How did AK create a 6 digits annual passive income? (How did AK achieve financial freedom?)

(Be better savers sooner.)



The original title for this blog post was:

"How did AK create a 6 digits annual passive income after almost 20 years with a mid to high 4 digits monthly salary? Secrets revealed."

I decided it was too long and, perhaps, too dramatic.




This was the email that started it all:

Hi AK,

I am a new follower of your blog. I have questions which are a bit sensitive if you don't mind. If you do not answer, I understand.

You said you make mid to high 4 figure monthly salary. 

I estimate $60,000 to $100,000 a year. 






Over 20 years, if you don't spend money, you have $1.2m to $2m. If we invest for income, at 5%, it will give $60K to $100K of passive income a year. You managed more. How?

I am even more confused because you have a war chest which is spare money. 

So, it means you have even more money on standby. It seems impossible. 






Please enlighten me how you do this with your salary?

I ask because my salary is like yours and I am in my mid 30s. 

I cannot imagine I can do what you have done.

Sincerely,
LL

Money magic?

My reply:

Hi LL,

Welcome to my blog. I guess the easiest thing for me to do is to ask you to comb my blog for the answers and, trust me, the answers are there in past blog posts. 

However, I know navigating my blog is like walking in a labyrinth. That's my fault. -.-"

OK, this is going to be a long email. 






Here goes:

1. It is difficult but not impossible for anyone who has the kind of earned income that I have to achieve what I have achieved financially. 

The most important thing to remember is to be careful with our money. 

A penny saved is a penny earned. Try to make some extra money on the side (e.g. tutoring) in our free time. 

As we make more money, don't spend more, save more.

Don't say I say one.

2. Do not wait 20 years before investing for income. Like you said, if we saved all our earned income and not spend a single cent, with my kind of earned income, 20 years later, investing for a 5% dividend yield would give us (only) $60K to $100K in passive income. 

Of course, it is impossible not to spend a single cent in those 20 years!





3. Start investing in the stock market early (once all the basics have been taken care of). Don't just leave money in our bank accounts. 

The earlier we start, the earlier we will enjoy another stream of income, passive income. The idea is to have our earned income supplemented by passive income. 

Have a war chest ready so that we can invest more in years when Mr. Market is feeling particularly depressed. 

So, doing this, in effect, my total income grew year after year.





4. I am also lucky. I was lucky enough to win a car in a lucky draw a few years ago. So, my car is actually free. 

I am also lucky that my parents don't need financial support from me. I am lucky that my health is not too bad. I am lucky that I came to my senses very early in life to be prudent with money. I am lucky I don't have any children. 

Well, at least I think I don't have any. All these meant that I avoided wealth destruction.





5. Expanding on the above point on luck, I did a fair bit of trading in the stock market before and I was lucky that I made more money than I lost. 

I bought a couple of private properties at the right time too. I sold them a few years ago, making some hefty capital gains. 

So, I was lucky when it comes to wealth creation and not just in avoiding wealth destruction. Most of the money made went into my war chest. 

I have shared my experience and insights on real estate in Singapore in my blog too, if you are interested to know more. 

It is important to recognise opportunities and not restrict ourselves to any one asset class.




6. The last thing I want to say has nothing to do with your questions but I feel that it is important to make a point that there is always a place for a risk free and volatility free instrument in our portfolio. 

If we believe that investment grade bonds have a place in our portfolio, then, we won't be wrong to look at money in our CPF accounts as the bond component of our portfolio. 

We should let the government help build our retirement fund. 

Why reject highly rated assistance?






So, in summary, for anyone who wants to achieve what I have achieved,

1. Be financially prudent.

2. Monetise spare time.

3. Don't spend more as you make more money.

4. Start investing early.

5. Invest more during bear markets.

6. A bit of luck helps.

7. Accept help from the government.






I hope you won't think of what I have achieved for anyone with a salary like mine as an impossibility anymore. 

It is not easy, I will admit, but it is not impossible.

Best wishes,
AK




Other related posts:
1. 9 wealth building blog posts.
2. Be prepared for war.
3. Retire by age 45.

Where to go for a meaningful and inexpensive vacation?

I have blogged about how we should try to be tourists in our own country, have "staycations" or a vacation in our country. There are so many things to see and do in Singapore.

Some might think that this is just another cheapskate idea from AK. Well, when I think about how foreigners spend a lot of money to have vacations in Singapore and I don't have to, it puts things in perspective for me. Singapore is not a cheap place to have a vacation in! 

A: "Where are you going for your vacation?"

B: "Singapore lah."

