It was a casual saturday and I’d normally stop by my favourite bookstore to top up my family’s weekly groceries.
It was then that I come across this amazing book called “Your Way to Financial Independence”, authored by Yap Ming Hui. He’s been helping a lot of people planning out their life and achieve financial independence – his company (Whitman Independent Advisors Sdn Bhd) helps people to achieve this. Check their page out if you are keen to restructure your life plans at https://whitman.com.my/.
I only imagine the idea of financial independence and retire early in life so that I can do things that I deem much more important than working around the clock and have no time to do the things I’m really passionate or care about in life such as spending time with my loved ones.
Hence, I believe it is vital for me to get my notes into other people’s notes. Knowing key knowledge in life earlier in life will help reduce your stress in future to come. Just like Jim Rohn said, ignorance is not bliss – ignorance is pain and tragedy.
In this article, we’ll be going through 5 very simple cores to take note if you plan to become the master of your money. I believe this will pose as an important turn around in reader’s life if people know these infos early in life.
Knowing where you stand in life is important. This is the same in spending, knowing how much you spend every day or every month determines your financial standings for that period.
An important note from the book, very simple –
The more you spend, the less savings you have.
The more you spend, the more money will be needed to maintain your lifestyle.
Spending relates very closely to our wants and needs, being aware of your wants and needs will help you steer your way to a more controlled spending life.
2. Return on investments (ROI)
The main idea here is that wealth will work for you better when your ROI is higher.
How do you get high ROI?
There’s ROI from properties, stocks, bonds, businesses, dividends, compounded bank interest and so on – we only need to get a good research before getting our hands on those investments.
But be alert to get ROI that is above the inflation rate. Otherwise, your money will lose its value across time. It’s as if we didn’t invest at all.
Read more at the links below to know a little more about investments you can start!
3 Surprisingly Creative Ways To Make Money From Properties
Making money while you sleep – the compounding bank account (ASB)
Now let’s continue..
Savings and spending are like yin and yang – they are closely associated with one another.
Just like mentioned previously, the more you spend means the lesser you save.
When we retire, the money we saved will be utilise for our daily wants and needs. But the best way to use that big chunk of money upon retirement is that we invest it and earn dividends in return.
This is where big savings are important so that we only need lower “Return on Investments (ROI)” to sustain our daily life after retirement.
Take an example,
Josh who saves $16,000 a year would need to achieve ROI of 18.3% to accumulate $1million in 15 years time compared to the same Josh who saves $36,000 a year that needs only 8.3% ROI to accumulate $1million in 15 years.
Which Josh do we choose to be?
The point is that saving money consistently bears high result financially and save you more time to buy your financial freedom in the future.
Have a read at…
How You Can Save $1300 A Month With $3000 Salary
and find ways how you can save your money better!
When it comes to time, it means to forecast the period where certain of our wants and needs will appear in the foreseeable future.
For example, the time when:
1. We send our child into their tertiary education
2. We drawdown our retirement funds
3. We will marry or our children get married
And so on.
It could be a cash inflow or cash outflow depending on our needs and wants but normally big events in life. This is so that you can roughly estimate how many savings you must have or maybe a certain ROI you need to have to ensure your financial independence goals are still in check when the time comes.
When it comes to investing, always take into account inflation rate.
Because your ROI might be lower than the inflation rate. This will result in your investments losing out money whether short term or long term – and we don’t want that.
We expected a return on the money we put to work – what if after 5 years you discovered that your financial status is still the same?!
That’s a nightmare.
Hence, make an effort to check the current inflation rate and which investments whether individually or aggregately are able to beat the inflation rate.