Start Early

I have friends who wonder how I could achieve financial freedom while my kids may only complete their education in 4 to 9 years to come. They curious about how I am so sure that I have accumulated enough at such a "young" age and ready for foreseeable and unforeseeable circumstances in the remaining of my life. Well, life is indeed full of turbulence and I really have no idea what will be happened in the future. However, it is important to make sure I am ready for these unpredictable future and this "cushion" is ready before I get out from the rate race.

In order to retire early, I have to be very sure that my passive income is able to cover my essential living expenses while I also have reasonable reserve for family medical needs and kids' education requirement. Yes, I must admit that the total sum of these funds is not small and it is also impossible for me to have this sum within a year or two. How do I get it done? My secret: START EARLY.

I started my first investment way back to the age of 24 where I invested my first few months' salary into a government unit trust fund which it has been giving me 6% annual dividend in average for subsequent 24 years. This is how the magic works. Based on Rule of 72, by reinvesting 6% annual dividend of this investment, my initial fund will be doubled in every 12 years. Say I invested $10,000 at the age of 24, my fund will be about $40,490 by the age of 48. Let say you only start investing at the age of 30, your initial fund will only be about $28,540 by the age of 48. A 6-year delay in investment could cost you $11,950 in opportunity loss. That's huge. 

I heard that high living cost is the main reason of no savings for invest. Yes, living cost is escalating year by year and no one could escape. But the truth is there are not many individuals who really sitting down and investigate what is actually happening and what control should be enforced. Are you sure that all your expenses are essential? 

Living frugally does not mean to be stingy but only spend on essentials with long term value in return. Yes, spending with returns. For example, instead of spending $3,000 for a smartphone, I opt for $700 instead which consists of essential functions I need will do; instead of switching the latest smartphone model every year, I stick to my original smartphone as long as it is still working. Yes, needs and wants will decide your spending. Spend reasonably on needs will definitely generate more life value in return than wants. In the above example, I could save $2,300 on smartphone purchase and invest it for my future while my $700 smartphone is still meeting my daily needs.

Similarly, for big item such as living home. What I did was I bought my house at the age of 26 and I managed to fully settle my housing loan 5 years later even though my loan tenor was 25 years then. I allocated most of my monthly paycheck to serve the loan in order to get it settled soonest possible. Early settlement not only allows me to save on loan interest, it also let me have more future funds to invest for my future. Again, START buying my essential big items EARLY at the young age where I had less financial burden has allowed me to END my loan EARLY that let me have more time and funds to roll for my future.

It never be too late to start investing as long as you have decided to do so and do it as soon as you can. Let time and compounding impact work for you so that you could attain your financial target the soonest. Therefore, START INVEST EARLY and END LOAN EARLY is an effective way to accumulate your essential funds for your financial needs with a peace of mind. Let's do it now.