Sunday, August 28, 2022

The Ultimate Financial Independence Visualisation Tool

There's a saying that goes like this "If you fail to plan, you plan to fail". However, most of the time, you may be lost as to how to start your own financial planning to achieve financial independence (FI)? How do I even know how much income, expenses or investment return I must have in order to achieve FI? When is the age where I can finally say to my boss "I Quit"? 

These are all relevant concerns which is why I created a financial independence visualisation tool which I use for my own financial planning also. I've made it easy to use so you can just input your age, income, current savings, expenses, target dividend yield, bonus, salary increment and emergency fund and the tool will calculate it all out for you. 

Here's a screenshot of how the tool looks like in excel:

I'm giving this tool for free for download so do read all the way to the end for the link to download the tool. 

Visualisation is powerful where it can let us see where we are currently and where we will be in the future. With visualisation, we can adjust our parameters and achieve what we want for FI. This is like seeing light at the end of the tunnel instead of being blinded by darkness if we cannot visualise where we are going.

For example, if you're thinking of achieving FI when you are in your 40s, how do you do it and does your current financial situation allows you to do it? By putting in your details in the spreadsheet, you will be able to see if the dividends you receive will exceed expenses by what age? 

Using the visualisation tool, a person at current age 30 with the below details will have his dividends exceed expenses at age 62 only:

For networth, this is how it will grow for the same person:

To recap, for this person, his dividends received will exceed his expenses only at the age of 62 with a networth of almost $2.2 million. This is considering he only had a $2500 monthly expenses in his 30s. Dividends he will receive annually is $91,627 while his expenses will be $90,128. That's an expenses of average $7500 per month which has increased about 2.6x in 32 years just based on an inflation rate of 3%. That's the impact of inflation it has on our lives so we must factor this in our financial planning. We will definitely need more money in the future as cost of living continues to go up.

We assume the person above consistently invests 85% of his networth at 5% investment return and he will have $2.2 million at age 62. What if this same person does not invest at all? How much will he have when he's 62? The answer is $1.1 million, half of what he would have. This is the power of compound interest through investing. In the visualisation tool, it assumes that dividends received are reinvested back so it still acts like compound interest overtime. 

The tool may not be perfect but it would be the closest to what we can have to visualise our financial future. Feel free to try it and adjust the parameters and formulas to suit your needs if you feel its not too accurate for you. 

You can download the tool here and try it for free now. 

Hope this helps in your financial planning!

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Friday, August 26, 2022

Work can be frustrating and that's why the need for financial independence

Recently, I've been feeling frustrated with work and it's really bad for health. Getting blamed for mistakes, getting scolded and being thrown lots of workload are part and parcel of the working life. Sometimes, missing deadlines is not entirely controllable as there are many factors which can happen and having to go through multiple approvals and stakeholders can delay the whole process. Not everyone is cooperative and in the end most people will protect themselves first. I've worked in 3 companies now and all have its good and bad points. The verdict is whichever company you join, there are bound to be unhappy times and times of frustration and stress. At the end of the day, most people are just working for money to put food on the table and pay the bills. 

Sometimes I wonder is it because I take work too seriously and get affected when I make mistakes. I blame myself a lot and keep repeating in my mind why did I even allow it to happen. While on the other hand I also see people who are nonchalant about their work attitude and can get away doing little work by acting blur. These people survive the longest in the company. 

Nevertheless, this is why it's important to achieve financial independence because you are able to be in control of your happiness and health by calling it quits when it becomes unbearable. There are more young people who are in fact doing this now where there's a term called the great resignation where many resign without a job. Many people are also suffering health problems and burn out as we progress as a nation. Unfortunately, the push for productivity may end up causing many to suffer considerable side effects on their health. 

Will we end up like Japan where their citizens can work non stop and even to the extend of death by working? I think as society progresses, it gets increasingly difficult especially for Singapore where we have no natural resources. We can only depend on ourselves in order not to work to our deaths. I've already seen some colleagues who passed away while they were still employed by the company due to certain illness. They didn't get to retire at all. 

While I still cannot call it quits when work gets frustrating, I hope one day I can finally say I do not have to work for money and really do the work which I enjoy and not having to be frustrated and still suck it up. 

Sunday, August 21, 2022

Financial Independence, Retire Early (FIRE) Movement

CNA came out with an article on Financial Independence, Retire Early (FIRE) and the writer really captured the gist of what financial independence is about. In fact, this is the first time I've seen such a good article from main stream media talking about financial independence. You can read the article here.  

