Lean F.I.R.E. and Barista F.I.R.E. World of Warships!

During my recent podcast with The Fifth Person, Adam asked me if I knew about F.I.R.E.

I told him I only learned about F.I.R.E. after I did it!

And there are so many versions of F.I.R.E. since the time I found out about it.

Of course, if you have been reading my blog regularly, you would have read my piece on Lean F.I.R.E. which I published not too long ago.

I didn't think it was a good idea.

Basically, it meant having only enough financially to fund a very simple early retirement lifestyle.

Lean F.I.R.E. leaves little or no room for error.

Without any buffer, if we should have a situation where inflation increases rapidly and stays persistently high, we could be forced to rejoin the labor force, and when we are much older too.

Of course, if we depend on some passive income to fund our Lean F.I.R.E. plan, we would have to depend on the reliability of such passive income too.

Rejoin the labor force when we are older because we have no choice but to do it?

Not a pleasant thought.

Being a worrier, I cannot live like that and would probably not be able to sleep at night.

I remember some people saying I could have retired earlier.

Why did I wait till I was 45 years old?

For one thing, my plan was always to retire at 45.

OCD.

Another thing, I was worried I might not have enough, and having more money is always better.

Yes, I was building a buffer.

Some might even say I was building a buffer for my buffer.

Or was it a buffer for a buffer that's for another buffer?

Whatever we might call it, it's all good.

During the COVID-19 pandemic, we had an acid test for all F.I.R.E. practitioners.

Not everyone could stay retired as we saw some rejoining the workforce.

I think they would have been mostly people who practiced Lean F.I.R.E.

Anyway, this is just my view.

I am not demonizing Lean F.I.R.E. or anything.

I just feel strongly that if we are planning for Lean F.I.R.E., we must be aware of the potential pitfalls.

Then, I recently read about "Barista F.I.R.E."

That name conjured for me a Bohemian image.

Quite an attractive image, to be honest.

I found out that Barista F.I.R.E. basically meant semi-retirement, or at least that is what people my age would call it.

We would continue to be in the workforce but we would be working part time in Barista F.I.R.E.

So, this means we have more time to do the stuff we like.

For people who are tired of working full time, this is certainly an option.

A viable one too.

For people who want to be a full time gamer like AK, of course, this is not an option.

OK, I know.

Bad AK! Bad AK!

Talking about games, this is my latest warship, the Tier 9 Roon, which is a German cruiser.

In my blog dated 28 July, I shared a photo of my warship then which was a Tier 6 German cruiser.

This being a public holiday, if you should be interested in a free to play video game, try World of Warships on the Asian server. 

I am having a lot of fun and have not spent a single cent.

Use my referral link and both of us will get some freebies in game.

We can both F.I.R.E. at some enemy warships!

World of Warships. (AK's referral link.)

On a serious note, I think that Barista F.I.R.E. seems like a safer choice compared to Lean F.I.R.E. for people who wish to retire earlier with less money.

Barista F.I.R.E. means never leaving the workforce which means staying connected and probably more employable.

In more difficult times, people who have left the workforce for some time might find it hard to find a job, especially when they are much older, and their skill sets might no longer be as relevant.

So, Barista F.I.R.E. allows more room for error.

There are many ways to crunch the numbers for Barista F.I.R.E.

If I were to do it, I would estimate how much I might need for 40 years if I would like to retire by age 45.

This is because the average lifespan for males in Singapore is 85 years old.

Of course, I am being very cautious here because I would invest for income and not just have the money sitting in a savings account to be drawn down.

However, in an extremely unthinkable situation where passive income froze, then, I would have to draw on my savings.

Then, after estimating how much I might need for 40 years, I would need to estimate how much my part time job would pay me in those 40 years.

Subtract that expected income from the expected expenses for 40 years and I would know how much money I must have by age 45 before I could execute Barista F.I.R.E.

Of course, if we factor in the expected passive income from our investments, then, the amount of money required before we could enjoy Barista F.I.R.E. would be reduced.

