How Global Financial Crisis Changed My Mentality About Financial Independence (FIVE Key Themes)

When I started my first job out from the National Service (NS) in 2006/2007 and one year later, it was the Global Financial Crisis. 

As a junior staff in my early 20s, I was not impacted by the crisis when my company started their "restructuring" exercise, so this "restructuring" actually just meant "cost cutting" exercise, nothing else. 

Every time, there was an email announcement of a certain headcount reduction in Singapore office, I will look around me and realized that some of my more senior colleagues that were in their mid to late 30s were  nowhere to be seen so I knew that they were impacted. 

Names of the staffs were usually announced after the official email notification to allow the impacted staff to pack and leave the office "quietly" before everyone knew it was them.

I still remembered vividly seeing a manager in my department weeping after coming out from the ladies toilet carrying a box of her own belongings. 

I was supposed to be in the meeting room at that point of time but I went out to grab a coffee and just so happened to see her. We exchanged "eyes" signal and she's gone, no goodbye nothing.

To me, it was definitely not a positive way to say "goodbye". 

This whole experience for a young chap in his early 20s was pretty heavy and overwhelming. The questions of "what if it was me?", "will I be able to take it?" and "will I cry?" kept floating in my mind.

From that moment, I knew 10 to 20 years down the road, it will be my turn to say "goodbye" so I got to plan for my "final day" both emotionally and financially.

I kept it really simple and just focused on FIVE key themes to ensure I am healthy financially and mentally.

Debt

No matter how many people tell me about what low interest rate of housing loan, I must take full advantage, stretch the loan to maximum tenure and pay it slowly etc. I am never a believer of having debt.

Mentally I felt that I am indebted and this like a heavy piece of rock on my shoulder. 

I kept having questions like "what happen I cannot pay the mortgage loan" - Would the creditor take away my house? Then how about my family?

For my HDB mortgage, I stretched the loan to the maximum but decided to pay it down with my wife within 5 years. It was a humble 4 room BTO HDB which we could afford and still eligible when we are in our mid-20s.

We bought our first car which was a (resale) old car when our first child was born and I choose to pay it in full as well in cash. This applied to our second car when I traded in my first car and paid it in full as well. Obviously, the car agent wasn't too happy to hear about my full payments as they cannot earn a cut of the bank commission if I take up a car loan.

So in my life till now, I only have debt for 5 years which was my HDB loan. 

I truly enjoyed being debt-free without any fear that my house will be "taken" away by the creditor even if I am being retrenched.

Cash Savings

Honestly, I do not believed in hoarding cash as the bank interest rate was really low.

But after going through crisis after crisis whether it is economy crisis or personal/family crisis, it taught me that we need to hoard cash because when we need cash, it will cost us ALOT more!

Do you know that a Chinese funeral can cost you between 30k to 50k in total and must be paid in CASH? I didn't know until one of my parent passed away. 

Luckily I had 50k in Singapore Savings Bond and it was near month end, I managed to redeem it before I settle the funeral expenses the following month.

I was lucky as I usually keep less than 20k cash and have most of it invested in the stock market. Maybe this was planned by Guanyinma (the god I prayed to) for me to have sufficient cash to pay off the funeral without any worries. 

It is not that I cannot borrow from my relative if I really cannot fork our the money but since I personally do not like debt, I also do not like to borrow from anyone else.

The question is how much do we need to be efficient and most importantly, a "peace of mind". 

To me a combined liquid cash savings of between 50k to 100k at any one point of time will provide me and my wife with a complete "peace of mind" at this stage of life.

CPF (Pension Fund For Retirement)

I didn't know the importance until in my early 30s when I read up articles on the concepts on 1M65 and from the generous sharing from my first online "shifu" AK from ASSI blog on the benefits of CPF for retirement.

(https://dollarsandsense.sg/1-million-65-using-cpf-heres-math-behind-1m65-concept/) 

I started voluntarily contributing to my CPF actively in 2016 (nearly 10 years since I started working) when I was 33 years of age and I wished it was earlier, this means I wasted 10 years to compound my CPF balance. 

Well, better late than never right. I am on track to hit the Full Retirement Sum (FRS) for 2020 at a ripe age of 37.

I will then be able to let my CPF compound for the next 28 years until I reach 65 years old assuming I don't leave this world before that.

I know when I retire at age 65, there will be at least one stream of lifelong payout (CPF LIFE) waiting for me. Peace of mind.

https://singaporeturtleinvestor.blogspot.com/2020/01/boring-turtle-history-of-cash-top-up.html

Insurance

I bought my first insurance at age 23 when I started working and along the way, I have bought comprehensive protection coverage for myself and my family members including my parents. 

I am a person that believed in buy term invest the rest concept so no prize for guessing what type of coverage I am having now.

The key here is buy as early as possible when you are healthy else you will face lots of issues down the road when you need the coverage. 

With insurance as a hedge for my accumulated wealth and not allow illnesses to destroy what I had built up over the years. 

Life Long Learning

Never stop learning throughout your life. I did part time degree while I am working and completed it in four painful years. Imagine you have to go to attend night classes after you knock off at work and have to walk and take your dinner (usually a burger from MacD) as it is faster than sitting down and eat.

The Bachelor Degree was a hard earned one but it was essential in my industry, a basic requirement in modern days. I finally completed the studies at age 27.

Now at age 37, I am once again restarted my journey of higher education, a 15 months part time Masters of Business Administration (MBA) program from my Alma mater and to be completed by age 38, year 2021. 

I used the last 10 years between age 27 to 37 to focus on my career, my parents and build my own family. Learning how to be a professional, a responsible son, a husband and a father to two children. 

Never stop learning whether professionally or personally at any point of time as learning keeps your brain active and knowledge generates wealth.

The 5 key themes formed the foundation towards achieving financial independence.  

I think I will feel sad (or "weep") if I am being retrenched, not because I will not be able to survive financially but more of I will miss my team mates and my kind boss. 

One thing for sure, I am definitely more well prepared than I was during GFC, 2008 because I planned for it since then.

Have a Plan, Execute it !!!