This video was published on 24 October 2016 on You Tube by Adam Khoo. I was unable to find the transcript anywhere and had to do it myself. I have posted the transcript here for the public’s learning purposes.
I am Adam Khoo and in this video, I am going to show you how you can be financially free in 5 years or less, even if are an average income earner. And yes, it can be done, I have helped thousands of people to achieve this in the last 12 years. I believed that if you are committed to make this happen, you can achieve the same thing.
So you want to be financially free, the first thing is to define what that really means. Financial freedom is when your passive income is able to exceed your expenses.That is when you are truly free. What is passive income? It is income that you earn without having to sell your time for money actively, which means getting a salary from a job. Passive income is income that you earn from positive cash flow assets, where you money make you money. Whether you wake up in the morning or you don’t, you are still making money. Assets are things like bonds, company stocks, real estate, fixed deposits. This is where you parked your money and income is generated every month, every year.
So, why is it important for you to be financially free? Because when your passive income can exceed your expenses, you are truly free. Every single day, you can choose to do what you love, whether you love dancing, you love fishing, you love teaching. You still work because if you stop working, you can only sit on the beach for so long. You can only go shopping for so long, trust me. You will get bored to death and eventually, you have to get back to work. But the difference now is you do what you love. You work in areas which you are passionate aout, where you make a difference. You don’t have to stress anymore: “I have to work to pay the bills. No, the bills are paid.You work because you are serving a greater purpose.
And the most important thing to me is that when you are financially free, you are truly secure. See, when you get a job and a salary, you do not own your income source. It is your boss that owns your income, and your boss can take it away anytime and replace you and replace me with someone younger, cheaper and faster. To me, that is no security at all. But when you have passive income, you have no more fear of losing your job; you have no more fear of cutting your pay (“Cut it, I don’t care”); and financially free. And that is the best part about it.
In the 20th century, seems so long ago, but it is less than15 to 20 years ago, in the old days, there was the concept of life long employment, the iron rice bowl, where you could get your company to look after you; the Government would look after you. In the old days, we were told by our parents: study hard, get good grades, find a good job in a good company, and you are settled for life. Do as you are told. Along the way, you are going to get promoted.Be loyal to your company, and they will take care of you for life and once you reach your 40s and your 50s, you can take it easy, you can slow down and eventually, you can retire with your pensions and live happily ever after.
That was true in the old days, but if you are expecting your Government or your company to look after you for the rest of your life, I am sorry that it is not going to happen. You are going to be disappointed becausein today’s world even if you work for multi-national company; even if you work for a Government company, there is no more life long guaranteed employment. In fact, nowsaday, the longer you stay in the company, your value may not increase. The longer you stay, the more expensive to be kept because your salary goes up and eventually your boss is going to think, “Hey, I am not stupid. I can hire someone half your age, and half your pay, and do the same job and replace you with 3 more people.
To many people, it happens in their forties and their fifties.And, once they lose their job to someone younger and cheaper or they lose their income, guess what, they still have bills to pay. They have got debts to service. And that is when they get into financial straits or stress or even go bankrupt. And it is happening more and more regularly today because of the changing economy. Banks are slashing jobs every single day. Retailers are closing down. IT companies are slashing jobs. You know, a huge company, like Deutsche Bank, can see its value drop by more than half in a short period of time. Companies like CISCO or IBM can retrench thousands of people every single year.
It is not a question of whether it will happen to me; it is a question of when it is going to happen. So you got to prepare before it happens, so if it happens, you don’t care, you are already financially free and secure. Unfortunately, when this happens, most people who got hit would be those in their 40s and 50s and older. You have to start taking charge of your financial security. There is no point blaming the Government, blaming the economy, blaming the company because if we blame them, they are controlling our lives.But if we take responsibility and find our own way, I guarantee you that you can guarantee your own financial security and freedom and that is what I am going to show you how to do in this video. So, stay tuned.
