Financial independence – it is the ultimate goal of why we are doing what we are doing day in, day out, yes? According to the author of the book by Wiley – John J. Vento, this is akin to getting to point X in a treasure hunt map. There are many ways to go around it, some are longer, some are shorter but we all still yearn to arrive at point X – often sooner rather than later. There might be bumps along the way for some, while for others, they would be stranded before ever reaching point X. What Vento had in this 300 pages book is an advisor guide to comprehensive wealth management.
This book started with some of the hard realities in today’s world – known as the New Norm (the new normal) after the most recent 2008 recession, debunking the myths below:
- The real estate market will always rise
- You can “live large” on credit and never pay any consequences
- Owning a home is always a good debt
- If you need to work, you can always find a job
We are in a perpetual state of change, financially and otherwise. What is more challenging is that our economy is also in a constant state of change. Becoming financially independent is not something that happens by change – it requires focus, discipline, determination, sacrifice and a lot of hard work. Setting one’s priorities based on what is most important only at this point of time is a bane to your future financial condition. He added that one of the most basic fundamental, as cliched it may sound – is to never satisfy your immediate wants instead of a future need. Time is by far the most valuable asset, but it is something we always take for granted and never appreciate until the later stages in life.
What I appreciate most from the book are some of the real stories he shared showcasing the stark realities and tragedies his clients faced as a result of complacency in managing the personal finance matters, especially when they are in their 30’s or 40’s. Because personal finance matters all inter-related, how you deal with one very often will have an effect on how you treat others. Not only these will impact one’s directly, but will also affect the next generation. For example, if you neglect to property insure yourself against sickness or premature death, your spouse and family could be wiped out.
The tales Vento shared and observed throughout his years are both heartwarming and heartbreaking. But one thing for sure, the same thing I felt myself, – that “…the most satisfying aspects of my work as Certified Financial Planner is that I have the opportunity to meet with some amazing people and become integral part of their lives. There is no more satisfying feeling than helping clients and their children achieve their financial goals and live out their dreams.”
And once one is at Point X, one of the most important things now is how to protect the assets you have worked so hard to accumulate. Clearly, if one does not protect your financial independence once you achieved it, it is almost as irresponsible as never taking the steps to achieve it in the first place. If reaching Point X coincides with retirement, ensure that the proper means to address post retirement concerns like medical cost are properly funded, hopefully by a comprehensive insurance coverage rather than hard cold cash. People coming to retirement are facing concerns that retirees did not face 2 or 3 decades ago, including living longer and supporting themselves throughout turbulent times.
The only part I’d skip are the topics regarding taxes because they would require a more localized approach. Other than that, this book is a good read – not because the concepts are new, but because the approach and perspective are fresh. I can relate to this because in my client engagement session, I too, shared stories of my older clients so that the younger clients can shortcut their way in getting to Point X. The true value an advisor brings to the table, besides the technical part, are real life cases he/she has seen so client could leverage on that to reduce roadbumps in achieving financial freedom.
Now, if you post a comment below on which part of this book review resonates with you, 2 readers will stand a chance to win 2 copies of the book (worth U$ 39.95), courtesy of Wiley Singapore.
Winners will be announced 28 June 2013
[Updated] Winners this round are Patrick and Lee Yun Kiew. Please send me your full name, addresses and phone# via Contact form above to claim your free book. Thanks!
I personally think that financial planning should be included in our education system starts as early as from primary school.
I have gone through very hard time for the last 5 years due to my family debts. I lost not only my savings but also got few personal loans to serve. Luckily, all the debt already cleared and also i have managed to settled my car loan and bought a house lately by practising frugal lifestyle during last few years.
I am 38 now with 2 little lovely daughters. To be honest, I was so stressful and pressure for the past 5 years when looked at my bank account. The amount not even enough for me to live for more than one month if suddenly i lost my job. Right now, i have extra money to be invested in stock and some savings. And i am not so stressful unlike before and i can fully concentrate on my job.
My advice is live within your means and frugally. Also get yourself insured and protected or else you can lost a big chunk of your hard savings. PS: I just gone through minor operations and it costs me RM10K (luckily i am insured).
Dear BY, I hope you are recovering fine. Like they said, insurance is NOT important until we need it, which is already too late.