Anything to add?

I will say that for Barista F.I.R.E. to be quite comfortable and worry-free, we should still keep an emergency fund.

We must be ready for the possibility of not only our passive income slowing to a trickle or drying up completely (if we have been wise enough to invest in some income generating assets,) we must also be ready for the possibility of losing our part-time job.

Peace of mind is priceless.

Don't just say it.

Make sure we have done enough to truly have peace of mind.

Neither Lean F.I.R.E. nor Barista F.I.R.E. is for me.

They are watered down versions of the original concept of F.I.R.E. but they could be what some people want.

Quite possibly, some people might even need them.

Have to be fair.

To be sure, I am not judging anyone for choosing these forms of F.I.R.E.

It is never my way or the highway.

As usual, I am just talking to myself.

If AK can talk to himself, so can you!

Happy National Day!

Visit AK's YouTube Community page: 

https://www.youtube.com/@A.Singaporean.Stocks.Investor./community

References:
1. Retirement drawdown strategy.
2. Avoid Lean F.I.R.E. and struggling with higher costs.

$200K in dividends podcast. To inspire and encourage.

Everyone should probably know by now that I did a podcast with my friends at Fifth Person two weeks ago.

Apparently, it has turned out to be a blockbuster!

I so stunned like vegetable!

If you have not seen the podcast yet, here it is.

For readers who have been to "Evening with AK and friends" or who have been listening to me talking to myself for years, the stuff I said in the podcast wouldn't be anything new.

I have said many times before that I am not allowed to give financial advice.

I am just sharing my story and what has worked for me.

It is also important to remember that I have not always been right.

However, like Peter Lynch said, we cannot be right all the time.

In this business, if we are right 6 times out of 10, we are doing OK.

Not in those exact words but you get the idea.

It is OK to have a couple of investments in our portfolio which are not doing as well sometimes but as long as they are fundamentally sound investments, the day will come when they shine.

I remind myself from time to time that in the short run, the market is a voting machine.

There are many people who are more interested in prices and they make money trading in the market which gives rise to volatility.

Nothing wrong with that especially if they are good at it.

When we are investing, we are weighing machines as we are more interested in valuations.

We want to buy stocks of businesses when they are undervalued or at least fairly valued.

Depending on what kind of investor we are, we would look at different things.

However, in the end, it is all about searching for value.

As an investor for income, I am more concerned with whether my investments are able and willing to pay me as expected.

So, during market meltdowns, I am usually pretty calm because I am not using borrowed money to invest with.

There is no need for me to sell at depressed prices to meet obligations as I am not using money meant for something else in life.

What I have achieved as an investor for income took many, many years of time and effort.

Totally worthwhile as I mostly do nothing most of the time unlike the days when I was more active as a trader.

I always say "If AK can do it, so can you".

I really believe this.

As an average income earner, if we are prudent financially and patiently invest for income, we can become a millionaire too.

To invest, we need capital.

It is all going to come from our earned income in the early days, unless we have been lucky.

So, I talked to myself about how to save 100% of our take home pay.

It sounded funny but it wasn't a joke.

If you search my blog or my YouTube channel, which is still a baby, you would find the content.

My YouTube channel: AK71SG.

When the dividends we receive are able to pay for our lifestyle, we can save 100% of our take home pay.

Simple.

Of course, we shouldn't be saving for the sake of saving.

The money saved can be used to invest for more income when the time is right.

So, wealth creation continues.

When people see "$200K in annual dividends", some think maybe AK had a $4 million inheritance or maybe he struck TOTO or something.

A 5% dividend yield on a $4 million investment would give $200K in annual dividends, after all.

When I started my journey, I only had a few thousand dollars and my monthly salary was only $3,000 a month.

Those were hard times.

Long time readers might remember my blog on how I bought my first lot or 1000 shares of ST Engineering at $1.55 a share.

That was more than half of my monthly salary.

I still have those shares today.

What is my dividend yield on those shares today?

