Tips to Early Retirement (Part 2)

This is a continuation of the previous post “Tips to Early Retirement“

6) OWN A BUSINESS

You could start a business if you have the right idea, relevant expertise and helpful partners, of cos that’s for traditional business. Nowadays, it’s not that difficult to start an internet business as it requires low or no cost.

No other investment can match the kind of returns that owning a business can give you. If you don’t have the inspiration to be an entrepreneur, then buy a piece of an existing company from the stock market, but that requires u to have a large sum of money and some expertise in picking stocks.

7) AVOID UNIT TRUSTS

Unit trusts have always marketed themselves as these glorious bastions of out-performances, run by dedicated professionals. But a Wall Street Journal study showed that, on average, professional fund managers are not any better at stock picking than chimpanzees throwing darts at a newspaper.

After taking sales charges, management fees and so on into account, you are almost always better off buying a benchmark index-tracking Exchange-Traded Funds, or ETFs.

DON’T BUY INSURANCE UNLESS YOU REALLY NEED IT

Insurance is an undoubtedly useful instrument. But think carefully again when your insurance agent starts saying that you should start early to “lock in low premiums” (because they will only get higher as you age).

The facts: At 5% p.a. compounded annually, a 30-yr policy will cost you twice as much as a 20-yr one, all else being equal. This means that buying an insurance policy 10 yrs earlier than necessary will cost you dearly, even if you do pay marginally lower premiums annually.

9) HAVE THREE OR MORE? YOU CAN’T AFFORD IT!

I adore children but kids are really financial black holes. Consolidate all your expenses, from hospital bills to tertiary education, and you realize that the baby bonus does little to alleviate the epic costs of raising a child. And parents regularly pass up promotions and raises for the sake of their children.

10) LIVE SIMPLY

Perhaps the most important and crucial point. Michael Jackson was worth over US$1 billion at his zenith, but the spendthrift frittered his fortune because of his decadent lifestyle. Remember that income is only half of the wealth equation. A lack of fiscal discipline can still spell financial ruin.

Migration is also an option, but plan carefully, because amenities like healthcare are appallingly inefficient and/or expensive in other countries.

Money may be terrible master, but the mastery of money makes many things possible. Even early retirement.