Panzer's Guide to Financial Freedom: It's Your Money and It's Your Life

[panzergrenadier]

Breaking Through Your Comfort Zone towards Financial Freedom

I remember attending “Outward Bound School” (OBS) in Pulau Ubin a few years back whilst I was a volunteer with one of the self-help groups. As part of volunteer development, volunteers who had 2-3 years under their belt were invited to participate in OBS training as part of team building and also for personal growth.

What does going to OBS have to do with financial freedom?

Our Comfort Zone

It is easy to fall into our comfort zone and not grow in our lives once we are used to a routine that takes cares of our basic needs. Take for example our careers. Looking back, I realise one of the important things I did in the past was to change my job every 4-5 years. In my 15 year career I’ve moved from external audit to IT audit and security, internal audit and governance. Along the way, I have been exposed to different industries and sectors and have worked in both private and public sectors.

It was easy to have stayed on in my comfort zone. Thinking back, if I had stayed on in my first job, I think I would potentially had the chance to become the 4th or 5th most senior person in the organisation (of 180 people) by now. Of course, nothing in guaranteed and I could also have stagnated in that position as I was largely doing similar things year in year out. Because I left that organisation and joined an IT company, I gained new skills in IT security and IT audit which helped me grow into a more complete internal auditor that I am now.

Inertia and the fear of the unknown are two powerful forces that tend to make us want to avoid taking risks and keep doing the same thing over and over again. But if the same thing is not getting us nearer to our goal of being financially free, then we need to seriously consider what we need to do differently to achieve a better (and different) outcome from the status quo.

Outward Bound Challenges You to Better Yourself

The useful thing about going for an OBS course or any new experiential learning opportunity is that it takes you out of the comfort zone. For one, you are physically transported to Pulau Ubin, a jungle type of environment with interesting and challening obstacles for you to climb. The various obstacles have varying degrees of difficulty and most able-bodied people are able to at least participate in climbing them and to challenge themselves on how high they want to and can go.

It is in the striving beyond what you think you can do that is the learning in OBS. You challenge your mental fears, doubts and uncertainties about reaching the top of the rock wall and you determine how hard you want to strive to break through to the next level.

Our journey towards financial freedom is also fraught with challenges. How do we learn more about money management and living within our means. How do we pick up new knowledge and skills about investing in equities, bonds, unit trusts or plain vanilla deposits?

In short, we need to set our own goals and strive to venture beyond our comfort zone in putting our monies just in plain fixed deposits and savings that yield less than 0.5% when inflation is expected to be in the range of 3-4% for 2010?

Continuous Improvement

Improving ourselves continuously requires a beginners’ mindset. This is a mindset where you one approaches the new domain (e.g. equity investing, fundamental analysis or technical analysis) with an open mind. To learn what the new area tells us and to analyse how it can or cannot be intergrated into our own investing approach and philosophy.

Continuous improvement also means to keep reading about new things in our quest for financial freedom. Learning doesn’t have to be confined to pure financial and investment related resources. Learning more about ourselves as human beings, about history of world markets on asset bubbles, about the Asian financial crisis and 2008 global financial crisis touches more on general current affairs. One doesn’t have to be studying for a Certified Financial Analyst qualification to get interested in the social, economic and political forces that shapes world markets.

Even Shakespeare has something to teach us to be financially free as his plays touches on our human nature. We will always be struggling with the forces of greed and fear when we are in this journey towards financial freedom.

What are some of the things you do to break free of your comfort zone in your own journey towards financial freedom?

Share with Panzer in the comments section.

Be well and prosper.

 

[thekeith]

Hi Panzer,

Can i have a copy of your ebook? i have sent you a request at rod.loh at gmail.com

 

[panzergrenadier]

Hi Panzer,

Can i have a copy of your ebook? i have sent you a request at rod.loh at gmail.com

Dear Keith

I have emailed you "Panzer's Guide to Financial Freedom".

Be well and prosper

 

[panzergrenadier]

Personal Growth and Financial Freedom

Have you ever felt that you were going through the same routine over and over and over again in life?

Has it ever occurred to you that your life could be on auto-pilot as you engage in the get-up-go-to-work-go-home schedule?

Have you ever paused to think about what is this whole purpose of getting ahead, to be financially free or to be free to do whatever in life?

Mid-life Crisis and Financial Freedom

I am approaching the big 40 and for a number of people, it is the start of what we call a “mid-life crisis”. But even before I came to this age, I was already feeling some of the effects of mid-life crisis especially when I moved from my second to third job in my career.

After spending 4 years plus in the IT security consulting and auditing arena and discovering that my career was literally plateauing in terms of income and progression, I took the plunge and tendered my resignation after securing a job as a head of internal audit in an organisation.

