Breaking free

Technically we have achieved financial freedom.

I have been keeping track of our net worth over the past couple of years. I estimated that we have easily saved about $900k over the last 13 years. This includes our CPF accounts and quite a bit of the savings went into our overseas investment and insurance policies (a bad mistake I know, a story that I will tell another time)

Coupled with the meteoric rise in Singapore's real estate prices and blessed overseas investment that we made in the past 5-6 years, our net worth has reached the point whereby if the entire net worth is in cash/cash equivalent, we have enough to last for the next 30-40 years.

I have never considered early retirement till the last couple of years. Reason being I loved my job. But in the last couple of years, the kids have grown up so fast. It's amazing to see how a tiny infant transit into a toddler and then a child.

How much is enough? 

When I started work, I could never imagine being able to reach even half of our current net worth. In fact I remember about 5 years back, I did a quick conservative calculation on how much would our combined OA and SA. would have when we retire at 65. The figure was about $500,000 (Interestingly, now we have ~70% of that amount in our combined OA and SA already). I already felt a sense of relief, cause at that point, we were maxing out our OAs to pay off the mortgage quick. Then we had about 8.5 yrs before we are debt free.

However the birth of my first child made me decided that I need to take a pro active stance towards managing our finances. 

We decided to refinance and stretch our loans from 8.5 remaining to 25 years instead. Took advantage of the low interest environment to secure an additional home equity loan. We use that loan and invested in  income stocks such as REITs, SPH and SingPost. The yield on cost was about 7%. Enough to make capital and interest repayment.

At the same time, we restructured our insurance. I put all our ILPs on premium holidays, took up additional group term policies to increase our protection.

We continued to save aggressively. Passive income also managed to hit around $30k.

Our annual household expenses is about $100k. 

Wow, outflow of $100k and only $30k passive??? How to break free?

Our plan is simple. We are exploring moving to another part of the world. Most people will think that means moving to places like Thailand or perhaps Johor. But no, we are looking to move to a developed country with four seasons. Yes I have done my sums.

By moving over, we will be arbitraging the between the two rental markets. We could easily rent a detached house for less money than what my home would fetch on our local rental market allowing us to have a annual net cash of $6-12k

At the same time, I have recently liquidated an overseas investment in view of an equity downturn. Depending on how I play my card, I will be able to boost the passive income by another $12-18k.

So I am looking at a projected passive income of about $60-70k.

Now that still doesn't look like it could make the cut. But by moving over, we will be able to cut down certain expenses. First of all, have we ever realized that there's a financial cost to working? Eg, we need a car in Singapore so that we can sent the kids to childcare and get ourselves to work on time. By moving over, we eliminate such a need, not to mentioned that a good 2nd hand full sized MPV can be gotten for $10k.

The best part is also that many other developed countries have much lower cost of living in Singapore. Main reason is that they are physically bigger, allowing more choices such as suburbs or city living. We don't have a choice in Singapore. We are living right in a concrete jungle. I've actually asked ex-Singaporeans what would be an estimated monthly expenditure and its about $2.5-3k. 

So now, the projected annual expenses is down to about $30-36k.

Hey suddenly the math is working out.

Is there still fear and uncertainty. Yes you bet.

In fact I just commented to my wife that we are blessed that our investments worked out fine, giving us a big base to generate the passive income. So while the income at $30k is so much smaller than our combined annual income and it would look foolish to stop work and live on the passive income but if we were not blessed with this big investment base, it would easily take us another ten working years to build up an equivalent base that would generate passive income to let us spend more time with the children. However they would already be in their teens and could possibly be sully adolescents and we will rue the time lost during their formative years. So therefore with what we have, we should just take the plunge and set our plans in motion so that we can redeem time to bring up the children.

I shall end off with a recent piece of article about Gurmit Singh...

He was at a theme park in Bali with Elliot, whom he felt missed out the most during his years as a full-time entertainer.

He said: "We were having so much fun when he suddenly turned to me with a grave expression.

"He then said, 'Dad, this is nice... Thank you'.

"I'll remember that until the day I die. My hair stood on end and I was almost in tears. As a father, I felt like I did something right for once.

"I hope to do more of that because that is what's important. On my deathbed, my accolades and achievements won't matter but my family will be there by my side".

- See more at: http://news.asiaone.com/news/showbiz/gurmit-singh-back-showbiz#sthash.8V0PmHr1.dpuf