Right now, I am going to show you the 3 steps you can take immediately to move to financial freedom in 5 years or less. The first step is to calculate what are your current expenses and hence how much passive income you would need to cover those expenses. So the first thing is to track your monthly expenses. Let us say for example that you are spending $5,000 a month. It could be $2,000. It could be $10,000. It could be $30,000 a month. Whatever it is, calculate your expenses a month. So, for example, for the purpose of this discussion, let us imagine that you are spending $5,000 a month. So that is $60,000 a year.So that means you have to generate passive income of $60,000 from some kind of assets that you Have.
So step 2 is to determine the assets required the income that you required. Now it all depends on the assets that you have. If you ask most financial advisors and most banks, they will tell you to go into conventional assets, for example at the most basic level, you have got time deposits or fixed deposits. Unfortunately, with interest rates at all time low, if you can get 2 percent a year, that is fanastic in most developed countries. Let’s imagine if in your country, the fixed deposit rate is 2 percent a year, how much do you need? Take $60,000, which is the income required, and you divide it by 2 percent and that gives you $3 million. So that tells you that if you have $3 million in cash, and you put it in a bank, at a 2 percent interest, that is $60,000 passive income a year. That is your expenses a year. You can stop working on what you don’t like and do just what you love, and live off that. Now, if you are like most people, you wont have 3 million dollars lying around in cash. So that is going to be challenging.
What else could we do? Well, we could put it into another asset called bonds, where you lend money to companies and they pay you interests on those loans, or you buy companies that pay dividends. Now, if you look at most bonds, the interest they pay and dividends on stocks, the best you can get would be about 5 percent a year. So if your money can now grow at 5 percent, you take the same income of $60,000, you divide it by 5 percent, it becomes 1.2 million. Well, you now need less assets to make the same passive income, but $1.2 million for most people is going to be pretty hard to save up in cash. Don’t forget that if you buy bonds of the wrong company, your bonds can go down in value. And when you buy stocks that gives you dividends, those stock prices can collapse. There is risks involved. It is not that every company is going to go on forever. So, for 5 percent with that kind of risk, may not be worth it. So what else is there? Check it out.
The next thing would be to invest in real estate or REITS (real estate investment trusts). So if you invest in real estae, you basically rent out the property and you collect rental income. So what is the rental return (yield) that you get from most properties. It depends on the country. Countries like Singapore, the rental yield is 2 to 3 percent. In Malaysia, it is like 5 to 6 percent.In the UK, it could go up to 7 to 8 percent. It depends on the country. Let take an average yield of 7 percent on terms of rental yield. So now, if you take $60,000, divide by 7 per cent, that is about $857,000; which means again, if you have got $857,000 worth of real estate and rent it out at 7 percent rental yield, that is $60,000 passive income a year. That is a bit better than what we saw so far, but still, you need to save up to about $1 million.
Step 1: Calculate Your Passive Income and Passive Income Needed
- Expenses a month = $5,000.
- Expenses a year = 12 x $5,000 = $60,000.
- Passive income required = $60,000.
Step 2:Determine the Assets Required to Generate the Income Required
Option 1 :Investing in fixed deposits at 2 percent per annum.
- $60,000 / 2 percent = $3,000,000.
- $3,000,000 x 2 percent =$60,000 passive income a year.
Option 2: Investing in bonds/dividend stocks at 5 percent per annum.
- $60,000 / 5 percent = $1,200,000
- $1,200,000 x 5 percent =$60,000 passive income a year.
Option 3: Investing in Real Estate/REITs at 7 percent per annum.
- $60,000 / 7 percent = $1,200,000
- $857,142 x 7%=$60,000 passive Income a year
So, the question is: Is there a much better way? Is there a way that we can generate much higher income on lower capital, so that we can reach there in 5 years or less and not in 10 or 20 years? Most importantly, can it be done safely because we do not want to put out our retirement savings at a huge risk, where we can lose 15 percent or 20 percent because of a market crash due to a Brexit event or the wrong person get elected in the US for example? We want to be safe, no matter what, we are sure that we have our capital.
