Do you want to be richer?

The original title of this blog post was "Do you want to be rich?".  Then, I decided to change the last word as it would be more inclusive.  Almost everything is relative in this world, after all.  Few things are absolutes, such as death.  Even then, there could be debates on the different degrees of death. 

Oh well, modern society does complicate things.






This blog post was inspired by a recent late night chat in LP's infamous cbox. I was just sharing my ideas on how we could generate passive income from the stock market when a person mentioned that not everyone has $500k to begin with. 

Well, unless we are very lucky, I doubt anyone would have that kind of money from day one.  Then, a long discussion ensued in which I felt there wasn't any real engagement. 

Anyway, if someone feels that way, it could be possible that there are others who feel the same way.  Hence, the genesis of this post.

Let's go back in time. In an earlier blog post, I mentioned a personal aim for a minimum of $50k passive income from the stock market. I said that we just need $500k invested with a 10% yield.  I gave examples of REITs which I was vested in which I felt could help deliver this passive income target.  These are REITs which I blog about quite a lot and readers who are considering my strategy could be kept updated.






Question: How on Earth could an average worker amass $500k in capital through working and by being frugal? The operative word being "average". 

An example was given on how a Diploma holder making $2k a month would find it hard to achieve this. 

Well, if we were making $2k a month, we would have to make more money more quickly towards this end. 

However, if we did not do anything to change the status quo, we would continue making only $2k month. 

We cannot logically expect an improvement in our circumstances if we do not make an effort to change for the better. 

So, stop being "average".

For example, a certain full time private tutor I know managed to save $50k per annum! That's inspirational, if I do say so myself. He probably took on more students and worked harder. He should perhaps up his fees but that's just me. All of us could make incremental changes to our lives to be more productive.

What is the first step towards passive income generation? 

Find a job that pays us as much as we are worth or more than we are worth. Do not shortchange ourselves.  

If we are worth more than $2k a month, find people who are willing to pay us more.  If we are only worth $2k a month, find ways of increasing our value. Upgrade ourselves.

I would like to share another example here. I had a fellow soldier for a student when I was in the Army.  I gave him free English classes because he was not from a well to do family and the evenings in camp were pretty free anyway.  He took his 'O' Levels English paper twice before and he could not make the grade but he did not give up. 

I was then 24 years old and had just graduated from university but I was quite a bit older than he.

After a few months of lessons, I advised the student that perhaps there was another route that he could take. He should spend some time thinking of what he was really interested in and what he was good at.  Doing English was an uphill task for him.  

When I met him again a few years ago, he told me he was doing some IT stuff which involved laying cables and networking workstations. It was all Greek to me but he was doing very well with a pay of more than $6k a month! This is a success story which I still share with my students today.






Find your strengths and build on them.

Unless we are physically or mentally disadvantaged, if we would like to be richer, we could find ways of doing it.  

If we thought that making $2k a month was what we were supposed to make and that it was our fate, then, it would become a self-fulfilling prophecy. 

If we wallow in self-pity, the only people who would show us sympathy would be people with the same mindset. It becomes a reinforcing vicious cycle! 

We build our own traps!







If we want to be richer, make it happen. How? The will must exist and it must be strong. Where there is a will, there is a way! This rings true.

When we make money, we must know how to save money. Recognise what are our needs and what are our wants. Fulfill the needs and delay gratification of the wants. Save as much as we can. 

Once we have an amount of money which could cover a year or two worth of routine expenses, we can start thinking of investing the rest.

Must all that $500k capital be from working hard and being frugal? 

Going back to an earlier blog post, I mentioned that when we invest in income generating assets, the passive income generated could be re-invested or it could be spent. If we re-invest, our targets (be it $500k or $100k) could be achieved sooner.  

This is the power of compounding.

To illustrate the power of compounding, let me use an institution in Singapore that we are all familiar with: the CPF.  When I first started working, I was thinking of how probable it was for me to meet the CPF minimum sum set by the Singapore government by the time I retire. 

Most of our contribution goes into the Ordinary Account (OA) while a much smaller sum goes into the Special Account (SA). 

At the face of it, 2.5% interest for the OA and 4.0% for the SA have only a 1.5% difference per annum but think of it a bit more and we realise that that the SA pays 60% more in interest compared to the OA!  Furthermore, if we compound 4% per annum, it becomes a very powerful force!

So, I voluntarily transferred my OA money into my SA for the first few years of my working life. Then, I let the government and time help me meet the minimum sum required through compounding 4% interest per annum.  Every 10 years, the SA money would grow 50% even if the monthly contributions should stop.





Do you want to be richer? 

Obviously, you do, otherwise, you would not have reached this part of the post. How soon do I think we could amass S$500k from the day we start working? 

To give a specific time period is difficult because it would depend on each person's circumstances but my point is that if we have the will to achieve it, and if we are physically and mentally whole, we will find ways to do it.


Related posts:
1. How much to have or how much to use?
2. 7 steps to creating passive income from stocks.
3. Building and preserving our wealth.
4. A minimum of $50k in annual passive income.
5. Money management: Needs and Wants.