Live a life of leisure?

Do whatever you want with your time?

Go anywhere, do anything, be anyone?

Your financial freedom lifestyle
Financial freedom is both a journey and a destination. It is a journey in that each decision we make concerning what we eat, how we live, what do we do to earn a living contributes to how we travel along the path towards financial freedom where you passive income exceeds your lifestyle expenses. It is a destination in that when your investible savings generates an income that covers your living expenses, you have reached your goal.

Let’s consider what actually happens when you reach financial freedom. When you don’t have to work or when you really can do ANYTHING with your time since you’ve escaped the time-money trade-off.

It’s one thing to imagine not having to go to work and not having to follow a routine but it’s another to actually try it out. Having read Tim Ferriss’s The Four Hour Workweek where he shares the concept of mini-retirements, I tried out his concept in real life by making use of the accumulated leave that I had when I switched employers. After my last working day in my previous organisation and while serving my 1 mth notice using my leave, I embarked on my “mini-retirement” in living a lifestyle that didn’t involve having to go to work.

Not going to work (but going to the library)
After staying at home for the first couple of days and helping out with the care of my daughter, I realised that this was not the ideal way to practice my mini-retirement as when I reached my goal of financial freedom, my daughter would be old enough to go to school. Thus, I decided to go out each morning and occupy myself from 9 to 5 without having to spend too much money. This was important to test whether I could create that ideal lifestyle when I achieve my goal of being financially free.

As I loved reading and enjoyed quiet places, I decided that the ideal lifestyle in general was one that did involve a routine in going to the public libraries. We human beings are creatures of habit and a lifestyle while you are constantly looking out for ways to avoid boredom (without spending too much money) is actually quite challenging!

Public libraries provided quiet places with air-conditioning that was open from 10.00 a.m. in the mornings to 9.00 p.m. in the evenings. They have proper chairs and tables and even provided free use of electricity sockets to charge one’s notebook. The Central Library near Bugis Junction has perhaps the best facility as you can camp out at their reference sections on the higher floors with your laptop and be engaged via the internet doing your thing. Most public libraries are also located near MRT stations and foodcourts or coffee-shops.

So what was my thing during the 3 week long experiment in having a “mini-retirement” or a trial lifestyle of leisure?

Your thing in the financially free lifestyle
My thing was to have a routine of going to McDonalds’ for their $2 breakfast meal that includes a cofee and a sausage mcmuffin. Don’t eat too much of the stuff though because it’s choc-full of cholestrol; and not very good for your health. This is because the library opens only at 10.00 a.m. and I wanted to get out of the house in the morning to maintain the habit of waking up early.

Just before the clock strikes 10 am, I’ll make a move to the library and deposit my bag at the free lockers available in the Central Library. Next is to park myself at a table and start my laptop going with my M1 mobile broadband that costs me $22.42 a month. Reasonable price as internet access costs $1.80 a hour at all public libraries. $22.42 would only get you 12.4 hours at the libraries terminals or perhaps 4 days surfing if you access the internet for 3 hours a day.

My blog monetisation efforts basically take up half the day as I write blog posts, reply to comments on my blog and surf the internet for financial news, check my stock holdings (which are all underwater thanks to the US credit crisis. This experiment made me realise that I could actually survive on $10 a day for breakfast + lunch + transport if I really get engaged in doing my thing. Of course, you could do many other things which I tried during my “mini-retirement”.

I walked around shopping malls, terminals one to three at Changi Airport and caught movies during weekday afternoons. However, the consumption lifestyle tends to get boring quite fast and my blog monetisation initiatives helped stave boredom away, keep my mind occupied and yet yields a modest amount of income to defray the costs of the mini-retirement.

Lessons from my experiment in the financially free lifestyle
I learnt some useful lessons in planning for my future financially free lifestyle:

1. Develop a productive routine
The most counter-intuitive thing I realised from this experiment in the financially free lifestyle was that having a routine is more important than you think. The key reason for this is that you need something to get you waking up in the morning. Being an employee for the past 13 years has made me a creature of habit. Without a routine or structure to fill your time, you end up being aimless and drifting through each day. The discipline of having to get to a place at a certain time makes it easier for me to wake up and go. It also makes me continue on my breakfast regime which generally consists of rolled oats and coffee (broken up by lapses into sausage mcmuffin at McDonalds).

2. Do something creative and value-adding
Living a life solely dedicated to leisure may sound like heaven to you. But if unless you are in the league of having a couple of million in the bank or yielding income of 6 digits per year, a realistic financially free lifestyle earned in this lifetime still requires one to be mindful of how fast you burn through your income. My series on “Your Money or Your Life” by Vicki Robins and Joe Dominguez really hits home that you can opt for voluntary simplicity and still live a rather fulfilled life. My blog monetisation efforts give me a purpose and allows me to write creatively and generate a bit of pocket money.

The activation of my creative juices through my blog posts and responding to comments by readers help keep me excited about this activity.

