In our current society, most employees are working a 9 to 5 for a company. They use the money that they have earned from it to enjoy their life. At the end of every month, they will realise that they are left with nothing to show. Stucking in this endless rat race of chasing more money for the end of the month paycheck. The most important thing people forget to do in investing is to have a clear vision and reason to invest.
In other words, lots of people might invest just because they think they ought to because others are doing it. Or they think they need to retire, but they aren’t excited about it. In other words, they aren’t blown away by the power and potential of investing to change their lives.
So sometimes I think it’s important to ask why, why do I need to invest.
And oftentimes, I think that’s where we’re going to find the building blocks of motivation, and that motivation will be the thing that supercharges our investing.
Alright, so first, let’s ask this question, why invest?
Now, this is a personal kind of question, and answers are going to be subjective. So all of this is just stream-of-consciousness thoughts. You can make up your mind and have your angle on why you need to invest. It can be some of the following examples:
- Retiring early like the FIRE movement group
- Want more time control for yourself
- Not be tied down by the dollar
- Would like to be in a stronger financial position
- Retire your parents and let them enjoy their retirement earlier
Situations you are probably in
If you are reading this article, well, you probably are in the rat race. So you want to find out how to escape from it.
The number reason that you need to be invested is to grow an asset that is able to cover your living expenses indefinitely. However, the majority of people, do not have enough equity to cover all of their living expenses indefinitely. Or are in a tough position to build their wealth whether it is a personal issue or whatsoever.
That is why even so, they have to find a way to invest a portion of their income in order to escape the rat race.
The problem you will face in life
Everyone has this ongoing obligation or obligation to meet our essential needs in life. For example, we need lodging, food, and transportation. These types of obligations and needs are ongoing and you just can’t escape them. On average, a family of 4 Singaporean would require $4,400 a month to spend on living expenses. If you have gotten sick or injured, you’re still going to need the basic things to live. So these obligations or needs are things that every single human right he’s dealing with, and it’s almost this weight and this burden in life at times.
Responsibilities get heavier
Now, in addition, our mental and physical capacities aren’t guaranteed in the future. So you might be young in your 20s or 30s or whatever. And you might be in great health, but that’s not guaranteed for you to have that type of mental or physical capacities into your 70s 80s, or 90s. Further, the obligations and needs that you have to live actually can grow and they can grow substantially in the future. Especially, you know, let’s say at an older age, right?
Expounding on kind this problem these obligations are guaranteed to be there until you die right this is just the reality of life, but the mental and physical capacity to work and to get income is not guaranteed. So this is kind of like this dilemma here. Also further there are possible additional obligations and needs someone might have for example, for your family or for loved ones that you want to help and take care of.
Investing as a way out
Investing provides a way to counter the burden and the weight of these continued obligations. Having to take care of the needs in your own life, your family members and your loved ones. And the idea in the vision of investing is that you grow your assets and resources, and I like to use the words assets and resources more than money because I think money has been kind of twisted, and already has the connotation that’s defined in a way that I don’t think is necessarily helpful for us in this conversation here at least.
So when I say assets and resources, these are kind of like the things that have a value that is tradable in your life, right, and the point of investing as you grow these assets, resources where you can cover, right, all of your obligations and your needs, not just, for example, you know, for this year, but ongoing, let’s say until you die so and one of the key concepts of how this works, is this idea that these assets and resources can grow themselves.
Letting assets work for you
It’s kind of magical in a sense, assets, and resources in a way they can be like almost a living thing where they can work for you to create economic value or, you know, monetary value even when you’re not working. In other words, they can compound and multiply over time, even without your involvement. And if you think about it, this concept is mind-boggling that you can have assets that can work on your behalf or even when you’re not working. And these assets can provide the right ongoing value to take care of your living expenses on your obligations.
Another kind of aspect I think of investing is it helps gain freedom in life. For example, let’s say there’s a government or a company that is requiring you to do something that you don’t want to do and you’re gonna lose your job if you don’t comply. And this can be a very tough decision if you can’t afford to lose your job. Therefore, the ability to be able to quit your job can add a huge amount of leverage in your life to be able to do the things that you want to do and not just the things that you’re obligated to do.
Another example is let’s say you’re sending your kids to school and I say all the schools all around require you to do something that you don’t agree with. And this can be a tough situation to pull your kids from school if both parents need to work full-time just to meet right the ongoing obligation and needs. And so you think that you might have a lot of freedom, but when you’re placing certain tough situations, maybe you don’t have leverage in that situation to do what you want to do.
