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Freedom versus Independence

Most FIRE adherents are familiar with the different tiers of financial independence (FI).  

Starting from coast-FIRE, barista-FIRE or Lean-FIRE all the way to the peak that is Financial Freedom (FF), each level is usually characterized by a marked improvement in one's freedom to disengage from paid labor. 




FF differs from FI in that it requires more than just having sufficient passive income to cover one's liabilities, the elusive FF tier is only attained when a person has more than enough passive income to lead his/her Ideal Lifestyle without worrying about money. 

Consequently, FF differs from person to person. 

For a person whose ideal lifestyle is to live in a HDB flat and take public transport, FF is probably easily reachable. 

For another, FF may mean GCB, yachts, and opulent cars. This may require one to hit the jackpot with some sort of crypto-scam, multi-bagger investment.

That said, I do wonder, for the average Singaporean, what is considered an Ideal Lifestyle and more importantly, how much money is needed to provide sufficient passive income to fund said Ideal Lifestyle.  In other words, how much is your fuck you money?

Today, let's explore a few types of FF and the fuck you money required to fund them. I should caveat that the estimates below are purely guess-work derived from daily conversations within my social circle. It is by no means intended to represent proper research of any sort. You are free to disagree with them.

 

Monthly Expenditure

 

Standard

Middle class

Comfortable

Housing

$1,500

 

(e.g., 4RM HDB flat in non-mature estate)

 

$ 3,500

 

(e.g., 2BR condo in OCR region)

$ 8,000

 

(e.g., 2BR CCR condo or 3 or 4 BR OCR condo)

Transport

$ 250

 

(e.g., MRT/bus dominant means)

$ 1,000

 

(Small sedan)

$ 2,500

 

(Mid-sized sedan or entry level sportscar)

 

Entertainment, food, and travel

$ 500

$ 1,500

$ 3,000

Parental maintenance / Childcare

$ 1,000

$ 1,500

$ 3,000

Insurance

$ 200

$ 500

$ 1,000

Total Monthly Expenses

$ 3,450

$ 8,000

$ 17,500

Size of portfolio required to fund monthly expenditures (assume 5.5% yield)

$ 753,000

$ 1,750,000

$ 3,820,000

As you can see, even for modest middle class living, you will need at least 1.75M to keep it funded in perpetuity. And this is a simplistic calculation which ignores the pernicious effects of inflation.  Ideally, at least part of the passive income should be re-invested in order to maintain its purchasing power over time. 

The ugly truth is only a select lucky few can accumulate a 1.75M portfolio in their 30s or 40s, let alone a 3.8M one. 

For those who still wish to pursue FIRE, know what you are getting yourself into. 

Onward to FI my friends.

 

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