2006 & 2007 Greatest Accomplishment

Let’s see what I did well in the past and screwed up in the past as well:

What I Did Well

• I successfully ran out of my comfort zone and joined a new company. I learned a lot of things out of it. My learning curve shoots up exponentially. Most importantly, what I learned build up my competent area in my expertise.

• I successfully maintained my yearly income raise at 7% rate or higher in order for me to achieve financial freedom at 40. So far, this holds true in these 7 years of my working experience.

• I managed to move my parents out of their comfort zone too. They are staying in East Malaysia and I’m in the West Malaysia. I meet them once a year (sometimes more than that) and this is not a solution in long term. They have sold their house eventually and officially will move to West Malaysia in May 2008. They are going to stay at this house.

• I managed to start 2 blogs(i.e. software blog and financial blog) to generate income out of it. I set a very minimum goal to get a Google’s check by end of this year and I finally able to do it by 2007. This is also one of my second incomes. Although the earning is not as many as I wish, it is a good start and able to cover the cost I registered a domain which I don't use. :D Most importantly, I use blogging to help me to manage my thoughts and goals. I can also share what I learn to all of you.

What I Screwed Up

• I failed to survive in a new company. Perhaps I stay in the comfort zone for too long. Although I learned a lot of things in this new company and I realized that I cannot perform as good as in my ex-company for several reasons. When I know I can’t perform as what I expected, it translates to my next focal review which will not meet my 7% target. I rejoined my ex-company in different department with the second time of salary raise to maintain the 7% rate.

• I failed to start a business. I was once together with my wife and few colleagues planned to start a “comic bookstore” business. We did a lot of researches and we financially did not go for it. Starting a business is not as easy as I thought. It is not only time consuming but it requires a huge amount of capital. Maintaining a good relationship with your business partners is also another problem and needs to be managed well. For this experience, I realized that I don’t born naturally with business (not sure about internet business yet) and I don’t do well in sales too.

• I discontinued my second income on giving 1-on-1 tuition service. I stopped doing this because I wanted to put more focus on the new job which I failed eventually also. However, what I did is conflict with my personal financial goal which is to build my second income. Then, why I want to stop? I shouldn’t have discontinued my second income.

• I failed to exercise at least once in a week. I think in average I exercise once to twice a month. My target is once in a week only. Although I understand the importance of health, but I ignore it like the rest of you. This is my bad. Perhaps I should remind myself often that we need health to build wealth.

• I failed to track my financial status monthly. 2 years ago my wife took an initiative to track our finance daily. So, I told her tracking it daily is very hard. Sooner or later you’re going to stop doing it. Guess what, I’m right. Few months later she gave up and I took over her job. I have a brilliant idea to track it monthly instead by monitoring our bank account expenses. I have been doing this successfully until the last September 2007 I stopped updating it monthly until today. Reason is "Lazy" and "Busy" - a very popular reasons. Perhaps I should just change it to yearly instead of monthly or I can set a check point at every six months.

This is what I did well and screwed up in past 2 years. I hope I’m not a loser because I have 5 items in my screwed-up list as compared to 4 items in my success list. The screwed-up list will be used to help me to define my 2008 and 2009 goals.

Time flies! Whatever, I'm here to wish you HAPPY NEW YEAR 2008!

10 Years Retirement Plan Is Possible

Most of my friends feel ridiculous when I told them I want to retire in 10 years. They even laugh at me and they think it is impossible. Is it really true? Let’s me prove it.

My monthly income is $5,000 and yearly will be $5,000 X 12 = $60,000. My monthly expense is $3,000 and $36,000 in a year.

Let’s do a simple math here how much I will spend in 10 years with the 4.5 % inflation rate.

Current Expenses = Last Year Expense + (Last Year Expense X 4.5%)

1. $36,000 + $36,000 X 4.5% = $37,620
2. $37,620 + $37,620 X 4.5%= $39,313
3. $39,313 + $39,313 X 4.5% = $41,082
4. $41,082 + $41,082 X 4.5% = $42,931
5. $42,931 + $42,931 X 4.5% = $44,862
6. $44,862 + $44,862 X 4.5%= $46,881
7. $46,881 + $46,881 X 4.5%= $48,991
8. $48,991 + $48,991 X 4.5% = $51,195
9. $51,195 + $51,195 X 4.5%= $53,499
10. $53,499 + $53,499 X 4.5%= $55,906

In 10 years, my monthly expenses now become $55,906 which is $4,659 monthly. It is 155% increase from $3000, Wow! No wonder the compound interest is so powerful.

To be financially independent (assuming the investment return is 8%), I need to have total of $55,906 / 8% = $698,836 investment. Wow! So much! That means in 10 years time if I want to be financial freedom, I must have at least $698,836 in cash for investment. Is that possible? Let’s do another simple math again. Now, I want to calculate how much cash I have in 10 years.

Total Current Cash =
Last Year Cash Balance + Current Year Income
– Current Year Expenses + Current Year Investment Return

Total Current Cash =
Last Year Cash Balance + (Last Year Income + Last Year Income X 7%)
– Current Year Expenses + (Last Year Cash Balance X 8%)

I have $120,000 cash now. This is how much I have in 10 years time:

1. $120,000 + ($60,000 + $60,000 X 7% = $64,200)
– $37,620 + $120,000 X 8% = $156,180
2. $156,180 + ($64,200 + $64,200 X 7 % = $68,694)
– $39,313 + $156,180 X 8% = $198,056
…
…
[I lazy to write here, actually you can use the MS Excel to calculate all these. I skip to the last year]
…

10. $719,278 + ($110,308 + $110,308 X 7 % = $118,030)
– $55,907 + $719,278 X 8% = $838,942

Wow! I will have $838,942 in 10 years. Assuming still 8% return, I will have $67,115 income without working anymore. Minus out my expenses $55,906, I still have extra $11,209 which means $934 monthly. This is what we all call FINANCIAL FREEDOM!

To achieve financial freedom in 10 years, please note the following conditions must hold true:

1. Inflation rate is less or equal to 4.5%
2. My Income continue to grow with at least 7%
3. My Investments return have at least 8%
4. No major unplanned expenses (E.g. Medical fees for parents)

To make it simple, I don’t include the car and housing loan into this calculation. My spouse will cover the car and housing loan within these 5 years anyway. The income excludes my spouse income as well. Also, I almost forgot the education fees for my children. Let’s omit that first for simplicity and assuming my spouse will settle that as well. Yes, she can settle that in fact.

One more last very important thing is the medical fees for parents. This is the most worry thing that I may fail to retire in 10 years time. I haven’t really got a chance to attack this yet. Anyway, 10 years retirement plan is my stretch goal. 15 years retirement plan is my measure of success. I still have 5 years tolerance for anything that out my plan. Having said that, even though after I become financially independent, I’m sure I will still continue working and generate extra income but of course in a more relax way.

So, 10 years retirement plan is possible for me. Please don’t laugh at me, this is no kidding. You can't do it doesn't mean I can't too. What about you? Have you ever thought about it? Do you know you can actually retire in 10 years as well?

p/s: Btw, this is just my rough estimation only. Detail exact and supporting data it is all in my excel spreadsheet.

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