Another article on the FIRE movement by CNA
The previous article seems to be just the personal views from the writer. This time around, it is a more balanced piece and there are real FIRE practitioners from Singapore providing their views as well. Most of the points resonate with me on how FIRE can be achieved and maintained.
1. Your spouse/partner will have to be supportive in it. They dont necessary have to be part of the FIRE movement, but there shouldn't be arguments over the idea of FIRE. This is with the caveat that the person intending to FIRE is realistic and has a clear plan about the process of achieving FIRE without causing harm to anyone during the journey. My wife is a good example. In fact, she was the one who asked me to FIRE so that I can spend more time with the family. So I accidentally FIREed even though that was my plan all along but I never really thought that I will pull the trigger. I FIRE mostly out of necessity.
2. Being financially frugal? Instead of the word frugal, I prefer the word prudent. In any case, the definition of being frugal is subjective. It all depends on how much you are earning. If you are earning 3000 SGD per month, spending 300 dollars on something is 10 percent of your monthly income. If you are earning 15,000 SGD per month, 300 dollars is just 2 percent of your monthly income. Whereas being prudent is about caring for the future. You sort out your personal P&L, cashflow and balance sheet and ensure your excess disposable income is invested and earning you more money.
3. Being realistic about what you want. I've repeated this many times. If you want a lambo, 5 million dollars condo, 2 helpers, 4 long haul trips a year and etc, FIRE is most likely not for you. Well, actually if you can have a passive income that pays for all that, then go for it but realistically speaking, this kind of atas FIRE is beyond the reach for perhaps 99.9% of the people. I think this is the main point that stop people from attaining FIRE.
4. You need to enjoy the journey or at least the journey of FIRE isnt too painful to make you give up. I will give an example of a bicycle since I am an avid cyclist.( yes, I am 1 of those middle age uncles wearing spandex riding on the road. But I dont ride in groups, nor do I ride during peak hrs and I only ride at ulu places.). My very close friend commented that it is amazing that I can go for 100km ride but he cant even last 10km and his butt hurts and cycling is not for him. He was using those pay per use bikes that weigh something like 25kg and not well maintained.
I told him if he is new to cycling and not used to it, how is he going to enjoy cycling with such a beast? If you want to pick up cycling, you need to have a decent enough bike, have a good seat, adjust all the height and everything to suit you and you will slowly realise you can cycle more than 10km without butt pain. Needless to say, he gave up on cycling because he was very sure that cycling is not for him after his experience with the 25kg bike.
Going back to the journey of FIRE, if you are those who love parties, cafe hopping and etc, then the journey is going to be really painful when you start to cut back on the expenses. If you are really serious about FIRE, take it easy and dont do a cold turkey style, cut 5% a week or something to get used to it. There's really no point if you go in cold turkey style, then give up on the FIRE process because you are suffering from withdrawal symptoms of not being able to splurge on yourself. The journey may be long and perhaps a little painful but alot of people have walked the path before you and succeeded. For people who like a simple life, then this will be a piece of cake.
The first thing that caught my attention in the article was the experience of a Mr benedict Tan who is 27 years old right now. His long term target is a whooping 2.5m by the time he is 40 years old. I am like wow. Thinking back on the past 13 years, would it be possible for me to have a portfolio of 2.5m now? I think theoretically it is possible but it is going to be so painful that I most likely wouldnt have enjoyed my life as much as I had for the past 13 years. I wish benedict all the very best .
Hi, It's me again, in counting down mode now. On point no. 3, if he can afford those, he can RE straight away ommiting the word FI :p
ReplyDeleteOn the last point, in our journey towards FIRE, sometime luck play a very big part, in my humble beginning, if I am a little ambitious, I should have gone for The Sail when it first launched, it was near my office and the property agent giving out flyer day in day out near Raffles Place MRT, it was like 600+ psf, so a 1000 sf unit is slighly more than 600k+, that was before the 2 Casinos were announced and during then, who dares to puchase a condo in downtown area and on a reclaimed land? At the end me and wify gone for a Pungol 21 4-room flat at 159K...that was also after much calculation for the 20% down payment as we didn't have much in CPF, we were just started working for a number of years and the annual income just barely qualify for applying credit cards....imagine if I have an encouraging parent who is willing to lend me the down payment....that will be hoseh liao!!! :p
When is your last day? Haha yeah the Sail, a colleague bought it when it was launched. good move on him. I was just a fresh grad back then. I had the same thoughts as u actually, but we were looking at a condo at marine parade, the one that is at the cross junction, just opposite the old cinema. When it was being launched, the psf was 800-900 plus, the unit that we wanted was just a million over but didnt dare to move on it as I just grad. in the end, we also settled at punggol.
