Quality of Life beyond Financial Security

JC Project Freedom Journey Towards Financial Freedom

One of my favorite blogs is Kyith’s Investment Moat$, he is the master of all calculations and his blog has lots of treasures on financial freedom. He shared a LinkedIn post from Anshu Sharma.

Once you are financially secure, there is no difference in the quality of life between you and the richest person on earth. You both have limited time on earth. A sandwich is a sandwich whether a billionaire eats or you do. Money is nothing but a piece of paper or a number on your phone. Real life is in relationships. Work on something you love, become financially secure, have good food, enjoy your relationships, take care of your parents and find a bigger purpose to help others. That’s all there is to life. Time is the real currency of life, not money. If you are young, you are far richer than an old billionaire walking the earth. Sooner you figure this out, the happier you will be.

Anshu Sharma

Once you achieve the financially secure milestone, it is more important to invest in relationships, helping others, and having a purposeful life. What would an ideal day look like to you? I will want to wake up without an alarm, have breakfast with the family, and spend the morning reading newspapers and books. In the afternoon, I can meet up with friends for coffee. Then in the evening, I can spend time with the children to help them with their homework and talk about some interesting things that happen in their day. On other days, I can teach tuition and volunteer my time mentoring the less privileged children.

What is financially secure to you?

There was a time when I thought that the family is close to financially secure. There was a bumper year of a special dividend in 2017 and the following year’s dividend started to decline from 2018 to 2019. How do we determine financial security? When dividend income exceeds your expenses, does it mean you have achieved financial security? Is there a rule for this? Dividend income can decrease when businesses are not doing well. You may argue that you can adjust your expenses to meet the fluctuation of dividend income.

I thought that in 2019, we are in a financially secure position, I went to try something which I like, and I realize my wealth became slightly stagnant. In 2020, COVID-19 came and there was a sharp drop in my wealth for a while. I started to question the plan.

Financial security is a state of mind. This is the crux. Different people accept financial security in different ways. I have read Kyith’s blog and changed the way I approach financial security. As you can see previously I was busy pursuing the goal to increase my dividend income. Then I aim to diversify the portfolio and increase multiple streams of income. The biggest challenge with different streams of income is how solid those streams of income are. How sustainable they can last? It can be passive but if it lasts only 1 year, it won’t help you to retire. Maybe you can take a sabbatical leave for that 1 year. Hence, I refer to Kyith’s Initial Withdrawal Rate ratio.

Initial Withdrawal Rate = stable income you need in the first year divided by your initial portfolio value

I am toying with various numbers and I want to understand whether the number will increase with more family commitment.

Scenario 1
Initial Withdrawal Rate = S$80,000 / S$2,000,000 = 4%
This is in the range of Barista FI and Risky FIRE

Scenario 2
Initial Withdrawal Rate = S$80,000 / S$2,500,000 = 3.2%
This will come close to Financial Security, Financial Independence, FAT FIRE

Scenario 3
Initial Withdrawal Rate = S$60,000 / S$2,000,000 = 3%
This will be the same as Scenario 2, Financial Security, Financial Independence, FAT FIRE

It is easier to achieve Scenario 3 than Scenario 2. The portfolio needs to increase by another 25%. Reducing expenses by S$20,000 is not a simple affair.

Currently, both of us are working and we are spending more naturally. I think we can scale down our expenses if don’t have employment income. We will become more practical to manage our expenses when that time arrives. Mrs has started her side hustle in the last 5 years and she is going to change her side hustle into a full-time business. With good wifi, she can bring her business with her globally. I will like to relocate to another country for the family to increase their global quotient. Meanwhile, I can still be meaningfully employed and feel challenged at work. I want to work to keep myself engaged and train the next generation of team members. I will return to Singapore maybe after 5 years to a decade. Then it is time to volunteer and teach for my 2nd career.

Be the first to comment

Leave a Reply

Your email address will not be published.