Do you mind sharing your story on the “hard times”? Because of lack of awareness in early 30’s that cause you to take so many personal loans?
One should give priority to firstly having an emergency fund while being adequately insured.
Then we should decide on what kind of a retirement we aspire to have. Is it a retirement of ‘cukup makan’ or a retirement of abundance? Having done that, we should work on realistic numbers to form our retirement financial goal. Then a reality check should be done to assess our present financial health status. We should take it from here to formulate a workable plan. Without a definite financial goal any plan formulated would be treading on moving sand. Most of us are not even saving while many are not saving enough. Retirement is so remote! Yet those who do save are confusing retirement saving with investing and are chasing ‘highest returns’ and exposing themselves to all manner of risks, when we should not be taking any more risk than we should!
Kris! It’s been a while! Yea, and not to mention life contingencies as well once married. When is your turn? 🙂
I am 24 and now eager to learn about financial independence. Looking for new sharing knowledge from everyone. I slowly start to reach at X point by saving 10 percent of my salary. 5 percent for insurance. Even my salary is around 2.5k, I need to focus, discipline, determination and do a lot of hard work to reach at X point and live happily during retirement. I will learn time by time to reach financial independent and own a good property. I must focus and become a discipline person to be someone like Vento
Pok, Admired your determination. Certainly not easy for youngsters working and staying in KL if lacks the discipline.
When I open my heart to learn more in financial freedom since 2010, almost everyday and every time I will found something knowledgeable about finance that I can implement it on my financial management.
For example how hard I try to perfect my financial planning track every pennies that I spent.
Lately I still digging on the knowledge of how to achieve in financial freedom
Hi Iskandar
Where else are you “digging”? In books? Seminars? Blogs like mine? 🙂 How old are you btw…
“Clearly, if one does not protect your financial independence once you achieved it, it is almost as irresponsible as never taking the steps to achieve it in the first place. ”
I totally agree, aware and always advise my friends and investor about this part, where, a lot of them thought they are covered, but indeed, are they ?
We bought something that we think what we want, while, in fact, it is not really the case, don’t blame the sales agent, you never, they never know you don’t know. But, we always don’t know what to ask as we don’t know what we don’t know.
I always don’t know what I don’t know, but by reading, always reading and reading, you will start to know what you don’t know, and the journey of starting to get from the ‘don’t know’ to the ‘I know’ is right in front of us.
Wish all happy learning and planning –> the financial independent way.
Nicely said. Get covered first, then go gung-ho on growing money 🙂
I am a 60 years old retiree , achieved my financial independence at the age of 53!
I like to share with you and your readers my journey and how I got started on my financial planning only at the age of 40!
I hope that this sharing will encourage many of you who may think that starting at age 40 may be too late …well, the it’s never too late to get started!
I started working at age of 24, after graduating from USM Penang. I worked very hard because my one and only goal is to make more money to improve my lifestyle for me and family. So for 16 years ( age 24 to 40), I succeeded to climb the corporate ladder to become a senior executive of a multi national company, earning relatively high income , but have I accumulated a lot of wealth? none! Just like many people, the more I earned, the more I spent ! sometimes spent beyond my means !!
On hindsight, I made countless financial mistakes, invest (gamble) in stock market and lost, bought life insurance without knowing why I was buying them, careless spending, no budget etc.
At age 40, with a family of 2 young kids ( 4 and 6 years old respectively), I suddenly realised that if I do not do anything, then I may not be able to afford tertiary education for my kids and I may be broke when I retire. I then started to look for information on financial planning ( not much of internet during that time), I read books on financial planning , one of the first book was Millionaires are from different Planet Azizi Ali. I started to learn about budgets, cash flow, pay yourself first concept, delay gratification, compounding, insurance, investment, personal net worth etc
I learn, I practice and I share with friends and my staff, investing into myself was the best investment of my life. Until today, I am still learning about financial planning and investment everyday!
This was how I achieved my financial independence in 13 years , at the age of 53!
Though retired, I still offer career coaching to youth at my church and continue to encourage many of my younger friends to invest into money education. At this point of my life, my money objective is how to manage my wealth so that my money will not finish before I die. My life mission is to share my accumulated experiences with as many people as possible!
