Since young, Mum had always advised me to save my money. Intuitively, I know that the saving habit was good, but it took me a long while to reconcile my urge to spend recklessly with the caution of having something extra for rainy days.
Recently, I read an article from MMM (Mr Money Mustache). He is a famous blogger from USA who retired at the age of 30. He writes of a direct link between achieving FIRE (Financial Independence, Retiring Early) and the savings rate. Suddenly, my ferocious saving habit made more sense to me.
The article can be found here.
After getting your salary at the end of the month, if you save nothing, you probably have to continue working for the rest of your life. But if you can save 100% of your pay, technically, you can stop working right now.
That is not to say you really have to quit your job. There are many people who have no idea how to spend their free time if they do not work. If you love what you are doing, there is no reason why you have to stop. In fact, many of the richest people on this planet are all still working, although they might not view what they do everyday as work. They enjoy what they are doing so much that most will do their work for free.
So your saving rate defines how fast you achieve financial independence. If you save only 10%, you can retire in 51 years. But doubling your savings rate to 20% will shorten the working years to 37, reducing by 14 years!
At a recent motorshow, some colleagues who attended were commenting about many people queuing up to pay the down payment for a car. Cars in Singapore are infamously expensive, and sucks cash in many ways beyond the price tag.
The conversation drifted towards savings and how it seems that so many people had so much cash for the car’s 50% deposit. One of my colleague commented that he is looking to buy a new car soon as he don’t see the point why he should save so much. He thinks that he can’t bring his money after death, and will spend for enjoyment and convenience for his family. This colleague, a smart and generous fellow, earns a decent 5 figure monthly salary.
I kept quiet, but I do not subscribe to his point of view. We all lead our lives our own ways and what works for one may not suit another. I have colleagues who saves part of their salary and spends everything else. I have some colleagues who seem to spend everything they earn. Most of them have some savings but few, if any, are able to retire right now if they decide to.
In fact, I appeared to be the weird one to them. They wondered why I do not spend much, why I am thrifty and why I save my money. In the words of one of my colleague, I “do not drive, do not spend on expensive clothes or watches, have no mortgage, and basically don’t spend money.” Am I really the oddball? Am I really leading a miserable life because I do not consume much?
On the contrary, I believe I am leading a good life now. I have little wants, and whatever I want to have, I already do. There are many material goods that I might have hanker after in the past but somehow over the years, my mindset has changed. Now I do not want to have a car, neither do I need another expensive watch. I am alright with what I already have, and material goods no longer have control over my life.
I take the public transport, mostly during off peak hours, and feel happy that it costs little and I have the free time to read while commuting. I already have 2 nice watches (an Omega and a Tissot) and feels guilty when I don’t utilize either watch enough, so am unlikely ever to get a Patek Phillipe. I feel blessed that I can have cheap and nice food just below my place, and that restaurant meals no longer appeals to me (so much). I am even slowly turning vegetarian, as I get more joy in eating “life” food rather than “dead” stuff.
Of course it wasn’t like that before. I used to drive, loved red meats and restaurants. But life is so unpredictable. As I slowly moved down the path of FI, I started changing subtly. I became more conscious of myself and the environment. I stopped wastage in many aspects of my life, became determined to improve myself and my wants slowly diminished.
I am becoming more minimalist. I stopped hoarding stuff and prefer simplicity in my daily activities. My work improves as I became less stressed and concerned about moving up the career ladder. I walk with more confidence as my life truly became my own, with no bosses to really answer to or no pay cheque to hold me ransom.
With my change in lifestyle and mindset over the years, I now have a 100% salary savings rate. My expenses, including my annual holidays and insurance premiums, are all covered by my passive income. I live simply, and some bystanders may even think I am “suffering”, but I am truly fine with my current lifestyle.
Since I am now independent of my salary, I am looking to retire from my current job and try my hands at something else. I have started hinting to my bosses that I may not finish this work year. I pray for courage and faith that I can be true to myself.
Though I know the path ahead is still long and uncertain, I am determined to live my life fully and without the controlling reins of a pay cheque. Soon, I may have 0% savings when I don’t have a salary. But I will want everyday to be exciting, happy and full of promise.
“Normal is getting dressed in clothes that you buy for work and driving through traffic in a car that you are still paying for – in order to get to the job you need to pay for the clothes and the car, and the house you leave vacant all day so you can afford to live in it.”– Ellen Goodman
“Success is having everything you need and doing everything you want. It is not doing everything you need to have everything you want.” – Early Retirement Extreme