5 Myths of Financial Freedom: How much money do you really need?

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This article was submitted by a Guest Contributor.

Imagine a time where you don’t need to rely on a job, and are able to live off your assets?

But with mounting lifestyle costs and job pressures, financial freedom can seem like an insurmountable task to achieve. 

This post explores 5 myths about achieving financial freedom – the goal may be nearer to you than you think!

1. Financial Freedom requires a 6 figure Income 

According to this study of 10,000 millionaires, the majority of millionaires do not actually have high-level, high-salary jobs. In fact, only 15% of millionaires were in senior leadership roles, such as vice president or C-suite roles.

93% of millionaires said they got their wealth because they worked hard, not because they had big salaries.

Only 31% averaged $100,000 a year over the course of their career, and one-third never made six figures in any single working year of their career.

In addition, despite what society might believe, only a small number of wealthy people inherited their money.

Therefore, the majority of millionaires made their money slow and steady, by working hard and saving right. 

2. Aggressive High-Risk Strategies will Shortcut my way to Financial Freedom

3 out of 4 millionaires (75%) said that regular, consistent investing over a long period of time is the reason for their success.

Participants interviewed said they didn’t risk their money on single-stock investments or “an opportunity they couldn’t pass up.”

Regular, consistent investing over a long period of time is the reason for their success

Slow and steady wins the race.

Living beneath your means, and making sure you are consistently investing your money within your risk appetite will bring you far more rewards than trying to find a shortcut. 

All the 21-year-old millionaires you see on social media is the exception, not the rule.

Not to mention often times completely fake. 

Flashy cars and private jets often cover up the reality of luxury rentals, credit card loans, and carefully staged photoshoots. 

Social media is a house of mirrors, and “faking rich” online has become an entire industry in and of itself. 

So don’t be fooled, and concentrate on accumulating real wealth in front of you. 

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3. Financial Freedom requires Zero Debt 

On the other hand, being completely risk adverse can also be detrimental in achieving financial freedom.

This is where recognizing good debt vs bad debt comes into handy. 

For instance, most of the millionaires/billionaires you know today made their money from real estate. Especially in land-scarce Singapore, investing in property can often be the key to achieving a 7-figure net worth. 

While its returns may be a lot less than stocks or other riskier investments, property has the benefit of: (1) leverage especially in low-interest rates climate; and (2) act as a form of forced saving as it is a large and comparatively less liquid asset. 

In fact, the best form of investment you can make is in yourself.

Investing in knowledge, skills and improving your mindset can help you achieve financial freedom.

Honing marketable skill-sets is key. By being part of growth sectors, this will ensure that your income trends upwards. 

Refinancing tool

With rapidly rising interest rates – it might pay off to look into refinancing if your loan is coming due.

There’s a fantastic refinancing tool by Property Guru.

Do give it a try if you’re close to refinancing.

It’s completely free – you just input your mortgage details, and the tool lets you know whether you’ll save money by refinancing.

If the answer is yes, they’ll give you recommendations on what loan to take.

If the answer is no, you can set up a reminder for the tool to remind you when its time to refinance.

Do give it a try here.

4. Financial Freedom = Retirement

Another common misconception is that financial freedom = retirement. 

This may actually put off people from prioritizing financial freedom, as a lot of people imagine retirement as some kind of slow death where they are living a very boring lifestyle. 

The truth is that financial freedom may not necessarily equate to retirement – if you don’t want it to be.

What you get is freedom of choice – you can continue working, you can do part-time work, you can work on a passion business or philanthrophy, the world is your oyster. 

What is financial freedom to you? You can make your own choices! 

Think about Warren Buffett or Mahathir – you can very well choose a very busy & active life into your 90s. 

5. Financial freedom will Solve all your Problems 

Finally, at its core, financial freedom may be more of a mindset shift than a monetary goal. 

As the survey above suggests, what people want from financial freedom is to be free from “work” and not being dependent on anyone. It is the freedom of choice that people crave and want. 

To be able to be the master of their own destiny.

Therefore, if the end goal is freedom and happiness, there are many ways to achieve that right now as well.

If your job is making you miserable, if you are living beyond your means etc. There are ways to alleviate your situation immediately – taking active steps will break you out of this mind prison. 

There is a reason why Marie Kondo has captivated the world – people want freedom from clutter, and the peace of mind that comes with the clean space. 

You don’t need to wait until you reach a lofty monetary goal before you find peace and happiness, you can start today, by decluttering your life – choose what matters to you, and get rid of the things that weigh you down. 

Often times, people find that detaching themselves from material items (bigger house, bigger car, bigger problems?) can bring them increased inner peace and security.

Do what’s best for you and prioritize your happiness today! 

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2 COMMENTS

  1. Giving my opinions, in the context of Singaporean (holding high asset value n not much cash).

    For the debt part, IMO it need to be as low as possible. Minimum debt will free up your fund n have a less stressful life. On the other hand leveraging can a powerful tool to the way of financial freedom.

    4% or 3% is a good rule to determine how much need to have to generate a recurring income. Lump sum draw down methods is another way to calculate the amount.

    Since we cant runaway from CPF contribution in sg. Make the best out of it, CPF Life could be a basis for good retirement income, you could build around it. All the best to you.

    Above message are for entertainment only, it is NOT financial advices.

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