Of course, a more recent example would be my investment in AIMS APAC REIT which I bought mostly during the Global Financial Crisis.

At a post consolidation price of less than $1 per unit and a distribution yield of more than 10% per annum on cost, my investment has been free of cost for many years.

Even more recently in 2016, I started investing in DBS at $13 to $14 a share.

Some readers might remember this.

What is my dividend yield on those shares today?

Of course, it would be a mistake to think that it is all just buying and holding as long time readers of my blog would know that I have sold many of my investments over the years too.

Some like Old Chang Kee and Hock Lian Seng, I sold half when their stock prices doubled which means that what I have today is free of cost.

I kept 50% of my original investment as I continued to like them and the dividends they paid.

Who doesn't like free money?

Some of my investments like Lippo Mall Trust and First REIT, I reduced exposure significantly or sold completely for some hefty gains after some years of extraordinarily high distribution yields.

Why did I sell?

Bad vibes.

The same could be said for my investment in Sabana REIT many years ago and also Soilbuild REIT.

Then, there was a string of divestments after many years of receiving good income like Saizen REIT, Croesus Retail Trust, Accordia Golf Trust etc.

In all cases, I had good outcomes not only because of the dividends received but also because I invested in them when they were undervalued.

We cannot always count on a good selling price, after all.

Buying undervalued stocks gives us a better chance of having a good result.

Of course, the capital gains help to give me more ammo to fire when Mr. Market went into a depression again.

I bought about $200K worth of UOB's common stock during the COVID-19 pandemic.

Where did a retiree like AK who depended on passive income for a living get the money from?

AK is so very long winded and almost lost his train of thought.

This is why I prefer blogging to talking because I can see what I was talking to myself about and how to continue.

Very good especially when my brain power is not what it used to be.

Anyway, what I want to say is some of what I have achieved is from "buy and hold" but if I was just purely buying and holding, I would not have what I have today.

Not when I started with only a few thousand dollars and a monthly salary of $3,000 a month.

Yes, I had a couple of side hustles and I was also fortunate enough to make some money as a trader for a few years.

These helped to give me more capital to invest with.

However, they are not the main reasons why I have what I have today.

All of us have different circumstances but we can all have the same philosophy.

If we stay true to that philosophy, we can all achieve success although in varying degrees.

There will always be naysayers out there.

"Alamak! $200K dividend income needs a few million dollars in capital lah! Walao! Where to find that kind of money?"

Well, if they keep thinking like this, they will never find the money.

Don't let negative people tell us that we cannot achieve financial freedom.

We have to believe that we can and I believe that is half the battle won!

I truly believe it when I say if AK can do it, so can you!

Have a good weekend!

References:
1. Passive income as much as earned income.
2. Peace of mind as investors.

3. Three words starting with "P".

DBS, OCBC and UOB to pay well! Q3 2023 passive income to be higher! T-bill auction with free money from AA REIT!

Whenever I could find some free time, I would go out to sea in the last few days.

It is my latest hobby!

Well, in a sense, anyway.

Look at my latest ship!

Look at those cannons!

If you are interested in some naval warfare too, this is my latest free to play find.

Absolutely free to play and perfect if you feel like destroying stuff to feel better after a rough day.

Use my referral link for the Asian server and both of us will get some freebies in the game:

World of Warships. (AK's referral link.)

Anyway, now that the serious stuff is out of the way, let's look at other stuff.

In my last blog, I talked to myself about the bumper interim dividend from UOB.

Up by 40%, it made me giddy with joy!

I expect OCBC and DBS to pay higher dividends too.

This means they should at least match their dividends in the last quarter.

If nothing goes wrong, my passive income for Q3 2023 should be somewhat higher than for Q3 2022.

If this pans out, it would be quite a feat since 2Q 2022 passive income generated by my investment portfolio increased by an impressive 42% compared to 2Q 2021 (mostly because the banks were still paying lower dividends in 2Q 2021.)

Whether passive income in Q3 2023 would be higher than Q2 2023 is less certain and, for that, I would wait and see.