This turned out to be a challenge initially as the new employer was demanding and the environment was very stressful. I found myself putting weight due to poor diet (eating out at food courts and fast foods) and lack of exercise. That was a period that turned out to be a blessing in disguise. After 4 plus years doing similar work day-in-day-out, the career change again helped me sharpen my career saw to pick up or refresh skills in office politics, report writing, leadership and management.

My crisis on the personal front was not so much driven by work but by the question arising from the lifestyle, “Is there all to life except to work, earn and spend money?”

But my career then helped me answer this question because it was a fairly good paying job. They were paying me significantly more than my previous job as an IT security consultant and auditor. But the workload and stress was much more and I had fewer friends in that organisation. It was a year after suffering in that place that an epiphany struck me. That there was more to life than just money and subjecting oneself to lots of stress and unhealthy habits due to the work environment. I plucked up courage and asked for a transfer or I would resign.

I was fortunate to then be re-assigned to an outpost that was still within the organisation but not as hectic. Where the people there were less political. The price I paid was that then I had more or less written off my move up the career ladder as once you were out of the HQ, you were no longer visible. You could keep your job if you continued to deliver but would eventually plateau as well since I was no longer on the fast-track.

Work-Life Balance

It was then that I realised that work-life balance was for me to determine and not long after, my daughter was born and I counted myself fortunate that I was in work environment that was condusive for having a family. It then struck me that financial freedom was important, but finding a balance between achieving financial freedom and enjoying family life was also important. Thus, it dawned upon me that financial freedom was not about earning lots of money per-se but to do so in a sustainable manner since we are expected to work until 68 or beyond

My own sense of the concept of “retirement” is that there is no such thing. I’ve decided that I want to continue to work so long as the work-life balance and salary considerations are in harmony and really working is no longer drudgery as I enjoy the challenges (mostly) that I encounter. I realise that keeping my health intact and being able to be healthy and fit for life and a career is critical for a sustainable journey towards financial freedom.

Personal Growth and being financially free

My journey towards financial freedom has shown me that in fact this journey involves other parts of my life. If I only focus on the dollars and sense and not develop myself to my fullest potential as a human being, than I am doing a disservice to myself.

The older I get, the more excited I get about personal growth and development. Learning new techniques in computer assisted audit tools get me all fired up. Learning new ways to communicate visually information and ideas lights me up inside. Reading a good piece of fiction that brings me to another world gives me immense pleasure. Many of these personal growth areas do not involve spending lots of money and in fact some of the best things in life, e.g. reading is literally FREE and cost the time to go down to the nearest public library

As you continue on your own journey towards financial freedom, how have you continued to invest in your own personal growth?

Share with Panzer in the comments section.

Be well and prosper

 

[The_Davis]

Hey Panzer,

Great to see that you decided to focus on work-life balance! Agree that sometimes the cut throat environment in the corporate world can make you jaded with life.

 

[panzergrenadier]

Hi The_Davis

Thanks for your comment. I guess one gets more philosophical about life once one learns that money is not the only thing

Be well and prosper

 

[panzergrenadier]

Saving for a Rainy Day

I was catching up with three of my good buddies (ex-colleagues from my first job) over lunch and one of them remarked that he was not so sure that the growth and “good vibes” of the growing economy for 2010 was sustainable. He could see rising COE prices, prices of good class bungalows and private property as well as long queues for taxis and crowds thronging restaurants and cafes being signs that prosperity is flowing around. But can the tap continue to flow?

As I gain more little grey hairs and my skin starts to become less soft and flexible, I realise that age is catching up. But with age comes wisdom. Not because I can predict what will happen in the future, but because I have seen what had happened in the past.

Turning Back the Clock

Rewinding the clock back to 1997-98 and it was the Asian financial crisis. My buddies and I were having a similar conversation at Starbucks at Liat Towers and we were then remarking how despite the Asian crisis, we could still see visible signs of people spending money in Orchard Road. Perhaps they are tourists, or perhaps they are the truly rich that are not affected by the crisis. We were fortunate that then we were working in a Government agency so our jobs were relatively safe despite the serious downturn.

But we had accounts of friends, relatives and neighbours being laid off and hence that was the start of our awakening to the whole concept of black swans or rainy days. Times when great uncertainty reigns and you cannot have full confidence that your rice bowl is rock solid unless you were in a robust industry or sector that could withstand the ups and downs of market forces.

We also went through the 2003 SARS period as well as the dot.com internet bubble rise and fall. These key milestones in our careers taught us one thing, that is to have some savings for a rainy day.

Save for the Unforseen

If you strip away the concept of financial freedom, the core that is revealed focuses a lot on savings. It is only from spending less than you earn (living within your means) that you can save. This savings can then be put aside for unforseen circumstances. You want to protect and grow your savings because as a responsible steward of your own financial assets, you want to maximise their returns whilst minimising the risks that you are willing to accept for that potential returns.

