Sunday, 24 May 2015

I could flip the bird and "retire" now, but...

(This is going to be a long post. I did think quite a bit over whether I should actually do a post on this, given this essentially is a first world problem, but I figured articulation of my thoughts might prove helpful to myself and it might be useful to folks who are embarking on the FIRE path in realising some of the challenges and downsides FIRE might yield.

Oh yes by the way it's my blog (like it's my life). So please hit "back" if a whimper of disgust has arisen in your soul. I don't really care. Or do I care by writing this disclaimer up top? Hmm... nah...)

Ever since I started out my FIRE journey back in the summer of 2008 with my first peanuts paying corporate gig, it has always been a life long dream to be able to flip the bird to the "Man", ride away into the sunset on my harley davidson, all guns a blazing, never to return to corporate town and the shit it stands for.

Before I got educated on the nuances and strategies required to sustain an FIRE path, my initial target for my FU stash was set at S$500k. Somehow that became S$1.0m along the way, then S$1.5m, and at this current point in my life, it's contemplated to be S$2.5 - 3.0m. Large does of pure dumb luck, coupled with some discipline, loads of hard work, sleepless nights, and a persistence to drudge along the path less taken has resulted in a decent stash of S$1.3m before I turn 30 years of age, which comprises of pure liquid investable assets without any form of leverage. 

In case you think I'm some trust fund kid, when I started out in the corporate world, I only had less than S$7k from pocket money, savings through scholarships and liquidation of a life insurance policy that my parents had bought for me when I was much younger. That being said I'm extremely thankful to my parents for paying off my tuition fees in college, which I estimate at S$35k in total, and for providing me with a base to work on.  

S$1.3m - certainly a result that the 14 year old version of me would have never thought of being possible in my wildest dreams when I was just mucking around in secondary school chasing skirts and pulling hokey pokey BS around town, and a form of catharsis that the 24 year old version would feel as a result of putting faith in my abilities and choices over the last couple of years, which were somewhat fearful to make in hindsight. 

Using the results of the trinity studies and from other pieces of analyses, a typical 4% p.a. withdrawal rate would result in c.S$52k of passive income a year, which means c. S$4k of free cashflow a month. Technically I could call it quits now, but I realise the further I go along this path, the nearer I get to the end result of my FU figure, the more uneasy I feel. And this comes as a surprise to me, as I would have thought that I would feel much better as I progress towards achieving my goals. 

I spent some time ruminating about why I would have felt this way. And I also spent time trying to draw some form of vicarious experiences through other FIRE websites and forums (special thanks to LivingAFI for providing some guidance on this through his piece on his experience with a therapist). And I kind of figured that my uneasiness revolved around the below themes:
  • Focus (Goal vs Progress approach): I've spent the last 7 years totally focused on a goal. Delaying gratification, pushing ahead and against the consensus view. Now that some of it has come to fruition, I'm going through a phase where I feel a loss of drive to progress, as if the carrot does not taste that sweet after all. Similar to the law of diminishing marginal returns, or how one would feel where after chasing a chick for 6 months and realising hey I've placed the girl on the pedestal. It wasn't that good after all. Or maybe delaying gratification and saving money have been providing the endorphin rush and now that there should be less emphasis on saving and instead experiencing life for what it has to offer, I feel lost.
  • Identity: Although being a banker ain't fun at times, I've managed to tough things out and ride the waves (though I do admit that there were some monster waves that I thought would cause my demise) in a proficient enough manner that I have become good at what I do, ranking at the top of my class since I've started out. Trust me, for most things, if you apply yourself wholeheartedly and mindfully to it, you'll eventually become good at it too. But undoubtedly, you'll find yourself drawing a form of your identity to it. Honestly, I started off in this world with a huge chip off my shoulder, wanting to prove myself that I could excel in this role even though I thought it sucked balls, but I think I've actually grown to enjoy some aspects of this, such as the analysis involved and decision making process. In some senses, it has become a parasitic relationship where I need to find a replacement outlet for throwing myself into if I do leave. I thought of living in a different part of the world for 6 months at a time, experiencing different cultures and pushing through several hardcore physical endurance goals such as the four desserts ultra marathon series, but somehow I do feel like I'm tethering on the edge, the edge of either lifting off or engines down.
  • Worries: Anxiety over whether my lifestyle is going to blow through my free cashflow. Anxiety over whether my portfolio is built to last for the next 50 years. Anxiety whether I'm adequately covered from an insurance perspective. Anxiety whether I'll be able to take care of my parents in the future. Anxiety over what I'll eventually be doing. Anxiety over whether I'll be able to contribute any value to the immediate society next time. Anxiety over whether I'll just be sitting on my ass watching TV serials 24/7. Anxiety whether I'll degenerate mentally and whether I'll lose my drive and focus that has kept me well heeled since graduating junior college. Anxiety over being anxious about the above. Perhaps it's easier to be a lemming and follow the herd instead of branching out. That way, you could blame someone when you turn 60 and realise your life has been a "template" and you've wasted it.
  • FOMO (Fear of Missing Out): If I leave the finance industry, there's going to be little chance to turn back. Am I doing myself a disservice when my path to being a senior banker is pretty clearly laid out. In 3 - 5 more years, I'll be able to make "Executive Director". Am I letting my parents down by choosing to FIRE? Am I wasting the first 22 plus years of my life getting educated and then beating the capitalist game in less than 8 years? Am I missing out on the finer things in life by leaving now? What if my stash runs out? This is as good as it gets for a middle class boy made good, why would I want to leave the gravy train? 
I never did think much about these issues when I first started out. It was all guns a blazing and a head first endeavour into the great challenge with much relish, but it's obvious that these are pertinent issues and probably needs more analysis and experimentation with over the next couple of years as I move towards FIRE.

