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<\/span><\/p>\nLast week, there was an article in the Straits Times, titled
\n\u201cMoving from financial stability to financial abundance takes Singaporeans
\n32.3 years\u201d.<\/i><\/span><\/p>\nAs usual, when it comes to the topic of retirement\u2026 it
\ncaused quite a stir online. Based on social media comments, the overwhelming
\nsentiment seems to be that these numbers are ridiculous \u2013 that in Singapore, it
\nis nearly impossible<\/i> to achieve financial freedom \/ financial
\nabundance, apart from maybe striking the lottery (or birth lottery).\u00a0 <\/span><\/span><\/p>\nTo summarise what the article mentioned, the survey found
\nthat from a starting point of financial stability, it took:<\/span><\/p>\n6.1 years to reach financial security; defined as being able
\nto invest on top of saving a portion of income. \u00a0<\/span><\/span><\/p>\nAn additional 6.5 years (cumulatively 12.6 years) to reach financial
\nflexibility; defined as having sufficient financial investments and assets to
\ncover living expenses for up to one year.<\/span><\/p>\nAn additional 8.7 years (cumulatively 21.3 years) to reach
\nfinancial freedom; defined as having sufficient investments and assets to
\ngenerate enough passive income for life.<\/span><\/p>\nAnd finally, an additional 11 years (cumulatively 32.3
\nyears) to reach financial abundance; defined as having more than enough income
\nfor one\u2019s lifetime.<\/span><\/p>\n\n
\u00a0<\/span><\/p>\n<\/p>\nComments on social media raised a few key points.<\/span><\/p>\nFirstly, some folks believed that this survey was \u201cnot
\nrepresentative\u201d of the average Singaporean, because it only targeted the \u201chigh
\nincome\u201d folks. Is it perspective valid? Let\u2019s look at some figures.<\/span><\/p>\nThe survey interviewed 1,000 participants aged between 25
\nand 64, with household incomes of $70k to $250k. <\/span><\/p>\nFor perspective, the median<\/i><\/b> household income
\nfor Singaporeans in 2022 was around $120k per year ($10,099 per month), which
\nmeans that the 50th<\/sup> percentile household would be included in this
\nsurvey.<\/span><\/p>\nAt the lower end, the $70k household income would actually
\nfall slightly under that of a median household consisting of 2 fresh graduates:
\n$4,200\/month per person (2022 figures) amounts to ~$100k per year.<\/span><\/p>\nWhile at the upper end, assuming the $250k household income
\nare for folks in their 50s, then that works out to around $10k\/month per person
\n\u2013 reasonable for people working in middle-management roles at
\nthat age.<\/span><\/p>\nThus, based on the figures above, I believe that the sampled
\npopulation surveyed is reasonable. While it does skew slightly towards the wealthier
\nsegments (the article itself mentioned that respondents were \u201caffluent\u201d), the $70k
\nto $120k income group falls below the median household income. Definitely not only
\nthe \u201crich\u201d folks, as many have speculated. <\/span><\/p>\nBut within the sample there could be anomalies. While a
\n$250k household income in your 50s is would be comfortable, a $250k household
\nincome for a fresh graduate couple in their 20s is undoubtedly amazing. After
\nall, there are fresh grads earning >$10k per month, right?<\/span><\/p>\n\n
\u00a0<\/span><\/p>\n<\/p>\nThe second point that many have brought up is that: if it
\ntakes an average of 21 years to attain financial independence, and 32 years to
\nattain financial abundance, why do we still see many elderly folks working well
\ninto their 60s and 70s? (Or, to be politically correct, some may just be \u201ccollecting
\ncardboard for exercise\u201d). Why isn\u2019t everyone retiring in their 40s and 50s?<\/span><\/p>\nI think this is a valid challenge. I don\u2019t have a
\ncomprehensive answer to this, but I have a few thoughts.<\/span><\/p>\nIf we were to compare the Baby Boomers against the
\nMillennials \/ Gen Z, the Boomers grew up in an environment where the priority
\nwas on survival. Literacy rates were lower, and many stopped pursuing education
\nat a young age, in order to work to support their families. Consequently, if
\nsome Baby Boomers end up falling short on retirement adequacy, I don\u2019t think it
\nis fair to fault them for not managing their finances well. It was a different
\ntime.<\/span><\/p>\nToday, for the majority of the Millennials \/ Gen Zs, life
\nisn\u2019t solely about survival. Education in Singapore is heavily subsidised, and
\nmost go on to complete tertiary education. Singapore\u2019s economy has grown by
\nmany multiples from the early days of independence, providing more
\nopportunities. The internet has also democratised access to financial knowledge
\n\u2013 we have forums like Seedly, SGFI on Reddit or telegram groups like 1M65 where
\nfolks can discuss personal finance. The FIRE movement has also increasingly gained
\ntraction in Singapore in recent years. <\/span><\/p>\nAs a result, financial literacy today is much higher than
