Monday 29 January 2024

F.I/[R.E] and relationships

Financial independence can be distilled down into a simple formula.  

Income >= Expenses. 

There are different degrees of F.I. but the common notion is that you are only really F.I. once your level of passive income surpasses your expenses to a certain degree. 

In any case, consider a fresh graduate out of school trying to get to a state of F.I. 

It is really quite formulaic - 1) maximize your income and replace income that is earned trading your time with that which is earned via capital; and 2) reduce your expenses.   

There are many ways to go about part 1) but the focus of this article is on the fundamentals of part 2 above and the main factor that drives it. 

In my humble opinion, in the context of Singapore and discussing this purely from an expense point of view, whether you can get to F.I./[R.E], how fast you can get there and remain there will depend on certain major factors described below, not whether you can suffer on S$3.50 cai png vs the need to consume S$20 avocado toast. 

Sure - it all adds up, but I believe these 3 factors are the big ones that can cause massive impact on your journey. I think the pareto principle holds true here. 

Key Factors

1) Your partner in life - Basically the person you will be living with in a long term relationship, whether its through a marriage or just a simple long term partnership. 

2) Your accommodation - I believe everyone needs a base of operations. Some prefer HDB which goes for a minimum S$300k, but others prefer a private apartment which will be at least 2 to 3x the price. 

3) Your transportation - Need to own a private vehicle? If you want one with four wheels, that's at least S$10k per annum in running costs. Two wheels might start at S$2.5k per annum. Unlimited public transport in Singapore will cost you S$1.5k per annum. 

What is the one major factor that will drive your F.I./[R.E.] process?

My own personal experience is that the choice of your partner will not only drive your path of F.I./[R.E.], but will also determine whether you will remain F.I./[R.E.]. 

This is because your partner will generally have a say (I guess for chauvinists it might be different) in the lifestyle aspirations for the both of you. And these aspirations will revolve around: 

1) Housing aspirations - Where and what kind of housing do you both want to stay in? 

2) Lifestyle consumption aspirations - Do you want to travel and how flash you both want to go? Where do you want to do most of the boring day to day eating? How do you want to get around Singapore? 

3) Children - Do you aspire to build a nest for 2 or do you want to play the game of life on hardcore mode and build a family in Singapore?

4) Career aspirations - How ambitious are the both of you in rising to the top of rat race? Do you love your jobs or are you the sort that work to get paid to live ? Do you want to set up a business of your own which requires a heavy infusion of capital? 

5) Familial obligations - Do you or your partner need to support your immediate family? Maybe you have ailing parents who actually require financial support, or perhaps a younger sibling whom you need to help foot their education expenses? 

6) Others - The list can go on.

Qualities I look out for in a partner

So what do you look out for in a potential partner? 

I'm not an expert in this field, though I have been through a couple of relationships since my junior college days, and in my experience, I found the below qualities to be important attributes:

1) Compatibility of aspirations and values - Are your aspirations largely compatible? How about your financial values? What is your lifestyle consumption habits like vis a vis your partners'? How about thoughts on contribution to household and life expenses - do you go 50-50 or you have to take it all on your chin?

2) Conflict resolution style - How do you both resolve conflict, which will invariably come up. Is there a mechanic which you can find some common ground in how such situations are taken care of? Basically can you work together as a team to face life? 

3) Openness to experiences - Do new experiences generally invigorate your partner, or does it cause terror and fright. Does your partner prefer routine instead of trying to deal with new experiences, whether sought after or imposed upon?   

5) Ability to learn and adapt - Is there a desire and ability to learn new tricks? How adaptable is one to changes, such as work requirements or lifestyle changes, especially in a situation where income is not exactly regular and subject to the vagaries of the stock market?   

Personal experience

Readers who have been with me from the start would probably know I only found my partner 5+ years ago in 2018 when I left banking - certainly helps when you have a clearer head and more control over your time. 

We dated for a while and decided to get married in mid 2022 - I have my own views on marriage in Singapore but that is for another topic. 

In all aspects, I must say I am a really lucky guy for being to find a gem like her, what more through one of those dating apps - a really curious personality who is open to new experiences with an ability to adapt and desire to learn and improve herself, and I am very grateful that she is in my life. 

From a financial standpoint, although her income levels then was slightly below the median in Singapore (creatives really do not get rewarded financially (at least at the start) in our society), I found the following behaviors to be positive and helped to give me the green light: 

1) Contribution to expenses - An early indication was her desire and actual contribution to lifestyle expenses on a joint and equal when it comes to eating out and traveling. 

2) Living below her means - Although her income was not high, she still managed to save money no matter how small the quantum.  