What do you want to make out of your life? My honest answer is I have yet to find out. 

Sunday, 17 May 2015

Thoughts on leading a template life

Have you ever thought about how your life is panning out and developing? If you have, you're most likely at the stage of bridging towards the self actualization phase under Maslow's hierarchy of needs, which is what I would like to term as a first world problem.

The truth is being able to actually entertain such thoughts on a regular basis means you actually are in a pretty decent position right now. You have the basic necessities fulfilled and are looking towards self fulfillment and really building a life worth living. I met a couple of banker friends for a round of drinks this week, and most of them were lamenting that now they had some sort of free time given the crappy markets and their even worse pipeline, they were really bored with their current lifestyles. Putting the unpredictability of banking aside, where you won't know what you'll be doing on nights and weekends, they mentioned the predictability of leading a typical existence, AKA living life according to a template. 

The typical template of a seemingly well heeled life in the corporate system typically starts when individuals are mere tadpoles, with life milestones put in place via societal and inter-generational expectations through scoring well in nationwide examinations, getting into the best schools and colleges, getting lucky and obtaining offers for internships / full time positions, and then starting corporate life with much enthusiasm and vigor, only to realise what's next. 

For most of my friends, they then fall in love, purchase their first property and before you know it, some kids are popping out and then it's groundhog day everyday. And you know what, most of my friends are actually "resigned" to experience life like this, and I can totally understand why. From well meaning relatives, and expectations that are both subconsciously and consciously imposed on us by society, it seems like the perfectly normal response to follow the herd. 

Though I would question if life is really worth living by through the motions via following the herd instead of pushing for what makes you really happy. The more dangerous, unpredictable and insecure path of padding through the snow as a lone wolf, living life in a contrarian, unconventional, and exciting manner. The way I see it, you get to be proficient at what you do after 7 to 10 years of doing so with deliberate practice, assuming a typical 40 hours a week based on the notion that you'll become an expert with 10,000 hours of practice. 

So if you live till 80 years old, that means you get about 6 chances to reinvent yourself, to build different facets of your personality and character. Doesn't that excite you, to know that your current job is only a small part of the grand scheme of your life, and no matter how exciting or tiresome it is, you'll eventually move on to more fulfilling experiences? Ultimately, life is all about choices, with some choices mattering more than others.So start making those choices that will yield dividends in the future, with the knowledge that you are the sole captain of your ship and the master of your fate. You can choose what kind of life you can live, and it is your responsibility to take charge of that. Yes you can be a MMA wrestler by night and a equities trader by day. You can be an investment banker and a triathlete. You can be an accountant and a adventure racer. 

