The Spine of Early Retirement

I'm sure that most of you are familiar with some of the steps you have to take to reach early retirement, but bear with me as I repeat them once again for the benefit those who do not. These steps are not concrete and you can choose to take them or not to attain your early retirement but I believe that paths are similar to these. Only difference being your personal tweaks, luck and mistakes.

Without further ado, here they are:

• Start as Early as Possible - This applies not only to those seeking early retirement or financial freedom but to everyone. The earlier you start, the more time you have to allow the magic of compound interest to work. What's more, having more time allows for more margin of error. No one is perfect therefore we should always make allowance for mistakes.

• Manage your Consumption - One of the main reasons why most people are not able to save enough for an early retirement is because they spend to much. We are all wired to consume and many of us can't help it but conform. However, there is this rebel within us that does not want to conform, we want to break free from the norm - these are the people that are able to achieve extremely early retirement. Reduce spending now, stop spending money on too much wants, stick with the needs. You do not need that new hand phone just because it has a battery life of 1/2 an hour more than yours or a screen 1/2 an inch bigger than yours. Remember, you choose your enough, not your neighbor.

• .Cut down on Excess Spending -  I know it's often hard to form new good habits, but trust me, this will benefit you. For just 1 or 2 months, track every dollar you spend and at the end of the month, you will be able to see where you have been spending unnecessarily. These are the parts of your spending tree that you must prune away. If you feel comfortable keeping track of your expenses by then, you can continue doing so. If not, try to stick to your current monthly expenses less those unnecessary expenses and do a follow up 6 months later to find out your monthly expense status.

•  Be Frugal - This step is an acquired taste, once you get it, it becomes something you actually enjoy doing. However i urge you to do this is moderation if you are not alone in your journey. Your significant other might not share the same joys as you in being frugal. You have to take baby steps to let them see the benefits of being frugal. What you must do to be frugal is to view money as an extremely precious resource not be to exchanged for something of lesser value. For me, i feel that lesser value means items that bring no benefit or new experiences to your life. Most of the time, these items just bring you momentary satisfaction that last for a month at most. Not worth it.

• Never Trade Early Retirement for Happiness and Family - This is the last and most important key. You should never trade anything in this world for happiness and your family. What is the point of forsaking your happiness and family to gain early retirement? The point of early retirement is to be able to have time for both. Don't be over obsessed with retiring early that you forgo your current happiness or spend so much time tweaking your spreadsheet or monitoring your portfolio that you neglect your family. You have to set your priorities right.. what is most important in your life. For me, its family, for without them life would be quite meaningless even if u have all the riches in the world.

 I know that everyone will make mistakes as to err is to be human or was it to err is human... Anyway, i hope that on your journey to financial freedom or early retirement, you will make more right choices than mistakes. Ponder upon what is most important in your life, keep it close and never ever trade it for anything this world has to offer.

As always, save more, spend less and invest wisely.
P.

Book Review of the Coffee House Investor by Bill Schuultheis

 Sometime during the beginning of April, I was at Times bookstore scouring over the finance and self help section for yet another book to read. ( Feel my wife's eyes rolling behind my back). After about half an hour or so, i decided on a book called the Coffee House Investor.

The book is written very simply yet holds very powerful messages. Its tagline being "How to build wealth, ignore Wall Street and get on with your life." I guess the term ignore Wall Street caught my eye. In MY opinion Wall Street can be contextualized into things such as market noise, analyst reports and random idle talks and speculations.

The author constantly reminds of 3 lifelong and important principles that we all know to be true. 

They are:

1. Don't put all your eggs in one basket. 
2. There is no such thing as a free lunch.
3. Save for a rainy day.

The book is filled with many examples and careful explanations thus making the authors concepts very easy to understand. Basically, the essence of the book is very similar to that of The Millionaire Teacher by Andrew Hallam. It preaches heavily on the benefits of Investing in Index funds. Some of which are low cost, diversity, ease of re-balancing and the ability to beat Mutual funds or Unit trusts in the long run.

The part of the book that left an impression the most was a poem by Robert Service the author posted titled "The Spell of the Yukon" It goes something like this...

I wanted the gold, and I sought it;

I scrabbled and mucked like a slave;

Was it famine or scurvy, I fought it;

I hurled my youth into a grave.

I wanted the gold, and i got it-

Came out with a fortune last fall,-

Yet somehow life's not what i thought it,

and somehow the gold isn't all.

The poem struck a chord within me as it kinda assured me that my goal of early retirement to do things that i want to do and spend time with people i want to spend time with is right. What the point of working your youth away earning that massive sum of money only to lose the only thing which can never be gotten back...time.

Time is the most important thing that you can possess. Don't waste too much of it attaining wealth, only to find at a later age, you would have given any wealth to get that time back. Think upon it and i hope what i have written will open another option in life for you.

As always, save more, spend less and invest wisely.. and also.. make the most of your youth.

P.

My Portfolio Allocation 26 April 2013

Here is my portfolio allocation:

• Cash...................36%
• Stocks................44%
• Bonds.................9%
• Gold...................3%
• Unit Trust............7%

In the past year, I have drastically reduced the amount of stock i hold for 2 reasons, one which many would find stupid, was fear. Fear that the market would collapse for reasons such as the European crisis. I have to admit that this fear was borne out of watching too much news and reading too much into analysts reports. Instead of trusting my judgement and holding on to the good companies that i have bought, i sold them. That said, i have to admit that i slept better at night after selling.

The other reason, was because i was going to buy a house and start a family and therefore preferred not to carry too much risk. I currently hold many individual stocks consisting of blue chips, reits and low cap stocks which I will discuss further in another post.

I am currently trying to move my investments towards one that is more heavy on index funds and less of individual stocks ( Influenced by the books The coffeehouse Investor by Bill Schultheis and The Millionaire Teacher by Andrew Hallam - Will do a review on these books soon). I would still have to carry some individual stocks as i would like to keep my annual yield at a minimum of 5%.

The gold segment of my portfolio was only added recently when the price of gold dropped to a price i was comfortable with. I do not really believe in gold and therefore would only hold a small amount of it. However, if the price should drop a lot more, i would consider buying physical gold.( Not as an investment but more of a personal vanity thing.)

As for unit trust, the only reason why i got it is because i want to be consistently investing in something every month(sounds stupid i know) and DBS does provide no sales charge on the regular savings plan for up to $500. I do not put a lot into unit trusts due to the high annual maintenance and management fees which i know will slowly but surely eat into my returns in the long run.

As for the cash portion of my portfolio, i am currently waiting for a market correction so that i can invest it. I have already set aside money for my house and therefore the whole sum of cash is investable. 

Well, that's it for my portfolio allocation! What's yours like? Please do share so that we can learn more from each other.

As always, Save more, Spend Less and Invest wisely
P.