DeleteLast day is today :p I didn't move to Punggol at the end because out of the blue HDB offered switching to Sengkang without q penalty, we also got early delivery from the left over selection unit. We went for a 5 room instead at 258k since we got more $ in CPF liao after waited 1 2 yrs, also everyone we spoke to ask us to go for the biggest we can afford since it's subsidized housing, typical Sgrean mentality, glad that we did as our selling price also much higher at the end, this also helps in my FIRE journey :p
Deleteoh congrats on getting out of the rat race! haha, sounds like we do have pretty similar experience. In my previous reply to you , i wanted to say if we had gone with the marine parade condo, I most probably wouldnt be chatting with an anonymous person online now. lol.
DeleteNice article.
ReplyDeleteActually I also like to cycle. Just that I am a bit OCD and like to wipe down the bike, and always feel that I need to clean the bicycle chain.. so end reluctant to always cycle. And also I don't have as much time as you.
Yeah $2.5mil by 40 yrs old is a high / painful target. It may also be painful for those around him (esp. if he is married)... need to live life a bit. Wife (or children) may not share same value. Extreme frugality is not for everyone.
Take the middle ground between 'nailing down the specific amount of money' and 'mindset'.
Perhaps one take away from the pandemic I personally think I learned or felt strongly - is how important health (be it mental or physical) is to me. In the past, I did not really think much about mental health esp.
The below Jean Voronkova video was recommended by another financial blogger.
https://www.youtube.com/watch?v=rLrkqqnDa_8
hahaha, yeah. Im not that particular about cleanliness but I dont ride when the road is wet coz i hate washing bikes. Indeed , it's not going to be helpful if someone goes all in to only give up prematurely as the extreme cost cutting takes a toll on everyone.
DeleteHi there,
ReplyDeleteCongrats to you on achieving FIRE at such a young age.
I saw that you are even contemplating permanent RE seeing that you are comfortable with $4K pm of passive income. Well, let me share my experience with passive income so that you have another point of view.
I have been investing for passive income for many years with the main objective of establishing passive cash flow in our retirement. My target for dividend income was $5K pm which I achieved in 2018. The dividends grew to $78,800 (or $6,500 pm) in 2019. Thought things were going great and then Covid struck. The dividend income came tumbling down to $64,000 in 2020. And this was only because I injected more funds into the market to scoop up discounted stocks. If not, my dividend income would have been much lower.
The moral of the story is you will not have enduring RE if your passive income is not robust. In an economic crisis, you will most likely suffer the double whammy of seeing your stock holdings decimated and your dividend income drastically reduced. Thus depending on dividend income alone is not the way to go for FIRE. Its not the quantity (amount of passive $) but the quality of the source as well that will ensure an enduring FIRE.
What my wife and I did to ensure we have robust passive cash flow in retirement as a couple:
Gold taps (income from our CPF sources)
1. Yearly Interests from our OA&SA = $60,000
2. Yearly payout from CPF LIfe (payout at 70) = $60,000
Silver taps
1. Yearly SRS drawdown (over 8 years) = $50,000
2. Medisafe account = use when necessary
Bonus taps
1. Dividends from stocks = $72,000 (2022 YTD figure)
2. Yearly Rental income = $36,000
It is evident we have relegated the dividend and rental to bonus income sources. Meaning we can live without them, and will be defining our retirement lifestyle based on the incomes from our gold and silver taps. If we have dividend and rental incomes, great, if not, life goes on.
The incomes from our bonus taps will then be used for discretionary expenses such as travelling, buying a car and gifting to our children.
Good luck.
Hi there, thanks for your input. Frankly speaking, I dont think i will go into full retirement at age 40. I wouldnt have stopped working if not for family reasons. I guessed being financially "independent" gives me the leeway to make reckless decision like this once in a while. I will most likely take on a job that pays me much lesser but not a 9-5 job. My wife is still working though, so that makes my "FIRE" decision easier to make. She is the one who made me quit my job. Haha.
DeleteTalking about CPF, i am guilty of sitting on it and didnt try to understand how it work. Thanks for reminding me on this.
If you found any non 9 to 5 job, do share in your blog. Thanks!
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