On to another happy discovery.

When I checked my bank account, I found a few thousand dollars deposited by my old friend, AIMS APAC REIT (AA REIT.)

With my war chest largely depleted by IREIT Global's rights issue, getting some free money from AA REIT makes me love the REIT more.

As there will be quite a bit more dividend to be received from UOB and probably OCBC and DBS too next month, I decided to increase the quantum in my application for the upcoming 6 months T-bill with some of the money.

It is now open for application and the auction is happening on 3 August.

I will be going for non-competitive bid, as usual.

There is no need to agonize over a competitive bid since whatever the cut-off yield might be, it would most likely be higher than whatever interest rate the banks are offering for a 6 months fixed deposit.

So, the exercise to strengthen the fixed income component of my investment portfolio continues.

It gives my portfolio greater stability.

It gives me greater peace of mind to know that if I need more money, I have a T-bill ladder I can rely on.

This means I would not have to sell my stocks at prices not of my own choosing if some things should go terribly wrong in life.

Being forced to do something, not having control over our lives is not a good feeling.

With the yield curve still inverted, 6 months T-bills are going to remain rewarding.

So, they help to keep me sane and happy at the same time.

If AK can do it, so can you!

Related posts:
1. 2Q 2023 passive income.
2. 2Q 2022 passive income.
3. T-bill ladder is attractive.

UOB: Interim dividend 85c per share! Huat ah!

During "Evening with AK and friends 2023", I said that UOB would continue to grow its earnings very strongly. 

This is thanks in a large part to its acquisition of Citibank's consumer business in 4 South East Asian countries.

UOB has delivered and in terms of dividends, it has exceeded my expectation.

85 cents interim dividend per share has been declared.

Huat ah!

Source: UOB.

Although I only started investing in UOB during the COVID-19 pandemic, it grew into one of my largest investments within a few weeks.

"When it's raining gold, reach for a bucket, not a thimble."

Warren Buffett said this, not me.

Since then, I have been adding to my investment in UOB, most notably when the price of its common stock languished at around $26 a share for a while last year.

This enlarged investment in UOB is going to bring home a larger portion of bacon.

I remind myself that UOB retains 50% of its earnings which means that it is growing more valuable over time.

If the constant buying back of shares by UOB is anything to go by, this is probably going to be the case for some time to come.

Investing in UOB is not just investing for income, it is also investing for growth.

We can have our cake and eat it too.

If AK can do it, so can you!

Related post:
Banks: Even higher dividends?

Are all Singaporeans rich? Be richer in 3 years!

While watching some YouTube videos regarding the economy, a video titled "Are All Singaporeans Rich?" popped up in the right sidebar.

I am usually not interested in videos like this but since I blogged about Singaporeans being obsessed with salaries not too long ago, I decided to give it a go.

Fortunately, the video had timestamps which allowed me to watch the segments I was more interested in.

It is interesting to see that the people interviewed in the streets of Singapore mostly agreed that everything was expensive in Singapore.

Most of them had earned income of $5K a month or more.

Personally, I think I can be quite comfortable with a salary of $5K a month today.

Apart from cars and private housing, I don't think Singapore is expensive.

Why do many Singaporeans think that a salary of $5K a month is insufficient?

Watching the video produced so many "Alamak, AK!" moments.

Someone said he would buy lattes regularly, paying $8 a cup!

Then, there is pubbing on weekends and taking taxis!

(OK, as a ComfortDelgro shareholder, I think taking taxis is a good idea. Please continue.)

Then, some talk about fine dining and how expensive wine is in Singapore!

Hey, we have choices.

If we overpay for coffee and if we choose to take taxis instead of buses and trains, of course, it would lead to a higher cost of living.

If we choose to get our nutrition in fancy restaurants, definitely, it would be costlier.

Such a lifestyle in any country would be more expensive than more humble alternatives in the same country.

Am I right to say that?

So easy to blame others for bad results even when it was our choices that led to those results.

Don't say Singapore is expensive when we make expensive choices.