3. Take time to be in the present
In our daily life subject to the rigours of the rat-race, we sometimes fail to live in the present. To be fully aware of the wind rustling, the sounds of nature in our urban jungle and even to appreciate little details in life. My experiment has made me more aware of how we rush through life getting from point A to point B without appreciating that the journey is as important as the destination.

What is your ideal financially free lifestyle?
Let Panzer know through the comments and I’ll feature the responses to all in the coming week!

Be well and prosper.

After reading “The Black Swan,” I realised that “Fooled by Randomness” had to be next and here are some of my thoughts after reading his earlier book. Word of warning before you read his book, I think you either love or hate his writing style. It’s hard to be neutral to his very personal voice that is speaking to you through his books.

What is it About?

It’s hard to classify the book because Taleb doesn’t write it like a academic paper (thank goodness!). He himself describes his style of writing “idiosyncratic” because his writing style is informal and weaves narrative of anecdotal stories but supported by concrete examples and logical arguments of his views on probability and how people use and misuse it in social sciences and in the financial markets.

He doesn’t hide his disdain for journalists, financial engineering experts and those who mis-use science and statistics in the social sciences. One of the key points he makes is that in life and in the financial markets, many of the occurrences are due more to randomness than the specific actions of the trader or fund manager.

To compound the issue, we humans are not particularly well suited to understand statistics and probability well in real life applications. We are subject to many biases such as attributing causality between occurrences where there is none. We tend to think we can predict the future (e.g. stock market behaviour) by looking back at history but fail to realise that our historical data could be lacking in size.

We live in a random world and we are human beings that make decisions (more than we’d like to think) using emotions and feelings rather than logic and rationality. The combination of these two factors have resulted in many traders “blowing up” in Taleb’s terms which means to lose unexpectedly large sums of money in trading.

Huh? So What Can I Do About It?

“Fooled by Randomness” can be rather “cheem” (hokkien for deep or intellectually challenging). The key idea that I took away is that the world is more random than we think. The older (but not necessarily wiser) I get, the more I tend to agree that it is more random than we think.

Because of that randomness, while basic hardwork and effort will get you somewhere middle class (a video of Taleb speaking at the airport on this can be found in youtube), luck is the key to becoming a millionaire/billionaire.

I learnt from his book to be more sceptical of journalists and financial media. To be skeptical during Channelnewsasia segment where an analyst gives his 2-3 minute sound bite on why the STI went up or down and where he/she sees the STI in xx months’ or year’s time.

The current financial meltdown where banks CEOs who were making millions in bonuses on Wall Street also shows the flaw in a system where such people are rewarded for taking crazy bets on the market that has since “blown up” based partly on their greed and quest for profitability. Bank CEOs are not the only category of humans who like to attribute success to their efforts but failures to the randomness of markets and of the world.

Randomness is Not Always Bad

Taleb doesn’t prescribe that you should live your life being a fully rational being, i.e. a robot. To be human is to live life coloured with the lens of emotions. The important thing we need to take note is not to allow the randomness to literally kill us (i.e. wear a seatbelt or stop smoking) or to financially ruin us (i.e. buy health insurance and do not put ALL your investment monies in one basket).

An interesting aspect of reading this book is that I am more inclined to want to live the life similar to what Taleb is doing. He spends his time living and enjoying life partly because his trading strategies of benefitting from the positive black swans (unlikely events with big impacts and are retrospectively predictable). It takes a certain degree of financial independence to pursue his intellectual and other pursuits.

Both “The Black Swan” and “Fooled by Randomness” has reinforced in me the desire to read more about the world and to cut down further watching television and especially financial related news programmes as these are more noise than real information. It also prods me to be more skeptical about the statistics and information bandied in main stream media. (Our local newspapers are particularly notorious for portraying statistics in a light that helps “nation building”… but I digress.)

Share with Panzer your thoughts if you’ve read the book too!

Be well and prosper.

P.S. Over 60+ people (and counting) have downloaded “Panzer’s Guide to Financial Freedom: It’s Your Money and It’s Your Life“. Get it here!

Related articles by Zemanta

• The Black Swan: The Impact of the Highly Improbable

Perhaps it is your broker who tells you that, “DEF company” is the next big thing to invest as a potential multi-bagger (i.e. a company whose share price will go up a few times the initial price) or “sure make money one!”

Noise is everywhere

In this age of internet, television news channels and Google, there is an overload of information. Before search engines and Google, there were public libraries and older-wiser friends or relatives who dispensed wisdom on what you should do in personal finance. “Put money in fixed deposits, very safe one,” goes your grandmother. “Buy property,  Singapore got so little land, property sure make one,” adds your aunt on your mother’s side. “Work hard, save money, everything is bull*shit, except money,” intones your mother in cantonese.

Everyone and anyone has an opinion on the markets, on personal finance and on how to ben financially free. Some think of using the lottery as a means towards financial freedom. Others believe the tried-and-tested way of working hard and saving every other dollar is the one-true-path. And yet some think it’s totally LUCK and all RANDOM, so let’s kick back and enjoy life a bit more.