3) Ability and desire to learn - She is open to learning and improving herself in life. Be it financial knowledge and investments, budgeting works, etc, she is always looking to learn new things which might be helpful to her

4) Openness to experiences - Let's just say she has an open mind especially when it comes to how people live their lives, otherwise she would not have dated a "guy on extended sabbatical". I think we both have the shared belief that as long as you are financial responsible for your own expenses, you can choose to live the way you like. 

Perhaps for the single folks who are on your on financial independence journeys out there, maybe this list of qualities might be helpful if you are actually looking out for a partner, because this will help to mitigate any conflicts that might arise down the road. 

Maybe the other topic of interest is how do my wife and I live well together and share the financial burden, despite having different lifestyles - she is currently working full time, having found her groove in another industry that pays well, whereas I have been on an extended sabbatical for 8 months and counting. 

But that is another topic for another time. 

Remind me again - what is the one constant in life? 

Having said all that... the kicker for the spiel above is that such aspirations and values can change even though it might initially be green lights on all fronts. 

That is because your partner will change. 

You will change. 

Say maybe you start off working and think to yourself - all jobs suck balls, fuck I really want to hunker down and get F.I./[R.E.] ASAP.  

But after 10 years of living like a monk and working your job you realise hey maybe I have a bit more autonomy now and it is more tolerable and I enjoy this and that aspect, what the heck... 

Or you both started off not wanting kids, but 5 years down the road, suddenly you want a human kid and not just a fur-kid. 

Or maybe your partner didn't mind a HDB flat last time but upon seeing all her friends upgrading, she decided she wants to stay in a private apartment now?  

The list of potential conflicts that could arise is endless. 

What do you do then? 

The simple truth is I do not know - I am simply making life up as I go along, but I suspect such situations will resolve according to your individual priorities and how you work together as team in melding those priorities, so it comes down again to values. And I do find that it does help to be on the same pages in those aforementioned items at the start. 

But perhaps the wiser and older people with more relationship experience can help shed some light in these aspects? 

Friday 26 January 2024

2023 finances and net worth thoughts

Hope everyone has had a great start to 2024. 

Well, I reckon I could have had a better start. 

Been battling a bug and sinus infection in the early weeks of 2024, but it looks like it is more or less healed up now. 

Certainly serves as a timely reminder that good health is a foundational piece to live the good life. 

Anyhow, I had some time to take a look at my finances for 2023 and this mainly serves as a pulse check now I have the time to sit and reflect for a bit. Personal financial planning and analysis - lol. 

In 2023, my total spending excluding rental and parental allowances came up to about c. S$65k or S$5.5k per month. 

My share of the rent and parental allowances came up to be c.S$31k or S$2.5k per month and I reckon this will come down by a few hundred per month in 2024 as my partner ramps up her contribution to the rent, and it will probably come down to S$1.5k per month once I get the keys to my BTO flat.  

Expenses

1) The largest contributor to the expenses line in 2023 was undoubtedly travel as total category spend came up to be c. S$28k, or c.43% of total spend. 

To give some context, this was the schedule of travel in 2023: 

1) c.2 months in Europe across France, Portugal, Spain and the United Kingdom over 2023; 
2) c.3 weeks in Japan;
3) c.2 weeks in Vietnam;
4) c.2 weeks in Hong Kong and Bangkok; and
5) c.1 week diving in East Malaysia 

So it works out to be close to 4 months overseas in 2023, or 33% of the time. I do think this expense might potentially drop in 2024 as I am contemplating basing myself more in Singapore to focus on building routines to develop and improve my skills. But hold that thought as contemplation is still underway.  

2) The second largest category was Food & Beverage, or expenses for dining out. This totaled S$13k, or c.20% of total spend. 

We do eat out as a couple quite a bit, even as we are currently trying to move towards home cooking for some part of the week. Alas, there ain't much insights to be had in this category. The highest single expenditure for each meal was perhaps c.S$350 and these were limited to special occasions.

I do think this might rise in 2024 though, given inflationary conditions and if I actually stay in SG more often. It is quite expensive to live in Singapore comparatively to the other places that I have visited last year.

3) The third largest category was surprisingly "Gifts" and that came up to be c. S$5.6k or c.9% of the total amounts. Weddings, birthdays of loved ones, ang pows for CNY and some treats for my old team at work over the course of the year to keep these guys going and motivated.

Now that I am an unemployed and unproductive member of society, I am going to heavily underweight the CNY ang pows and be more selective of the weddings I attend, especially when it comes to the extended family.

In summary - while the headline monthly expense of S$5.5k has surpassed my original FIRE budget (back in 2018) of S$4k, I think 2023 was an extraordinary year and I do expect expenses going forward to moderate accordingly within reason. 

