My mom is comfortably retired and so are her friends. Most of them enjoy travelling and work to pass time, not for survival. No, most of them do not hold high corporate positions while they are working, in fact most of them never earned $5K a month in their working lives. So how did they do it?
Here're the 3 things I observed they did.
1. Save money and make their money work harder for them.
Back in those days, fixed deposit rates are comparable to our endowment and investment returns today. So all the people had to do was to live thriftily and put the money in the bank and enjoy the power of compounding.
2. They have multiple jobs.
Side hustles has been an in-thing since our parents' time. In today's context, we may know it as driving grab or delivering food. Back in my mom's time, she took on two jobs. One on weekdays and one on weekends. If you spend all your time working, you have no time to spend money! Thus she has more money to save!
3. 先苦后甜 (you suffer first and enjoy later)
It's literally what their life looked like from my lens. When I was growing up, we didn't go for much holidays. In fact, I probably can count the number of countries I've been to with the fingers on one hand prior to my university days. Thankfully back then I didn't like travelling so I didn't feel like I missed out anything. Having said that, I had an awesome childhood with no university debts as they were fully paid for by my parents. I was sent to good enrichment lessons and had all the tuition I needed. You get the point. My parents and most of their friends only started travelling after 62 when they are retired. That's when they knew their savings were sufficient and their responsibilities were done. The greater part of their lives were really spent living simplistically and they were really disciplined about saving for retirement.
So what can we learn from this? How can we apply this knowledge and make it relevant to us?
1. You need to compound your money minimally on par with the fixed deposit rates of the past
Such awesome rates with decent flexibility don't really exist anymore. In order to attain such rates, we now have to rely on savings instruments like high interest savings accounts or endowments and investment instruments ranging from mutual funds to derivatives. I'd like to point out that this commitment has to be long term. Put it this way, if my parents' and their friends didn't compound their money over their working years, they will not be able to travel the world and work for fun today.
2. You need to set up multiple income streams
There's only 2 ways to retire. You either have enough savings you can spend freely till the day you are gone or you have income coming in while you are having fun, to pay for your expenses. If income = expenses, you don't have to work. Even up till today, most of my mom's friends don't leave their monies from their fixed deposits idle in the bank. They put them in sexier instruments which generates an income stream to supplement their lump sum savings. Today's financial instruments are more advanced. There are more options on ways to generate income with idle cash. It just takes proactiveness on our part to get something started.
Related article: Why I'm sold on lifetime income plans
3. Discipline and planning is important
One of the primary reasons why people dislike the solutions presented by financial advisers are because the solutions are long term. Long term means uncertainty. How would you know if the projected returns in 20 years time fulfills what it says? Not like plan wrongly can balek right? Plus most of the plans cannot back out without losses once you commit. The truth is, in the past, the uncertainty is the same. Yes, fixed deposits appear more flexible. However, look at your bank accounts. How many of us can comfortably predict what's the balance in 10 years time and guarantee we save a fixed amount monthly every month?
My parents and their friends made a decision to save and it is because of their commitment that they won't withdraw the funds until retirement that they have the nest egg they did today. Given their pretty low income, technically it's achievable by a large majority of people their age. However, why is there still so many people unable to retire?
Read also: 5 retirement strategies common in Singapore
Not only that, there are many who retired at the expense of their quality of life. They need to downgrade their housing and cut down on their expenses, is this your idea of retirement? Flexibility comes at a price and most people do not have the discipline to save long term and not touch their nest egg till it's time to retire. That's why most financial instruments are designed this way.
If you haven't started thinking about your retirement, perhaps it's time to have a chat with your trusted adviser. Alternatively, you can reach out to me if you don't have a preferred adviser yet.
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Disclaimer: The content created are based on my personal opinions and may not be representative to everyone or any organisation. If you have any doubts or queries pertaining to insurance or investment, please seek professional advice from a trusted adviser in an official setting. You may also reach out to me if you do not have a present adviser using the message box under 'Let's Talk'.
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