Early Retirement

ASK anyone who has ever bought a lottery ticket what he would do if he won,and the reply will invariably be: "Quit my job." This leads me to believe that many of us seek fortune not because we want a second home or a third car, but rather, because we seek an end to the chore of our daily work routine.

So, for those who are seeking to retire comfortably, early, here are 10 tips:

1 Don't buy a car

Why, oh why, would you buy a car in Singapore? A vehicle, unlike property, never appreciates in value, petrol prices are astronomical, and parking is often a waste of time and money. Besides, Singapore has a world-class public transport system.

2 Rent to live, Buy to invest

With property prices hitting the roof and interest rates soaring steadily, buying a home now has never been riskier. Rent the house you intend to live in and only buy property when the economy is mired in recession. Surround yourself with liquidity when the going is good, because cash truly is king when going gets tough.

3 Don't drink or smoke

There's a perfectly good reason for all those heavy duties on alcohol and tobacco ?they're bad for you. Liver cirrhosis and lung cancer are not pleasurable ?and it's not cheap to treat them. Quit now.

4 Don't gamble

It may not seem like much every time you place a wager. But consider this: Instead of blowing $500 a month on gambling, saving that amount in your CPF Special Account at 4 per cent per annum would yield a total of $350,000 at the end of 30 years.

5 Credit cards

With interest rates of 24 per cent per annum, credit cards spell disaster when they fall into the wrong hands. If you use a credit card because of the perks and privileges, make sure you can afford to pay off the debt in full. If you find yourself only paying the "minimum sum", you're in trouble ?so switch to using a debit card or Nets.

6 Own a business

If you have the right idea, relevant expertise and helpful partners, 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.

7 Avoid unit trusts

Unit trusts have always marketed themselves as these glorious bastions of out-performance, 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.

8 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 per cent per annum compounded annually, a 30-year policy will cost you twice as much as a 20-year one, all else being equal. This means that buying an insurance policy 10 years 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, let's face it, kids really are financial black holes. Consolidate all your expenses, from hospital bills to tertiary education, and you realise 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 young ones.

10 Live simply

Perhaps the most crucial point. Michael Jackson was worth over US$1 billion ($1.5 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 a terrible master, but the mastery of money makes many things possible. Even early retirement.

The writer is Charles Tan, currently studying MSc Finance and Economics at the London
School of Economics and Political Science

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