Tag: t_w1r6

##struggl`families earn`$7k #Julius/LZ.Y #discipline

Posted on by tiger40490

Oth risk — this blogpost is less focused, less specific, less concrete, less rigorous than other blogspots below , but I like the 7k benchmark as a concrete, real-world benchmark.

My neighbor Julius complained about high living cost in SG (and loss of good jobs due to foreign professionals). After I told him about my friend R T whose double income adds up to about 9k gross, Julius immediately replied that a SG family would be lucky and comfortable once household gross income hits 7-8k. I wonder why 7k would be a struggle.

Q: if burn rate can be 4k/M for a family of four, then why is 7k income a struggle? Note the 7k median earlier.
A: a key factor — Median nuclear-family income is higher.

I assume he was describing a /stereotypical/ Singaporean Chinese family with kids (we both fathers of two), and possibly with grandparents to support financial.

  1. CPF deductions — 1~2k fixed percentage. Let’s assume 6K take-home
  2. —- My guesstimates of the G9 biggest (ex-CPF) expenditure categories:
  3. tuition + enrichment … — once surpassed 3k for my kids. ZengSheng feels for a family with 2 kids, childcare is the biggest outlay category
  4. essentials like nutrition, transport, utilities — could be 2-3k
  5. [m] maid — up to 1k. common if both parents work
  6. travel + dining — was almost 1k for my family.
  7. [m] car ownership? Not sure how many “struggling” families would take it on. Perhaps quite a lot.
  8. [m] allowance for grandparents? At least $500 IMO. Aaron Lee agreed, at least for the local Chinese family
  9. [m] mortgage — usually by CPF-OA, but some take on an investment property, with additional mortgage burden.
  10. insurance premiums? life policies, endowments, medical. I only have medical so probably lower
  11. [m=”light” burden in my current carefree life]

— a friend of mine with two kids in Grade 12 and College Y2. Self-employed, so his net income is around 7-9k, after some haircut (He quoted 30% haircut as standard). He did an calculation for his 2019 burn rate . Around 7-8k/M or 七八千. Struggle? He said there is livelihood pressure.

  • including mortgage. (Without mortgage, he said perhaps 五六千, but I feel he was less sure). I guess he has two mortgages for his two condos.
  • including insurance of 一万多 / Y. This estimate is vague, because I didn’t want to poke my nose in
  • probably excluding another 一万多 / Y insurance for a grandma
  • including private car monthly cost, which is needed for his daily work. I doubt he amortized the car purchase cost.
  • no more maid
  • including vacations. His family likes vacations.
  • including $500 piano lessons

I told him my wife spends presumably $1k, so our total burn rate is $4k+. So mine is $3k/M below his. He immediately pointed out mortgage as #1 difference. Car is probably #2 difference. Then we compared our insurance cost. I feel these factors explain about $3k.

— discipline for consistent saving

Q: So how about saving for college/retirement? Such a long-term plan can be very hard to implement. Many would shift focus to near-horizon and save what they can.

Based on this quick check, I now believe saving $1k/M would be challenging for this stereotypical family trapped in a cashflow low ground. ZengSheng also felt this stereotypical family would be hard pressed to save any meaningful amount. I agree with him that for the Chinese, saving at least $1k/M is essential.

This is also the Singapore government’s stance.

Financial discipline is easy for JackZ, RaymondTeo, me, and my dad, but hard for other family members and can be a challenge for my kids.

— FOMO^livelihood

Based on my personal record and analysis, 4k/M burn rate can be sufficient for a family of four, without the level of discipline of the ERE author. So family livelihood is taken care of , but why why would a 7k family feel so bad?

I would say FOMO peer comparison is the main underlying reason.  As stated in ffree^FOMO #9K/M, if you can’t afford the nice things that your neighbors, ex-schoolmates and colleagues can afford, then you feel left behind and poor.

theoretical-min (自理)Retirement burn rate: food+transport+bx

Posted on by tiger40490

Roaming retirement in cheaper cities would reduce my food + transport burn rate.

