5 Steps to Live Your Future Life Today
Posted by panzer on January 6, 2009.
Have you ever day-dreamed about your ideal lifestyle?
Waking up to the natural light of the sun streaming gently into your room.
Taking a deep breath knowing that you’re going to start the day with some light exercise followed by a leisurely breakfast of kopi-c (coffee with evaporated milk) and a bowl of steaming wan-ton noodles cooked to perfection?
Knowing that today is the day where you have achieved financial freedom and each day your passive income is more than your living expenses.
You go to work because you want to, and not because you have to.
Such a reality is possible and it starts with TODAY.
Why is your future today?
I learnt from David Allen’s Getting Things Done (GTD) approach that any endeavour that takes multiple steps is a project. Financial freedom is a project because to reach the goal, you need to work at it one activity and task at a time. You break-down your goal into a series of steps or next actions that will help you achieve it.
But there’s a catch…
You need to start now AND work at it today. Everyday of many, many todays.
We fret about tomorrow because of our unpaid bills, living expenses and whatever life throws at us, and yet, we forget that worrying about tomorrow but doing nothing for today will not help us one bit.
Not. One. Bit!
The trick of achieving financial freedom is to be able to dream of your future, but execute it today, one realistic step at a time.
Let’s see how you can take that step TODAY and move yourself closer to financial freedom for 2009 and beyond!
Step 1: Set Your Goals
I’ve talked about goal setting in many of my earlier posts. The key is to make it SMART.
Specific - Don’t say I want to save more for 2009, say I want to save $5,000 or $10,000.
Measurable - How much. Give numbers.
Achieveable and Realistic- If you managed to save $500 in 2008, you may not want to set $50,000 for 2009. Aim for $1,000 or even $5,000. Something achievable and is within the realm of possibility
Time frame - Set a date, be specific about it. Better still, write the date in your personal organiser, your Excel worksheet and set a countdown to it!
Step 2: Break Down You Goals into Key Areas
Let’s say your goal is to achieve $500,000 in net-worth excluding your home by 2030. It’s a good start as you have specified your financial freedom goal, of reaching $500,000 in net-worth in 21 years’ time.
Now, if you divide $500,000 by 21 years, you need to save $23,809.52 a year. To make things simple, we’ll ignore interest rate and compounding for the time being. Say $24,000 is what you need to save every year for 21 years to get half-a-million in net-worth. That’s $2,000 a month.
So the question for you is how are you going to save $2,000 or $x,xxxx a month? Here’s where you set your key areas and start to think creatively.
To save money, you can spend less if your income is more than $2,000. You can also try to develop alternate sources of income, such as blog monetisation or put money in fixed deposits and treasury bills for yields.
Step 3: Measure Your Performance
This is where the challenging part comes. You have to start measuring how well you perform in terms of savings or developing alternate streams of income. You have to track how much you are spending each month and what you are saving.
After reading “Your Money or Your Life” by Joe Dominguez and Vicki Robin, I start to realise the importance of keeping good records of your cash inflows and outflows as a means to become clearly aware of where the gaps in your behaviour is leading you in this journey towards financial freedom. This tracking is how you can determine if you are making progress or not.
Those who work in organisations know the importance of having key performance indicators where you track. I track my net worth as a % of my target and know if I’m going nearer or further from my goal.
Step 4: Take Corrective Action and Make Changes
Tracking your performance in living within your means, savings and investing, growing and protecting your means is not enough. You have to be prepared to take corrective action if you are moving away from your target.
Saving too little in December, make adjustment to your lifestyle expenditure in January and the following months. Eat out a little less. Spend less on mobile phone charges. Buy one less PC game a month. Get a cheaper accessory. You still can live life but know that your actions determine how you get closer or further from being financially free.
Not earning enough? Join toastmasters and develop better inter-personal communication skills to help you speak better and showcase your talents in your organisation more effectively. This could help you clinch that promotion or increment to have more earned income to save. Consider ways to make money through your hobbies, sell your unwanted stuff on eBay, give tuition, put more money into investments yielding interest, dividends. Do something constructive.
Change is painful. Human beings tend to avoid changes and enjoy being in the comfort zone. I know I love the comfort zone. It’s warm, familiar and easy to navigate.
Looking back at my career, most of my gains in earned income have come through career changes I took that had a fair degree of risk. I moved from financial auditing into IT audit and security after 5 years in my first employer. A unfamiliar but growing field that required certain niche expertise and a quick ramp-up of skills acquisition. After 4 years plus of understanding the IT sector as well as the IT security and audit niche, I moved back into internal audit and governance. Three plus years there and some personality differences and backstabbing later, I find myself in internal audit but with a much friendlier environment.
Step 5: Re-visit Your Goals
Once you have put the above steps in place, re-visit your goals at least annually to reflect on where you have made progress and where you have not. Don’t engage in self-criticism for the sake of putting yourself down. Learning from mistakes is part of being human. Learning and growing is the way you change for the better.
Along the way, you may discover some insights that help you refine your goals. For me, the birth of my daughter made me more concerned about health issues as my state of health is no longer an issue that concerns me alone. Her dependence on her parents makes us aware of the greater responsibility to take care of our own health so that we can take care of her well.
The global financial crisis also made me see the transient nature of unrealised gains in the equity market. Reading Nicholas Nassim Taleb’s books, “Fooled by Randomness” and “The Black Swan” has also made me more aware of liquidity and portfolio management issues in a world of black swans. Highly improbable retrospectively predictable events that have such devastating consequences that could wipe us out financially. I need to be able to manage the black swans especially nearer to my retirement days when I want to cash out my equity portfolio.
Today While the Blossoms Still Cling to the Vine
I sing the song above to my daughter almost everyday. This song says
Can I forget all the joy that is mine today?
In your journey towards financial freedom, don’t forget to enjoy the present. Yes, work hard and be focussed on financial freedom by doing the necessary today. Live within your means. Save and Invest. Grow and protect your means. Enjoy today a little.
A McDonalds $1.50 chocolate sundae eaten slowly.
The sight of sunset at West Coast Park with my family.
Seeing my net-worth Excel worksheet grow yearly.
Be well and prosper.
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Panzer is a 30-something accountant who finally grasped the concept of financial freedom at the ripe old age of 32. Ever since, he has been travelling on his journey towards financial freedom and documenting his adventures through his blog Five Cents Ten Cents.
His first self-published book, “
Panzer’s Guide to Financial Freedom: It’s Your Money and It’s Your Life“, was launched in November 2008 sharing his thoughts on his journey towards financial freedom.