Wake up.

A lady said that she had to work harder to earn more money.

I don't think that is a bad thing per se.

If she worked harder and put some of the money to work in order to generate passive income, her financial health can only improve over time.

If we do the right things, we don't have to worry too much about our financial future.

If I were 30 years old today and drew a salary of $5K a month, if I were truly prudent, I could probably save 50% of that money each month.

If I were to invest $2K per month in good income generating businesses, with a dividend yield of say 4% to 5%, I would be able to generate a few thousand dollars per year in passive income by the end of the third year.

Yes, it would take only 3 years to see meaningful results!

Over time, if we make more money, we could put more money to work if we stay financially prudent.

I remind myself that it is not how much money we make but how much money we save that will tell us if we are growing richer.

Then, be a pragmatic and patient investor for income and we can only become richer.

Not all Singaporeans are rich but all Singaporeans can be richer.

If AK can do it, so can you!

Related posts:
1. Why obsess with salaries?
2. Passive income as much as earned income?

IREIT and plan for refunded money.

I don't think my application for excess rights would be fully filled.

So, I am waiting for some money to be refunded.

I have also received some money from a 6 months T-bill which has matured.

The next 6 months T-bill will see its auction happening on 20 July or next Thursday.

Instead of simply recycling money from the matured T-bill, I plan to increase the quantum by using some of the money I expect to be refunded from my application for excess rights.

Judging by the increased interest in non-competitive bidding in the last 6 months T-bill auction, it is possible that my non-competitive bids would only be partially filled in future auctions.

So, given this consideration, increasing the application quantum in future makes sense too.

With interest rates offered by the banks for 6 months fixed deposits having declined pretty significantly, it is only natural that interest in 6 months T-bills should pick up.

Adding exposure to 6 months T-bills while the front end of the yield curve remains elevated will generate relatively attractive passive income for me safely.

It would also help to strengthen the fixed income component of my portfolio which is something I have been doing for quite a while now.

The money in my T-bill ladder can also be deployed in the next significant stock market correction which might happen if the much talked about economic recession takes place.

Just talking to myself, as usual.

If AK can do it, so can you!

Recently published:
IREIT's rights issue oversubscribed.
(Read the comments section too.)

2Q 2023 passive income: Stronger again!

Before I start doing other stuff today, I decided that I would quickly talk to myself about my 2Q 2023 passive income, and also what I plan on doing for the rest of the year in the investment space.

When I talked to myself about my 2Q 2022 passive income, I titled it "Stronger with changes." 

In 2Q 2022, total passive income received was about S$63,980.

It was an impressive 42% year on year increase.

Since then, I have continued to re-allocate resources although on a smaller scale.

This exercise has proven to be fruitful as 2Q 2023 passive income came in at $79,774.61.

This is an almost 25% year on year increase.

Hence, the unimaginative title for this blog.

"Stronger again!"

Higher dividends from the following entities did most of the heavy lifting:

1. DBS

2. OCBC

3. UOB

4. Wilmar

5. ComfortDelgro

6. AIMS APAC REIT

These are some of my largest investments. 

So, the higher dividends from them have an outsized impact which more than compensated for the reduced dividends from some of my smaller investments for income such as Ho Bee Land and VICOM.

To be fair, not all of my smaller investments for income reduced dividends.

Raffles Medical Group and Hock Lian Seng paid higher dividends, for examples.

Passive income in 2Q 2023 also benefitted from contributions by Singapore Savings Bonds and T-bills.

These were missing in 2Q 2022.

I will continue to re-allocate resources in my investment portfolio for the rest of the year.

This means moving funds into investments which I feel would generate meaningful income for me while maintaining relatively strong balance sheets.

I would also inject fresh funds into my portfolio whenever circumstances permit.

While re-allocation of funds is for increasing my investments in businesses like OCBC and UOB, the injection of fresh funds is probably going to the strengthening of my T-bill ladder.

This strategy will help to ensure that I maintain a more meaningful exposure to quality fixed income which is relevant to a person with circumstances like mine.

