Saturday, 21 May 2016

Money Talk

Do you want to live your life just by spending your passive income, with another 200% buffer, without using any of your capital? Here is an illustration of how I will do it for my family of 3:

Needs: $15,000/year - This amount of money is what my family will need minimally to survive in Singapore

Wants: $14,000/year - This amount of additional money is what my family need to maintain current lifestyle in Singapore (this include yearly travelling, restaurants visits and more) - I will share more tips in future on how you can spend less to get more - Frugality

Total Needs + Wants = $29,000/year

At 5% return, you will need to have $600,000 to provide a passive income of $30,000/ year. The capital remains untouched. For simplicity, assuming the capital growth covers the inflation rate.

As a prudent family man, let us set aside 2 years worth of emergency cash of $58,000. Assuming this generate 2% a year of interest. You will have about $143,000 at age 80 using my current age of 32.

We bought annuities and insurance at a premium of about $11,000 / year for my family of 3, payable up to 40-50 years old. So using mine as reference, please set aside about $170,000 for life time annuities and insurance premiums.

Let us make some assumptions:

Assuming mortgage fully paid - $500,000
Assuming you have met the basic retirement sum for CPF - $100,000 (now is $80,500) link: here
Assuming annuities and insurance continues to perform based on past decades - $800,000
Total : $1,400,000

Let us recap, at age 80, you have $600,000 to generate passive income of $30,000/ year to cover your expenses for a family of 3, based on my comfortable lifestyle at present value. You will have $143,000 left in your emergency fund, while another $1,400,000 untouched. Total of $2,143,000.

Still feel insecure? You and your spouse can do some freelance or part time at 22 hours a week to generate, say, $30,000 a year to cover your expenses. This works out to be $13.20/hour.

What is the moral of the story? Do you mind to sum it up for me?


  1. Will your household expenses be increasing each year when your children is growing up and plus higher inflation effect on education costs?

    Once your kid reaches secondary school level, his/her expenses escalate faster than in primary school. He/she will have more social activities and leisure.

    University education cost is inflating every 2 to 3 yr around 10%. :-(

    1. Hi CW

      Household expenses will increase, but it is possible to minimise it. It depends on how we want to manage the money. On the education part, if we are worried, we can set aside more buffer if necessary. It is all possible to plan, but the question is, ourselves. A lot of time, we spent money by choice or habits, we actually don't need so much, even for the children. Agreed that tuition fee for university is increasing at a ridiculous rate. 3-4 years and 50k spent on local degree. Most people want to be a degree holder, what to do.

  2. Hi FD,

    Just a joke as u always know me! :-)

    Assumption, just assumption!

    if only minority or just your family freelance and part time, it is ok.

    Imagine whole of Sg workforce also all follow FF path and do freelance and part time, (22h).

    Then the entire output of Sg economy will be halved!

    So maybe by ur next generation, maybe u enjoy ur life, and ur son will lead a terrible life. Our economy and currency will falter!

    So how huh?

    Maybe some can shift back to Malaysia or Indonesia if their spouse is from these countries. But local Singaporean how huh? :-(

    1. Hi Rolf

      I can assure you that this day will never come.

      Why? Human is comfort creatures. Most people will spend and spend and desire for more. It takes a high level of "zen" mind to live frugally when you are have "enough".

      Also, it is a more common trend in the younger generation already. there are more and more freelancing, part timer, but most people are still running the race. By the time SG100, we shall see.

      On the part of enjoying my life. You reminded me. Then I need to quickly enjoy more before it is gone. haha.
      By enjoying, It can also mean more time spent on what we treasure, not necessary more money spent.