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?
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.
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.
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$10 for a ballot and leave it to chance. We went for two rounds of balloting and just received a decent queue number this time round. So hopefully we get to select a decent unit that we like this time round.
Mortgage financing while F.I.R.E
Obtaining mortgage financing was the trickier bit. We're both freelancers and have come into the self employment in recent times. She has been doing freelance work since Nov 2019 and I just started in Mar 2020. Meaning our tax assessment for FY2019 showed her as full time employed and me as unemployed.
My mortgage financing strategy since Feb (when the BTO process started and we started looking at resale units too) was to engage various mortgage brokers and banks directly since HDB requirements were for 6 months of self employed income.
I wanted to see if it was possible to get asset based financing given income based financing seemed unavailable to us. Well, let's just say to purchase a S$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.
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.