The younger generation now has less propensity to save as consumerism is more entrenched among the young than the older generation. By itself, it is not a “good” or “bad” thing but it has implications for one’s choices of deciding when one can retire or when one can slow down the imperative to always be looking for ways to earn or make more money in life.

Spending more now and saving later means that one has less options when unexpected things happen. Many of us go through life assuming we will always be healthy, that our jobs will always be there for us or that our incomes will always rise. That is not a given. In fact, the older I get, the more I realise the opposite is true.

The world economics changes so fast that the challenges of an increasing aging population, relentless competition from within Singapore through local talent plus influx of foreigners into Singapore Inc. make many of our assumptions to be wrong. The signs are here if we choose to read them.

CPF withdrawal age has gone up. The Government is openly discussing raising the retirement age to even 68. The concept of “retirement” where you stop working completely and live off retirement savings is passe partly due to the the aging population and poor returns from your monies in CPF or other private pension plans or investment plans.

The reality is that more rainy days are in store for us.

Thinking Outside of the Box

One of the scenarios that I’ve envisaged in response to the trends noted of money no enough when we retire is to get even more aggressive in savings whilst I in the phase of life of having a decent earning capacity. I basically need to save even more from spending less or earning more and preferably to do both!

My previous post exploring retiring in Thailand is also one way to think of how I can lower my expenses in the future by relocating to a lower cost country. Businesses have been moving their manfacturing operations from Singapore out to Malaysia and then to China and India. There is nothing to stop us from applying the same principles when thinking about how to plan our transition to when our hairs are all silver

Technology has made such moves possible in that you can skype, SMS, email and continue to keep in contact with family and friends. Low cost airlines provide a way to physically stay in touch with Singapore even on tight travel budgets when we are past our economically prime years.

I’ve also started to read more widely as well as in-depth in my own career to deepen and broaden my thinking so that I can contribute more in my career. I also realise that I should actively considering building alternative sources of income but they may not be pure passive incomes and can be active ones that I spend my weekends and evenings on.

Saving for a rainy day is a key component of my strategy to be financially free.

But look for a bigger and better umbrella (i.e. alternate source of income) is also always on my radar.

What is your own umbrella towards financial freedom?

Share with Panzer in the comments section.

Be well and prosper.

 

[panzergrenadier]

Spend or Save: Year End Bonuses and Windfall Gains

One of the challenges of travelling along this journey towards financial freedom is how we manage our decisions to spend or save when it comes to year-end bonuses and windfall gains. It’s the time of year again where most employees would receive their 13th month bonus plus a bit more depending on their organisation remuneration policy. I am fortunate to work in an organisation that pays the 13th month as well as additional variable bonus.

What would you do with the year-end bonus that you receive?

Spend or Save: The Fork in the Road Towards Financial Freedom

Some people would spend all of it, some would spend some of it, some would spend little of it and save most for a rainy day. It all boils down to what is your approach towards financial freedom and whether you subscribe to the principles of living within (or below) your means and to save and invest the rest. My approach has been to treat bonuses and windfall gains as well… a bonus, i.e. something unexpected. Thus, I plan my expenditures for living expenses for my family and myself to be within my monthly income.

This approach then allows me to save most of the year-end bonus and windfall gains I receive. I’ve talked about the 10-90 or 20-80 rule of thumb which refers to how I’ll try to save 80-90% of the bonus and spend 10-20% of it.

What to Spend on

I’m currently reading the book, “The Happiness Hypothesis” by Jonathan Haidt and found a chapter to be extremely interesting. It talks about how much happiness we get from spending money. It turns out what many people believe makes them happy in terms of buying that new car / house / watch / <insert your luxury or conspicuous consumption item> only makes you happy for a short time. After that, the effect wears off.

It turns out that conspicuous consumption goods typically help us achieve esteem needs through signalling of our social status through the things we possess. We use stuff to signal our status in society. If you need a watch, a cheap digital quartz watch would serve the functional purpose of telling time although it won’t do too much to signal a higher social status.

From research, people experienced longer periods of happiness from spending money on experiences with people that matter, i.e. friends, relatives and loved ones. Hence, if you have $100 to blow, you may be able to maximise your happiness from spending that on a good meal with family and friends rather than on a $100 pen that is for your own consumption only. The experiences that connect you to people satisfies more than the feeling of having a $100 writing instrument because once you see someone with a $2,000 pen that is even nicer and more expensive than yours in office, the allure of your $100 pen wanes pretty fast.

