Scenario planning ..
Need to recognize the non-zero risk and cashflow impact of a protracted benchtime, surviving on savings + nonwork income.
Compared to them, Wall St Java developers enjoy a better demand, but how about the older guys? You should never be too confident.
Inflation, recession, covid restrictions, rental income decline, health decline due to aging
.. are some of the common “stressors” that have not become my stressors, because they affect many people around me more seriously.
Q: What’s special about long commute? Why do I suffer so much while others don’t?
A: 49 out of 50 of my peers can tolerate it better than I can, just as in an economy seat on a long flight.
k_deflation
Past title: covid19 recession: feel`richer@unchanged income
During the covid19 recession, roughly half the Singapore nationals [1][2] experienced job loss or partial loss of income. This made my family feel richer than before the pandemic — a paradox because in theory, without income growth we feel richer only during deflation (price fall). Now I think this theory is inconsistent with how people actually feel — People feel richer when they rise relative to perceived peers, regardless of inflation/deflation, or income rise/fall
Therefore, my sense of rich/inferior is mostly driven by peer comparison or FOMO , although livelihood and Fuller wealth is driven by cost level vs (work+nonwork) income level
[1] I will not focus exclusively on the middle class.
[2] Pandemic-proof sectors like tech, healthcare … employ lots of foreigners
— case: real estate inflation: am poorer even though my rental cost increased minimally
— case: globalization reducing min cost@basicHealthy Food but only a small percentage of the people I know actually say they feel richer thanks to globalization.
Jolt: So deflation doesn’t make us feel richer, for most of us, most of the time.
The paradox of smartphone .. Even though globalization leads to concrete, verifiable life-enhancing deflation [in basic food, clothing, bicycle, toy, basic electronics etc], the ordinary person would feel impoverished if she only has a school-supplied (or pre-owned) old or slow smartphone! Even if this phone is actually faster than a new phone, she may still feel impoverished because it looks outdated ! Vanity?
So peer comparison rather than this “deflation” is the real determinant of perceived poverty. By a certain age like 45 or 65, we don’t care so much about exclub or FOMO, and we can afford to ignore the smartphones (and other fancy, new stuff) that our cohort have.
I think this is a form of mellowing up, a form of let-go.
— (shocking) example: when I receive a modest bonus (like SGD 10k), I feel inferior and poor iFF I know my coworkers get bigger bonuses. In theory, a $10k handout ought to make us feel richer.
— example: in a WallSt bank, all contractors were forced to take 2-week furloughs at year end, but luckily I was spared. Nevertheless, I was unable to work on Christmas and New Year holidays, and lost billing, but I felt richer in comparison to other contractors.
I feel Brbr and Fuller Wealth are two related gauges/indicators/barometers of
— ffree analysis .. is dominated by big shocks. Fuller Wealth and brbr have a limited /relevance/.
— black-swan disaster (and resilience)
As a “buffer” ratio, Brbr (winner) is very relevant to disaster coping. Fuller wealth basically assumes loss of salary (perhaps in a livelihood disaster)… also relevant to disaster coping.
Insurers? I am biased against insurance products as a reliable protection against disasters. I’m heavily self-reliant in my outlook.
I prefer the word “disaster”. Resilience operates at the physical, health, attitude, network levels. Financial resilience is a at most half the package of overall resilience.
Compared to brbr, Fuller wealth is more well-known, more discussed, but Fuller wealth assumes a stable operating environment over a long horizon, free of black swan events. History seems to show otherwise, so brbr is more down-to-earth, i.e. closer to reality.
Witnessing the mass layoff during covid19, I hold on tight to my brbr buffer. I might lose my job after a few years, so every month I get paid, I put away 66% as reserve. If and when the salary stops, I would rely on my Fuller wealth.
— inflation as a realistic macro risk (not a crash)
Brbr (winner) and dev-till-70 are more inflation-proof than Fuller wealth.
Fuller wealth would rely on rental or dividend income to beat inflation, they are more unstable but more inflation-resistant than annuity products.
— FOMO or livelihood?
These concepts are all about livelihood. FOMO is kinda naïve in this context.
— low burn rate, high savings rate
Brbr and Fuller Wealth both depend critically on low burn rate high savings rate, where I have a definite advantage.
— Am I anti-growth (rather than pro-growth), backward looking, ultra-conservative, 复古, pessimistic about economic expansion?
Not entirely. I like cautious optimism, cautious expansion. Fuller wealth (winner) is less anti-growth …
— a Toa Payoh barber’s 压力 is presumably brbr. If they earn 2k and spend only $500, then no ground for complaint.
FOMO is probably another factor. The essential needs are probably $500/M
See also
I like the visual (albeit loose) concept of “cashflow highground”, similar to “moral high ground “. Physical flow is usually from highground to low ground. Sometimes, I prefer the shorter phrase “PFF highground”.
Each household (single or family) can move between lower ground and higher ground as their life unfolds. Even a country can go through the same, as SG did during covid19.
On a low ground, household outlays exceed income, debts exceed assets, debt servicing is a major recurring expense, or salary income stability is in doubt. Some households sink lower and lower, apparently unable to escape. Common among the immigrants and non-white, non-Chinese Americans. In a contrast, JackZ (Raymond to a lesser extent) lost his job and then hit the pandemic, but thanks to his savings and low burn rate, he probably didn’t sink further.
In a down turn such as the widespread job loss during covid19, you don’t want to find yourself on the lower grounds as they are more at risk of “overrun”.
Remember the WhyFactor production on scarcity? On the lower ground, people struggle to cope. On the higher ground, you can enjoy, relax and live in relative peace and comfort, but lifestyle creep can erode the high ground.
Therefore, on the high ground I feel a need to build up my defense, strengthen my foundation, and raise my ground even higher. So What type of insurance would protect my high ground? Not endowment, not life insurance. Here is my insurance plan:
! Even a middle-lower income household can achieve cash flow high ground, by reducing burn rate (and lifestyle creep), debt,, and build up a reserve and nonwork income stream. I feel Raymond has not done enough on the income side.
— How is BRBR related? Big ticket infrequent outlays are less visible in BRBR, but more clearly felt in high/low ground.
— How about Fuller wealth?
Fuller wealth as a barometer is one of the best indcators of high/low ground.
— Disaster insurance — such as TPD, major medical and eldershield.
These are rare events so hopefully successful claim rate is low and premium is low. Such low-cost insurance plans help strengthen the foundation of my high ground.
Recall the tallboy vs K3 story?
— How about lifestyle creep? I would venture to say if your income is below 300k/Y, a key difference between high ground and low ground is the attitude/habits on lifestyle creep.
The creeps don’t make a huge difference numerically (because they are small spends) but the attitude does make a huge difference. You have to be conscious of where you spend. You need to review your paste decisions critically.