Here is an unequivocal statement – Everyone needs a Financial Map that they are building towards, so that they can live off the investment returns from that nest egg. This is a phase that we complete in life, to finance activities that we are passionate in or to ensure that our families have money if something happens to us.

A graduate couple in Singapore can easily aim towards a $3million liquid asset financial nest egg. This is a figure that we calculated on an average basis, and you might need more or less. It is usually best to choose your own right amount that you need.

It has to be an amount and a lifestyle that is exciting enough for you to look forward to. It should include how you spend as well as how you can finance yourself to live your passion to contribute to the world.

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If you think $3 million is impossible, you really have to sign up for the workshop. If in the first day, we cannot convince you that $3million is really possible without any sleight of hand tricks or hard work beyond 5 minutes a day – you get your full fees back, every single cent.

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The Finance Your Passion Map works for any amount that you wish to build towards. To work out what is the right amount. Read on the article.

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There are only 3 simple principles to choosing the amount that you need for your financial nest.

1) The Lifestyle you want to have.
2) The number of years you have to reach that financial nest target.
3) The Investment returns/ yield you can get from your financial nest.

Principle 1 – The lifestyle you want to lead

Firstly, I do not agree with having a lower expenditure lifestyle at retirement. Have a lifestyle that you can look forward to, not a lifestyle that you see yourself tightening your pockets.

Imagine this, you work so hard now, and your financial nest plan was designed to lead you to living a meagre life after you retire – what is the chance that you would not buy that Mercedes right now? I bet you would spend now, since the future looks pretty bleak anyway.

So, the first step that you want to do right now is to discover your passion in life - That is the driver for your retirement nest egg. Is there something you would love to do at 55? Do you want to volunteer all week at a children’s home and then spend the weekend on a fishing trip? How much would a lifestyle like that cost right now?

No one is inspired by a financial dollar number, it is the lifestyle that matters. Focus on the lifestyle and you would be inspired to save and invest prudently.

Take out your notepad and your calculator – call up some fishing tour companies and get a real figure out now.

Take this figure together with your normal meals that you enjoy right now and multiply the whole sum by 3.

For simplicity sake, we will say it costs $60,000 a year for a couple to lead such a lifestyle today (remember to minus off children’s education and housing costs because by that age, all these would be settled)

Principle 2 – The number of years available for your Financial Nest Egg to materialise

Most people reading this would be starting off their careers, so I assume 20 years would be an appropriate number.

However, some people want it much quicker, because they really cannot stand their job and they want to start teaching music (or anything you like!) really soon. Great, then you might want a shorter time frame. It is your choice.

Principle 3 – The Investment Yield you can expect for your Financial Nest

This is the most important principle in your planning because it is the one that you have generally the least amount of control in.

You can spend less to pursue your dreams earlier, or you can work hard to build your financial nest egg faster, but to increase yield is almost detrimental if you do not have professional training.

The simple answer is to base your returns on 6% of your financial nest egg. So, here’s your calculation:

$60,000 x 3 (the multiplying factor in Principle 1) = 6% of your financial nest egg.

So, you are aiming towards a financial nest egg of $3 million dollars.

How did we get the expected Investment Yield as 6%?

Any amount below 6% is extremely low – you can easily find investment vehicles that practically guarantee those returns. As a simple gauge if anyone can guarantee those returns, the investment firm has to be making more than that to tide over volatile periods. There are Prime Notes, land rental yield, certificates of deposits that all come close to 6% return. There is a threshold that crosses between risk and reward to ignorance and insecurity.

The safest investment options are usually fixed deposits in your local banks. This is of course a major misconception because you can ask the Malaysians what happened to their currency overnight in 1998, when they woke up to find the next day that they had only 1/3 the spending power. A Dell computer suddenly became three times as expensive.

If you think that the Malaysians are a backward country, which they are not, you can look at the Americans. Over a span of two years, a holiday trip to London has almost doubled in U.S. dollars.

There is also the other thing about a bank collapse, which most of the time does not guarantee your bank account. It requires a more in-depth discussion but basically many banks do not protect your fixed deposits from a systematic bank failure.

So, any expectation of returns over 20 greatly below 6% per year is too low and you are merely paying for a false sense of security.

What about Yields above 6%? – In reality, you can comfortably get yields of 10% – 15% every year, if you pick a fund manager with a good track record and you think in terms of decades not days.

Most people- weekend investors- think of their returns in terms of weeks. “How is my portfolio going this week?” That is a fallacious line of thinking and would only do harm to your account and waste your time.

If you have picked a good fund manager, you do not want to constantly second guess the professional who is doing his job 24/7.

The S&P 500 averages 10% per annum if you held your position for a decade. That does not even require brains.

It would surprise many people that you can easily find fund managers who have ten year track records of doubling their portfolios (about 12% p.a.) every five years. If you placed $10,000 with them 5 years ago, it would be $20,000 now.

So, why not use 12% as the benchmark? Well, you want to keep some in reserves, because of the unpredictability of returns within a one year period of time. Furthermore, the extra 6% would allow your whole financial nest egg to continue growing through time. You would probably get even richer while living off your financial nest egg.

Bringing it all together

Now that you have your target of $3million across 20 years, you can start to work on how much you need to save, learn to be a master of your spending patterns and acquire the skills of selecting a good fund manager.

In addition to saving and investing, you want to learn the skill of Precise Spending™, the process teaches you how to increase satisfaction from your expenditure and yet reduce the spending amount. You will enjoy the journey to building your financial freedom.

Total financial freedom begins with a map, followed by the right tools to make it happen. It does not require you to be a full-time investor, just like you do not need to be a gym instructor to be fit.

Join our two day workshop to plan your financial nest egg and learn all the core skills that you would need to set the process in motion. After that, it only takes once a month to review and ensure the process is in place.

Take your free time to discover your own passion, be it music, art, community service, then create a plan for your financial nest and leave it to the professionals to do their job.

Sign up for our workshop now, or sign up for our free newsletter to ask us questions!

To Financing Your Passion!

Winston