Image adapted from

Financial advice from main stream media?

In the past, most financial advice from main stream media often comes from financial advisors or experts but are often not so relatable to the people on the street. Most advice will tell you to save certain amount and draw down that amount when you retire. For example, a typical advice will ask you how much you need per month during retirement (eg $5000) then you'll need to save $xx amount so that it can last you for xx number of years. If you save up $1 Million dollars, $5000 per month during retirement will only last you 16 years ($1 Million divided by $60,000/year). If you retire at 65, this $1 Million will last you till you're 81. 

With articles on FIRE coming out from main stream media like CNA, it goes to show the younger generation of journalist have been brought up differently and are exposed to other forms of financial advice other than from experts alone. This is encouraging as more young people are taking charge of their own finances and are finally seeing the light to the real financial independence. 

Financial Independence, Retire Early (FIRE) movement

The Financial Independence, Retire Early (FIRE) movement is different. This started to get more popular through the financial blogging community where a group of us were so called obsessed with saving enough to retire early. I was one of them back then when I started this blog in 2013. Its been 9 years of blogging journey and more than 10 years of pursuing financial independence for me. I was impacted by other bloggers who have been blogging for a few years and in fact, most of them have already achieved financial independence by the time I read their blog. A few of them were in their 40s and have accumulated millions and put their money to work over many years to achieve the financial independence they were able to enjoy. Although I don't write as much now, I'm still quite active in managing my own finances and still putting my money to work through investing. I've not given up on this journey and in fact I'm glad I started it early. 

Achieving financial independence is defined as "the status of having enough income or wealth sufficient to pay one's living expenses for the rest of one's life without having to be employed or dependent on others." This definition I extracted it from Wikipedia. It accurately describes what FI is all about. The income to pay one's living expenses is often from dividends from stocks, rental from property, annuity plans (eg CPF life) etc. The key is this income must be passive. This is the method which I subscribe to as compared to traditional advise of asking you to save and then draw down your savings during old age. Drawing down your savings is also a form of retirement plan but you'll soon realise that many people face the problem of not enough money in their old age and have to go back to the workforce again even when they are in their 70s. Remember, $1 Million dollars can only last you 16 years if you draw down $5000 per month. That's not a lot of years to be honest for retirement. 

Is it possible to retire early?

The FIRE movement has financial independence but also has retire early in its description. If you want to retire early, having the plan to draw down your savings when you retire is a definite failure. It won't work at all because your numbers of years to live will be quite long. For example if you retire at 50 and live till the age of 80, that's 30 years of life! If you spend $5000 per month for 30 years, that's a total sum of $1.8 Million dollars! Don't forget, inflation will still continue to happen for that 30 years and even at 3% inflation, $5000 will only be worth $2500 in 24 years. This is because at 3% inflation, your same plate of chicken rice at $4 will probably cost $8 in 24 years. If you think this is unlikely, look at how much the same plate of chicken rice was about 20 years ago? The answer is $2 and it has doubled to $4 now in 20 years or probably lesser as what we've experienced. 

If you have passive income in the from of dividends or rental income, that income will increase over the years. Why is this so? Think about it, rental income has definitely increased over the years. I found from HDB website that the rental rates of a typical 4 room flat is about $2000-$2400 in 2022 while the rental rates was $1300-$1500 back in 2007 which is 15 years ago. This is a 50%-60% which is about 3%-4% increase per year which just nice covers inflation. 

If you have passive income from dividends, the income also will increase over the years. That's if you pick the right stocks with growing dividends or what we call distribution per unit (DPU). Let's take a look at one dividend stock in Singapore which is Frasers Centrepoint trust. Its dividend in 2007 was only 0.066 cents per share and in 2021, its dividend is 0.12 cents. That's a whopping 82% increase over 14 years which is an increase of about 5.8% per year. That's even higher than the rental income growth from a HDB property. Although there's a significant drop in DPU in 2020, it has mostly recovered back and is on track to grow even more beyond 2022. Not only that, FCT share price has also increased from 1.29 during its IPO in 2007 to 2.32 now which is a 80% increase. 

Is extreme savings needed to achieve FIRE?