The happiness we get from conspicuous consumption is relative. We are happy only if we have the biggest, nicest, latest, more expensive item than someone else. Once the relative higher status of the item is lost to someone else’s item, we start all over again. That explains why if one focusses on material stuff like a bigger house, car and home theatre system to keep up with your neighbours, one will never be happy as once your neighbour has a better “thing” than yours, you need to re-start the arms race again.

Panzer’s Approach to 2010’s Bonus

My own approach would be to spend 10% and save the rest. This allows me to indulge in the occasional frappes or blended ice coffee drink and a nice lunch versus the normal $3 economical rice. I recently bought a Bamboo Pen tablet ($125) that I found to be an useful input device that helps me minimise risk of carpal tunnel and at the same time is an interesting mouse alternative.

I’ll probably not buy another gadget since I am already using an iPhone 3GS and am not really into iPad or Andriod tablet device. But I’ll invest some of it to upgrade my wardrobe since my belts are starting to peel. Of course, bringing my family to a few restaurant meals instead of the food court would be well within my budgeted 10% spending on the bonus. My three good buddies will also get a good meal on me as we celebrate our 15 years of being friends.

My own journey towards financial freedom has taught me to develop good habits such as taking pleasure in the simple things in life. Thus, I get enormous satisfaction from visiting the public library and reading some good fiction or catching the latest Harry Potter film in the cinema. These things don’t cost much but are as enjoyable as anything that costs much more

I guess while reading Jonathan Haidt’s book, “The Happiness Hypothesis” has helped me validate some of my decisions in embarking on this journey towards financial freedom. It’s really true that keeping up with your neighbours doesn’t satisfy us as much as we think and we are just giving in to our imperative to achieve high social status.

What will you be spending your year-end bonus this year?

Share with Panzer in the comments section.

Be well and prosper.

 

[panzergrenadier]

Learn, Laugh and Live

It’s been quite a while since I last posted on Five Cents Ten Cents. Part of the reason was that one of my staff was down with chicken-pox so I had to cover her load whilst managing my own i.e. meant shorter lunch breaks to write posts as well as staying slighter later in office to clear stuff.

Increasingly, I realise the quality of posts matter more than the quantity. Thus, I’ll try to make each post a bit more reflective, a bit more thoughtful and a bit more meaningful as I’ve thought about the issues a little deeper before writing it down.

Year End Reflections

This post touches on my reflections towards the year-end. The feel good vibes generated from the bonus declared by my organisation that follows public sector norms made me feel happy for a while but the effect is wearing off fast. The older I get, the more I read and what I’ve read convinces me that this elusive thing called happiness results from a combination of both intrinsic and extrinsic factors. Money makes us happy, up to a point.

If one is living at barely subsistence levels, then more money makes one feel happier as the pressure of earning your daily living is lessened. But once we are paid sufficient for our lifestyles and learn to live within our means, than the realisation hits us that more money only motivates to a small degree. There is much more happiness from having good working relationships with bosses, peers and colleagues. There is more happiness from being in good health and there is more happiness in spending quality time with family and friends.

I’ve earmarked 10% of my bonus as a reward to myself for the work and efforts I’ve put in the past year. At the same time, this 10% cap allows me to spend without feeling guilty or worrying if I’m spending too little or too much of my bonus. The strange thing is that the cap is liberating me to be more relaxed about spending it, and it turns out I’m not in a rush to get the latest iPad or MacBook Air.

I know that getting the latest iPad or MacBook Air will make me happy for a few weeks or so. But it would soon subside. The same thing happened with my iPhone. I was delirious for the first month or so but now that I’ve had my iPhone for 8 months or so, I find that it is a useful device and provides great internet mobility but ultimately it is still mainly a phone for calls/SMS and for occasionally surfing to find out information on the go and to check emails away from office.

Learning

This year has been a year that I rediscovered the joys of reading. I managed to finally read the entire Harry Potter series of books by JK Rowling and was amazed and how much fun I had tracking the life and adventures of the boy wizard and his friends. I’ve also read quite a few books on non-fiction that has grown my understanding of myself and the world with each chapter. Reading to learn about life (fiction) and the practicalities of life (non-fiction) provide such a tremendous value because we grow as individuals through absorption the intellectual and cultural wisdom of society into our little brains.

Laughter

My daughter is approaching three and provides me with lots of joy and laughter as her behaviour never fails to elicit laughs as well as the occasional frustration when she is being naughty. The terrible twos and threes are truly a rite of passage for all parents and I’m glad for it as it makes me learn patience and endurance Laughter or having a sense of humour is important for one to make it through life without losing one’s sanity. The older I get, the more I must remember to laugh more.

Live

Ultimately, our happiness in life is determined by how we want to live despite the situations that life throws at us. Life happens, but we can choose how we respond to it. Thus, many philosophers make the argument that when things happen, it is “good” or “bad” only because we choose to deem it “good” or “bad”. Life just “is”.

