Have you seen the movie “Slumdog Millionaire”? The movie tells of Jamal Malik, a young man from the slums of Mumbai who appears on the Indian reality television programme similar to “Who Wants to Be a Millionaire?”. He exceeds people's expectations, thereby arousing suspicions of cheating. In the movie, Jamal explains how he knew the answers to each question, because each was linked to a key event in his life. Well, everything happens for a reason – isn’t it true? We hope reading this article will become a key event in your life – one that makes you realize why becoming a millionaire is no longer an option. At some point of time, all of us want to “retire” and be financially independent, so that we can spend time doing what we love without having to worry about money. Depending on your age, “retirement” might sound very far away. But the reality will hit you like a train unless you plan early. Statistics show that majority of population will have to work ALL THEIR LIVES because they do not have enough money to retire! Why didn’t they realize this earlier? It’s because they did not plan for their retirement.

WHY  BECOMING  A  MILLIONAIRE  IS  NO  LONGER  AN  OPTION  

“Slumdog Millionaire”, Danny Boyle (2008)

SO  HOW  MUCH  DO  YOU  REALLY  NEED  TO  RETIRE?   To work out this number, you will need to ask yourself a few basic but important questions:

1. How much are you spending per month on average? This number should be worked out based on your projected living expenses. That means if you plan to get married, you need to make an estimate of your expenses based on the size of the family you plan to have, the type of education you wish to provide for your children etc. You also need to factor in healthcare expenses that increases with age. (You can download our Financial Planning template to give you a better understanding.) 2. When do you plan to retire? “Retiring” means financial independence – it doesn’t mean “too old to do anything”. You can retire at the standard age of 60 or much earlier. Be prepared to work harder on your finances if you want to retire earlier. 3. How long do you plan to live? Go with your gut feel, or refer to the national statistics. Certainly we want to live as long as we have good health and great relationships. 4. Inflation rate. The standard reference for inflation rate in developing countries is 3% per year. You can use this, or find a more specific number based on World Bank’s data. Inflation rate has to be factored in to get an accurate forecast. In our country, for example, what we can buy with $1 in year 1980 – costs about $3 now. That means we need to have a larger amount of money to cover the same expenses we have today.

WHY  BECOMING  A  MILLIONAIRE  IS  NO  LONGER  AN  OPTION  

   

A  CASE  STUDY Let us look at an example of a 35 years old female executive, with the following attributes: 1. Married with 2 children. Planning to send them overseas for studies. 2. Looking forward to retire at 55 years old and live until 80 years old. 3. Needs $10,000 a month or $120,000 a year to maintain her desired lifestyle. 4. Assuming annual inflation rate of 3%.

So this person has to accumulate about $4.3 million in 20 years for her to retire.

Accumulation Years (20) Spending Years (25)

$4.3 million 20 years x 12 months

= $18,000 per month

$10,000 x 25 years x 12 months with 3% annual inflation rate

= $18,000 per month

How much you need to accumulate every month before you retire

How much you need to have upon retirement

Now 35 Retire 55 R.I.P. 80

What about you? How much do you need to accumulate each month for retirement? (Use our Retirement Calculator now to find out whether you are on track to retire according to your plan.) So the reality is that becoming a millionaire is a necessity and no longer a luxury for us.  

WHY  BECOMING  A  MILLIONAIRE  IS  NO  LONGER  AN  OPTION  

WHAT  IS  THE  PROBLEM  THEN?  Majority of the population find that they cannot save enough or grow their money fast enough to reach their retirement goal.  

WHAT  IS  THE  SOLUTION?  1. Cut spending to save more. 2. Get a higher paying job.

Find ways to improve yourself and climb your current ladder, or learn new skills to move to a better paying career. Check out the research on highest paying job in Singapore and Malaysia. Most importantly, you must love what you do. Forcing yourself into a career just for the money will not bring you very far.

3. Grow your money. You must have the ability to make your money grow by 5-6% a year. This is to cover the rising inflation and to ensure substantial progress towards your retirement goal. Do you have the ability to generate a good return from the money you have? In the next article – we will look into the different investment vehicles available in the market; what they are, along with their upsides and downsides.  

WHY  BECOMING  A  MILLIONAIRE  IS  NO  LONGER  AN  OPTION