\nprevious generations. The barriers to entry for investing is much lower (zero \/
\nlow cost brokerages), and there are a wider suite of products that cater to
\npeople who do not want to actively manage their investments (ETFs \/
\nrobo-advisors). An increasing number of people realise the power of compounding
\nand the importance of starting early, and have started investing in their 20s
\nor even late-teens.<\/span><\/p>\nFor further evidence of the aspirations of Millennials and
\nGen Zs, a survey last year found that on average, Millennials and Gen Zs want to
\nretire earlier<\/i><\/b> than the previous generations, which is ironic and
\ncontradictory to the retirement age being progressively raised.\u00a0 <\/span><\/span><\/p>\nTherefore, I would argue that despite the rising cost of
\nliving, achieving financial freedom today would actually be easier than for the
\nprevious generation. People are more financially savvy, aware of the steps
\nrequired to achieve financial freedom, and have the benefit of staring early
\nwith time on our side for compounding to work its magic.<\/span><\/p>\nThe main contributors to the sky-high cost of living today
\nare private properties and cars. Without these big-ticket items, I believe that
\nit is still possible work towards financial freedom, while enjoying a
\nreasonable standard of living in Singapore. <\/span><\/p>\n\n
\u00a0<\/span><\/p>\n<\/p>\nPutting some figures to each level of wealth<\/span><\/u><\/b><\/p>\nThe article left out any reference to hard figures when for
\neach milestone. Which makes perfect sense, because these milestones differ
\nbased on individual needs and wants. A luxury to someone may be a necessity to
\nanother.<\/span><\/p>\nBut let me share what I think would be comfortable<\/i><\/b>
\nfor me (for 1 person \u2013 double the amount for a couple, although there could be
\nsome synergies):<\/span><\/p>\nFinancial Security:<\/b> At least 6 months of emergency
\nfunds set aside, and starting to build an investment portfolio. <\/span><\/p>\nFinancial Flexibility:<\/b> Emergency funds able to last
\nat least 12 months, possibly supplemented by some passive income.<\/span><\/p>\nBarista FIRE<\/b> (Added by me)<\/i>:<\/b> $1m to $1.25m
\nSGD<\/span><\/p>\nFinancial Freedom:<\/b> $1.5m \u2013 $2m SGD<\/span><\/p>\nFinancial Abundance:<\/b> $3m SGD and above. <\/span><\/p>\nGiven that I view attaining FIRE as a \u201ccashflow\u201d target,
\nrather than an \u201casset target\u201d (FIRE number), the way I think about the last 3
\nstages above would be \u201cif I want a monthly cashflow of $X, how much capital
\nwould I need to invest, based on a reasonable portfolio yield of 3 to 5%?\u201d<\/span><\/p>\nOur mindset is key<\/span><\/u><\/b><\/p>\nFor me, the main takeaway from the fervent debate would be
\nthe different mindsets that people have. In the Financial Independence
\ncommunity, I am used to seeing people with targets like \u201cBarista FIRE by 30\u201d,
\n\u201c2M35 as a couple\u201d, and \u201cRetire by 45\u201d. <\/span><\/p>\nThese are very ambitious targets, but definitely possible,
\nwith a combination of 1) above average income, 2) above average savings rate,
\nand 3) moderate investment returns.<\/span><\/p>\nWhereas in the general comments on social media, the
\nsentiment seems to be that even after working for 32 years, it is impossible
\n<\/i><\/b>to even achieve financial freedom, let alone financial abundance. To me,
\nthat\u2019s the stark difference. Those actively working towards FIRE are mostly
\ndriven, goal-oriented folks, with the conviction that FIRE can<\/i><\/b>
\n<\/i>and will<\/b><\/i> be achieved, even if some trade-offs are required
\nalong the way.<\/span><\/p>\nIf we believe that something is impossible, it will remain
\nimpossible. A good example of this would be the 4-minute mile. For a long time,
\npeople believed that it was impossible<\/i><\/b> for a person to run a mile
\nin under 4 minutes. People genuinely believed that it was just not possible for
\nthe human body. But once Roger Bannister broke the 4-minute mile barrier in 1959,
\nsubsequently, many people could break it as well. This shows that our beliefs play
\na huge role in determining the outcome. Get rid of your limiting beliefs today!<\/span><\/p>\nSurround yourself with like-minded people who share the same
\nvalues and mindsets towards positive wealth building habits, who will inspire
\nyou on your journey. Having the belief and conviction that you will succeed.
\nIgnore the naysayers and skeptics.<\/span><\/p>\nWhile reading through the comments, perhaps my favourite one
\nwas \u201cI don\u2019t even want to work for 25 years\u201d. <\/span><\/p>\nWell, I don\u2019t even want to work for 10.<\/span><\/p>\n\u201cBelieve you can, and you\u2019re halfway there.\u201d<\/b> \u2013 Theodore
\nRoosevelt<\/span><\/p>\nEarlier this year, I made a YouTube video detailing the numbers required for an average fresh graduate earning $4,200 per month to achieve financial freedom within 20 years. Do check it out!<\/i><\/span><\/p>\n
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