Monthly Reports

A Singaporean’s Financial Independence Journey – July 2017

MrLifeCEO - A Singaporean's FI Journey - July 2017

Financial independence is a journey, and a long one at that. Over the past few months, if you’ve seen my monthly updates, things seem rather depressing after plotting some of the projections. Achieving F.I. at 52 is a way longer journey than I’ve anticipated.

Sometimes we all need some kind of motivation. During the past month, I’ve came across a couple of articles that were helpful in putting things into perspective. The first is an article called The Milestones of F.I. and the second is Visualizing Financial Independence with Tiny Blocks. Both articles are very interesting read and I recommend to check them out as I’ve adopted some of the concepts to this month’s reporting.

 

Key Statistics

For this month, the statistics will be based on my own average year-to-date figures, as well as when combined with Mrs L-CEO’s average year-to-date figures. Since we’re in this together, makes sense to pool our numbers together ya? Where’s the fun in enjoying F.I. alone while your other half is still trapped in the hamster wheel?

Stats / Average YTD till July 2017SoloVarianceCombinedVariance
Net Worth:$84,214.41+10.45%$132,222.99-
Savings Rate:49.66%-19.66%47.60%-
Expense:$3,812.59+27.21%$5,569.13-
Actual Return:4.68%+0.8%3.66%-
I/We can stop working for:22 months+10%24 months-
Passive Income / Month:$141.66-12.53%$191.25-
F.I Ratio:3.72%-0.5%3.43%-

 

The Road to F.I.

This is my personal outlook from July 2017. The chart has been modified to incorporate the various milestones of F.I.

Mr Life CEO - FI Target Chart - Jul 2017As you can see, the graph now indicates certain key milestones, the closest of which is to obtain enough F U $.

On a personal level, that should be achieved by next year. I’m actually pretty close to it now, with my net worth mileage up to 22 months as of July (Target: 24 months).

To fully fund my non-discretionary spending with my net worth will only need me to work till 41 to achieve Lean F.I. My discretionary expenses are currently defined as things I’m spending on while still fully employed, such as lunch, daily transportation and the like. I’ve also classified insurance premiums as discretionary as I can cut them off if the need arises. Surprisingly Lean F.I. is 2 years before my Half F.I. mark.

Flex F.I at 49 and Full F.I at 52 are just too demoralizing to talk about at this point in time. Still way ahead of the national standard for retirement though, but still considered too long for me.

F.I. is not about NOT working, but working on things that MATTER.

 

Going Down the Path Together

Taking into account Mrs L-CEO’s numbers, the graph will look like this:

Mr Life CEO - Combined FI Target Chart - July 2017

Mrs L-CEO does require much for upkeep. She seldom shops and needs very little but on the rare occasions that she does go on a spree, her purchases are based on necessity, but we all know how reality sometimes like to fool with us. Hey, who doesn’t fall victim to such errors in judgement? Although times like these are few, but when they do occur, we go by the rule that if it isn’t used for a year, up onto Carousell it goes.

The surprising thing about this is that we have already hit F U $ and we seem to be able to hit Lean F.I. 2 years earlier than if I were to do it alone. However, Half, Flex and Full F.I. are going to take 1, 2 and 2 years longer respectively. Perhaps I’ve overestimated the missus’s discretionary expenses, but currently, it’s by a percentage-based estimate on expense categories and we’re both using the same categories and estimates. I do also have higher family allowance expenses, so something doesn’t fully add up. Will need to take a deeper look at this phenomenon.

 

So Where Exactly Are We Now?

This is THE question that I’ve been asking myself for the past few months. Looking at all these projections fluctuating up and down doesn’t seem to answer this question… until I came across the article on visualizing your F.I as small blocks.

Basically speaking, for every $1,000 in annual expenses, you will need $25,000 to fully fund it to be considered financially independent. So this can be visualized as 1 red block representing $1,000 in annual expenses, followed by 25 green blocks each representing $1,000 of net worth to support it.

For me, I’m not so much of a blocks person, so I’ve

  1. Worked out our average annual expenses in their respective categories
  2. Multiplied them by 25 to determine the amount of assets needed to fully fund each category indefinitely 1According to the 4% withdrawal rule.
  3. Arranged each category by order of importance and priority
  4. Determined the non-discretionary amounts that are absolutely necessary
  5. Distributed our current net worth among each category to see which ones can already be fully funded
  6. Tossed them all into a chart

The result? The graph below:

Mr Life CEO - FI Milestones (Combined) - Jul 2017So what does this mean?

Right now, my parents, missus and myself are all living under the same roof. What this means is that the Life CEOs’ assets can keep our lights on and water flowing indefinitely at the rate of our current consumption. For transportation, we have enough to fund our trips, perhaps to get more food or for other necessities. The discretionary work transportation needs are out of the picture.

The current progress is working on funding family allowances, which includes allowance for the parents and other necessities such as groceries for everyone. Eventually, should we have kids and as the years go by, we foresee this category will fluctuate maybe 5-10%. This is a tough one, judging by the height of the column and its small discretionary component. I believe the standards of living of the elders should not be impacted by us pulling the F.I. trigger, whether willingly or not.

I’m leaving a bit of “F&B – Work” as non-discretionary. I will still need to eat if I weren’t working, or this could go into the “Family” bucket as additional family groceries, but that will further increase the “Family” column, which will be difficult to track, so let’s just take it as such for the time being.

“F&B – Personal” are the eating out expenses. Perhaps more can be discretionary, but I’ll leave it as is for now.

The additional groceries category were for times when Mrs L-CEO and myself got to get our own groceries while our parents were away on vacation. A taste of how life will be like once we move out in 2 years. Therefore, this figure will only be fully formed when we move into our own home in 2019. Furthermore, its sequence down the line makes it a non-priority at the moment.

With regards to the rest of those categories, they’re still a bit far down the line to talk about at this moment. Perhaps when we’ve fully funded more living expenses and as the next item in line gets close, we can discuss more. They might even be changed for all we know.

For now, although it is not much, but knowing that what we have now can keep the lights on, water flowing and ability to move about conservatively does bring some comfort. As mentioned earlier, I believe this is the key measurement of progress I’ve been looking for.

 

Footnotes   [ + ]

1. According to the 4% withdrawal rule.

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