This lesson is possibly the hardest for me to accept because it means that you accept that there are many things you cannot control in your own life and need to focus on yourself internally on how you react to them. It is a lesson I continue to learn and will learn till the day I move on from this world.

Why are we embarking on this journey towards financial freedom?

For me, it is to achieve happiness by learning to manage the relationship between my life energy and money. I realise that the journey towards financial freedom strengthens the behaviour that helps me manage my financial resources that empower me to learn, laugh and to live

Be well and prosper.

 

[panzergrenadier]

Value-for-Money in Financial Freedom

Value-for-Money in Financial Freedom

As an internal auditor, I frequently use the term “value-for-money” when making recommendations to improve business processes in my organisation that is a public sector entity.

What is value-for-money (VFM) and how does it impact you in your own journey towards financial freedom?

Value for Money (VFM)

By now some of you would have already fired up another browser tab to search on Google or Wikipedia for the definition of value-for-money or VFM. VFM is a concept that is talking about the three “E”s of economy, efficiency and effectiveness. It is a useful framework for examining business processes. For example, if I am reviewing budgets, I will talk about best sourcing to get economical purchases, i.e. getting more with the same budget or getting the same (quantity and quality) with a smaller budget.

Efficiency touches on the ratio between inputs and outputs, i.e. taking fewer steps to achieve same results or cutting red-tape and processes that do not add value to the organisation’s delivery of its goods or services.

Effectiveness is arguably the most challenging part of VFM in that knowing what your final outcome or objective is may not always be the easiest or most intuitive thing when you are delivering a service.

These three Es come together to forge a powerful framework in which an internal auditor can examine processes. Incidentally, it turns out that this VFM framework can also be applied to one’s journey towards financial freedom.

Economy

I think of economy as living within my means. December is bonus month and I make sure my living expenses for myself and my family does not exceed my monthly income. Thus, the bonus that I receive truly becomes a bonus and I apply the 10-90 rule, i.e. allow myself guilt-free spending of 10% while I save away 90% of the bonus for savings, investments and pre-payment of mortgage loan.

When applied to my life, it’s also about simplifying my life. Owning less stuff such as gadgets. I already have an iPhone so currently have no interest in buying an iPad or tablet device. Was considering looking at a Kindle but think the hoops that one has to jump through to buy ebooks from Amazon may not justify the time and effort as Kindle is not officially supported for the Singapore market.

Efficiency

I learnt a lot about money representing life energy given that most of us trade our working hours from 8.30 AM to 6.00 PM Mondays to Fridays to earn our wages or to carry out our business. Thus, I realise I need to work efficiently but getting as much (effective) work done during office hours but also spend sufficient time with my family and loved ones.

Efficiency can be related to cutting out the extraneous steps in life, i.e. simple but fulfilling living.

Effectiveness

This is also difficult for many to define. What is our goal in life? We can only define success or failure or being effective in reaching our goals if we have defined them. My journey towards finnacial freedom has taught me to define my goals clearly. It still remains at achieving $1 million in investible savings by age 45. It is tangible and very real but challenging target.

I may achieve it, I may not, but it continues to enthuse me to work within the principles of living within my means, to save and invest, to protect and grow my means.

Thinking about being effective in life also makes me more focussed at work. After working 15 years, I realise that working hard AND working smart are complementary. It’s no use working hard at things that do not matter and it if you don’t perfrom well at things that do matter, you still cannot achieve breakthrough results.

I am starting to see some results from applying the VFM framework to my journey towards financial freedom. The key aspect is to simplify my life. When you declutter your life with less material stuff and focus to being healthy with simple living and balance in work, family and self, you bring yourself closer to being financially free and being able to achieve economy, effectiveness and efficiency in your life.

The journey towards financial freedom is a process and not a destination. Sounds cliched but is so true. I begin to see life more and more as a process and focus on achieving repeatable results through embracing the core principles.

What type of framework or model to you use to describe how you operate towards financial freedom?

Be well and prosper.

 

[swirler]

Very insightful as usual. I love your posts. So how far are you from
reaching financial goals.

 

[peterchan75]

He who cannot profit from market, selling idea and wisdom is next best thing.

 

[panzergrenadier]

Very insightful as usual. I love your posts. So how far are you from
reaching financial goals.

Hi swirler

I am progressing towards my target on a reasonable basis. Still not even half-way there but am getting to it bit by bit.

The interesting thing about pursuing financial freedom is that the process actually frees you and not the destination. I find that living within the principles (living within my means, save and invest, growing and protecting my means) makes me less anxious about money and finances as I know this framework helps me control my habits.

Of course, I focus on the destination to push me to stay true to the habits but the journey opens up my eyes to what is important, i.e. to seek work-life balance, to be healthy and happy with life and be able to ride out the occasional storms that shift us temporarily off-course from our destination. To also be grateful to family, friends and colleagues who support me along this journey directly or indirectly.

