Experiencing “Financial Joy”!

With more free time on my hands these days, I have been doing a bit more reading than usual. During one of my visits to the Woodlands Regional Library, I was on the prowl for some personal finance books, even though I have already read the bulk of them that’s available.

To be honest, sometimes I think that I have reached a stage where reading personal finance books doesn’t really add to my knowledge. It doesn’t help that most of them are pretty similar. But I still do it occasionally, especially when I need some reinforcement on the merits of frugality, saving or basic investing.  😛

I was lucky during that visit as Seah Seah’s relatively new title “Financial Joy” caught my eye! I am not really familiar with him even though this was already his third book. Removing it from the book shelf, I spent the next couple of hours digesting its simple-to-read contents.

I enjoyed it and even though it’s basically a beginner’s guide to financial freedom in Singapore (with many similarities to other basic personal finance guides), I thought it’s definitely worth sharing, especially these points Sean illustrated in this book:

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Concept of Financial Maturity

Sean believes that most people can be grouped into four financial maturity levels. A person struggling with credit card debts can be termed a Financial Baby, another living paycheck to paycheck a Financial Teenager. Financial Young Adults are generally financially responsible and save a little whereas Financial Adults will always save and invest at least 10% of their income.

I find this pretty interesting and feel that there should be an additional category since even adults can be reckless at times. Maybe Financial Old Folks could be used to describe the even wiser people who save and invest >30% of their incomes and are planning on an early semi-retirement.  😛

View on insurance

With a child diagnosed with leukemia, Sean has personally benefited from having a comprehensive insurance plan  and understands that the primary purposes of having insurance is to protect against the possible loss of future income or incurring huge expenses.

I share the same view (here and here) and I am delighted that his planner Yun Fa has also reiterated that “as a rule of thumb, a medical (or hospitalisation) policy is a must.”

Emphasis on reducing expenses to achieve financial freedom

If my monthly expenditure is $5,000 and my passive income is $1,000 per month, according to Sean, I would have a financial freedom gap of $4,000. It seems that if I manage to reduce my expenses by another $800, the gap would reduce to $3,200.

However, it’s better than that! The $800 saved adds up to $9,600 a year and if one can get a 10% return, this adds $80 of passive income the next year. Reducing the financial freedom gap to $3,120 would definitely help to speed up the path to financial freedom!

Importance of planning

A mantra that is a personal favourite of mine is this:

Fail to plan = Plan to fail

But even I didn’t do something similar to what Sean and his wife did back in 1999. They were junior college students then and wrote down their 7 year plan (!) on a piece of paper. And amazingly when they stumbled onto this paper in 2007, they realised that they were mostly on track!

Sean believes that drawing future timelines and planning for goals “subconsciously imprint these milestones that we set for ourselves”. And I definitely agree that such an exercise can only help us in achieving these dreams for our future!

Life’s more than hoarding money

In the end, what we really want is not money. Satisfaction, gratitude, a life of meaning and happiness are just some of those things that we really hope would happen after getting our hands on enough money. But it doesn’t really work that way as Sean has encountered many people who are financially free but utterly miserable.

Even though one is financially free when passive income > expenses, I can understand that most people would want some margin. But when one’s passive income is more than double that of the expenses, the person is in a good position to give more to help the less fortunate.

Only when one is generous enough to give away a portion of his money is he truly financially free. Otherwise, I think he is just trapped by his money.

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Instead of worrying about money, I hope you can attain financial joy like what Sean has described in his book. I saw this book retailing at Kinokuniya so you should be able to get a copy there. But as usual, you can borrow it from the library like me. Will be returning the book soon.  🙂

And you can find out more about Sean Seah on his website: www.seanseahsg.com