Lookalikes? Unlike a few related blogposts, this blogpost is about Retirement burn rate, after I stop working, after kids grow up. This bpost is fundamental, but my elasticity bpost is more fundamental and more broad.

Conceptually, excluding housing + insurance + healthcare, the minimum monthly burn rate would be roughly[1] 50% allocated to nutrition. Nutrition + transport + public utilities would comprise 70% of that burn rate. These categories are elastic to some extent.

Singapore CPI “basket” (https://www.singstat.gov.sg/find-data/search-by-theme/economy/prices-and-price-indices/related-info/faq-on-cpi) allocates 24.8% weight to housing+utilities. Together with nutrition 21.1% and 17.1% transport, they represent 63.0% of the Singapore CPI basket. This 63% is comparable to the 70% above.

[1] 40% at the basic-healthy level; 55% at the “nice food” level

  • nutrition — Across developed countries, food cost is rather low relative to typical income, and possibly falling over the years if we aim at the “basic-healthy” level.
    • Home cooking and raw food reduces service costs, as I told Colin Lim.
  • transport — a rising daily cost but
    • PUBLIC transport (like utilities) — are subsidized because 50% of the households can’t afford higher cost in these essentials services.
    • bicycle cost is dropping globally, just like food cost
  • [part of 17.1%] private car — Most U.S. locations unfortunately offer limited public transport so private car (insurance, gas, repairs…) is a major monthly cost.
  • [7%] healthcare — is the wildcard. In Singapore, outpatient cost might be $50-$100/month. Some basic medical supplies are mass-produced and falling in price.
  • clothing + bedding — is a yearly consumable item. The worst component, shoes, can last a year+. The minimum yearly clothing cost is much lower than nutrition. Colin Lim agreed with me. The Singapore CPI has only 2.1% allocated to clothing!

Mass production + globalization has brought down cost of food, clothing, vehicles, basic medical supplies, electronics, stationery. I won’t spend too much time listing what items are mass-produced.

During the covid19 economic downturn, many governments had cash handouts (up to $3k per U.S. family, and a few hundred a month for retrenched Singapore workers,,,) These amounts could make a difference iFF the family deploys it to basic-healthy foods, and cut discretionary spend ,,, to the bare minimum.

— scenario planning: hardship

Q: What’s my lifetime risk that my family may /fall on hard times/ and needs belt-tightening?
A: Not zero. My parents experienced that.

Some afflulent families can’t cope with belt-tightening. My family is not really well-to-do. I feel relatively confident we can cope with a lifestyle change including

  • healthcare including bx — we can rely on polyclinics + TCM clinics.
  • nutrition — basic healthy
  • kids’ enrichment — would become a luxury to live without

— some of the non-essential spends during retirement.

  • travel and dining
  • electronics
  • reunion with family and friends
  • workout and hobbies (often expensive) to keep an active life
  • fashion and personal items, esp. for older women
  • personal care

— more reflections on the Singapore CPI basket — See SG inflation: personal xp

barebones ffree=realistic: Covid^wife^Claris

Posted on by tiger40490

See also CRBR estimates

During my q3sg years, I concluded and declared repeatedly that my wife and I can be realistically satisfied with SGD 3k/M non-work income. Perhaps 4-5k as a family of four? Perhaps a Level 5 ffree , as defined in 6 levels@ffree #American perspective

Now, during my hib19 phase, A major pillar of my carefree bliss is the fierce boycott to FOMO/kiasu, exclub, 上一个台阶, benchmark with the MDs, chasing the endless latency goal. I tell myself and my family that we don’t need even more money once we have enough nonwork income to support a certain level of lifestyle. So What burn rate is “good enough latency” for you? I guess this is between Level5 and 6 of ffree. This blogpost is more about barebones ffree something like Level 5.