Be well and prosper.

 

[panzergrenadier]

He who cannot profit from market, selling idea and wisdom is next best thing.

Hi peterchan75

The market is not the only means towards financial freedom or to achieving your goals.

There are so many examples out there of people who live a simple life, achieve balance in work and family and are happy working for others until they retire with sufficient income.

Be well and prosper

 

[panzergrenadier]

Funding Your Child’s University in the Future

I caught this news snippet on Al Jazeera and was blown away by the amounts that US students have to pay for their college (university) tuition. The USD 100,000 + and USD 36,000 plus figures quoted are definitely much higher than tuition in Singapore for the local government funded universities as well as the private ones (e.g. SIM). However, what the US experiences could be what could be a foretaste for us here as I know that a SIM programme with a foreign university that is delivered locally costs close to $9k a year or almost $30k in three years so our costs of university are also creeping up.

Makes you think more about funding your child’s college tuition in the future especially the point made that colleague fee increases outpace inflation.

<Youtube video in the link above>

 

[panzergrenadier]

Goodbye 2010, Hello 2011!

The start of the year is associated with setting resolutions and targets for the year as we say, “goodbye” to 2010 and, “hello” to 2011. If you read enough about New Year’s resolutions, you’d realise that goal setting should be happening all through the year and not only during the beginning of each year. Although for many of us, the start of a year is a good cut-off to review what transpired in our lives in the past 365 days and what we intend to do for the next 365 days.

Look back at 2010

It was an interesting year from the perspective of life experiences. I sold my Executive Condo (EC) and bought a older condo for about the same price at a psf basis but paid more as my condo is larger by 100 sqft than my EC. Part of the reason why I moved was for a quieter environment (my previous EC faced the MRT track) as well as to be closer both mine and my spouse’s workplaces.

Family-wise, things are better as my daughter approaches three this year (2011) but I still do not take what I have for granted and focus on improving myself in managing the relationship at home one day at a time.

Career wise, 2010 was one of consolidation as I started in my current organisation in late 2008 and I’ve gotten day-to-day operations set-up fairly efficiently despite having staff turnover every 1.5 year or so. I learnt from the experience that having standard operating procedures, adequate briefing and explanations help ease new staff into the role but the hand-holding can be fairly tiring when the staff can’t seem to grasp some of the nuances of the work.

The recovery and spectacular rebound of the Singapore economy also saw decent bonuses declared for 2010 which has helped build up my income (and savings) from salary.

My investment strategy now is more refined in that I try to buy blue-chips for dividend yield at fair prices for long-term and keep them as opposed to trading. But I still allow myself the occasional punt but I make it very clear to myself what is the target price and sell when it is reached. I’m still cautious in that my equity-cash ratio is 43%:57%, i.e. I am overweight in cash and cash equivalents.

This is partly because the cash component is funded largely by the housing loan that I had to take when buying my bigger but older condo when selling my EC. I actually paid off most of the loan as the bulk of it was to bridge the timing difference between receiving the sales proceeds from EC sale and paying for the condo purchase. Hence, once I received the sales proceeds, most of the loan was paid leaving a five digit loan quantum still outstanding that I can pay anytime.

Looking Forward to 2011

In terms of financial freedom, I am slowly getting there. I managed a respectable but not spectacular return of 3.2% for 2010. If we factor in inflation at 3.8%, then I’ve made a net loss of 0.6%. Not a great performance but considering my target is 2x fixed deposits rates, I’ve actually beaten the internal benchmarks as even the best FD now is 1% plus for long-tenure so 3.2% is decent.

I realised that you have to risk quite a chunk of your capital to achieve higher returns and thus given that I’m still partially sidelined and overweight in cash, a 3.2% return is not bad. But I can improve and focus on identifying other blue-chips for investment when their values are temporarily depressed due to external factors.

My take on financial freedom has evolved over time. I still plan to derive a significant stream of income from dividends in the long-run, but I realised another form of investment is to build capability for me to get involved in other small ventures that could generate income streams. For instance, I still think that becoming a paid non-executive director of a listed company is one of the second careers I can aspire too but I need to build up my skillsets to do so right now. I am fortunate that in my current organisation, I’ve been appointed to be a director as part of my job to one of our entities and this is helping me learn the ropes of board responsibilities.

Healthwise, I’ve put on some of the kilogrammes I lost whilst my daughter was growing up the first 2 years. I know that health is a critical and real component of being financially free so am investing time and effort to wake up at 5.45 AM to go jogging or brisk walking. I hope to sustain this for 2011 as there is really no excuse not to pay attention to my health.