Now comes the question, how do we achieve FIRE? Do we need to embark on a campaign of extreme savings to achieve what we want? In 2014, I wrote an article on "Why extreme savings is more powerful than investing". I was much focused on saving as much as possible back then and would scrimp and save even on food and drinks. I was brought up in an environment where money was hard to earn and saving as much money for rainy days is important. As I grow older, I begin to realise the importance of balancing saving vs spending. Its about setting a plan on not too much savings as well as not too much spending but still being able to achieve your financial goals. As I continue to invest my money and my dividends from stocks continue to grow, I'm able to spend more and still can achieve financial independence around the age of 47 which is 12 years from now. That's the goal I set for myself. This is the balance I seek where I don't achieve FI that early but don't have to scrimp and save every dollar I have. 

I've also seen some people embark on Barista FIRE where instead of having enough passive income to support your lifestyle, you have the passive income to cover your basic needs and work part time to cover the rest. This can be called a semi retirement where you retire from full time job and work part time doing the things you like. 

Enjoy the journey

A financial independence journey is often a long one so its important to enjoy the journey along the way. There are certainly some sacrifices to be made to save enough but its important to also balance and enjoy sometimes. 

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Thursday, August 4, 2022

INVEST Fair 2022 - Investing in this Borderless Era

With physical events coming back after COVID, INVEST Fair 2022 by ShareInvestor is also back with their physical event on 27 August 2022 at Suntec Exhibition Hall 404. It is good to have such physical events where we can immerse ourselves with all the knowledge we can get and concentrate on what the speakers have to say. It is still quite different from virtual talks where we often get distracted at home. 

I enjoy physical seminars as I really can concentrate and focus my attention for that few hours when I'm there. I've tried attending virtual seminars and it is definitely not the same experience. INVEST Fair is one of the few events which I like to attend and another of my favourite is the REITs Symposium. Both have good speakers which I can learn from even at this stage of investing for more than 10 years now. 

This is the 15th year that INVEST Fair has been held. I remembered I attended my first INVEST Fair back when I first started investing in my early 20s probably 12 years ago. Looking back, INVEST Fair was fairly new back then. 

Highlights of INVEST Fair 2022

For this year, INVEST Fair  will focus on 3 special features:

  1. Public Listed Companies Engagement
  2. Insights from industry veterans
  3. Different investing strategies
Property Investing
There are many topics to choose from ranging from macroeconomics to investing and trading. There is even a talk on property where the head of research of Knight Frank Singapore will share about the wealth report and luxury homes in Singapore. With property prices at sky high prices now, will property prices continue to rise? In the area of luxury homes, will we see more of such properties due to the rise in high net worth individuals? It is interesting to note that the number of global Ultra High Net Worth Individuals grew by 9.3% in 2021, up from 2.4% in 2020 and Singapore is predicted to witness a 268% growth in its Ultra High Net Worth Individuals (UHNWIs) population to around 6,000 individuals by 2026.

Stocks Investing
In the area of investing, its not been an easy time for most investors as stock prices come down and investors are seeing losses in their investment portfolio. Topics such as "Picking Winning Shares For All Economic Conditions" by David Kuo, Co-Founder of The Smart Investor will be interesting for investors who want to know how to navigate the impact of rising inflation and interest rates on our investments. During the past many years, we've enjoyed falling interest rates and surging government spend where this propelled property and bond prices alike. That was the era of "free" or easy money where we had multiple rounds of quantitative easing (QE) which is essentially the printing of more money and low interest rates enabled ordinary people to borrow more money. The head of research of Phillip Securities research will share on "Investing in inflationary times" where he will focus on the macro framework for investors to pivot to. 

There will also be a panel discussion on "Investing in Uncertain Times" where this would be interesting to know from experts on how to invest under the current economic conditions. There are many other topics on stocks investing which you can check out on INVEST Fair 2022 website here

Stocks/Options Trading
Finally, there are also topics on options trading where the Chief Investment Officer of Tiger Brokers Singapore will share on "Options Investment Strategy".

Shanison Lin, Founder & CEO of InvestingNote will also share on the topic of "Level Up Your Experience in Trading" where we can learn some trading tips from him if you're a trader or interested to learn about trading. 

Register for Free for INVEST Fair 2022
The list of speakers and topics are still in the progress of finalization and there will be more added closer to date. This event is free for all to attend and you may register here on their website. 

Event details:
27 Aug 2022 9am to 6pm
Suntec Exhibition Hall 404

This post is sponsored by ShareInvestor but all views are of my own