That said, I do have some other thoughts on my increased flexibility towards expenses vis-a-vis experiences that I would probably espouse on in another future post. 

Net Worth - Total Resources and Total Liquidity 

I thought it might be helpful for the F.I.RE aficiondaos out there if I gave a breakdown on how I measure my net-worth while embarking on my F.I.RE plans. 

For measuring my own personal finances, I divvy it up into various categories below: 

1) Pure Cash and Deposits on Hand ("Cash") - Cold hard cash split into various traditional and digital bank accounts earnings meagre ST interest and also staggered ladder of T-bills. This is used to pay for my daily operating expenses. 

2) Cash Equivalents ("ST Trading") - Once used primarily by me to convert USD into SGD given the best exchange rates on market, this has morphed into a short term trading account where I test out various stonk strategies, like selling options, short term growth stock trading etc. 

This was only set up in 2020 and is currently 40% underwater due to perfect market timing and a lack of knife juggling training lol. This account is fully fungible with Cash and will be liquidated to supplement lifestyle when Cash runs low. 

3) Central Provident Fund and Supplementary Retirement Scheme ("CPF/SRS") - To the uninitiated, the Central Provident Fund is Singapore government's version of social security, with mandatory employer and self contributions which are awarded certain returns that are risk-free in nature. It comprises the Ordinary Account, Special Account and Medisave Account. 

I do utilize past contributions to my Ordinary Account for investments under the CPF Investment Scheme and this has been performing reasonably above the OA rate of 2.5% since I first started investing. The sole purpose of my OA is to fully cover my share of the HDB flat. I leave my Special Account alone as the base 4% rate of return is hard to beat and try to refrain from touching my MA (currently at maximum level) given the 4% rate of return. 

The Supplementary Retirement Scheme allows S$15.3k of tax deductible contribution annually, and is subject to a penalty and tax payment if this is withdrawn before your applicable statutory retirement age (was 62 when I set it up years ago).

This source of funds largely acts as a back-up in a shit hits the fan situation and I need an urgent emergency cash infusion. 

There are penalties to be paid but it will be lower than the tax rate I had to pay if I did not do these contributions then. 

4) LT Investments ("AUM") - This forms bulk of my net worth and is invested in a globally diversified managed fund across more than 1,000 equity counters. There is nil leverage involved and the fund solely invests in equities. 

This is the account where I am supposed to perform the much vaunted "safe withdrawal" method when my Cash and ST Trading starts running dry. But you know what the experts say - safe withdrawal also can make babies and cause you to change your plan lol. 

5) Other Investments ("OI") - This is my highly illiquid account which comprises private direct equity investments and crypto (only BTC and ETH). Also holding a right to receive liquidation proceeds from HodlNaut which I am ascribing a value of donut.

6) Employee Share Option Plan ("ESOP") - This is the see-through value of my equity I have earned with the start-up i worked for over 2.5 years, with a hefty discount applied on it.

I would think I do have a good handle on what the right discount is to apply since I actually led the fund raising efforts, but given the illiquidity and binary nature of things of such ESOP in these market conditions, even though the ESOP on a post discounted basis contributes to 20% of an aggregated list of items 1 to 5, I will be giving this a big 0 and excluding it from my net worth thoughts. 

As of 31 Dec 2023, this is the split of contribution for items 1 to 5 above: 

1) Cash - 8%
2) ST Trading - 4%
3) CPF/SRS - 18%
4) AUM - 69%
5) OI - 2%

I like to think of this as a indication of "Total Resources" on hand. 

To think of if in even tighter terms, lets see the breakdown of what I like to call "Total Liquidity" since these can be liquidated at ease to serve life purposes. 

1) Cash - 10%
2) ST Trading - 4%
3) AUM - 85% 

As of 31 Dec 2023, my cash runway (summation of 1 and 2) before drawdown of AUM is roughly 5 years, so I do hope that it will help alleviate any sequence of returns risk and allow my AUM to grow in the market before I actually need to enact drawdown actions. 

AUM did grow 8% in 2023 which contributed to Total Resources growth of 6% despite having zero employment income for 7 months, and this gives me some confidence going forward. 

Separately, I do feel that to go 5 years without any income at 38 years old is quite improbable, which is another one of these thoughts that have surfaced quite quickly during my second time taking a F.I.R.E sabbatical. 

It is a bit hard to put a pulse on things, and might be worthwhile expounding on in a future post, but generally doing this sabbatical for the second time has given me more confidence to adapt my plans accordingly and not dwell too much on the numbers or get into a form of "analysis-paralysis". 

In any case, hope this post is somewhat helpful to the public, as it is to me in reflecting on the state of my personal finances in 2023. 

Wishing all readers good health to come in the upcoming year of the Dragon! 