I look forward to the year 2011 and realise each day is to be lived one day at a time. I believe in the saying that, “If we fail to plan, we plan to fail.” At the same time, I realise that one has to be flexible and open to what life throws at us. Life just “is”. Whether it is “good” or “bad” depends on our own perception of it.

What are some of your thoughts as the new year 2011 begins?

Share with Panzer in the comments section.

Be well and prosper.

 

[panzergrenadier]

What is Your Gift to the World?

I chanced upon Ted Williams story when one of my facebook (FB) friends posted a link in his FB status to the youtube video. If you don’t know who and what is Ted Williams story (”Homeless man with a golden voice”) by now, even our Straits Times ran the AP/Guardian press feeds on his remarkable story of a 53 year old Ohio man who has been homeless for ten years but was formerly one of the top radio announcer/host in Ohio for many years. The Al-Jazeera video below summarises his recent change in fortunes when a local Columbus Dispatch reporter filmed his story and posted it up on the news website and it went viral on youtube.

What does his story have to do with financial freedom?

Our Gifts

All of us are born with some gifts in the world. Good health is a gift. To be alive is a gift. Some of us are good at our careers. Some of us are good at our hobbies. Some of us are good at relationships with family and friends.

We are all born with some gifts. The trick in life is to discover what is your gift and to be able to use it to contribute to the world in our unique way.

The ability to generate income through our skills in our careers or in running a business is what we need to achieve our goal to be financially free. But life is more than being financially free, “The Happiness Hypothesis” taught me that from research, happiness really comes from a whole breadth of things in our life. The challenge is that in Singapore, the definition of success and happiness is too rooted in terms of material possessions and financial wealth with little connection to how you discover and use your gifts in life for the betterment of yourself as well as others.

In my own quest for financial freedom, I’ve discovered that the auditing career is something that I can do reasonably well to give me a decent living. My gift is the ability to review processes and to help improve them by identifying areas where things can be made better and where controls can be enhanced.

My own journey into the world of toastmasters also allowed me to discover than I could do impromptu speaking after I learnt that you could use certain techniques to help you structure your thoughts very rapidly in response to virtually any topic that is thrown at you.

Discover Your Gift and Use It!

The more I travel along this road towards financial freedom, the more I learn that discovering your gifts and applying them towards your life in a meaningful way helps you move closer to being financially free. If you live your passion, the money will come eventually because if you have passion to use your gift to benefit others, there is value created for which people are willing to pay.

Share with Panzer in the comments section on what you think you gift is and how do you use it in life!

Be well and prosper.

 

[panzergrenadier]

The Stork and The Pension Fund

The Channelnewsasia article “Singapore Fertility Rate Falls to Record Low,” of 1.16 (2010) from 1.22 (2009) is not telling us anything new. If you look around your colleagues, relatives and friends, the reality is that Singapore faces the population trends prevalent in developed countries, i.e. a declining birthrate. Possibly it is the rate of decline as well as the level of the total fertility rate (TFR) when extrapolated gives rise to concern in the future, i.e. we will have a greying population that will be supported by fewer economically active population.

What does the decline in the TFR have to do with your financial freedom?

Stop at Two, Developed Country Trends

There are many possible reasons for why the TFR is declining. Singaporeans are getting married later and putting their education and careers first before starting a family. Some prefer to be single out of choice or due to circumstances. The older you marry, the less time you give yourself to have children. I remember during my NS where I had a platoon mate whose name was number 12 in hokkien (”Chap Ji”). That is because there were 12 children in the family and the parents named them numerically from number 1 to number 12!

It is increasingly rare to find friends, relatives or even in your own family such large family numbers. The trend is for people to have one or two. I also have only one daughter and she is very likely to be the only child as my spouse and I aren’t exactly that young any more and my daughter is such a handful that we are not sure if we could handle another one just like her!

If we look back at our history, Singapore had the hugely effective “Stop at two” family planning policy that is arguably one of the key contributors to our declining birthrate. We won’t debate the merits and demerits of that policy but it has to be acknowledged that it did contribute to people having small families as there were serious economic penalties then if you violated the stop-at-two policy. Today, it’s the reverse in that the Government gives baby bonuses which increase dramatically with the third and fourth child.

Implications for Retirement

Smaller families mean you have fewer dependents when your child is growing up. In terms of financial freedom, that is a good thing because you only need to spend on that one child instead of two or three. However, the implications for our retirements come in later years because in the past, parents used to rely on their children for allowances when their children reached working age. This practice also meant that parents who didn’t have sufficient retirement funding in their Central Provident Fund accounts e.g. housewives who didn’t earn an income during their children’s growing up years could tap on their adult children as a source of retirement income.

But if you only have one child, it is more challenging for that one child to support two parents if they do not have enough retirement funding from their CPF savings.