Location is key, which determines affordability of housing, education, car ownership, hospitalization,,,, long-term (nursing) care,,,, rental demand,,,, inflation,,,, utility fees,,,,. These include some of the major concerns in every adult. I achieved my bare-bones ffree precisely because I have my answers to each concern. ( The early-retirement-extreme author also has answers to each item. )

I feel good but not conceited about my burn rate + savings rate. Also proud of my passive income. This is a constant wellspring/fountainhead of positive feeling. Hopefully no attachment.

I mention my ffree to many people and I start to feel positive about it, hopefully not losing my feet on the ground.

— covid19$$handout reflect`Realistic burn rate suggests as low as $1k/M family burn rate.

======== a few burn rate figures “just enough to be comfortable” for various individuals
— first, a U.S. figure: https://moneywise.com/a/the-7-stages-of-financial-independence says “Because lifestyles vary, a simple man can say that $20,000 is more than enough to cover everything he would need every year for the rest of his life, but another person may need $50,000 or $80,000 to cover their basic lifestyle needs and the occasional holiday abroad.”
— value-investing seminar “published” estimate: pre-retirement burn rate SGD 2k/M/head is considered decent for a typical Singaporean family, perhaps an HDB heartland family.

Instead of 2k/person, Aaron of DBS said 10k/M nonwork income would be comfortable for financial freedom. I feel this is one young man’s wild dream.
— Philip.Che once said if his family of four had SGD5k/M non-work income then his life would be comfortable and he would feel free to do something else.
In Dec 2021, Claris of HSBC said SGD 10k/M is a typical burn rate for a family of 4, echoed at Gabbar a few weeks later. I think such an “increment” is mostly driven by peer benchmark. Is it inflation? My basket cost grew 15-30% over 20Y.

— Similarly, at wife’s spending level, she told me SGD 4-5k excluding housing, major medical, college tuition and travel. As of Sep 2020 her answer was SGD 5k/M. I feel this quality of life is more than “bare-bones”. This quality of life is comparable to the amount my friend LZ recorded over 2019.

She wants freedom to spend any way she wants, without asking for approval.

I kind of believe I can be truly comfortable at, say, SGD4k/M burn rate (excluding housing + major medical + college tuition), but for her, the ‘comfortable’ level is possibly SGD8k/M.

However, what if the “peers” all make SGD20k a month? See %%bare-bones_ffree ^ envy+FOMO

[18]Y I feel ffree !!US cohort despite higher pay #Deepak

Posted on by tiger40490

See also big discretionary spends

Background, by definition, my “peers” all have kids, and working in (financial) IT, often with 2 incomes.

Q: why am I feeling financially free but not the U.S. peers despite their higher income
A: My advantages are 1) burn rate 2) nonwork income
A: For their USD 90k burn rate supported by employee health benefit, at 4% reliable return, they need 2.25M invested.
A: For my SGD 36k burn rate supported by medishield, at 6% rental yield, I only need SGD 600k invested

  • passive income — i.e. the incoming side —
    • my projected real-estate passive incomes add up to S$4k+. Do some of my peers have a similar income? Not sure
    • I think too few of my peers have seriously focused on reliable, consistent passive income
  • burn rate — i.e the outgoing side  —
    1. My burn rate is 20-30% lower than my peers in the same location. For example, during the initial stabilization period after my family comes, my burn rate is possibly 7k, including rent + med bx + car
    2. my actual SGP burn rate of S$4-6k is less than their USD9k, largely due to location difference and childcare. Rural China, Malaysia, India .. would be even lower. I think Rural America is somewhat lower but not sure how much. I can ask some U.S. colleagues
    3. In terms of “minimum” burn rate, I think their average in the U.S. is 2 to 4 times higher than mine in Singapore, largely due to medical, transport and rental cost.
    4. SG citizenship — offers cost advantages in terms of medical, college ..
    5. In the job loss scenario, my confidence about reducing burn rate is not echoed by U.S. peers. Can some of them cut from USD9k to USD5k? I assume yes but none of them shows confidence.
    6. I don’t aim to buy a 700k home or send my kids to private colleges. Free of these burdens.
    7. My minimalist lifestyle is rare among my peers. This lifestyle is not theoretical, but visible in action
    8. my confidence about my household burn rate is rare among my peers

— After the analysis, now a more casual look at peer’s burn rate:

I discussed with grandpa about a huge difference between me and my colleagues’ burn rates.
This difference is rooted in their long-term optimism about their earning growth and stock market returns.

