Tag: T_optimist

##pff protection: powerless against SOME swans[def]

Posted on by tiger40490

Q: Why do you think Singapore among many small countries keep building their national reserve, if the reserve are powerless against so many disasters?
Q: Why does the global insurance industry has grown over centuries, with ever wider coverage, and many policies lasting 50-100 years?
Q: Why do credit unions (and banks) even exist if long-term saving and lending is actually based on shaky ground?
Same Answer: The reality is , the world will not end in 100 years, so the consistent savers do build up /formidable/ resources.

We tend to exaggerate the likelihood of various headline disasters, and then reach un-calibrated, quick, sweeping conclusions that “financial protections are often close to useless”. Such protections including

  1. gold,
  2. insurance plans
  3. government health insurance
  4. bank deposits in a resilient currency

Financial protections can be more reliable than other protections like levees, military protection, self-defense…. See also reliable shield: burnRate^wellness habits. There are rather few disasters that financial protection can’t help at all.

  1. political upheavals [looting, revolutions] that seize assets of private families. This happened to my father’s family and my mother’s family, but I won’t say financial protections were completely useless. It also happened in Cambodia (Grandpa pointed out) and perhaps Eastern Europe. I discussed this with grandpa. He said this will not happen again in China.
    • rare: armed conflicts — somewhere in your country is still “manageable”, but if it hits your city, then I hope money can buy you some travel tickets or weapons. Such things never happen out of the blue, so you have years to prepare.
    • Defining feature: anarchy including government-sanctioned anarchy
  2. hospital overrun — at national level can still be manageable, but if your city hits hospital capacity and somehow you can’t seek treatment in another city, then money can’t help. I think this happened in Wuhan, Span, Italy, NYC. Thanks to lessons from covid19, this is less likely to happen.
  3. ==== For below items , financial reserve can provide partial /relief/ or at least buy some precious time
  4. stock market boom and bust, wiping out a big chunk of your wealth. One of the most frequent disasters.
  5. government financial reform hurts my cohort. I am confident that in well-managed systems like SG or U.S. we would be given sufficient advance notice/warning.
  6. burglary .. nowadays most people keep bulk of assets offsite.
  7. — For the items below, the threats appear to be approaching from a distance. The financial cushions you built can buy you some time + some real benefits relative to the unprotected larger population.
  8. rare: high inflation more than 50% a year
  9. severe currency devaluation short of hyper inflation .. imported inflation
  10. very rare: famine — hitting somewhere in your country is still “manageable”, but if famine hits your city then money can’t help. Luckily such things always develop over decades , never suddenly like a pandemic, so your money can help you prepare. Other rare natural disasters include earth-quake, tsunami, but they affect fewer people.
  11. population aging leading to ever more people drawing from (rather than contributing to) a dwindling pool
  12. peak oil
  13. global warming and sea level rise; climate change and desertification.
    • Note sudden global-scale natural disasters including cosmic collisions happen only in sci-fi.
  14. global protein shortage but short of famine

— “Black swan” the concept .. Most writers use this term for _financial_ events. By strict definition, black swan events are so rare and unpredictable that assessing the probability will be guesswork and not based on data.

Is it simply better to put aside this theory? Well, one can study the pattern of past black-swan events and try to learn something, but I don’t know how useful that is, given that predicting similar events are by definition nearly impossible. I find it fun to read history. It doesn’t always offer any actionable insights though.

SG economy has experienced many large shocks. (These shocks could be considered white swans.) I feel the PAP leaders understand the vulnerability inherent in this system. They try to turn the vulnerability into agility.

 

[18]ffree=state@mind #peers diff

Posted on by tiger40490

See also ffree ^ envy+FOMO

6 levels of ffree is one of the first articles describing the liberating self-knowledge that “I can retire now if I want to”. Financial independence is based on easy elementary math — Without salary from work, match up your family burn rate against your Savings + Income.