I am more interested in having a stronger base for my investment portfolio which ensures stability.

If I have should have more excess funds to deploy, I would increase exposure to Wilmar if its common stock should decline to $3.50 or even $3.00 a share.

The same goes for ComfortDelgro if it should ever decline to $1 a share or lower, all else being equal.

As I did not participate in AIMS APAC REIT's recent rights issue, I must expect a reduction of approximately 10% in my passive income from the REIT in future.

Even if I did participate in the rights issue, I would still experience a reduction in my passive income from the REIT unless I applied for more excess rights so that the total number of rights units was 3x that of my entitlement.

Of course, I would have to be successful in getting those excess rights as well.

I have instead decided to channel more funds to IREIT Global's rights issue to apply for more excess rights which would generate more passive income for me.

To be realistic, I am unlikely to get all that I have applied for.

Even if I should be unsuccessful in getting any excess rights, as IREIT Global's fund raising exercise does not have a private placement component which I am not invited to, I would not see any dilution which would lead to a lower DPU.

If I should be successful in getting even some excess rights, it would mean having a bigger share in some attractive properties which are already generating income.

Having said this, any injection of fresh funds is likely to be a slow trickle as I have limited excess funds after taking into consideration my commitments.

I think that is all for now.

Until the next time I talk to myself, remember this.

If we are interested in achieving financial freedom, investing in bona fide income producing assets can only be a good thing.

If AK can do it, so can you!

Related post:
2Q 2022 passive income.

F.I.R.E. AK still needs $136K p.a. Growing richer or poorer?

This blog is just a bit longer than the video because I had a bit of problem with the voice recording.
----------------------

I have been asked many times before if I was ever bored in my early retirement.

To be quite honest, I find that question boring.

It was never something I was worried about because I was never married to my job.

I had many things I wanted to do but just didn't have the time for them.

So, I tell people that I am as busy now in my early retirement as when I was gainfully employed.

What I did worry about was whether I would have enough funds to retire early?

I was worried if I planned it right as I didn't fancy the possibility of rejoining the workforce.

That was during a time when I didn't know what was LEAN F.I.R.E.

Of course, if you have been following my blogs, you know what I think of that idea.

Having said this, all of us have different circumstances and, to be fair, LEAN F.I.R.E. could work for some people.



However, for people like me who have aged parents and for those who have children, if we want to retire early, it is financially more demanding.

We cannot afford to be too optimistic that things will work out on their own somehow.

There is only so much belt tightening we can do if things do go wrong.

For people who have dependents, early retirement is more demanding as we have to ensure our financial resources are sufficient to support more people.

Although my passive income seems massive to some people, once we take into consideration my expenses, it doesn't leave much room for error.

I don't track or blog about my expenses in detail, but I have blogged about my budget in whole numbers before.

In an earlier blog in 2019, I said I would need around $120,000 in passive income to cover my own expenses, parental support and CPF contribution.

$40,000 per item.

Then, in another blog sometime later, I said that given the higher inflation we were seeing, I would increase by 20% the money for my own expenses and parental support.

That would bring total passive income required yearly to $136,000.

Fortunately, passive income generated by my investment portfolio, excluding interest earned in my CPF account, has been able to cover this.



Of course, regular readers know that I will not be making any voluntary contribution to my CPF account in 2023 and 2024.

This is because money earmarked for this purpose has been used to buy Singapore Savings Bonds when they offered 10-year average yields of more than 3% p.a.

My plan is still to continue saving money in my CPF account or buying Singapore Savings Bonds till I turn 55.

When I turn 55, I could continue with this plan, or I could decide to enjoy life a little more.

I was more inclined towards continuing to save more money in the past, but the COVID-19 pandemic got me thinking.

Life could be cut short quite unexpectedly.



Yes, the COVID-19 pandemic changed the way I look at many things, including investments.

So, there is a high chance that in another few years from now, I would only need $96,000 a year in passive income as I stop earmarking money for CPF contributions.