(In contrast, my self-confidence about my salary sustainability is based on IV.)

One thing easy and really useful to do with money matters is break-down analysis.
I can see my younger (and some in 40’s) colleagues spending more than I do on food, rent, mortgage, car, vacations, entertainment, gadgets, kids’ enrichment ..
These are often big-ticket items or creature-comfort spending, and clearly luxury IMO

Many believe food is never a big ticket item, but I think they spend $40/D i.e. $15k/Y vs my 4k/Y.

Q: sometimes I feel I can’t (allow myself to) cut further down below my peers because my family could then feel deprived, but can I?
A: I think I some capacity to ignore the peer pressure and maintain my superior brbr.

— In Sep 2020, I discussed “livelihood pressure” with DeepakCM. I described a fictitious family earning 250k [1] combined. Deepak said after-tax 150k/Y or 12.5k/M.

If they spend 10k/M then Brbr is stressful not comfortable. I feel comfortable brbr is 2.0+ but I guess the typical family is unlikely to save half the income.

Deepak pointed out that immigrants leave their home countries behind, and come to U.S. in search for a better life, so these high-income families would spend to enjoy. Lifestyle creep — a stark contrast to my financial discipline.

Q: If these immigrants are able to “accept/cope with” a simpler life but choose to enjoy a better, more /comfortable/ (actually lavish) life, then why do they complain about livelihood pressure like depicted in 中年男士40-50压力最高@@?
A: It depends on the acceptance — like my carefree acceptance vs reluctant, grudging acceptance. I think exclub and FOMO are fundamental /drivers/ in these high-earning immigrants. They are driven to spend, and driven to endure livelihood pressure. Some are unable to say NoThanks, as I described to my sis.

Q: Are they on cashflow high ground, with their high income?
A: No necessarily.

Q[1]: 250k … what if combined income is 300k? I think by most wealth-management standards that income would put the family in a different league . Indeed, some of my U.S. (I didn’t write “SG”) friends, my ex-classmates, and possibly my sister are in the “wealthy” exclub and not comparable to the rest of us. Their livelihood pressure, their Brbr, their assets are not comparable to mine.

##6ppa realistic longTerm return across asset class

Posted on by tiger40490

Q: What’s a realistic, reasonable expectation of long-term annualized compound return?

%%%%%%A: primarily depends on the historical period you are looking at, assuming we use historical return as a basis for forecast. Regime change is rather common. For example, real estate growth was very high for some time, but now … slower.

Rental yield is more stable and resistant to regime change.

%%%%%% A: depends on the asset class

  • My FundSuperMart equity investment averaged 3-5% over 4 years
  • GIC 20Y return is 6.1%.
  • hedge funds — if a fund can consistently deliver 6% (to their customers) it’s considered pretty good, according to an insider
  • insurance — I think 4% posted return is a common, conservative expectation.
    • CPF Life annualized return? Perhaps, presumably 5-7% with severe illiquidity .
    • Insurance as an asset class has poor liquidity and long lock-in period, but only 3% – 5% annualized return. Insurance companies typically achieve negative 10% to positive 20% investment return each year on their internal portfolio.
  • Property
    • My Blk 177 flat? roughly 10%+ excluding rental income.
    • top cities in Asia? roughly 10% – 15%
  • alternative investments
    • [a] 24% achieved over 2Y — German property private high-yield bond
    • [a] 28% achieved over 2Y — Brazil property private high-yield bond
    • [a] 33% per year to be delivered — Asian property private high-yield bond
  • [a=not compound annualized)