F.I.R.E. lean or shaky? AK still worried? Confession.

Change is the real constant in life, many would say.

Back in June 2020, I published a blog on how worried I was. 

Why was I worried?

Dividends from my investments during the COVID-19 pandemic reduced pretty significantly.

The central banks were also lowering interest rates again in order to keep their economies alive. 

That meant even lower interest income for my fixed deposits.

It was a double whammy. 

Without an earned income, the double whammy was pretty impactful for me.

Fortunately, being a worrier, I built buffers before retiring early so many years ago.

I had an emergency fund which I was prepared to dip into if things got even worse in the same way our country dipped into our reserves during the pandemic.

It is imperative to hold a buffer against possible crises.

Our country has reserves and we should have emergency funds.

Readers who have been following my blogs for some time know what I say about regular folks like us keeping our needs simple and our wants few if we want to achieve financial freedom earlier.

It means to live well below our means.

There are people who then retire early once their passive income is able to cover their basic necessities in life with very little or no room for error.

They call it lean F.I.R.E.

I think it should be called shaky F.I.R.E.

OK, maybe I am just mental but I like to have buffers in case things go wrong.

If I didn't have buffers, with reduced dividends and interest income during the COVID-19 pandemic, I might have had to look for a job in a very difficult environment.

Just thinking of the possibility is giving me an anxiety attack.

Yes, PTSD moment right there.

What is the opposite of lean F.I.R.E. then?

Fat F.I.R.E. sounds unhealthy but maybe that is what it is.

While lean F.I.R.E. is about having just enough passive income to cover basic necessities in life, I suppose fat F.I.R.E. means being able to afford some luxuries as well.

There is a limit to how tight lean F.I.R.E. can be while the sky is the limit for fat F.I.R.E.

If I am a very sensible person, I would live like I am on lean or shaky F.I.R.E. when I have already achieved fat F.I.R.E.

This is because we don't know what we don't know.

However, I am not very sensible, so, I live in a shoebox condominium and I own a car, both of which are so expensive in Singapore.

Hence, when things took a turn for the worse like what happened during the COVID-19 pandemic, I worried as I also wished to provide my parents with greater financial support.

Don't be like AK.

Be sensible, very sensible.

Anyway, two and a half years later, how have things changed?

Things have changed a lot.

I have made changes to my investment portfolio in the last two and a half years.

The aim was to have a more resilient investment portfolio.

Passive income received from my investment portfolio has grown significantly, year on year.

Inflation has shot up and it has remained elevated.

Interest rates have increased rapidly as central banks try to tame inflation.

Cost of living crisis has become a trending topic for some time now.

However, this development is good for the financially prudent people who have been living well below their means.

Inflation affects them too but not by very much as they are used to keeping their needs simple and their wants few.

Higher interest rate is good for them too as they have ample savings in the form of a meaningful emergency fund and also a float.

Interest income is not a negligible sum anymore.

I see my interest income increasing many folds. 

In fact, the percentage increase is very much higher when compared to the increase in dividends and distributions received from my investment portfolio, year on year.

So, is AK worried no more?

I shared in a recent blog that we could see a recession this year and with inflation staying high, we could see stagflation.

So, people like AK might be quite comfortable now but don't be complacent.

Give ourselves a little treat from time to time but don't overdo the "revenge spending."

Remember, swans are not always white in color.

It is safer to stay worried!

Wishing all readers good health and abundant wealth in an energetic Year of the Rabbit!

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References:
1. Worried as dividends and interest income reduced.
2. Largest investments updated (4Q 2022.)
3. Full year 2022 passive income.