Just need money to cover my own expenses and parental support.

Of course, we don't live forever.

Although I wish my parents would be around for a long, long time, I am not sure they want to outlive me.

The day I become an orphan, I would only need $48,000 in passive income per year, all else being equal.

When I think of this, melancholy sets in.

It is bittersweet.

OK, I shan't be maudlin about it.

I am just going to talk about finance here.

Well, it seems that, over time, I will become richer than I ever was without having to do anything differently from what I am doing now.

My investment portfolio should still be generating passive income and even if that doesn't grow, over time, my wealth could grow as my expenses shrink.



I don't think I would ever need to draw on my CPF savings.

So, over time, just from compound interest, that should grow too.

Anyway, what is the message here?

Early retirement is definitely financially more demanding for people with dependents.

However, if we are able to achieve this, we are likely to do better financially over time even when we become aged.

Just remember that we cannot be too adventurous, and we should be able to avoid financially catastrophic mistakes which might force us to rejoin the workforce.

Anyway, this is just me talking to myself about my experience and perspective.

If you have made it this far, you could be just as mental as me.

If AK can talk to himself, so can you!

Related posts:
1. How much passive income is enough?
2. Inflation, passive income and my budget.
3. Retirement drawdown strategy.
4. Retirement adequacy for late bloomers.
5. 59% want F.I.R.E.
6. LEAN F.I.R.E.

Own a house and become poor? No passive income?

This is the transcript of a YouTube video I produced recently.
-----------------------
In 2017, I published a rather controversial blog which shared the story of a couple who chose financial freedom over home ownership.

OMG!

What did I just say?

Isn't home ownership part and parcel of financial freedom?

Well, it depends.

Anyway, some readers didn't like the blog.

It could have hurt their vested interests, if you know what I mean.

So, if you are one with vested interests, you might want to stop listening or reading now.

I don't want to upset anyone.

I might have upset some people before but it was never my intention.



Still here?

OK, since you are still interested to find out more, just take this as another perspective on how to achieve financial freedom.

So, back to this couple who chose financial freedom over home ownership.

They are in their thirties and, well, they are retired.

They can work from anywhere in the world that has good internet access.

They are able to move to anywhere in the world where housing is relatively cheap to rent.

Footloose, they move to any country with an attractive standard of living, while having a relatively low cost of living.

This lifestyle must sound pretty attractive to many people, including Singaporeans.

This is probably because it is attractive.

It is probably why many Singaporeans are thinking of moving to Johor in Malaysia to live.



Not being bogged down by high costs of living especially the high housing costs in Singapore, they could possibly fast forward their journey to financial freedom.

What about people who want to stay in Singapore?

Singapore is relatively more expensive but there are many things to like about Singapore.

Well, for those of us who choose to stay in Singapore, we could become financially free faster if we avoid over consumption in housing.

Very often, people over consume when it comes to housing.

Not surprisingly, they might also be the people who find financial freedom out of reach.

This could be even though they might be enjoying higher than average earned incomes.

Often, it has to do with peer pressure.

Keeping up appearances is more than just financially destructive.



Do you believe me when I say that when I tell people I downsized from a two-bedroom apartment to a one-bedroom apartment, most of the time I would get a negative response?

When I told my banker that I bought a small car, he said the same thing my dad said, that he would not buy a small car unless he could not afford a bigger one.

When we think about it, it really has to do with peer pressure and keeping up appearances, but it is also how we deal with it.

In a recent survey, results showed that homeowners generally scored lower on retirement readiness than those who live in rental homes.

Nearly 30 per cent of homeowners surveyed saved less than 10 per cent of their salary, and their median retirement readiness score was placed at the “very low” level.



“These results suggest that homeownership does not guarantee retirement security, especially if an individual is not saving enough for retirement.

While a property is usually considered a financial asset in the long term, it is essentially still a liability until its mortgage is paid off.

“An individual with most of their retirement savings tied up in property assets could be facing a less-than-ideal retirement, since this property wealth does not contribute to retirement income.”

