Achieving financial wellness/independence
Getting out of needing and wanting is to achieve financial freedom and no worries.
BY: Geoffrey Kung
From the news media, there are more and more courses advertised to teach one to ‘get rich’ quick. They promise to show one how to become millionaires or obtain huge returns on their investments. What they don’t promise or teach is how to sustain the millions or the high returns. So some lucky ones can become rich under favourable conditions and for a certain period. But the really rich people or businesses know it is easier to gain riches but much harder to keep them. Chinese has this saying that family wealth doesn’t last more than three generations.
There are also many seminars and books that will teach you to be ‘financially independent’. Essentially, these books or seminars teach one to generate an alternative income source so one doesn’t depend on his/her job solely for income. When this alternative income stream can be ‘passive’ and becomes sustainable, then one achieves ‘financial independence’. This means financially one doesn’t need to work actively to have the financial means to live life.
All these teaching works on a ‘relative’ basis. One is rich because when compared to others, he/she is rich. Just like the average Singaporean with S$500,000 is rich when compared to the average person in India because the Singaporean’s net worth is equivalent to multi-millions in rupees. A ‘relative’ rich person will have to keep growing his/her riches because one’s wealth is measured against others. When you compare yourself with the ‘super rich’, you will never have enough and you will need more to attain what you consider real wealth. It is for this reason that most millionaires are in hot pursuit trying to make even more money. Even when one with millions realises this and stops trying to ‘have more’, the millionaire still will have fears of losing the comparative riches because in an inflationary economy, not to increase, can be tantamount to decrease or demise of wealth.
As long as one is still comparing or competing, one cannot achieve ‘financial freedom’ defined as freedom from financial worries. An everyday illustration will be a millionaire with asset either in property or shares will have to keep monitoring the property or stock market respectively with the fear of losing his/her investments if and when the relevant markets turn against him/her.
There are many financial planners or advisors who can advise or help lessen such worries. They teach or help implement diversification (not putting all the eggs in same basket), asset allocations or dollar averaging (spreading over different time periods), etc, strategies to minimise the risk of loss. Because every person has a very different financial profile from others, each advice or financial plan needs to be individually tailored to implement and work. The process actually forces the ‘haves’ to take more prudent steps over their assets. The result is instead of less worries, the millionaire will have more work to do and in the course of it, more worries.
Therefore for someone to be truly ‘financially free’ is to get out of the loop of needing or wanting more. The source of the alternative income or passive income must be sustainable and can come from a third-party. The most common example is to have a bank account that pays sufficient interest periodically without erosion of capital. For those second-generation millionaires, the worries and risks belong to the first-generation. They have in some ways ‘financial freedom’ or ‘financial freedom through ignorance’. Financial independence and financial freedom are stepping-stones to financial wellness. A common and easy step to take towards financial wellness is to invest in a few (eliminate counter-party default worries) annuities (setting up a lifetime of passive income).
In summary, there are many books and courses to teach people to get rich. There are relatively less books and courses that teach people to be ‘financially independent’. And even less books or seminars to teach ‘financial freedom’ because most cases these are to be individually charted. And even less public or general information on how to achieve ‘financial wellness’ which can combine ‘financial independence’ and ‘financial freedom’ together and more.
Actually, this should not be because the community is part and parcel of wellness. Imagine growing intellectually without learning and sharing thoughts and information with others. Likewise, it is difficult to be attain emotional wellness without sharing or being open to sharing with others. So is with financial wellness – without helping one another, it is impossible to be attain financial wellness. We learn from each other, especially from close family members. If methods and strategies to achieve ‘financial wellness’ are not readily available, then the only conclusion that one can gather is not many have actually achieved ‘financial wellness’, or teaching ‘financial wellness’ does not make one money.
Geoffrey Kung, 66, is a POSB Active Ager Award Winner for financial wellness and believes in sharing the way to achieve ‘financial wellness’. He is also a founder of a cooperative called REVERSE (Re-Employ Valuable Experienced Retirees Serving Elders).