The most important thing you can buy with money

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“Masa itu emas”

It’s an old Malay expression, meaning “Time is Gold” or, more accurately, “Time is Money”.

After all, money can buy you many things. It can buy you stuff to make your environment better… but you only need so much. It can buy you experiences to make you better… but you only need so much. What happens when you have enough stuff and experiences and education to live on?

Then? Then you need Freedom.

And by freedom, I mean time. Time to do what you want. Time to work if you want to and time to pursue things that matter to you. But most importantly, it must be your own time. Unfortunately, I’ve always understood the “time to money equation” as a one way equation. More specifically, I’ve always understood that if I had the Time, I could use it to make more money, but that Time was the one thing I could never buy. Therefore, time was more valuable than money.

It turns out, I was wrong. It turns out that Time is gold, and gold/money can actually buy you time. When I first came across this concept, I couldn’t believe it. I wouldn’t believe it. But unfortunately for me, I understood the math behind it, and the math adds up. Oh me oh my, the curse of those who understand math!

So how does it actually work? We need to backtrack a bit and see why we don’t have our own time first. Let me introduce you to the “Rat Race”.

The Rat Race

I went through 6 years of primary school and 5 years of high school, 1 year of pre-university and 4 years of a university degree, 2 years of Masters and now heading into 3 more years of PhD. Wow… at least 21 years of studying right there. Even for those who begin working after their degree, it’s still 16 years spent just studying. And it’s all supposed to be to get a job. So the first thing everyone does after graduating is to get a job.

…And now that they have a job, after 16 years of studying and living like a student (because they were students), they treat themselves a little. Oh, and they now have to rent an apartment near their workplace. Oh, and of course get a car to drive to work. Oh, and the car should be new, to celebrate their graduation. Oh, and of course they need to eat out for lunch everyday since they’re working.

Before they know it, the wages they get every month are already spent on bills, rent, car payments, petrol, and eating out for lunch everyday. But that’s okay, because they’re still working next month, so no worries, right?

But there’s something they’re forgetting. If every month’s paycheck is used fully to pay every month’s bills and treating themselves, then where are the savings? Where’s the money that they earned? Shouldn’t they be able to keep it?

“A part of the money you earned is yours to keep” – George S. Clason in The Richest Man in Babylon

The idea above is one of those ideas that radically shifted my mindset. There’s only been one other idea that’s been so radical for me in my whole life. After all, I used to think the same as most people do. If I earned it, then of course I keep it! And of course they keep it right? Who would take it away? But it turns out that they don’t own their money. They don’t own any of the money they worked so hard for. That money is owned by the electric company, the water company, the landlord of the rented house, the bank lending money for car payments, the restaurants they visit and the clothes companies they shop at. That money? That money is not theirs to keep.

Before they know it, they’re stuck in the rat race, earning money every month just so they can keep paying off a new car or a new house or new clothes. Moving at this pace, they spend their days working until age 60, always with the stress that if they stopped work for even 6 months, they’d be in huge trouble.

These people do not own their money. And in fact, they don’t even own their time.

So how do you escape the rat race?

The way out

If you look back at the story just now, I’m sure you can see that the person is stuck in his job because of financial reasons. And it’s a great excuse that we’ve continually used. It turns out that the solution to this problem is simple. He should just buy his freedom.

Yes! Buy his freedom, like in the days of old, when slavery used to happen. A slave can always buy his freedom from his master.

Here, the master is the threat of bills always over your head. To buy your freedom is simple then. Just have enough money that you can afford to live without a job. When you have that much, you’re free!

You’re then free to not work, or work if you want. You’re free to pursue your own curiosities or to pursue a life helping others. You’re free to stay home and take care of the kids, or just do some part-time work whenever you want. Whenever YOU want.

But wouldn’t that take a ton of money?

It turns out that money is a subject that a lot of people are interested in. Hahaha. So interested in fact, that they conducted a study which figured out the how much money would be needed to survive indefinitely. And they found out that if you can live off of 4% of your savings every year, and invest your money in the stock market index funds, then even after 30 years you would still have your money!

This study was called the Trinity study. It found that the stock market index (in America) grew on average 7% a year. Assuming that inflation happens at about 3% a year, that leaves 4% for a person to live on without ever touching the original money. So if you can live off 4% a year, then you’re free to choose your own work forever!

With this piece of knowledge in mind, the math becomes simple. If you can live off about RM 40,000 a year or about RM 3,000 per month, then that’s 4% of RM 1 million. Of course, if you’re a person who spends more, then you’re also a better slave who costs more to buy. For a person spending RM 6,000 every month, their freedom costs RM 2 million!

So now we know… the price of your freedom is RM 1 million. Can you afford that?

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