YH,
I am very impressed by what you have achieved and what you are doing now. I sincerely envy and admire your success especially your ability to achieve your financial freedom in such a short period of time.
I wish you the very best in fulfilling your life mission.
KS
Actually KS, YH is in your “age group” too. Sorry I don’t know how to better put this nicely 🙂 You two are the epitome of what I want to achieve at your current age.
Hi CF,
I am sure you will achieve the same even before you reach our age. You have taken the right approach at a very much younger age than YH and I.
*fingers crossed* Thanks!
Yes, indeed most people will not bother to do proper financial planning in order to achieve financial independence during their retirement years. Statistics has proven this.
I always believe in the following:-
1) Live within your means and way below your means if possible.
2) Save as much as possible.
3) Buy only the necessary protection (insurance).
4) Invest the surplus.
5) Constantly educate yourself on financial matters.
6) Be disciplined in your financial planning.
7) Live a simple and purposeful life.
Enough said.
🙂
There are 10 keys chapter in this book which include:
1) Live within your means
2) Understand Taxes
3) Determine your financial position
4) Manage debt
5) Insure your health and life
6) Protect your property with insurance
7) Pay for college
8) Plan for retirement
9) Manage your investment
10) Preserve your estate
I found that chapter 3 resonance with me, we need to know our financial health before we can proceed to another phase. Without knowing where you are, you are difficult to set a goal to reach your point “X”.
If you know your financial health, you need not fear the DEBT.
Adapted from Sun Tzu
That’s profound CK – “If you know your financial health, you need not fear DEBT”. Loved it.
Financial freedom is always my goal to achieve before my retirement! So it is quite challenging to plan my financial road map as earlier as possible.
I agreed that at the peak of your earning power with the active income, we shall begin to generate passive incomes from investing in stocks, properties, unit trusts as what you are comfortable with. As what Robert Kiyosaki said to become a sophisticated investor you must acquire 3 E’s i.e. Education, Experience and Excess cash!
Well said Jasper! 3E not not 5C’s 🙂
The new norm not only challenges the traditional thinking (our grand parents and parents good advises) of wealth creation – get a good paying job, be thrifty and save, buy properties etc, but also the new age thinking (typical financial consultant’s advises) like invest when young (you can afford to lose money and have time on your side to recover losses), take more risk, no risk no gain approach… I believe the truth lies somewhere in between the two, and I absolutely agree on your statement “Becoming financially independent is not something that happens by change – it requires focus, discipline, determination, sacrifice and a lot of hard work.” If I may add, it requires taking correct action with correct knowledge. To achieve financial freedom, we need to adopt a sound strategy. I personally have come up with a quadrant approach to financial freedom: Quad 1 – Wealth Protection like insurance for critical illness, hospitalisation etc; Quad 2 Wealth Preservation like gold & silver; Quad 3 Wealth Accumulation like employment, property, savings and lastly Quad 4 Wealth Acceleration invest in business, stocks, option etc… Happy to share more on my 4 quad approach to Full Financial Freedom if anyone interested…
Yes, Patrick please elaborate more 🙂 You are right, but most people tend to overlook Quad 1 and straight away jump to Quad 3 and 4 instead.
Totally agree. It is scary to think of the consequences of not planning, yet it is so hard to live out the plans… Good thing we have information now that people generations earlier didn’t have and it’s all at our fingertips. Feel so blessed to be a regular at your blog and several others’. Have learnt so much here!
Thank you doc 😀
I agree that being complacent with financial matters in your 30s and 40s will lead to issues with regards to retirement, healthcare funding in the later parts of your life. When you are in your 30s and 40s and you are at the peak of your earning power (active income), you should be saving, investing and insuring yourself.
Saving ie saving a significant portion of your income.
Insuring ie insuring yourself and your assets to prevent a financial tragedy with cheap term insurance.
Investing ie generating significant returns on your savings so that you can reply on passive income when you fall from the peak of your earning abilities.
Hi Sihao, good one. Term is not necessarily the cheapest – I used to have this misconception too. Wait till one is at 50 or above, term is definitely not cheap. Investment linked option would be a better option for first policy with TPD, Critical illness and medical card. Term is only good if you have multiple properties for investment, just for pure death/TPD protection.