Monday 16 October 2023

Live off the land? One Hamlet, One Family is an example to think about

 One Hamlet, One Family

<https://www3.nhk.or.jp/nhkworld/en/ondemand/video/5001370/?fbclid=IwAR3EYlSwm1XSKBMvByyd1kA2_HsQxoeCdfwihlwU40PHYhK62wCxPe7ZhLY>

Came across this video above, describing a Japanese man who moved to an abandoned hamlet in Akita, Japan to set up a life of self sufficiency in 2012, after the 2011 tsunami in Fukushima impacted his life.  

Soon after, a woman came into his life, and they had kids, plus two dogs. 

The video captures their thoughts and their journey over the last 10 years. 

I find this really intriguing as one of my far flung pipedreams is to be able to live off the land and not have to depend on modern society or anyone at all. 

Anyway just sharing some of my takeaways from the c.50 mins video: 

1) Would you want to suffer for your ideals? 

I guess in all aspects of life, there is suffering. When you go to work for employment, there is the suffering of having to "do your job". 

Likewise, even if you choose another lifestyle, such as an early retirement, there is another type of suffering for that as you have to give up some important aspects, probably comfort, certainty of a pay cheque, and immediate commune with other beings. 

You can only choose your suffering and make the best out of it. Hard work is required in all aspects to have a life well lived. 

2) Money is still useful. 

In this world of today, even if you have self sufficiency and can grow your own food, you still need money as a medium of exchange to facilitate your desired lifestyle. 

There is no running away from that, unless you can really live off the land in absolutely all aspects for a indefinite period of time.  

So perhaps the right move especially in the Singapore context is to figure out the money problem first, being deciding what lifestyle you want to live. 

But more often than not, once the money problem is sorted, the lifestyle follows along, like a shadow. 

3) Community is important.

No man is an island. Humans are social creatures and need connection. One can only go so long without social connection. 

It is of paramount importance to find community in daily life. This can be in the form of friends, family, communities (say investment circles, telegram groups, etc) or even your workplace. 

4) Having kids certainly changes the picture

Sometimes I do think whether I am missing out. But I like my games on easy mode, and to me having kids is like playing life on hardcore mode. 

And this is quite evident where the protagonist of the video talks about his desire to give his kids more opportunities in life to find happiness and a life that they enjoy. 

Which means he needs income. 

Tuesday 15 August 2023

Quick update on F.I.R.E since Sep 2020

It has been almost 3 years since I last posted and thought it might be worthwhile to update this blog on a gist of what has happened since September 2020. I'll keep this one short since I have to jet off in a couple hours. 

tl;dr - Started full time employment since late 2020 and put my nose to the grind again for more than 2.5 years. Left full time employment and back to the beach since late 2Q23.

Nothing like a pandemic to force one back to the drawing block. It became pretty crystal in 3Q20 that the pandemic wasn't like SARS. It was here to stay for the unforseeable future and like it or not, everyone was going to be grounded. 

So since we are going to be locked down for some time anyway, I thought perhaps I might as well find a full time role. Was offered a position to return back to banking, and another one with a local startup to be their guy to do finance things. 

I was not very smart - my decision was to join the hype train and embrace start-up culture. Well the thought process then was along the lines of after spending time in investment banking, how tough can a start-up get? Maybe its a reduction in pay but surely there's a some kind of intangible experience to be had? *nervous laughter* 

To surmise, it was a very very tough 2.5 years but in hindsight, I did learn a whole bunch of new skills. built a team from scratch, raised a lot of money, invested moneys for a corporate and well I got a seat to get on the pirate ship and drive certain key decisions. 

Made a decision post a round of fund-raising to get my old life back. So here I am back in the wilderness after a pretty intense 2.5 years. I would say it was more intense than banking. 

That said and work aside, the last 3 years have been pretty nice in other ways. Met my partner in life since 2018, moved out to rent together, bought a flat and got married, though no kids (at least that I know of).  

Feeling pretty grateful in life right now, and eager to explore the wilderness in my 2nd time out. 

Separately am also sharing an article that was shared with me. 

Hope you guys who are pursuing FI(RE) might find this as useful and interesting as I found it to be. 

https://knowledge.insead.edu/career/fulfilment-and-fire-movement-realities-life-after-early-retirement 

tl;dr - summaries the challenges and broadly categorises FIRE folks into three different profiles.

Let me know if there are any questions I can help address. 

Tuesday 15 September 2020

24 months of F.I.R.E

Time really does fly by in a blink of an eye. 

It has been more than 2 years since my F.I.R.E journey began, which makes it a good time to evaluate the evolution of my journey, especially over the last 12 months. This post can be read in conjunction with my reflections of the first 12 months of my post F.I.R.E journey for a more holistic view.