This elementary math has to be a projection over a long horizon, but over long term there are many uncertainties. We tend to overestimate our predictive power on medical, inflation, property depreciation … We tend to underestimate the amount of uncertainty/volatility,  black/white swans. See also NAV 一辈子花不完@@ 4 factors. Therefore, for me financial independence is really a state of mind. I often feel peaceful and reassured by mathematical projections based on

  • income — rental incomes + rental spread + CPF-life .. but beware of attachment
  • income — shields
  • expenses — burn rate … due to detachment
  • asset appreciations — Beijing, Cambodia, BGC, SG .. but beware of attachment

Actually for me, “financial independence” has a modified math definition — “without the pressure to work, match up … .” Due to the modification, my peace of mind has another pillar

  • I’m capable of, and will enjoy, working till my 70’s

Q: Am I too attached?

Yes to my property assets
yes to my health, which will eventually diminish
yes to my robust career prospect, which will eventually diminish

— Q: Strip away the exaggerations, the superficial, the unfounded, what are the measurable, rock solid, real differences between me and my cohort in terms of ffree ?

  • I record/reconcile my burn rate over decades, and have higher confidence in my forecast.
  • I have a reliable nonwork income in cpfLife and HDB rental, not counting other rental properties.
  • I often feel free to (and actually did) choose lower jobs. I don’t think many in my cohort feel that same level of freedom.
  • Based on straightforward calculations and SG public data, I have no worries about medical, retirement income, long-term inflation. I think many of my cohort are not so care-free. These are big components of long-term ffree.
  • — Here are some subjective assessments:
  • I have no plan to save up USD 300k/child for college
  • I say and feel I can stop working any time .. Statement 1
  • I say both parents can stop working indefinitely and my family can live a reasonable, comfortable life .. Statement 2.
  • I sometimes say that I have more money than I need for my lifetime .. Statement 3.
  • ^^^ My circle of a few dozen friends never say these things. Am I serious? Yes. I didn’t say what kind of family lifestyle that Statement 2/3 entail.

 

career_longevity= bedrock@ %%fledgling ffree

Posted on by tiger40490

See also

Paradox — Fuller wealth and ffree are defined in the context of zero salary, but my ffree is fragile. So, paradoxically, the bedrock of my fledgling ffree is my career longevity, such as but not limited to dev-till-70, health and vitality. Look at LKY and my dad in their 80’s.

More than a “shield“, this is a bedrock and a foundation. I like the vivid imagery of shield and bedrock.

I think many of peers (such as Jason Fu) are very pessimistic about dev-till-70 (not career longevity). I feel sad for them.

Both missteps and swans (external disasters) are “covered” by this shield.

— non-monetary benefit of career longevity are extremely important.
I want a purpose, engagement, interaction
— nonwork income? Much less reliable than career longevity. I’m more skeptical than pessimistic
— medical cost cushions? mostly I rely on my SG citizenship
Am I a cautious optimist? I think it’s better than pessimist.
— citizenship is the 2nd bedrock, providing multiple benefits
— my burn rate control is the soil around the bedrocks, almost invisible but always there.

CPIx-inflation fear: discrediting high-saving (minimalist)lifestyle

Posted on by tiger40490

Since my 20’s, many people around me have drilled into me notions like “your $1000 /squirrel/ away will be worth $500 in 10Y (or 20Y), so saving 60% of your income every month is less advantageous than spending 90%”.

(The same people also say that “If you can invest profitably, then it’s a different story”, but we always stopped there because none of us has that skill.)

This is the mainstream view. Well, since my 20’s I have gradually increased my savings rate. I guess it was 2-3k when I was earning s$5k. Now it’s touching s$10k.

Q: Was I unwise and regretful maintaining high saving rate?
— A: On the contrary, I think I am insightful and incredulous, with a healthy dose of skepticism. Luck is a secondary factor.
— A: No. SG government squrrels away some amount in every term, to build up the past reserve. The purchasing power didn’t drop to below half over the years. In fact, I think it has grown.
— A: No. ERE author and MMM each saved up enough and retired early. Apparently, their savings didn’t lose value due to inflation.
MMM has a blog proclaiming — once you save up 30Y worth of living expenses you will be able to retire.
— A: No because I have managed to leverage my savings to invest profitably not in traditional stocks, mutual funds, insurance products but in overseas and local properties.
— A: No because I don’t know where I could have spent more. I can look at my peers’ burn rate breakdown
— A: most important, inflation rate in my personal experience has not been half as high as predicted (by those pundits). My best-effort analysis is 30Y SG inflation: personal xp.