Beware of the pitfalls that might throw your scheme into disarray though. These pitfalls typically include revolve around you providing a form of commitment that you aren't ready for, be it on an emotional or financial commitment. I.E. kids, mortgage etc. But the most commonly overlooked pitfall would be to live life in the past or in the future, and not being in the present. I feel that focusing on the present, and being mindful in an objective manner in observing present reality, is perhaps the only way to save us from swinging between the cycles of unhappiness and happiness, and to experience everything with the knowledge that regardless of our preferential bias, it is impermanent. The moment we avert or crave something, someone, or a particular sensation, we are left feeling anxious about the situation internally. 

That last paragraph of prose might run contrary to what I've been saying about the exciting future one can have, but if you do read more in depth, living in the present moment would have more of an impact on how your future pans out, as you become more aware of what you do on a day to day basis and the impact that has going forward. Think about it. 

Oh the decisions we make. And the choices we have. How exciting it is, to live, to experience, and to strive forward. Carpe diem and may you find happiness in life :) 

Friday, 1 May 2015

Thoughts on blogs and insurance

Have been pretty busy over the last couple of weeks traveling for business. Thank goodness for this long weekend. Counting thy blessings.

Came across a blog called LivingAFI which I would rank as one of the top three financial freedom blogs that I've come across. Have been quite a fervent reader of the The Financial Samurai and Early Retirement Extreme since commencing my "career". The Financial Samurai feels very relatable as we basically come from the same industry and Early Retirement Extreme seems like a hardcore straight out logical thinking fellow who's pretty impressive -I could never do what he has done to get to where he is. 

But LivingAFI, at the risk of sounding like I have a man crush, boy I've hadn't such an inspirational feeling from reading a blog since goodness knows when. Have gone through almost all of his posts and his attitude towards work, though in a different industry, is strikingly similar. Although the effort taken to elucidate our blog posts are rather different - I literally just regurgitate my thoughts all over blogger instead of taking the time to do nice illustrations and frame my thoughts in a coherent manner.

I think most financial blogs in Singapore generally comprise of investments, analysis on what to buy next and what not, but I seldom see local blogs portray a strong attitude to championing FIRE, nor provide a how to FIRE description in a local context. Fucking boring. I honestly think the investment concept is pretty simple - for folks just starting out in investing, a low cost Vanguard (or similar) index fund that tracks say the S&P 500 index or a global world index would be your best bet. If you want to do stock picking, I suggest starting a mock portfolio first and tracking your performance over 5 years before actually implementing it. There would be a high probability that you'll generate lower alpha on a portfolio basis as compared to low cost indexing.

On a side note, I think the worst place to start learning about investing, money management or FIRE would be from the "Me & My Money" series on the Sunday Times. That used to have a few gems, but I would say almost every single article that has been published in 2015 lacks character. You'll be served better following the blogs linked above or I would probably go out on a limb and say this blog.

So I managed to meet with my insurance agent over the last couple of weeks for a yearly "catchup". It's been three years since we've caught up because I didn't see the need to do so. I've got this term insurance policy which costs c. S$600 p.a. for a payout of S$200k on death or suffering caused by total/partial permanent disabilities or sickness (I think there are 30 plus of them). I bought this when I began working sometime back on the pretext that my family could be taken care of with S$200k, with the assumption of some form of medical insurance from my employer. Now I've accumulated a certain net worth which covers the insured amount by [ ]x and I am thinking of discontinuing this term policy. After all, if I pass, or fall ill, my family gets to inherit that net worth, and past a certain inflexion point it wouldn't make sense to pay out that S$600 p.a.

Question to the internet: What would be the net worth that you'll be comfortable with prior to discontinuing term insurance?

Further to that, assuming ceteris paribus, I think I'll have a maximum of 5 years in banking left before I can call it quits for good. To do that I estimate a net worth of S$2.5 - 3.0m, excluding property (i.e. investable net worth that can generate passive income through dividend distributions or portfolio rebalancing). Thus I've begun to explore hospitalisation and medical insurance, with the whole idea of complementing the government's medishield life such that you won't have to pay for any hospitalisation bills at all. I'm not yet 30 years of age, but I think these are important concepts from an FIRE perspective. If I've missed any other types of insurance (please don't get into life insurance with ILPs proponents...), kindly hit me up.