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Is Becoming Financially Independent An Impossible Dream For Us?

Credit: Melody Campbell

I believe most of you reading our articles at The Motley Fool Singapore do so because you want to be a better investor.

Each of you would have very different objectives for investing. For some, it might be for their dream car or house. For others, it could be that bucket-list vacation or for your kids’ future educational needs. But whatever your objective might be, I don’t think I’d be wrong to say that you ultimately invest in order to have enough money to not worry about your finances in the future. In other words, you’d like to be financially independent.

But some might say it’s an impossible dream, especially given Singapore’s rising cost of living. Is it really no longer possible for us? Let’s find out.

The road to a Million

Say you still have 30 years to go before retirement. How much do you think you’d need to save each month in order to be a millionaire when you retire? Make a quick guess. $5,000? $7,000?

In fact, the amount is much lesser than you might think: It’s only $500 a month! If you are able to save about S$500 a month, and invest it prudently, achieving a return of 10% a year, you will retire a millionaire after 30 years.

Saving chart

Lest you think a 10% annual return sounds like a pipe dream, here’s some food for thought. Since the start of 1988, the Straits Times Index (SGX: ^STI) has achieved a compounded annualised return of 5.3% per year at its current level of more than 3,300 points. The SPDR STI ETF (SGX: ES3), an exchange-traded fund which tracks the STI, has achieved compounded annual gains of 8.65% between April 2002 (its inception date) and July 2014 after including gains from reinvested dividends.

With the right advice and some discipline, achieving 10% a year, which is just a tad higher than what the SPDR STI ETF has returned over the long-term, might not be all that mystical.

Foolish Summary

So for those of you who are working toward your own financial freedom, we are here to let you know that it is possible. This is why we at The Motley Fool Singapore have created an easy guide for you in your quest to becoming a better investor. The guide, titled 10 Steps to Making a Million Singapore Dollars in the Market, is FREE. Click here now for your copy!

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.