If you are still at part 2, hope you are moving smoothly and well. For those who have just started entering part 3 or well over part 3, hopefully this article is able to give you some ideas on the plan of retiring. First to recap. In part 2, we are not supposed to save but to accumulate depreciating assets with good residual value. At the same time, you are also building your skills to increase your job market value. Now you are like most ‘walking zombies’ of the twilight zones whereby you have a car but nothing to shout about.
You have a house but nothing to show to others. You have some savings but you know that is not enough to let you retire. You seem to have everything and yet nothing :o Some turn more philosophical by telling themselves that ‘thou shalt not be greedy’. Appreciate what you have, good family, good health and stable income. Some lost interest in getting better because there is just nothing in sight and their current work demands 101% of their time. If you were to change jobs, there is a dark fear of losing what you already have.
Sound familiar? It's definitely the common mid-life crisis you are going through. There is no light at the end of the tunnel. Everyone goes through that plateau some time in their life. You are no exception. In a positive way, this is the BEST stage because it can determine the possibility of how you will end in your career life. It comes with risks of course but so is not doing anything.
What should we do? While there is not really a specific formula to follow, the attempt here is to try to give an all-rounded discussion to aspects that one has to pay attention too.
Time
First, you need time, not time to postpone deadlines but time to allow yourself to start organizing your life. If you are those that have no nights and days during weekdays, you then have to sacrifice some weekend time for a better tomorrow. Calculate your assets and liabilities that you have...and do it honestly. How much EPF, how much bank loan to go, how much your take home pay is...You will then be able to assess your status. Most likely it is still a net negative . No worries.
Income
Technically, what are the monies that come into your account. The most blatant one will be salary. However, if your plan is to work and rely on increment so that you can retire, you better do something else. If you do get a promotion every 3 years, yes then stay on for a chance to be part of the senior management. If you want to retire by working on a job, the ultimate goal is to get into the senior management level where you are offered better perks, profit sharing and stock options. Trust me, it’s those that make you rich.
If your skills and experience cannot get you to that level, then you need plan B i.e. your salary is not the main source to allow you to retire early. Your salary now plays the role as the main source for investment that will get you into earlier retirement. In other words, you want to spin your money to get more money.
Other income
How do you increase your other income? Other income is something that can either give you consistent money over a period of time. It can be a house that you rent out, it can be a business that gives you some profit every year or anything that can give you money consistently. If you fall into the group where you cannot get you into the senior management, then yes you need your salary as a form of fund to get more money. There are many possible business opportunities that can give you that.
Property
Property remains a main area that has proven over time that can bring more other income. A lot of people prefers to speculate property. That is not right if you are talking investment as it should be long term. A period of 5 years seem ok as it will have enough appreciation and also able to cover for legal fees and bank penalty for early settlement. Treat your property like a Fixed Deposit rather than as a dream home. Most people lose out in property because of 2 reasons:
1) They do too much renovation and hence trapping themselves into the need to sell the house at higher price.
2) They take too much risk by buying a property that has yet to grow rather than one property that is in an upward trend. I know you make less when you buy second hand, but think of it differently – you are outsourcing your risks to the 1st buyer
Business
In a country where fixed deposit rate is around 3.7%, we are all ears when we hear anything that can possible give us 5% interest per annum. While that may sound interesting, we do not have the same interest for a business venture that give us 5% return per year! Imagine you see a nice food stall in a coffee shop that is doing decent business. But for some reasons, this guy is getting old and is willing to sell his stall for RM30,000. If the profit is going to be RM300 per month, you probably is not interested. That is actually 12% interest per annum! The biggest trap that anyone could get into is trying to set up a NEW one. No, we do not have the skills and we do not have the time and the risk is too high. We have to look for EXISTING business that is already generating a steady income.
Direct selling
Multilevel, pyramid whatever you call it…it can also be a good business. But most people will tell you ‘I have been there and done that. It doesn’t work’. Sure it won’t if you are joining when the business is already at a stable level. To be filthy rich in such endeavors, you must START early. It’s usually the 1st to 3rd generation that makes tons of money, not when you are at 15th generation. You may want to invest a few potential direct selling that is at an early stage and work on it.
There are always more ways how we can make more ‘other income’. The basic principles remain:
If your current salary cannot get you to senior management that open up to profit sharing, steep bonuses and stock options, you need to find other income.
Happy exploring and Happy New Year!
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