So, subscribing to this idea that our homes are investments could be misguided.

In order for this to be a good idea, we must be willing to monetize our homes in one way or another.

We must be willing to rent out the spare room or rooms, if available.

We must be willing to downsize or downgrade to unlock value, if any.

This means going to for a smaller apartment or to move from a private apartment to a public flat later on.



It doesn't hurt to have some advantages in life but unless severely disadvantaged, all of us can be financially free.

Know ourselves.

Know our circumstances.

We especially do not want to do something to keep up appearances.

If we want to be financially free, focus on cash flow.

Don't end up being asset rich but cash poor.

If you want an example of this, just think of AK spending his early retirement playing computer games!

I am not going to say if AK can do it, so can you.

You might not like computer games.

However, we can definitely spend some time talking to ourselves to come up with a plan.

If AK can talk to himself, so can you!

Reference:
More passive income than "rich" friends.

T-bills, AIMS APAC REIT and IREIT Global. My plan.

This is the transcript of a YouTube video I produced recently.
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Q2 and Q3 are usually good quarters for me in terms of passive income.

After setting aside money for personal expenses, parental support and gifts, the plan was to use some of the money to increase exposure to T-bills.

I still find 6 months T-bills to be quite attractive.

Of course, regular readers would understand why.

I have always had a soft spot for risk free and volatility free CPF which pays between 2.5% to 4% per annum.

Oops.

My apologies, it should be 2.5% to 4.01% per annum.

So, with similar characteristics, it is no surprise that I am attracted to T-bills these days like a bee is to honey.

The latest 6 months T-bill auction saw a cut-off yield of 3.84% per annum.

I said in an earlier blog that I would be happy if cut-off yield remained the same at 3.85% per annum.
3.84% per annum is enough to make me quite happy.

Anyway, like I said, I had planned to use some incoming passive income to increase exposure to T-bills.

That plan has to be put on hold now.

I would have to be contented with simply recycling money from maturing T-bills into new ones.

This is because of two rights issues which are coming up.

AIMS APAC REIT and IREIT Global are two of my largest investments.

So, together, I would have to put aside a relatively large amount of money for the rights issues.



For AIMS APAC REIT, we are likely to see a slight near-term reduction in DPU.

This is because part of the plan is to use the funds for asset enhancements and possible redevelopment of existing assets.

Nothing immediately income generative.

With more units in issue, including those issued for the private placement, existing shareholders could see roughly a 6% decrease in DPU if we subscribed only to our rights entitlement.

We can apply for excess rights which would increase the income we receive from the REIT if we are successful, of course.

However, as my resources are pretty limited, I am alright with receiving a bit less income from AIMS APAC REIT post rights issue for a while.

For me, this is not a terrible outcome as I have said many times before that my investment in AIMS APAC REIT has been free of cost for some time.

All income distributions from the REIT are really free money for me.

So, I will subscribe to my rights entitlement and just enough excess rights so that I do not end up with odd lots.



As for IREIT Global, they do not have any private placement in their fund-raising exercise.

So, there is no risk of DPU dilution if we do not apply for excess rights.

They are raising funds using a combination of debt and rights issue.

I also like that the funds they are raising will be used to purchase income generating assets right away.

This is why I said that IREIT Global is really inviting existing shareholders to invest in more properties.

The sponsors will be doing this alongside shareholders as they hold about 50% of the units in issue.

Therefore, I find their rights issue to be more interesting than the one by AIMS APAC REIT.



I also like that at 45 cents a unit, we would be getting a distribution yield of around 8% which is pretty attractive.

Of course, this is not without risk and volatility, unlike T-bills.

However, for me to forgo increasing exposure to T-bills for this rights issue is not a tragedy.

Remember, I am just talking to myself here.

It should be quite obvious to anyone that this is a plan that seems fine for me but it might not be suitable for others.

If AK can talk to himself, so can you!

References:
1. AA REIT and IREIT: Rights issues.
2. When to dismantle T-bill ladder?