Early Semi Retirement - The best of both worlds.

How often have you wished that you were able to do what you love and still have enough money to see to all your expenses? Kudos to those who are currently loving their jobs they are at but many of us are stuck working at places we have no wish to be at.

We might not dread going to work, but that does not mean that its the place to want to be at the moment either For us who do not yet have a big enough investment fund to retire, one of the options that we have would be to semi-retire. However, I am going to have to remind you that tradeoffs would have to be made to get there. These tradeoffs and problems could come in many forms, most common of them are:

• Less income coming in every month - This could be mitigated by building a passive income enough to cover half or the entire of your expenses.
• Spousal disagreement - If you are married, you have made a choice that every decision you make involves 2 persons now. Make sure your spouse is agreeable with the choice that you are makingso as not to cause any future disagreements and resentment.
• Emotional Abuse from others - This would most probably happen if you are young and not of the "proper" semi retirement age. That is why, before making the choice, you have to give it very very serious thought and once you have decided, hold on to your choice and never let anyone talk you down. There will definitely be people who don't understand, people who are angry with your choice or people who are jealous of what you are doing just because they do not have the courage to seek what they desire. Let me remind you this - THIS IS YOUR LIFE, not theirs. If you succeed, it is YOU who succeeds and if you fail, it is YOU who fails. Do not let anyone choose your path for you else you will resent that person greatly in the future.

There are many ways to get there, it all depends on what you are seeking to attain. Having an extremely early semi retirement does not mean you just laze around and do nothing - (you could if you want). It means that you have the time to do what you love doing. Be it learning new skills, being able to have more time for your hobby or being able to spend more time with your family.

Its not all just fluffy dreams, it can definitely be achieved. But careful plans have to be made, you must be confident that your finances can hold up, you must acknowledge that you cannot afford to spend as much as you did when you were working full time and you must definitely have a contingency plan. Here is a check list of the things that you need or will have to do.

• Emergency Funds - This is important whether you are still working, semi retired or retired. You never know when an emergency would strike so this fund would definitely come in handy till you figure out your next move. Only you can know the amount of funds to have here. If you have the ability to reestablish your cash flow fast, you will require less.
• Cashflow - If you are partially relying on dividends, you will have to be very careful as it does not come at an equal amount every month. Make sure you always have a cash pool to fund those months you have less.
• Boss's Agreement - This is the most important actually if you do not intend to leave your current employment. You would have to somehow convince your boss to allow you to work part time. If this does not work out, you could always find a less stressful part time job that you enjoy.
• Medical Insurance - I feel that this is an extremely important item that you should acquire as you might not be receiving it from your regular employment. Having unexpected medical emergencies could derail any plan.
• A Plan - It goes without saying that you MUST have a plan, how you are going to fund your expenses, what are you going to do after semi retiring, what backups do you have and what are you going to do when if you do not succeed.

After all is said and done, we must all be realistic. Not everyone is cut out to be able to do this. Some might not want to give up buying luxury goods and  some might not yet have enough assets to risk carrying this out. We ourselves know best what is possible and good for us. Let's all strive to achieve an early semi-retirement followed by a full retirement soon. Let us not conform to what society tells us to be, let us not be brought down so easily by the hurtful words of others. Let us have the greatest gift of all - CHOICE.

As always, save more, spend less and invest wisely.

Job Loss - Utilisation of the Emergency Fund

Dear readers, I was just thinking to myself how I would handle loss of income should both my wife and I happen to be jobless at the same time. Not that it is happening now, but who is to say that it will never happen.

My wife and I are currently in the midst of starting a new company and we have decided that in order to increase the success rate, she would have to quit her current job. The reason as to why her and not me is because she knows the sector way better than myself. Therefore during these few months ( 4-6 ), we will be relying only on my income which means that our savings and investment amount will be cut down by a lot.

I was thinking, what if during this period of time, I was to lose my job as well. Would it be as disastrous as  I  think it would be? Upon careful consideration, I do feel that the emergency fund would suffice for these 6 month. We would have to cut down on eating out or going for holidays as my planned emergency funds was supposed to cover just our basic needs - plus or minus.

