My Biggest Wealth Building Tool Is My Income

One of the biggest lessons I learnt over the past year as I was getting out of debt is that the biggest wealth building tool is my income. It doesn't matter how much I earn. It matters with what I do with it. For many years, I got myself into debt thinking if I bought this and that I can use whatever to generate more money. How silly of me. What happened after many years of overspending is a huge shitload of debt that I had to clear, and whatever income that came in went out to the banks cos I had to pay my principal amount plus interest. I ended up living pay check to pay check, and got myself into deeper trouble with spending more than I earned. I'm sure I "sponsored" one of the bank executive's child to some private school somewhere thanks to my way of spending.

It is very painful living pay check to pay check. I can't buy whatever I want unless I want to get into more debt. I can't consider investing cos I have my bank account is perpetually zero, or more like negative. I can't work on any business ideas because those also need money. I mean I considered starting a business, but there is no way I could finance it. I wasn't going to go into more debt just to get more debt. Eventually I was sick and tired of being sick and tired.

Fast forward a year, and now that I'm debt free and building on my emergency fund, I find myself with a bank account that isn't zero. I'm no longer living pay check to pay check and damn it feels good. This has invigorated me to start considering what I can do to grow my wealth. With no debt to pay, I'm now in control of all my money. This allows me to do whatever I want with it. In many ways, with nothing to pay for besides my essentials, I've practically given myself a raise. So what do I intend to do after I've built up my 6 months emergency fund? Glad you asked.

1. Investments

Because I now have the money to do so, I would like to invest. This is extra cash I can spare and budgeted that I can put aside for investing. I don't need to worry if the market goes down and I lose some. This is money I can put in for the long term. 10 or 20 years. Is it a gamble? Of course it is, but I can detach myself emotionally from the investment because it isn't part of my daily expenses and I have enough. The dividends will then help grow my wealth. I can either put that back into more investments, buying some lego sets (don't judge me), or even save more for retirement.

2. CPF

CPF Board mentioned that there were more than 198,000 top-ups in the first 3 quarters of 2020. For many, the thought that people topping up their CPF is insane. For me, it's a dream I've had for a long time to start doing. Topping up my CPF meant that I could get up to $7,000 of tax relief every year, and not to mention, have the amount in my special account grow at 4% pa for my retirement, beating the current inflation rate by almost double. True, I won't see the money until I am 70 years old, but at least that covers my worries for my later years.

There is something called the Supplementary Retirement Scheme (SRS) which complements the CPF. I don't know much about it and will need to read more about it, but this is something that will be in the works for me down the road. To my understanding, whatever amount I put in will not be taxed until I withdraw. I can use the money to invest and grow it even further. And I am taxed only 50% when I withdraw. Something I'll definitely look into in the near future.

3. Building My Side Hustle

Possibly the most exciting plan for me is to finally work on my side hustle in 2021. Now that I have the money, the possibilities are endless. I've already made plans on what I want to do. With the extra money I have budgeted, I'm now able to start accomplishing my dream of creating this side hustle, which in turn will help generate extra income for me. There'll be no financial stress or worries in building this side hustle. If it works, fantastic. If it fails, I am still taken care of financially. And if it works, the extra income will be budgeted for more investments and whatever I'd like. The cycle never ends, and it all starts with my current income.