the powerful content of PBS programmes which aims to produced documentaries that we can learn and be entertained at the same time.

This video reveals the Madoff Affair – the largest Ponzi scheme uncovered that spans generations. Many of the people cheated in the scam were not unsophisticated investors. Still, they were taken in by Bernie Madoff’s ability to generate consistently high returns over many years.

In order to grow yourself towards financial freedom, it’s helpful to learn from the mistakes of others so that you can better travel on this journey to be financially free.

Be well and prosper.

The more I read about life style design and about living your own life, the more I start to understand that money is just a means but not the ends of life.

Money is an enabler

Working for money enables you to do some of those things. But it can be a huge chain around your leg that also traps you into thinking you need to get stuck in the work-sleep-eat-work cycle that has been what we see “life” as.

Is your reason for living to make money? If it is, then accumulating massive amounts of dollars in your bank account or having a big home and a big car (with big mortgages/loans) is the way to go.

But for many of us, the reason for living goes beyond collecting “stuff” or things in our life.

The older I get, the more I realise that life is about the many experiences that I can go through that expand my horizons as a human living being. I want to visit more places, eat more different kinds of foods, have fun with my family exploring places of interest and to just sit around with them. I want to go travelling to allow my daughter to see that this planet is more than just Singapore Inc.

Knowing how much is “sufficient”

I follow Chris Guillebeau on his quest to visit all the countries of the world as well his unconventional but authentic approach to life. He and many other true proponents of lifestyle design has made me rethink about what I truly want out of life.

I did my own sabbatical and also gained a number of insights on the role money plays in my life. My money goes into spending for mainly household expenses that provide a comfortable standard of living for my daughter and my spouse (who works part-time). I computed for a year how much income and expenses I incurred and now have a pretty specific number about what “sufficient” means to me.

This insight allows me to know that my income is enough to feed my family and what amount I need for pure subsistence. It also makes my plans for financial freedom more concrete because I know I can survive on that $x,xxx amount each month.

Going forward, I realise that my life-list is achievable and that’s why I am giving up 40+ hours a week at my current job because the money sustains my family and allows me to slowly tick-off each item on my life-list and to understand the human experience more with each day.

What are your own views on the role money plays in your life?

Share with Panzer in the comments section.

Be well and prosper.