Only a small portion of my personal “basket” has doubled in price over 30Y.

long-term PFF plann: doubter QnA #一劳永逸 #w1r2

Posted on by tiger40490

A 2021 revisit — I told my friend Zeng that any financial planning (ffree++) is a piece of cake for some, if they ignore the black swans and missteps, which are often non-financial. Zeng felt many disasters can be managed with insurance. However, many black swans are not financial in nature and can’t be compensated by insurance. (Amputation compensation?)

According to the originator, black swans by nature tend to dominate the course of history , esp. over the long horizon.  [19]random derailers@ffree lists many swans+missteps, but today’s blogpost is absolutely not exclusive to ffree, so most of the contents do not belong to that ffree blogpost.

My conclusion after the discussion with Zeng — the longer your horizon, the more you will see your planning dominated by swans (+missteps), which are not mathematical and hard to estimate.

Below are some common questions from friends and advisers, on my long-term financial planning, including retirement planning. I like the questions to be phrased as sharp and specific as possible, rather than vague and broad.

This blogpost is not in-depth, but offers an across-the-board comparison.

— non-stop marathon, no 一劳永逸, limited profit Lock-in

Fundamentally, There’s nothing permanent when it comes to long-horizon financial planning. The harder you think and the harder you try, the more clear this becomes.

  • Prime example — Singapore’s stability, prosperity, hub status.. is never guaranteed by anyone and constantly under threat. Similarly,
  • Your wellness will not last. You can’t “invest” or “buy” 10 years of wellness like 一劳永逸. You must keep working on it. Daily battle. My dad and LKY are good role models. You can lock-in BMI, cardio, muscle improvements for a few months (flexibility? a few weeks) but there’s no “capture this gigantic profit opportunity and enjoy temporary retirement for 4Y“.
  • You career longevity is even more similar to the Singapore case. Body building (Continuous coding drill, QQ study..) is a lifelong hobby and training, similiar to fitness.

The worry about the uncertainty and impermanence is legit and can be life-enhancing #bbc.

— Q: can I maintain my low burn rate through retirement till my final year?
A: As show in G5 Shields@family_livelihood, this shield is in my hand. There are surely some derailers — random ffree-derailers #resilience is the best “derailer list” I have.

— Q: can I achieve career longevity like dev-till-70 and beyond ?
A: As show in G5 Shields@family_livelihood, this shield is probably even more in my control. I actively reject the pessimism expressed by Jason Fu and the like.

Some concern, some sense of uncertainty are completely legit and would motivate my diligence, self-improvement, close watch, detachment.

— Q: are the SG medical cost cushions sustainable and reliable?
A: I choose not to worry, and leave it to the PAP leadership and the healthcare industry.

— Q: is CPF-life reliable over my lifetime?
A: easy question. I think this is like questioning the insurance industry, insurance model. Annuity has been around for a long time, in many countries, not invented by SG government.

CpfLife (and other annuities) basically adress the CRBR, not the black swans.

— Q: how reliable are the other nonwork incomes?
A: less reliable than CPF-life. Therefore, I plan to liquidate some of them and convert to CPF-life, despite the inferior return and liquidity.
A: I don’t want to be too pessimistic. In fact, I want to be cautiously optimistic. Many retirees seem to receive fairly reliable rental and dividend incomes.

This question is most relevant to the 一劳永逸 concept. In theory, you can buy and hold a hero stock for life to receive high dividends, but in reality it’s like winning the lottery. See buy-n-hold a hero stock4div #ValueInvest. If it’s easy to get so lucky then why is it enviable in the first place?

— Q: how long is my good health going to last?
A: among these common questions, this question has the weakest answer from me. In fact I have no answer.

Some fear, some sense of powerlessness are completely legit and would motivate my diligence, self-discipline, close watch, detachment, kindness, generosity.