So, you want to be financially free too but wonder how?

This blog post is really written with one person in mind. OK, there could be others like him. So, it is written with him and his like minded buddies in mind.



On 17 May, I shared the following on my FB wall:

Someone who was introduced to my blog wrote to me to say that it is difficult to have enough savings for investment as his salary increments will at most keep pace with inflation.

Of course, I gave him the usual talk on wants and needs but he said that he couldn't reduce his expenses for various reasons. (AK doesn't really believe this but close one eye lah.)

Anyway, he felt depressed after reading my blog. Alamak!

Save 100% of your take home pay. What?

So, cannot reduce expenses, how? I asked him to read Chapter 3 of this free "e-book".

I could have just given him the link to that single relevant blog post but I want him to read these 7 chapters (i.e. blog posts) together. Yes, AK is sneaky.

Don't depend on wage increases for higher income.



Journey to financial freedom is not a race.

Yesterday, this person contacted me and said he has read the "e-book" and he thinks that people like me are just "plain super". He didn't think he would be up to the challenge. He was wondering if there were easier ways available. So, what's new? Duh.

I know that it always is the hardest at the beginning. This is true. However, it will get easier over time. This is also true. It is whether we have the courage to take the first step and the determination to continue putting one foot in front of the other. It is a journey. Nothing is going to change if we stay at the same spot, feeling too fatalistic to make the move.

Many people have told me that my blog has changed the lives of many people for the better. It is just that I don't know about them as most people are not as talkative as I am. It was only in the last 1 or 2 years that many more readers have come forward to share their personal stories of transformation with me. I am glad.

I would like to do something for this person who is still feeling depressed and others like him. I would like to share bits of several chats I had with another reader in FB in recent weeks:

From what I know, W is someone who has parents and young children to care for. I believe that his financial burden is not light but he has the courage and determination to take the necessary steps to improve his financial health with an eye on generating passive income to help supplement his earned income. 

His is a story of a hardworking ordinary Singaporean who wants and is working towards a better life for himself and his family.

Some people say that the grit that Singapore's pioneer generation had is barely visible in the Singaporeans of today.

They say that the "can do" attitude is dying. They say that Singaporeans are spoilt and have grown soft. There is some truth in all the statements but we have a choice.

We have a choice to prove them wrong.

W has made his choice.

You have to make yours.

Related posts:
1. AK's birthday wish was for everyone to be wealthier.
2. "I used to think that the PAP was eating our money."
3. Tea with Matthew Seah: POSB Invest Saver account.

Should he do a VC or a MS Top Up to his CPF?

E-mail from reader:

Hello AK,

Hope this finds you well.

Firstly, thank you for sharing your knowledge with the readers! 

Been reading up on your blog posts since last year to improve my financial literacy and I have gained a lot.





Just a short introduction, I am 20 this year awaiting for my enlistment to NS. 

I intend to settle down at the age of 28 and hence, would need to save up quite an amount to afford for the wedding and a HDB flat. 

After reading your blog, I decided to make voluntary contribution to my CPF account starting next year to prepare for a sum of money. 

For example, contributing to OA from age 21 to 28 and thereafter, contribute to the SA till I retire which I aim for it to be at 55 years old.





Can you share with me your opinion on this plan of mine as I want to cover any loopholes as much as possible in my planning. 

Also, is it possible to just make a voluntary contribution to a specific account such as OA and not to all 3 accounts? 

I tried searching for the information on the CPF website but it was quite difficult for me to navigate around it.

Thank you for taking time out to read this and I look forward to your future blog posts!
Regards,N

Money tree? I go for low hanging fruits.

My reply:

Hi N,

Welcome to my blog. :)

Using cash, you could choose to do either a MS Top Up to your SA or a VC to your OA, SA and MA. 

A MS Top Up to your SA requires more serious consideration because you won't be able to use the money for housing unlike money in the OA. 

However, it would be more rewarding with much higher interest rate of 4% to 5% if your objective is to save early for retirement. 





The magic of compounding is amazing, given more time.

However, if you are not sure and it is hard to be sure when you are only 20, it is best not to do a MS Top Up yet. 

Doing VC to all three accounts will give you more flexibility and enjoy 2.5% to 5% in interest rates at the same time. 

A percentage of the money in the OA could be used for approved investments too while money in the MA could be drawn upon in case of hospitalisation (and MA is also used to pay for our H&S insurance plan).

When you start life as a working adult a couple of years later, you might want to consider doing an OA to SA transfer. 

This will not be an out of pocket exercise. 

It is money in your CPF OA that is being moved. 





You might choose to do this for the first 3 or 4 years. 

It will give your SA a boost and the magic of compounding will do the rest for the next 30 years. 

Of course, you might have to push back your plan to settle down by 3 or 4 years, in such a case.

Think carefully your own circumstances and what you want in future. 






The CPF is a useful tool in planning for a more comfortable and secure retirement but there are competing uses for our financial resources. 

I am only sharing what has worked for me in my blog. :)

Best wishes,
AK

Note:
VC = Voluntary Contributions
MS Top Up = Minimum Sum Top Up






Related posts:
1. A lot of money in the CPF-SA...
2. How did AK amass so much money in CPF-OA?
3. Beef up to attain financial freedom sooner.