Here's a friendly notice upfront that this is going to be a long read. 

What have I been up to since 1 September 2019?

Travel

The tail end of 2019 passed really quickly, and a large part of it was spent overseas. I spent about 2 months or so in southern and middle Italy and Istanbul from end September to end November, and about 10 days in Kluang for a Chan meditation retreat during the early part of December. 

Was in Malacca for a buddy's wedding in end December, and spent half a week in Bali to celebrate my partner's birthday in February, which was the last time I set foot overseas since. Kinda helped that one of my aims during the 2nd year of F.I.R.E was to ground myself more, which meant less travelling and more day to day normal living.  

Diving

I started the PADI Divemaster program in September 2019, and just managed to complete the course requirements over the last two weeks. Given the stop start nature of things, what could have been be a 3 week full time course took close to a year to complete in earnest. It was a great course with loads of learning, and I spent quite a lot of time diving in Pulau Hantu, with the highlight being a clean up trip at Sisters' Islands. I didn't realise how diverse Singapore waters are, and some of the coral and marine life here are certainly sights to behold.  

While I now have an option to help out in professional teaching and guiding for a very small fee, I don't think I'll be doing that much going forward, given the low payoffs involved. 

But one thing is for sure - I've grown very much to love diving, and I can imagine it being something I'll enjoy during this lifetime. 

Yoga

Signed up a 1 year membership since I got back from Europe last year and have been continuing to attend classes. In a bid to further develop my practice, I had signed up for a 200 hour yoga teacher training program originally scheduled for June 2020, but it got cancelled given the COVID-19 situation. 

I still practice on a regular basis, and I do feel it has helped me with increasing my flexibility and body strength, with added balance to my mind.  

Aside from the above, of course there was the normal day to day relaxed living, spending time with my partner (who started to embark on her own freelance writing journey since coming back from Europe) and loved ones, gaming, reading, watching Netflix, meditation, just generally chilling and.... 

A return to (part time) work

I guess you folks can call the Internet Retirement Police (IRP) on me and flip me the finger, because I've returned to work. Well, that's part time employment to be exact. 

COVID-19 hit our shores in 1Q20, and the sense of foreboding, slowly but surely, came true. To be frank, I didn't quite expect the fallout we are seeing now (and that is yet to come), but it didn't really affect me financially. I was still chilling and living my F.I.R.E life. 

In late March 20, shit really started to hit the fan in Singapore and contagion started spreading globally like wildfire. That was also the time when I got really lucky - an opportunity presented itself where I could work part time for a financial institution to help with structured debt transactions, given the scarce supply of liquidity in the global markets, and the heightened demand for it led to more deal flow coming in.

It was very much a consulting role, where I didn't have to quarterback any transactions, and I could work largely according to my own schedule. 

The increased probability of a lock down then, the desire for further "professional intellectual stimulus", other positive externalities, coupled with considerable incoming cash flow that could potentially help with mortgage financing, made it a no-brainer to take on the role.

It's been more than six months now that I've been doing this part time gig. I've put in more than 220 hours of services, helped to look at some potential transactions and closed 2 transactions with the firm. 

All in all, putting aside the cash consideration, it has been a good gig and use of my time. Learned quite a number of things about different geographies and new ways of thinking, and I must say that I quite enjoyed the work, where a large part of it was desktop analysis of different potential investments. It certainly did have its stressful moments, but it has been an interesting endeavor where I felt like I really used my brain and could apply some of the expertise that I had gained in my professional life. 

However, I don't think this part time gig is going to be a staple in my life going forward. 

Times are bad and that led to crunch time for the firm. Where there are bodies, there will be vultures. And there were loads of bodies then. But eventually things will normalize, especially when investment targets have been met.

I must say that I was actually quite surprised that I quite enjoyed working again, at least on this part time basis where there was a good level of autonomy and ability to control my life, and perhaps doing some kind of work which combines meaning and autonomy might be something I could look to in the future.

Financing my F.I.R.E lifestyle

After 2 years of F.I.R.E, I would like to touch on personal finances. Aside from the monthly expenses budget of S$4,000 that I've shared, I notice I had not delved much into my F.I.R.E retirement budget planning, so perhaps this is a reflection on plans vs reality.  

Back in March to May 2018, I did the math and decided I could F.I.R.E with passive income of 1.93x cover of expenses and the basis of a small out-performance of investment returns against expenses. To be conservative, I set aside 4.75 years of expected expenses in highly liquid resources (think cash, fixed deposits, etc.), that was separate from my investment portfolio, just in case you know shit hits the fan and what not, resulting in negative sequence of returns and a potential mandatory conscription back to full time employment. 

