“Woah.. i realised that after buying that house, we need to fork out $2000 every month” Sam (fictitious name), a good friend of mine was sharing with me that he had recently bought a flat with his wife that costs around half a million.
“Yup. But you can very well afford that right?” I had advised Sam to do a budget with his wife on how much they can afford before going shopping for houses.
“Yes we can afford, but that means I may not be able to afford to leave my job and do what I want to do.” Sam sighed.
Sam and I spoke a lot about financial freedom. He is much younger than me and I had thought of myself as a mentor to him. On many occasions, I shared ideas of investments, financial freedom and having a purpose driven life. He had obviously been picking up these ideas and have started investing. Unfortunately, he has the “Anti-Midas” touch, where everything he touches turn into… erm… not-so-good outcomes.
Now Sam had just bought probably one of the most expensive items in his life and realised that it was indeed a commitment that actually has an impact of his future plans. Looking at the house prices, car prices and the costs of raising a family, having the freedom to really do what you want and stop your work for one to 2 years, just seem a little tougher now.
“So what is it that you really want to do?” I asked Sam.
Step 1: Gain Clarity of What You Want!
I have to admit that this step alone is not easy. But we got to continue to ask ourselveswhat is it that we really want? Too many people come to me asking for financial advice because they want to make a lot of money. When I ask them why is it that they want the money for, they couldn’t give me something specific. They would say things like, “so i can do what I want….” When i ask them what is it that they want, they will give me other generic answers like, “Quit my job, travel the world etc”.
I know that there are better quality answers inside and it is my job to help them discover. So i will usually probe further and that is what I did for a number of my friends. Now back to Sam. After some questions, he related, “I want to do something related to sports”
“Great!” I answered. “Go and do it.”
“I can’t. I will not be able to afford the house, the car and the lifestyle for my family.” He replied.
Very common and nothing wrong. I was expecting that answer because I have heard so much of that. It fact, if someone will just say ,”Great! I will quit my job and dive right into it!” I will get a shock and will be lost for words. (Don’t try that on me please… haha)
It is a responsible thing to do to consider your situation and your responsibilities to your family, parents etc.
The issue is that most people just stop there!
So, in conclusion, the first step is to GAIN CLARITY of what you want to achieve!
Onward…
Step 2 – Analyze and Plan!
I asked Sam, “How much can you make in the sports field? Be prudent!”
“Well, i really don’t know. But if i become a coach, i can probably make $2000/ mth.”
“And how much do you need per month?” I continued asking.
“My guess is $3000?” Sam answered.
“To make your dreams very real, we will have to spend more time getting clarify on these numbers you have just provided. Does that $3000 include savings for retirement, insurance, children’s education? But in the meantime, let’s continue with what we have. May I right to say that if you can have another $1000 per month, you can be a sports coach and live the life you want?”
“Yah….” Sam answered, knowing that I was leading him somewhere.
“$1000 times 12 is $12,000 per year. If we are able to get you to invest in something that can help you achieve 10%. What kind of investment amount do you have?” I asked.
“I have $60,000” Sam replied (I had on purpose round off the number for easy calculations.)
“That will give you $6000. So you need another $6000 per year or $500 per month. Are there any other ways to earn another $500 per month?” I asked.
“Well, I can increase my credibility as a sports coach and charge a higher amount or I can find another part time job as a tutor or something.” Sam was getting excited as he sees the possibility.
I then worked through some numbers with Sam on the excel spreadsheet and asked him to consider giving himself a 1 to 2 years time frame instead of jumping right out.
Therefore, my point is, after working out WHAT you want to achieve, work backwards and determine how much do you need to achieve financial freedom.
Conclusion
1. Become clear of your financial status, needs (include all foreseeable financial needs), and what you want to achieve
2. Plan for your success by working backwards, and set yourself a monthly income target.
3. Invest wisely and save consistently to build up your financial freedom funds.
I have already seen many people achieving their desired lifestyle and they are financially free in the sense where their passive income covers their expenses. But I see more smiles on these guys (mostly guys because I do not have many lady friends) than any other people I meet. I see them being more generous with their time as well as money because they know they have the ability to control and manage their finances to serve them and their lifestyle.
Well, most of them are not driving extravagant cars or wearing branded, but the smile and the radiant they wear, drives people to having a nicer day.
I do hope the tools which I have provided and will continue to design and provide will help you achieve this, much sooner than you expect.
To your dreams,
Sean Seah
P.S By the way, if you’d like to learn how to be FINANCIALLY FREE through investing wisely in the stock market… You’ll benefit tremendously from the 2.5 hrs workshop I conduct for beginners. Click on the image below to find out more.
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