A: "Wah, Singapore is so expensive, you very rich."

B: "Hehehehe..."

Today, I decided to visit the National Museum.

Specifically, the visit was to view the exhibits "In Memoriam of Lee Kuan Yew."

Remember what used to be here? See the red bricked gate posts?

This sculpture has been outside the National Museum for a long time.
I always thought they must be Chinese. Look at their feet.

The reason for my visit.

What's this? Want to make a guess?

In Memoriam of Lee Kuan Yew. Respect.

The "In Memoriam of Lee Kuan Yew" exhibition is free to visit and open from 10am to 8pm.

A vacation at home can be a meaningful vacation too without spending too much money. If you have young children and old folks at home, you will appreciate a vacation at home even more, for various other reasons.

So, where are you going for your vacation?

Related posts:
1. A family vacation without spending too much money.

2. Some of AK's other "staycation" photos.
3. Why have I been silent on Mr. Lee's passing?

Thank you for investing in Income for income.

Investing for income has been very rewarding for me and it has helped me tremendously in my quest to achieve financial freedom. 

Some of my investments have been with me for years and in some instances I even "forget" that I have them.







I received a little reminder recently in the form of a letter to thank me for investing in Income. I rather enjoy the pun.

I pay NTUC Income regularly for a couple of insurance policies. NTUC Income make some money from me but because I am a shareholder, I get a share of their earnings. 

It creates a feeling that the insurance coverage I receive from NTUC Income is "free". Nice.

Wait a minute. Didn't I say that my H&S insurance is free from the government before? Alamak, I am confusing myself.

Anyway, jokes aside, it takes time to create an abundance of passive income and it doesn't always have to be through investment in equities. Bonds and bond-like instruments could help us meet some of our expenses in life too. 

That is what passive income is for at the most basic level, to help pay some of our bills.

Remember, having passive income will help to reduce our reliance on earned income. It is the best form of insurance we can have. 

Of course, all in good time.

Updated on 31 May 2016:
Another reminder arrived in the mail today:

Q: Can non-policyholders apply for the shares?
A:
No, non-policyholders cannot apply for the shares. Only life policyholders of NTUC Income are eligible to subscribe to Income shares. This is a benefit given to them to enjoy attractive returns on a long term investment.

Q: How can policyholders subscribe to Income shares?
A:
Applications for Income shares have been closed since Dec 2004.
 We are currently maintaining a waiting list for life policyholders who wish to subscribe to Income shares. We offer the shares which are redeemed by existing shareholders to the persons on the waitlist on a first come first served basis.
 Life policyholders who are keen to be on the waiting list may send an email to ms@income.com.sg with their full name and NRIC number. We will contact the persons on the wait list when we are able to process their applications.
Source: NTUC Income FAQs
http://www.income.com.sg/NTUCIncome/CMSTemplates/PrintFaqs.aspx?pId=7099

Related posts:
1. How to get free medical insurance in Singapore?
2. Investing for income: An important element.
3. Building an income portfolio is like building a house.
4. Best insurance to have in life.
5. FCL's 7 year 3.65% bond: Who should buy?

A meal that is good for your body and the environment.

I was back in the gym yesterday and did about 50 minutes of aerobic exercises. I wasn't exercising for a couple of weeks as I wasn't feeling well. Must get the body moving again.

It has also been a while since I made my own lunch. I've been visiting the economical rice store at the neighbourhood coffee shop which is convenient and inexpensive. A typical lunch would cost between $2.30 to $3.50 which would always include a portion of stir fried vegetables which so many readers remind me to consume regularly.

So, what did I have today for lunch? I made my own lunch!

Yummy!

Want to try making what I had today?

You would need all the above items.

Turmeric powder and black pepper in extra virgin olive oil.

Looked really nice after mixing it all up. Add some salt if you like.

I pan fried the tofu using a non-stick pan. No oil.

While the pan was still warm, I toasted two slices of bread. No oil.

I dipped both sides of the toasty bread in the olive oil mixture.

Piled the tofu and cucumber slices on the bread and bon appetit!

I have a sweet tooth and I must have something sweet after a meal:

A banana and a kiwi fruit. Natural sweetness!

Then, I had a handful of these:

Baked almonds. Good for guys, I was told.

"Well, I have been eating less meat recently. This is partly because I think I do not need much meat in my diet as I grow older and partly because I think they make me fat. The fact that not having meat helps the environment is a plus."  Source: Green is not just the color of money.

Burp. I am happy.

Related posts:
1. Be richer with yummy and frugal dinners.
2. One way to save money more rapidly.
3. How to recession proof your life?