Getting to Financial Freedom
So yeah, if you can’t quit your job, I think in some situations, your choices and the options that you have are more limited. This is a reason why individuals need to get a proper financial plan or do enough research to understand the proper step to take to reach financial freedom.
Investing to reach Financial Freedom
There are plenty of ways to build wealth, you can do that through real estate, stocks, a side hustle, or investing in cryptocurrency.
Stocks (Index Fund and ETFs)
For most people who are starting out to invest. They should start of with investing into an index fund or an ETF as these stocks are proven historically to have consistent returns and a long track history. Take for example the index fund VOO or VTI, these index funds have consistent provide investors with a 10% annual growth rate. So if you enjoy the place you work at but would like to one day escape the rat race, investing into index fund will greatly help.
Investing into stock is the better approach as it allows investor to start of with as little as a dollar(but don’t expect your dollar to grow to a thousand overnight). So if you would like to know more about how to invest in stocks, be sure to check out our beginner guide on how to invest in stocks or you can read hundreds of articles we written on stocks.
It’s a common belief that the only way to build wealth is through a traditional job with a steady paycheck. While it’s true that having steady income is an important step in the process, it’s not the only way to build wealth. In fact, there are many ways to build wealth other than a job. The key is to be open to all opportunities and take advantage of them when they present themselves.
The “side hustle” is a phrase that’s often used to describe small jobs or projects that you set aside time to work on in your spare time. The idea behind this concept is that you set aside some of your free time each week to work on a business, side project, or other entrepreneurial venture that can eventually turn into a full-time income stream. With the world becoming more digitalize, there are plenty of side hustle for you to try out. So make sure to find what’s right for you.
Ultimately, if you continuously improve your side hustle networking and building repeatable customers. You may be able to work full-time on your side hustle. So do also check out how we made $3,000 a month through our side hustles by clicking on the link.
How much you need to Retire?
The amount you need to retire depends heavily on how much you need in order to retire. But the formula to use in order to find out the amount you need to retire remains the same. They are as follow:
Amount to Retire = Monthly income x 12months x 25 years
So if you need $3,000 a month in order to retire, the amount is as follow:
$3,000 x 12 months x 25 years = $900,000 (amount to retire)
Now that you know the amount you need in order to retire. Do make sure to include inflation as you progress and always find out how much you need to retire and whether you are getting there or still stick in the rat race.
What Happen when you Escaped the Rat Race
So we all have heard the phrase escaping the rat race. So I’d like to rephrase it and reframe it in a bit. And the question is, if you stop working completely, I say today, do your assets from here on out?
Do they shrink or do they grow over time?
Can you live off indefinitely?
And the problem is, we all have living expenses, right? We have perhaps rent to pay and food and lots of other things that you know health insurance, all this stuff. And so these living expenses are the problem there like the vacuum and they suck up our assets. And unless our assets are growing faster than the vacuum cleaner is sucking up these assets, then our assets are going to be shrinking assets.
Not having enough to live off
So this is the situation for most people if they stopped working today and they stopped working, you know, let’s say indefinitely from today out their assets worst will surely shrink because right the power of the vacuum their living expenses, right? It’s just going to suck up the assets faster than their assets will be growing by themselves. So this people are the ones that need to find ways to build an income to be able to invest in order to escape the rat race.
Having enough to live off
Now there’s a different type of financial situation, and that is one of growing assets. And what that means is if you stop working completely today, and I say indefinitely in the future. Your asset will continue to grow even with the living expenses even as you’re spending. So in other words, the vacuum is sucking up right the living expenses or money from your free assets to live off of. But your assets are growing much faster, right than the pace of the vacuum cleaner sucking up those expenses. Congrats, you have escaped the rat race!
Having more than enough
So yeah, that’s the question. If you stop working today for the next 10 years, what would happen to your assets? Would they grow or would they shrink if they would grow despite your living expenses? That means you’re in a situation where you’re in a growing asset reaching escape velocity and what that means is your assets are growing on their own, even after all of your living expenses. Now, I think this concept is not taught much in school but it’s a hugely important concept. Especially with finances and investing. The question is, do you have a growing asset pool or a shrinking asset pool if you’re not working at all?