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. 

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 :) 

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.

Thinking of "investing" in the next IPO?

Back when the markets were going hot in 2006 - 2007, just before the Lehman Brothers and Bear Stearns collapse took centre stage, the common water cooler topic was whether you managed to get allotments for shares in the latest IPO on the SGX. It seemed like the gravy train was running full speed ahead on wards to nirvana for retail investors. Not a bad move isn't it, getting some allotments and then selling onto the market, after all in a red hot market the only way is up up and away. It certainly was, till the music stopped and most investors found themselves without the proverbial chair. 

Maybe if you had a better understanding of the IPO process, you probably would have stayed clear of the entire she-bang, so perhaps I can provide you with some insight of what an IPO process is all about, after working in investment banking for a good number of years. Maybe you would then have a better understanding of whether subscribing to allotments in the future would make sense. 

Rationale for an IPO

The IPO exists as a method for either one or a combination or two things. Firstly, to raise new equity for the incumbent shareholder - typically the incumbent tries to tap the equity capital markets for US$[ ]m in exchange for a [ ]% of his company through the issuance of new shares, called a primary issuance. The enlarged company would then be worth US$[ ]m plus the additional US$[ ]m raised through the primary issuance. 

Secondly, to raise proceeds for the incumbent shareholder - typically the incumbent tries to sell down a portion of his shareholding in his company through the equity capital markets, called a secondary issuance. The incumbent sells [ ]% of his company through the exchange of his existing shares for cash. There is no enlargement of anything but the incumbent shareholders' wallet. Sometimes this is called cashing out (exiting) or raising liquidity for the incumbent investor. 

Now... an IPO is most likely a combination of both a primary and secondary issuance, on the pretext of raising capital for expansion (growth story anyone?) and providing the current shareholders with some liquidity as well. There might be many reasons for an IPO, from government privatization exercises to a form of exit for big boys (private equity investors), to a more genuine form of capital raising for expansion purposes by normal businesses. 

Do think about it in more detail though, equity is the most costly form of investment as opposed to debt, so if you are raising capital for expansion through an equity issuance such as an IPO, it probably means that you are tapped out on your leverage and your capital structure really needs some equity. Common sense would dictate that is hardly a good sign... but then again common sense is not really common is it? 

The Investment Banks and your interest do not go hand in hand

The sole job of the investment banks underwriting the IPO is to maximize value for their clients through selling the share issuance. A small technical point is that these days, banks seldom fully underwrite (meaning the banks take the entire risk of the IPO on their books and then tries to sell down in the public market later) IPOs, they do them on a best efforts basis. 

The key word is "selling". And when you sell shit, you want to maximize value for what you get, so there is nil chance of something being fairly valued, or even under-valued. Nil. Donut. Kosong. And that is totally aligned with the investment banker's thoughts, as he wants to maximize deal size in order to generate more fees. Typically these guys are paid 2 - 4% of the total proceeds brought in. 

Ah yes, one small caveat is that if you want recurring customers in the form of institutional investors, you might price down your share issuance a little to provide some "perceived value" so that there is some money left on the table and every one gets rich. But that to me, is pretty much gambling. From a retail investor's perspective, you are betting on the next dude in line bidding your price up as you unload. 

You surely don't get anything at a discount to value, because the sole job of the investment banks are to maximize price for their clients. So if you are thinking of "investing" the next IPO, maybe you should just go play blackjack at MBS, might be a more exciting way of "investing" since you are gambling anyway :) Huat ah! 

Decluttering for the next chapter

Spent pretty much the last two weeks tidying up my life and gosh I haven't felt so at peace with myself in awhile. 

On the physical side of things, I've cut out the usual weekend alcohol after falling ill this week and my mind is starting to feel more lucid and aware instead of the post-week numbness that it usually entertains as a result of a combination of draggy crap it's been saddled through work together with pints of Guinness or drams of whiskey. Have also cleared up the room and literally thrown out bags of trash, cleared out magazines, papers, articles, irrelevant letters from before, and the entire barrage of gifts that ex-girlfriends have sent my way. Somehow managed to put myself through a hard kettlebell workout despite being ill, and suddenly I'm beginning to feel more alive. 

On the softer side of things, I've decided to do a massive clear-out of "friends" on Facebook, the culmination of the last 10 years of acquaintances that I've crossed paths with. Reduced the "Friends" list by c. 70% and it certainly feels pretty good to have some form of control over that to reduce the amount of junk and clutter that you'll have to deal with on social media. I went with the rationale of if I ever saw you on the street and if I didn't have the intention to at least stop and say hi and ask about you for at least a couple of minutes, like a friend would show some concern, I don't think we'll be considered friends. Key word there is "intention". Most people would advise that one should attempt to expand their network and you'll never know when that would be good for your career. 

My thinking on that is to fuck that shit, maybe we should start talking about what it means to have a career instead. Career networking is such as bullshit thing and linking up with potential acquaintances just so they might be of some help in the future smells like such a careerism idea that it makes me gag. I believe in making friends with folks who have similar interests, and if you're interested for career reasons and not because of who I am, what I like and the areas my interests lie in, then yeah I don't think we should be friends. But wait a min, those career networking folks have similar interests - careerism. Oops... 

I guess I like to think of myself as a lone wolf moving through the pine forest in search of nirvana, and sometimes to meet with a pack of like-minded wolves once in a while to have some fun and to bond over some prey. Okay, going on an off tangential spiel now, so I'll end here. 

I've also started meditating a little. Check out this app called "Stop, Breathe, Think". It's pretty helpful for beginners and is a good platform to get started on. 