We know that CPF savings are declining because of the caps in CPF contributions and declines in CPF employers contribution rates (currently at 15% and not restored to 20% as opposed to individual contributions which are at 20%). The low interest of 2.5% pales in comparison to inflation rate of 3.8% (CPI) that we are currently seeing in 2010. In addition, the CPF minimum sum draw-down age (aka withdrawal age) is being slowly increased to be 65 by 2018. Most of us who are aged 56 and below as at 31 Dec 2010 would only be able to tap of CPF to fund us by age 65. Realistically, it could probably hit 68 given our aging population plus life expectancy in Singapore.

These trends mean that relying on your child to support your retirement could become a thing of the past because we only have that one or two children to support us and in this age of increasing cost of living coupled with relatively high housing prices, our children will find it challenging to support themselves and their own families so how would they find the resources to support aged parents?

Taking Care of Yourself and Not Burdening Your Children

I count myself fortunate that my parents were retired on pension scheme. Their medical needs are taken care of by the State due to their long years in service to the country as educators. Thus, between three of us, we only gave allowances to our parents more out of filial piety than their financial needs.

I too am striving to keep myself as healthy as I can by eating a balanced diet, exercising and taking care of myself. A enhanced shield plan is also a must and I intend to work as long as I can and to transit into a second career nearer to 60 so that I have more options then. I also continue to adhere to my principles of living within my means, saving and investing as well as growing and protecting my means as each year sees more grey and white hairs sprouting on my head

My legacy to my daughter would be a good education coupled with not burdening her with the financial responsibilities of taking care of her parents. As an only child, the burden is higher and I should do what I can within my means to take care of myself even as I grow older in life.

How do you think the stork will have an impact on your own retirement planning?

Share with Panzer in the comments section.

Be well and prosper.

 

[panzergrenadier]

The War of Art by Steven Pressfield (or Why I'm Writing Less Blog Posts)

I’ve been writing fewer and fewer posts over time as I approach 40 this year. Part of the reason (or excuse) is pure laziness. There are many areas in personal finance that I’ve shared and increasingly there’s fewer new areas for me to explore. I’m currently reading the book, “The War of Art” and realise I’m facing what the author Steven Pressfield describes as the “Resistance”.

One of the things that I find satisfying is reading. Reading non-fiction teaches us some hacks to make our lives easier and more efficient. Reading fiction allows one to engage more in the senses and emotions. I finished reading “Norwegian Wood” by Haruki Murakami and it was a moving though sad novel. “The War of Art” reminds me that to achieve anything worthy, one needs to work at it. And so it is for fivecentstencents blog as well. If I want it to continue to have readers and to engage with people interesting in personal finance in Singapore, I need to continue sustaining it with bits and pieces of my thoughts written down in this blog.

Reading Fiction and Non-Fiction

Reading fiction also greases the mind as one is exposed to different ways in which dialogue and prose can be written to elicit feelings and emotions of the readers with the characters in the story. I’ve read most of the “Harry Potter” series of novels by J.K. Rowling and admit she is able to imbibe in her characters and Hogswarts School of Wizardry with such realistic facets that we are drawn into Harry’s struggles to become the grand wizard in fulfilling his destiny to rid the world of Voldermort.

While my blog is not a work of fiction, I’m also trying to engage readers to think more about and hopefully gain some insights on how they could improve their personal finances with some of the life experiences I share.

Recording Expenses – A Habit that Liberates

The small little insight that I would like to share in this post is about the habit of recording expenses. I’ve been doing this in an Excel worksheet since June 2008 and it has been a useful habit to help me in my journey towards financial freedom.

It works well for me because when you record your expenses, you know how much you’ve spent and also how much you’ve saved. This eliminates fuzziness of thought and allows you to know definitely if at each month end you are saving or dipping into savings to fund your own or your family’s lifestyle.

After I’ve started recording, I find myself less uptight about the occasional unplanned expenditures of life because at the end of the month, I’m able to look back to see if I’ve managed to live within my means for the month or the year-to-date. This gives me a lot of assurance that my personal finance is on track and that I don’t have to be overly anal about being a miser and to count every single cent. I do spend but in a manner that allows me to do so on needs and the occasional wants for myself and my family without having guilt, worry or fear come into the equation.

I count myself fortunate that for 2010, the public sector is paying a decent bonus which allows me to save more than I can just from monthly income alone. The year-end bonuses do contribute to a significant increase in my net-worth and are still the key drivers to growing my investible savings towards financial freedom.

Here’s wishing one and all a Happy Lunar New Year of the Rabbit where the savings habit will hop happily into your lives

Be well and prosper.

 

[Raider04]

I always believe that the first step toward Financial Freedom is not High Salary but rather having control over your expenses. When you are able to measure, you are able to control.