While I was doing financial planning for my clients, a lot of them mentioned that they want to achieve financial freedom early and retire young. I guess that is one of the common goals for working adults in Singaporean yea?
Is it really possible? Let’s analyse.
The best way to look into this is to analyse your cash flow. How much you earn and how much you spend. Let’s say you make $3,000 per month. What are your possible commitments?
Family Contribution
Family commitments can be one of your biggest cash outflow each month. Groceries, allowance to parents, utilities and so on. On the average, my clients contribute anything in between $500 to $1000 each month.
Personal Expenditure
Generally, food and transportation will be 2 largest fixed expenditures. If you work in the CBD area, owns a car or both, these 2 items will probably set you back close to $1,000 per month. Of course, it might or might not include your weekend outings and a meal at a nice restaurant.
Entertainment
All work and no play make you a dull boy. We, as humans, are social animals. We need to have social activities with friends and family members. How much does this cost? It is very subjective as it depends on individuals. If you are a confessed shopaholic, you know keeping yourself entertained is not cheap.
How much is left?
$3,000 gross income will be $2,400 take home after your CPF contribution. Let us say you give $750 to your family. Spends $800 on personal expenditure and $500 on entertainment, you are left with $350 per month to save and invest.
Can financial freedom be achieved with $350 per month? Unless you can find an investment instrument with 20% annualized return, it will be tough.
With this in mind, how do you think one can achieve financial freedom?