To be honest, I expected my investment portfolio to be generating solid returns, like it had been since day 1, but I thought it's better to be safe to have some cash stockpile to draw down from, instead of tapping the investment portfolio straight from the get go. 

Well... let's just say value investing not being in vogue over the last 2 years and the COVID-19 crisis playing out have largely led to an investment return of negative 6.2% per annum since 31 Aug 2018. In layman speak, my invested portfolio has decreased by 11.9%. 

This basically meant that if I didn't F.I.R.E with sufficient cash stockpile to draw down immediately from, and if I had lived YOLO outside my budgeted expenditure, I think it would have translated into looking out for full time employment really soon, which would have been a double whammy given the economic climate and retrenchment numbers. And it will undoubtedly, be extremely hard to get full time employment on decent terms in this market. 

You would think with 4.75 years of cash stockpile, seeing your investment portfolio suffer a decrease of 11.9% wouldn't have much of an impact on your well being. That's quite true at this point, but I'm speaking as of the point of 31 Aug 20. 

To encapsulate the point, as of 31 March 20, my invested portfolio was down 22.7% from 31 Aug 18, and my cash stockpile was 3.56 years, and that was because I had received an unexpected small inheritance. If not, my cash stockpile would have been 2.38 years. To say I wasn't even a wee bit concerned then would have been a massive lie. 

I rationalized with myself that I still had a good amount of time and could probably cut expenses to get some more time to returns to normalize. However, that took some effort to come to, and the thought of having to sell off my investments at depressed valuations to fund life requirements certainly caused some pain. 

It's like I could probably run 2.4km in 10 mins 30 seconds, but that's going to be painful and probably something I'll like to refrain from unless absolutely necessary. Same logic to liquidating my invested portfolio below original or at depressed valuations to fund life requirements, but the envisaged pain is real in my mind. Separately, it was definitely through the last six months or so that I realised I have a wee bit of an unhealthy attachment to my investment portfolio that needs to be managed.

Eventually post self rationalization, I decided that the increased market volatility presented an opportunity to good to pass, and set aside USD30,000 to do some short to medium term trading in a bid to capitalise on returns. That's doing fine (up 15% or so), though my main invested portfolio is still down 11.9%, I'm not too worried given the Asia Pacific equity market sans tech is still undervalued and I believe that will revert to the mean eventually; and I now have increased my cash stockpile to 6.60 years given income I've received from my part time gig. 

It's all good at this period of time, but looking back, I got really lucky in 2018 to get my retrenchment benefits that led to having an initial cash stockpile of 4.75 years, and receiving a unexpected small inheritance in March 2020 definitely helped, otherwise I might not have made the same decisions that I made in the last 2 years. 

TL;DR - it is absolutely necessary to have a sufficient amount cash stockpile (or other means) to prevent negative sequence of returns from kneeling a death blow to your F.I.R.E life. 

Purchasing a Property for Consumption

I'm turning 35 at the end of the year, and that means having access to purchase a resale HDB for own consumption soon, which was part of my original plan. Because every man needs his own space :)  

Living a F.I.R.E life means having limited access to mortgage financing, so my plan was to liquidate investments and fully use up my CPF to purchase a property sometime in 2021, which well added to a bit of my phantom pain when I had to think about this during the market meltdown in 1Q/2Q20. 

That was the original plan, and has since been subsequently redrawn as my partner came into my life shortly after I embarked on life post F.I.R.E. After over a year plus of dating, we decided we were going to be committed partners for life (at least in this life), and decided to ballot for the build to order flats by HDB instead given we qualified for it, and well, why waste the government's gift to its citizens? 

Only impediments were a decent queue number and the mortgage financing. 

Balloting was the straightforward part. Pony up S$10 for a ballot and leave it to chance. We went for two rounds of balloting and just received a decent queue number this time round. So hopefully we get to select a decent unit that we like this time round. 

Mortgage financing while F.I.R.E

Obtaining mortgage financing was the trickier bit. We're both freelancers and have come into the self employment in recent times. She has been doing freelance work since Nov 2019 and I just started in Mar 2020. Meaning our tax assessment for FY2019 showed her as full time employed and me as unemployed. 

My mortgage financing strategy since Feb (when the BTO process started and we started looking at resale units too) was to engage various mortgage brokers and banks directly since HDB requirements were for 6 months of self employed income. 

I wanted to see if it was possible to get asset based financing given income based financing seemed unavailable to us. Well, let's just say to purchase a S$[750]k flat, you needed to either show about c. S$[1.2]m of cash during the period between offer letter issuance and draw down (4 months or so), or a mix of showing [x] amount and taking on fixed deposits for 4 years. 

I have the numbers written down somewhere, but I'm bit lazy to go and dig, so the above number is from memory and might have changed given the mortgage rates have come down. 

