One of our advisers saw this Singapore Financial Freedom index, and wanted to find out whether I am financially free, the Singapore way.
Here is the Singaporean Financial Freedom index (unfortunately, I have no idea who created this and so I cannot give the proper credit for this great work)
You know, I felt scared when I looked at this index compared to my reknown 11 Stages of Wealth.
I cannot connect with it.
- I have always asked my friends to pay me back the exact amount. Only in recent years did I just ask for round numbers (or not pay me back.)
- I never ordered a full chicken rice set. WTF is a full set? Do you order Xiao Bai Cai together with the chicken?
- Don’t most phones come with a stock charging cable? Or do they mean usually you would need to get an accessory but we will often get the crappy Qoo10, Lazada, Shopee version?
- I can afford to forget to tap out, but… if I forget to tap out… what should I do to remedy the situation? Cannot do much right?
- How much does Bubble Tea topping cost?
- I just buy whatever fruits required if they are available. For a long time, I did not realize whether they are off-peak or not
- I am the rare few who seldom use Spotify or Netflix
- Not an Apple Eco-system person.
- Every time I need to pay for surge pricing, I feel like shit. Surge pricing is always a consideration of financial freedom or not.
- I don’t qualify for GST Vouchers.
- I never ordered fish ever at Cai Png
It made me wonder if most Singaporeans are able to connect their money freedom to these lifestyle spending. It feels like… an older Singaporean will come up with a different version.
You would have to ask someone else because I have no clue.
Good Aspects of the Singaporean Financial Freedom Index
The creator managed to make us focus on the progressive, intangible feeling as we try to get richer.
You can contrast this to my 11 Stages of Wealth.
I created the 11 stages of wealth to show you that it doesn’t mean if you don’t have $1 million, your money is useless.
The more money you accumulate, the more utility money can provide.
Utility can be tangible or something most of you can connect with in real life. Money can also be a utility as a feeling, or something intangible.
For example, if you accumulate 5-years of expenses, you would feel like you have a certain number of years of runway to do something. The duration of runway will depend from person to person.
You might not need to do that “something” eventually (much like you can spend on something but it does not mean you have to spend on it).
You attain freedom because you know you can do it.
Some of you would also use these 11 stages of wealth to assess where you are along the financial independence journey.
My ladder tends to be more focused on doing the right financial things. It also gives some rule-of-thumb, based on my competency, how to know if you have roughly attained a particular stage.
You may realize that if you manage to accumulate 5-years of annual expenses, you don’t really know what good would that money do. The amount of money means different things to different person and I will let you figure that out.
You may also have accumulated wealth assets that can provide you with a cash flow to pay for your current expenses. The math part checks out.
However, you don’t really feel… financially independent.
The beauty of the Singaporean Freedom Index is that you could only progress to a new stage if you FEEL you are rich enough to do it.
For example, I could never clear Level 1 for a long time. Technically, a lot of you would have told me if I for-go a lot of these change, it would not affect me financially, but I never felt comfortable doing that.
It makes you question what good is money if it cannot give you emotional freedom.
If you are able to attain many levels of the Singaporean Financial Freedom Index, you are more balanced then myself because you have attain both the financial freedom but also emotional freedom.
A Better Financial Freedom Index for Older Singaporeans
In a Millenial Money Webinar, I introduced Stewart Butterfield’s three levels of wealth.
Stewart created this messaging company called Slack, which became well-off. Before that, he also created the photo-sharing web portal Flickr, which was bought by Yahoo.
In the past year, Slack got sold to Salesforce, making him even richer.
In an episode of NPR’s How I built this with Guy Raz, Stewart shares a fair bit about his past and his view on what money means to him.
He sees that there are three levels of wealth (54 minute in the episode):
- Level 1. I’m not stressed out about debt: People who no longer have to worry about their credit card debt or student loans.
- Level 2. I don’t care what stuff costs in restaurants: How much you spend on a particular meal isn’t impacted by your finances.
- Level 3. I don’t care what vacation costs: People who don’t care how expensive the hotel is or which flight they go on.
Beyond this, Stewart do not see there is a lot of difference more money will make.
Stewart’s three level of wealth is closer to the Singaporean Financial Freedom index in that it focus more on the emotional side of money than the exact amount.
And I think the categories are generic enough.
Someone could owe $20,000 and not be worried about money while another person would not be able to sleep with so much debt.
You can have $5 million dollars but if you still need to consider the monetary part of vacation considerations, then maybe you are not there yet.
If you are able to reach any of Stewart’s three levels, you attain some serious financial and emotional freedom.
Technically, I think to reach financial and emotional freedom, you will need a combination of
- Having enough money buffers (your wealth needs to be larger than the standard investment returns projection. You need more wealth so that you can buffer if you are unlucky.)
- You need someone sophisticated to you if you have blindspots in your money strategy. Or you will need to figure this out on your own. This will affect how much you could let go not caring about the dollar figures so much.
- Checking off #1 and #2 and flipping the emotional switch inside your head. We have clients who have the wealth and even after we tell them they are OK, it is emotionally difficult for them. We can only flip a switch in their head by explaining they are OK in different ways and hope one of these conversation flip the switch.
If you are able to conquer the Singaporean Financial Freedom index, you have attain some wealth. Not a lot of wealth but it gives you certain levels of freedom to live a sensible life.
It also shows that you been living life like a true, blue Singaporean.
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