In the midst of all this noise and increasing more information on the markets through Bloomberg, Reuters and CNBC, you realise that the more you know, the more confused you get.

Reading Widely, Listening Selectively

As your brain seeks to make sense of the nonsense that floods your eyes and ears, you start to rely on filters to sieve out the noise and allow you to extract the essence or the principles in which to guide yourself towards your goal of financial freedom. You know that you need to learn and grow, to find out more about how you can live within your means, save and invest. You want to learn how to grow and protect your means.

The way to overcome this information overload may be counter-intuitive. It is to read widely but to listen selectively. Why is that?

Reading widely is important to broaden your sources of information about the things you want to learn about. By all means use Google but read not just the first search result you get but read the others. This gives you a quick breadth of the subject matter. Wikipedia is also a good first location but in order to understand for instance treasury bills,  you need to look for more in-depth sources of information. The ability to browse and scan different sources of information efficiently to gleam the territory of the subject matter is important. This is how you get the overview and know where to zoom in to focus on the exact things you need to know specifically about, say blue chip equities.

Listening selectively is important. Who are the trusted references for that particular subject matter. Why is he/she or the book/blog/article the trusted reference or “guru” for that particular area? (If you read Fooled by Randomness or The Black Swan, you would rethink what it means to be a guru or expert but that is digressing.)

The other day, my mother-in-law SMS’d me to say that “Maybank was collapsing and to consider taking out any deposits with them.” When I queried her in detail, it happened that she heard from her sister who heard from her son who heard from someone (whose references and credibility cannot be determined) that Maybank was undergoing some trouble. Because my mother-in-law’s sister trusted her son, she went to spend half a day queuing at Maybank to withdraw all her monies. It turns out that the rumour is completely false and Maybank is still solvent and under the supervision of the Monetary Authority of Singapore.

“Who do you trust” is an important factor that determines who you listen to. But listen selectively to people who have earned your trust through giving competent and fair (presents both sides of the story) views. Establish what is fact and what is opinion. There are many opinions out there that pose as fact. Even as you are reading my blog, make up your own mind if what you think I’m saying makes sense or is bullshit.

How you can distinguish between information and noise

To exercise your brain muscles in determining the good stuff from the nonsense, here are some steps you can take to get your little grey cells all pumped up:

1. Read Widely

Reading widely using the public library, the internet, Google, RSS feeds, Wikipedia, mainstream news and periodicals are useful but scan and skim. Get the feel of what is happening and what is the context of events and things happening.

Read a variety of books. Don’t just read that ONE personal finance book and that’s it. I try to read at least one to two books a month related to personal finance and also fiction. If I don’t read, my brain starts to stagnate as not many new ideas enter my brain.

Reading widely is important to broaden your sources of information about the things you want to learn about. By all means use Google but read not just the first search result you get but read the others. This gives you a quick breadth of the subject matter. Wikipedia is also a good first location but in order to understand for instance treasury bills,  you need to look for more in-depth sources of information. The ability to browse and scan different sources of information efficiently to gleam the territory of the subject matter is important. This is how you get the overview and know where to zoom in to focus on the exact things you need to know specifically about, say blue chip equities.

Listening selectively is important. Who are the trusted references for that particular subject matter. Why is he/she or the book/blog/article the trusted reference or “guru” for that particular area? (If you read Fooled by Randomness or The Black Swan, you would rethink what it means to be a guru or expert but that is digressing.)

2. Read in depth to Understand

Read in depth. Understand enough about personal finance and the principles of financial freedom to make informed choices in your life. Would you have invested in DBS High 5 Notes or Pinnacle Notes</a> or Lehman Brothers’ Minibonds if you knew now what you knew then about the credit events and what was the underlying assets of these derivative products?

3. Listen Selectively
The more you read widely and in-depth, the more you will realise that some people are mostly charlatans while others are true experts. The more you read, the more you realise true experts tend to be humble and also let you know their limits whilst charlatans use mother-hood statements to mask their lack of expertise. Even as I write this, I make no claims to be an expert and in all my posts I just share with you my experiences in journeying towards financial freedom including the mistakes I made and lessons I learnt.If you are interested to learn how you can be sceptical, read Nassim Nicholas Taleb’s “Fooled by Randomness” or “The Black Swan”. They are not easy books to read but those who can go through Taleb’s prose will find it
deeply rewarding. Listening selectively takes time and experience to sieve out the true voices from the charlatans. Was it Mencius or Confucius who said that one could learn from any person no matter his intellectual capacity. We as human beings, learn from each other all the time. But we sometimes also learn the wrong things

4. Be Open
Being open doesn’t mean believing everything you hear. It’s about having an open mind and to think about the various facets to any issue or subject. It is not easy to have an open mind and that is why I push myself to read something new every month. It’s to push through what I thought I knew about the world just that inch more to know who much I am really ignorant about the world around us.

How Do You Overcome the Noise and Find Information?

In your quest towards learning stuff to help you on your way towards financial freedom, what are your ways to overcome the noise and find information?<br>Who are your trusted sources for information?

Share with Panzer in the comments section!

Be well and prosper.