Things I learn from 1M65 Movement

JC Project Freedom 1M65

I was invited by Alvin Yeo who runs Credence Advisor to attend a talk by Loo Cheng Chuan who is the founder of 1M65 movement. A bit of his background, he graduated in 1997, he bought 1 resale flat while waiting for his BTO. The Asian Financial Crisis came and it was a double whammy for him. He sold his resale flat in panic and incurred a loss of SGD 100 k at age 24 years old. His father saved him by lending Loo his hard earn savings and it was a very painful lesson learnt for Loo.

The key sharing is harnessing the power of Compounding. He who understands it, earns it. He who doesn’t, pays it.

Assume average PMET working in Singapore with average salary couples and they both contribute SGD 100,000 each to their CPF Special Account, let it compound 5% p.a. (as of 2019) for next 35 years, they will have SGD 1 million when they retire. This will form the couple’s financial safety net. Besides this, the couple need to have insurance to cover Death, Critical Illness and Total Permanent Disability. Thereafter, the couple need to save and invest their money into equities.

Figure 1 SGD 100k compound 5% in CPF Special Account

His next key strategy is to invest his monies during crisis which will reap the greatest return. I can relate to this as I have experienced this during the various crisis such as Greece – Europe financial crisis in 2010, Japan Fukushima Nuclear leak in 2012 and China stock crisis in 2015. This is possible when you have saved up a sum of money or you have strong free cash flow at the end of every month. Then you can fearlessly keep averaging down when the stocks’ price keeps dropping. You need to be gutsy as well and able to sleep during times like this.

There is another aspect which requires your other half to buy in. The couple needs to agree to “Be Rich and not to look Rich”. This is a concept adopted from The Millionaire Next Door. The crux is to be frugal, save and invest while you are young and delay gratification. Let time do its magic through compounding effect.

A $1 today, compound 4% over 30 years will become $3.24
$1 today, compound 5% over 30 years will become $4.32
$1 today, compound 6% over 30 years will become $5.74

You get the idea.

I spoke to Mr Loo’s wife Ms Lee who sat on the same row as me. I asked her what’s next after achieving SGD 1 m in CPF? She shared something close to my heart, “It gives you freedom to choose. There is an option to continue to work or go into something that you like.” I asked her why not consider buying another house or upgrade to a condo. She replied,” If you take on a debt of say SGD 1.2 m which is price of a suburb condo, you need to pay your interest and principal sum every month, what if you lose your job? Especially when you are in your 40s, we do not want to be stressed up by this.”

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