I come to realise in my journey towards financial freedom that many of what people think are the tried and tested ways towards financial freedom doesn’t always hold true.

Reviewing the tried and tested

Take the power of compound interest and the rule of 72. The rule of 72 refers to how you can get the number of years it takes for any investment or debt to double by taking 72 and dividing it by the interest rate. So an investment (or debt) earning 10% will see your investment (or debt) double by 7.2 years (give and take a few decimals). A 5% investment will double in 14.4 years while your bank savings of 0.25% will double after 288 years by which most of us won’t be around to take out anything from that bank savings account.

This compounding effect only works IF you can find an investment that is able to generate that type of consistent returns. Currently, risk-free three month Singapore treasury bills yields 0.28% or so taking 257 years for you to double your investment.

Thus, we are faced with taking risks (a.k.a bets) on the market in equities (stocks and shares), commodities, property, bonds etc… to increase our returns to see some meaningful returns in our lifetimes. But investing even in blue chip equities has seen values plunge by more than 50% in less than a year!

Another problem is market timing. Assuming you have a portion of your investible savings in the form of assets such as stocks and shares, bonds and property. The issue of market timing arises because when you need the cash flows when you decide to retire, you then need to be able to exit the market at a level as high relative to your costs of investing. So if you bought stocks ranging from $1.00 to $5.00 per share now, when you decide to retire in say, 30 years’ time, you hope that those shares would rise up in value to $10.00 – $15.00 (compounded annual growth rate of 7.98%) because if the market collapses just when you need to sell your investments, then you are back to $1.00 and $5.00 which means you lost the value of inflation compounded over those 30 years.

Thinking out of the box

I still think that living within your means, savings and investing as well as growing and protecting your means are key to being financially free. But what the review of the tried and tested has shown is that you have to consider thinking out of the box ways to become financially free.

Living within your means

The out of the box thinking of this is NOT TO DO WHAT PEOPLE ARE DOING. If your peers and friends are all spending money on the latest fashion accessory, consumer electronic or related lifestyle expense. DO NOT FOLLOW THEM. Think of your own unique way to enjoy life.

Visit public parks. Cook your own meals at home. Read more books at the public libraries. Exercise. Volunteer. Do something meaningful to you that doesn’t always have to involve lots of money. Try it, you’d be surprised how simple you can make your life.

Saving and investing

Besides saving money and investing in assets generating passive income for your. Invest in learning new skills as well. Toastmasters is a relatively low cost way to learn inter-personal and public communication skills. You get to network and make lots of friends. Turn hobbies into income generating sidelines. Investing in yourself by learning new skills and abilities during your free time is another form of investment that can yield massive returns.

I credit my toastmasters experience for allowing me the opportunity to move from being a doer into a doer/manager. The ability to communicate effectively is such a powerful lifeskill.

Grow your means

Growing your means comes in two parts. Part 1 is to grow multiple streams of income such as what I’ve done (on a small scale) for blog monetisation. Part 2 is also related to the earlier point about investing in skills and abilities development.

Learn, learn and learn. Network, network and network. Connect with people because that is how the world works, through people. Machine and things are tools that help people connect, work and live with other people.

Protect your means

Invest in your health. Eat right. Exercise. Manage stress. All pretty commonsensical things to consider but often sacrificed for the sake of earning a living (or dying?) and getting ahead financially in life.

Be open and alive to the world

The main thing I start to realise in my journey towards financial freedom is to be open to new ideas in the world. To be alive to the small things that happen to shape how our life turns out. Achieving financial freedom is a target that comes by having a lifestyle that follows the fundamental principles of living within our means.

Simple living that is less reliant on materialism for well being is the key towards thinking out of the box. The crowd (especially in Singapore) loves material things. Be different from the crowd. Think outside of the box that is Singapore Inc. There are larger boxes that can be explored.

What was the most radical out of the box idea that you are applying in your journey towards financial freedom?

Share with Panzer.

Be well and prosper.

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