But taking bank financing meant a lower LTV of 75% and (1) having to liquidate my investments to show cash and be stuck for a couple of months, which to me was a bad idea, or (2) taking some form of cash backed financing, which was another bad idea given the need for me to be fully invested in appropriate return investments. 

And for income based financing for freelancers, the banks strictly rely on what is declared to the tax man in the previous year, and they apply a hair cut of 30% to that. So that means we were ruled out on that basis given we only started freelancing recently. 

In short, the bank financing process for us came to a screeching halt, at least until we receive our tax notices for FY2020 in 2Q21. 

However, if you are getting a HDB property, you could always get HDB financing - this gives you a up to 90% LTV at CPF OA rate + 0.1% (2.6% p.a presently), and the HDB financing will be available for 6 months from letter issuance. 

For BTOs, once you get a valid HLE for flat selection, this will last you all the way through the signing of lease agreement (4 to 6 months after flat selection) till 6 months before you get your keys (about 4 to 6 years from flat selection), where income is then reassessed and the loan is then disbursed at keys collection. 

So we tried that route, and started to get our paperwork in order. For self-employed persons, HDB requires the last 6 months of your self-employed income, and that means you have to be self-employed for at least 6 months, and they are very strict about this. 

I know this because I applied when I had 5 months under my belt, and they didn't count my income. Thankfully I re-applied shortly when I had 6 months under my belt, and they managed to provide us with full LTV for our targeted BTO purchase.

I was prepared to fully draw from CPF and liquidate investments to purchase a resale. But a mortgage really helps with managing my finances in a more efficient manner, and I'm really grateful that things worked out and we managed to get mortgage financing sorted for a HDB purchase until 1Q21. Fingers crossed that we can select a unit of our desired choice soon, whether it is a BTO or a resale. 

TL;DR - Unless you have plenty of cash reserves that you can pledge / show to the bank where you don't need that for investment return to generate your living expenses, please sort our your mortgage financing and property purchase before you call it a day and F.I.R.E. Otherwise you're going to have to jump through hoops or get lucky. 

Closing Thoughts

I wrote about the dark and bright side of my F.I.R.E journey about 12 months ago. 

12 months have passed and it's still really pretty much the same, but I must say that some of both the bad and good points have begun to have less of an impact on me. 

On the dark side, I don't quite see the "conformist questions" and "loss of identity" issues any more these days. Although "loss of community" is still there, but somewhat negated because of my part time gig. 

On the bright side, "off peak" is nice, and is still nice. But when quite a sizable proportion of the population have been working from home since February or so till today, and that is going to be the status quo at least for at least the next few months, being able to do things "off peak" loses some of its gloss. 

And I'm not even mentioning the extended lock-down over that couple of months which equalizes "off peak" and "peak".   

That said, looking at both the dark side and bright side, I'm really grateful to be able to have this F.I.R.E experience over the last 2 years. Especially so, given my original intention was to actually leave the bank in 2020 to do some exploration. No prizes in guessing how limited that exploration could have been right now. 

Presently though, I do feel a pervasive sense of stagnation and intellectual frustration. 

It is as if I've hit the pause button on growth overall, even though I do think I've developed in other areas (say spiritually and emotionally). The loss of community where I get insights and intellectual stimulation from, while supplemented by my part time gig, also actually accentuates my desire to find something that can provide that on a more permanent basis. 

So perhaps there is a need to find a full time gig that can give me personal autonomy and some kind professional growth and intellectual stimulation? Let's just say I'm not closed off to this idea if the right opportunity surfaces. 

Anyhow, that's just some food for thought. What I'm particularly looking forward to in the next 12 months is to building a life with my partner, and a home together. These are really exciting times, COVID-19 or not, and I intend to make the best use of them.

Best wishes to all readers, especially if you've managed to finish this monster of an article. 

Wishing you best of luck, and may you have the resilience, strength and daring do to pursue your dreams and happiness even in tumultuous times like these. Cheers. 

Monday 14 September 2020

Expenses - August 2020

 

Total - S$3,022.91

Righto. August 2020 saw total expenses amount to S$3,022.91, coming in at 75.6% of budgeted expenditure. 

"Eating Out" was of course the largest category at S$1,260.45. Some of the more memorable experiences include Ginett Wine Bar and LINO. Brought the folks to try the latter given it left a solid impression on me in July. Of course, went back to my usual haunts such as Wildfire Chicken and Burgers. I sincerely hope these guys take off, given the value to quality ratio there. 

"Gifts" came in second at S$789.06. Contributed some monies for my mom to hire a domestic helper given her old age. This went towards agency fees and stay-home-notice fees. Guess you got to do what you got to do for that. Bought pops some walking shoes and separately, a decent birthday meal for a bro. 