Everyone has different needs to be drawn from the emergency fund. Here are mine should I have to ever utilize it. - Fingers crossed that I will NEVER.

1) Car Expenses - About $300 ( should be a lot less since won't have to commute to work.)
2) Utility bills - About $250
3) Food - $700
4) Wife's Transport - $150
5) Mobile - $60
6) Cable - $50 ( would most likely cancel this, but would be a good replacement for going out which would cost more money)
7) Toiletries  - $50
8) Condo Fees - $350

Total a month would be about $1500-$1900
6 Months would be about $9000 to $11400

I used to be pretty paranoid about having a huge emergency fund to last me a long time, somewhere along the line of 2 years worth. However, I have deemed it to be totally unnecessary and have cut it down to about $15k. The rest were put to better use in investments.

How much emergency funds do you think is enough? 3 months? 6 months or like the old me, 2 years? What are your basic needs and how much can you cut it down to? I'm sure I can cut mine down by quite a bit but I do not see the point as I do not feel that both my wife and I would be out of job at the same time for too long a period of time. An emergency fund is a definite, the question is how much.

As always, save more, spend less and invest wisely.
P.

My Checklist for Retirement

Since i have decided to document my journey, i feel that it is only right to roughly state where i am on it. Honestly, i am only at the beginning, i would say that I am at about the 10% to 15% point ( I will show my portfolio allocation in a later post). The requirement for me in order to declare myself retired would be that i would have to have completed the following tasks.

1. Clear my mortgage.
2. Have an income from different streams equal to a min of all my expenses.
3. Have $0 debt.
4. Have an emergency fund of at least 1 year worth of expenses.
5. Have the min sum in my CPF

Sounds easy when generalized into these 5 point but in reality, not so. I have to continuously work hard at achieving these 5 targets should i want to retire before the age of 45. Why 45 you might ask? I chose this number because based on my calculations, which I will show in a later post, 45 would be the age whereby i can achieve these goals without compromising my current lifestyle too much. ( Wife is a spender, new house, new renovation.. etc etc)

45 is also an age whereby I am not too old to do the things i want to do such as travel, hiking and other such stuff. I would still be physically able to backpack Europe at that point, i dream i can only dream of now.

Clear my mortgage

Not clearing the mortgage during retirement would mean that 2 things, i have an added expenditure that is not within my control( cannot choose not to pay ) and my income would be reduced due to the fact that i will not longer be contributing to CPF thus I will have to pay cash for my mortgage. Not a wise choice.

Have different income streams that equals a minimum of my expenses

I would prefer not to draw down on my investment portfolio as i would like to leave it as a form of inheritance to my children. I would therefore try to create as many streams of income as possible to live on comfortably. Currently, my wife and I are working on several projects which should reap fruit in the near future. If not, we are still young and will learn from our failures and try again.

Have $0 debt

Unlike many who believes in good debt and bad debt, i am one who thinks otherwise. To me, all debt are bad debts as it only means that you are owned by someone either directly or indirectly. At the point of retirement, i do not want the chains of debt binding me. No car debts, no housing debts and definitely no credit card debts.( I always pay my credit card bills on time.)

Have an emergency fund of at least 1 year worth of expenses.

In life, nothing is ever certain, you never know when you will need extra money. I hate to think that i would have to borrow from someone to support my family in times of need. Instead, i will have an emergency fund containing at least one years worth of expenses. This would also be a safety net so i will, hopefully never have to sell my businesses or investments at a downturn to fund my living expenses.

Have the min sum in my CPF

 The reason for this option is purely personal. I feel that having an additional income coming in at the age of 65 would be something to look forward to. This extra stream of income would be gotten by putting the minimum sum from both my wife and I into CPF Life which should provide a nice extra monthly income  for several years. An extra benefit would be that after my wife and I leave this place for a better one, our kids would get whatever is left.( Since the earlier we travel to a better place the more our kids get, i seriously hope they will love us enough not to wish us an early voyage.)

These are my requirements i set for myself before considering myself retired. What are yours? I would love to hear about them so please leave comments.

As always, save more, spend less and invest wisely
P.