So, is there a way? The answer is Yes. So, what is the answer; what is the solution? Are you ready for it? The answer is professional online trading. Let me explain how you can use that to generate higher returns at very low risks. You see, when know how to trade professionally online in the right way, you can achieve conservatively an average of 5 percent on capital a month. How much return is that in a year? We take 5 percent times 12, it is 60 percent return a year. In reality, it is more than 60 percent because the 5 percent is compounded, which means, for example if you started with $100 and the next month, it is $105, 5 percent return. The following month, you are getting 5 percent return on the $105. So when we compound it, it is something like 72 percent return a year.
For simple maths, we just think 12 and we get 60 percent return a year on professional online trading. So, if you can get 60 percent a year conservatively, and I am serious about this, and I am going to show you how it works. If we take the $60,000 passion income that you require; you divide it by 60 percent, that is a $100,000 in capital. So now, all you need is $100,000 to be financially free. If you s[pend $10,000 a month and you need a $120,000 a year, then you need $200,000. Obviously, to be financially free faster, you want to spend less. If you spend more, you need to have more capital to generate more income. Make sense?
Professional online trading
- Professional trading at 5 percent per month (or> 60 percent per annum).
- $60,000 / 60% = $100,000
- You need $100,000 in capital to generate $60,000 in annual income.
- You need $200,000 in capital to generate $120,000 in annual income.
- Returns are recession proof.
Most important, we have to find a way that is safe. Our retirement savings is not susceptible to a recession or the market collapsing. Well, the way that we are going to teach you is that our returns are going to be recession proof. We are going to get this kind of returns, regardless of what happens to the economy or the market. So, how do you become financially free in 5 years or less? Again, if you saved $20,000 a year and for mot people, if you got an avaerage income, an average household, you can save $20,000 a year. That is less than $2,000 a month that you set aside. Over 5 years, there is a $100,000. For $100,000, if you get 5 percent a month in professional trading, that is $5,000 passive income. So if that is your expenses, you financially free; you are done.
- Save $20,000 a year x 5 years = $100,000
- $100,000 x 5 per cent per month = $5,000 passive income per month.
You may say “What is the catch? Can’t be all that easy, right? If it is so easy, everyone would quit their job and everyone would do this. I am here to tell you that there is no free lunch and it is not easy. The first step is that you have to master the professional trading strategies that would allow you to do that. You have to do that. So it takes time and efforts to master these trading skills.There is no free lunch in this world. There is no get rich quick, easy way because if there is, nobody would bother to work. Everyone would stay at home.
But here is the good news. I always say that when you first learn something, it seems difficult but once you learnt it, it becomes easy. First time I drive a car, I find it tough. But to me, driving was a life skill that I had to learn.Even though, I failed my driving test a couple of times, I never quit. And today, I can drive with these driving skills, I got the freedom. The same with trading skills and money management skills. I promise you that this skill, once you master it, is the only skill that can guarantee you an income for the rest of your life. See, if you spend all your time and money and you learn a skill called programming, or accounting or engineering, right? That cannot guarantee you a job in 5 years, because you can be replaced by a robot, an AI or another person. But when you learned how to trade the financial markets, no one can take away the skills from you. Anywhere in the world, as long as you have a lap-top, with internet connection, you can generate income and can be financially free.Understand that what I am going to teach you in the next few slides and learn how to trade professionally and profitably will go against everything you thought you know about stock trading, for example I am going to teach you to ignore the news. I am going to teach you not to listen to rumours and tips. And you are going to learn that trading ahs nothing to do with luck. Maybe in the short term it does, like a stock goes up or goes down, it isn’t dependent on luck to do it consistently, month after month, year after year, it has nothing to do with luck. It is a skill. It is a skill that you can learn.
Step 3:Master the Professional Trading Strategies