Boy I feel like a chapter of my life has now closed for a good and a new one is just beginning. Perhaps there is some veracity to the saying "Tomorrow is the first day of the rest of your life". I feel like an animal whose cage doors have just opened and I'm raring to go. 

The Kindle Element

If I could highlight one thing (I hope it's not the only thing) that my parents did right for me when I was growing up as a kid, it would be their belief that their children should have unconditional access to reading materials and literature. 

We would had to earn our way through a mix of savings from pocket money to achieving a certain set of grades in order to purchase luxury items such as a walkman, mp3 player, etc. but we were never denied the books we coveted. Unfortunately, I was more of an active than smart kid who preferred to get my hands dirty at the local playground rather than being holed up somewhere reading a book, thus comparatively to my siblings, I didn't take much advantage of this offer until I started to develop my reading habit in secondary school. 

I remember being recommended James Patterson by a kind auntie from Sunny Bookshop in Far East Plaza (wonder if that place is still around) and I started reading about Alex Cross even before it was turned into a movie. Trust me, the books are way better than the movies. I began to realise how great books for an imaginative mind. The authors did well to transport me to another realm, and there were many a good time I had with these fictional characters and plots. 

As I moved up to junior college, I started to explore the non-fictional genre and discovered the interesting realm of self-help, personal finance, investments and autobiographies. I would say I've been through quite a thick stack of self-help books, but I find that the one which really stood out to me, with its time tested principles, is The 7 Habits of Highly Effective People" by Stephen Covey. We were put through a course on that back in school and I would say that was my first introduction to personal development books. To be honest, despite having the opportunity to read that once through in secondary school, I only did really catch on with the principles in University, having messed around in my secondary school and junior college days. 

And I guess that's the beauty of books. They provide different perspectives at different times of your life when you re-read them. Especially the books on personal development and investments, such as "From Darwin to Munger" by Peter Bevelin - that book is one I try to go through briefly every 9 months or so. Or those books on philosophy such as "This Ugly Civilization", "How I Found Freedom in an Unfree World" or "The Selfish Gene" - they do provide interesting perspectives you probably would not be able to glean if you went about on your merry way through life without every adopting reading as a priority activity. As you can see, I'm a firm believer in investing in yourself through reading. A mind once expanded never goes back to its original shape and size. 

I have to say that the best thing about this decade is the development of technology to accommodate active readers. Prior to the invention of Amazon's Kindle, my house was pretty much stuffed up with hordes of books I had to kinda think twice before I bought anymore. Well it still is filled up with books now, but I haven't had to think twice about storing more books (electronic copies), no thanks to this nifty device. Mind you, my Kindle was one of the earlier versions of the Kindle Touch, and I purchased in in 2011. To date, that has been my best "luxury" purchase over the last four years, thanks for the sheer pleasure and adventures I had through it. 

These days I try to put in some reading on the train trips to and fro from the office, which can take up to an hour each day. Most days I do non-fiction and some days I'll load up some trashy novels to ease off the knowledge expansion project. ha ha! How about you dear reader? If you're reading this piece right now, chances are you'll like reading too. What are some of the best books you've come across that have impacted your lives? And how much heed do you pay to reading? 

Thoughts on Physical Training

One of my biggest fears is the wasting away of my body, and along in that, the wasting of my mind as I continue to plod along the path in search of the pot of gold at the end of the rainbow.

We've all heard stories of fellow schoolmates who were in their prime, the most outstanding and natural sportsmen during our teenage years. Envied by the boys in the compound for their sporting abilities and idolized by the girls from the nearby schools for mainly, their developing bodies (at least on a subconscious level). Well, I've never been an outstanding model of physicality, and had always been a late bloomer in that aspect, suffering from bouts of childhood asthma together with a strong penchant for a "Happy Meal" or "Zinger Burger" on the bus trips home.

Gradually, I decided enough was enough and thus started developing my physical fitness, undertaking certain endurance events through my JC and NS days. Now that I'm more than halfway there to my goal of financial freedom, I've started to dream of the things I'll do once I'm done with investment banking, and I realise from past experiences that I do love pushing the limits of my physical endurance levels, trying out different events would pit me against myself. Definitely one particular realm I'll like to focus my attention on would be adventure racing and self sufficient ultra marathons.

The main takeaway since beginning my journey into developing myself physically is that with the right mindset, discipline and plan, you can pretty much undertake any physical challenge you want to. Go from couch potato to marathoner in 60 days? Drop 30 kg in eight months?  Complete a 10km swim in one continuous attempt? These are all possibilities, as long as the right plan is in place and there is a strong will to follow through and execute your plan.

And little did I realise that was actually a transferable "skillset". You start believing in yourself and your abilities once you've completed those physical goals that hey perhaps I can do something like that in the corporate world, or I can actually retire by 35 with a few million in the bank. You draw strength from your past victories to keep you moving forward in search of future victories. Your goals might not always be reached, but hey, shoot for the stars and even if you don't reach them, you'll at least reach the clouds.

These days, I try to put in at least 3 HIITs (high intensity interval trainings) that lasts anywhere from 15 to 30 minutes, together with a run of  6 - 8km over the weekend. I do have a pedometer (think something like fitbit) and I try to cover about 4 to 5 km through walking daily. Hopefully that will put me in a good position to embark on my sporting adventures post calling it a day in the corporate world. And you know what, I actually feel much better and more effective during the day comparatively to a period where I was just slogging my guts off at work. I bet my heart and body agrees with that to some extent too.

Simple habits that translate into effectiveness in other aspects of life. I think there's a word to describe that - keystone habits. Maybe lacing up your shoes and heading out for the run might do more for your life than just generating endorphins.