"Motorcycle" rounded up the top three at S$241.62. Basically spent some money on safety equipment such as helmets and rain gear. Haven't quite changed out my helmet since 2015 so thought it'll be a good time to switch things out. And rain gear has come in handy given I've been caught in the rain more than once now. And the maxi scoot has storage space so it's a no brainer to purchase as a contingency act. 

Definitely a heavier expense month than normal in recent times, but it ain't an issue given it's coming in within the monthly and annual budget for my 2nd year into F.I.R.E, so no biggie there at all. 

Friday 11 September 2020

Motorbiking Ownership Experience in Singapore - Moving on to a Maxi Scooter

Following the sale of my 8 year old KTM Duke 200 in July 2020, I thought it was going to be the end of my motorcycling experience for the foreseeable future. 

Especially with motorcycle COE prices at S$7,000 to S$8,000, which is more than the machine price of the large swathe of class 2B and class 2A bikes, I thought it did not make much sense to own another two wheeler, given my limited intended mileage and the high maintenance experience that I had riding the KTM Duke 200. 

However, idle minds are the devil's playground eh. After twiddling around on some motorbiking forums, and trying to delay any purchase decisions, I decided to look around to see if I could get a good deal on a 2nd hand bike. 

Specifically, after receiving recommendations from some friends and from one of the comments received in the earlier blog post detailing the sale of my KTM Duke 200, I started looking around for 2nd hand maxi-scooters on SGBikeMart. Because increased storage space, twist and go, comfort and convenience began to appeal to me more than the conventional motorcycle riding experience. I guess age plays a part too :) 

I spent a couple of weeks looking through the available inventory, and following a failed negotiation for a 2013 SYM JoyMax 300, I found myself looking at a listing for a class 2A scooter. It was a c. 270 cc scooter by a reputable Taiwanese manufacturer (think KYMCO or SYM). After some back and forth with the seller, I went to view the bike, loved it, and managed to wrangle out a decent deal. 

Ponied up about c. S$9,400 in total post servicing, and after factoring in the c. S$4,500 received for the sale of my KTM Duke 200, this works out to be c. S$600 per annum for an upgrade of my experience and an extension of 6 more years to my original COE which was supposed to expire in 2023. 

Given this, and that a brand new bike of the same model would have cost me c. S$15,500, I reckon it was a deal that was too more than sweet enough to go through with even if I were to utilise the bike on an occasional basis.

How has the Maxi-Scooter riding experience been so far?

So I'm about 1+ month into my maxi-scoot experience and it has been nothing but awesome. Fantastic comfort and good mileage so far. I've put c. 600km or so on it and I love the increased power, convenience and comfort as compared to my KTM Duke 200. A full tank is 12l, costs c. S$20 and can yield 330 to 360 km per tank. I think I'm becoming an Uncle :) 

Tips for a 2nd hand motorcycle purchase

Anyhow, here are some thoughts to round up my purchase experience. Hopefully they might be of some help to any readers looking to purchase a 2nd hand motorcycle in Singapore. 

1) Take your time to scout for and view 2nd hand bikes. The longer you take, the more options you have. Don't go for the first bike you see. Also, I dealt directly with individuals selling their bikes, not with dealers. My hypothesis is that there are good deals to be found on either side, but individuals might have more flexibility with pricing. 

2) Everything is negotiable. The price you see on SGBikeMart is just the opening price. Knowing why your seller is selling the bike, seller's profile, bike condition, etc, will go some way in helping you to negotiate for a better price. 

3) It might make sense to go against the grain. I think I got this on the value side also because it wasn't a very popular model. The current trend for maxi-scooters in the Class 2A category is the Xmax 300. However, that comes with a premium. Given my lack of height, I think I wouldn't be able to straddle the Xmax 300 confidently as my feet couldn't be planted flat on the floor while the bike is at a standstill.   

4) Luck plays a huge role. I got lucky this time round - the bike was supposed to be sold to another guy in March, but circuit breaker came into play and he wasn't able to deliver the cash and collect the bike. And I met a seller who was generally easy going and just wanted to get rid of it. He wasn't looking to maximize sale price. 

5) It's quite straightforward to switch ownership through e-LTA now using SingPass. My last 2nd hand bike purchase required both seller and buyer to head down to Sin Ming to consummate the sale in person. However things have changed since. For my recent purchase, I gave the seller a small deposit upfront to firm up my interest. Waited for him to repay his loans fully and release the bike for ownership exchange, went down to collect the bike and do the remaining purchase price / ownership exchange through internet banking and e-LTA. The wonders of technology. 

Hope this post is of some use. 

To all readers who ride, ride on, and ride safe. Enjoy the weekend!