Strategies to FIRE early in Singapore
To FIRE early is one of the most satisfying goals you can have for yourself. We all dreamt of it, but few has attained it. In the past, our parents used to save every penny and investment isn’t an option for them. Sandwiched between the older generation with limited savings and your children, it is will be a challenge to survive on savings. With an increasing Inflation rate, your money will be worth lesser in ten years than it is today.
Singapore’s core inflation rate is 1.5 percent.
If you had $1000 today, it will only be worth $742 in 20 years! That is even assuming the inflation rate doesn’t increase. Housing, transport and food prices go up every day, while our income remains the same.
We may not be able to prevent inflation rates from rising, but we can do something about our money to prevent its devaluation. We can also find ways to increase the amount of money in our pocket to ensure we have enough for our retirement if we want to FIRE early. There are many ways to do this!
What is FIRE?
Nope, I am not referring to the fire element in Avatar! FIRE stands for Financial Independence, Retire Early. It is a new concept that has emerged and is quite popular among millennials.
“Financial freedom is the best thing money can buy”. FIRE allows you to live a life you want instead of living your life for others. It allows you to achieve your dreams, be it travelling around the world or buying your Maserati. My dream is not only to travel around the world but also to get a private pilot License and retire before 50 living with my partner in a small town in Canada or Switzerland, surrounded by mother nature. What’s yours?
All of that requires $$$. It may not be an easy journey, but it will be a worthwhile experience. I endeavor you to work towards your goal or dream and achieve FIRE so that we may unlock our freedom. After all, I am sure you do not want to work till you are in your 60s
How to FIRE early
It takes hard work and effort for one to be financially independent. Let’s see some of the tips!
- Grow your income
Grow your income through side hustles or passive investments. You can take on freelance jobs or even do a side business such as drop-shipping. You can also start a blog or become a Youtuber, living your passion and obtaining a side income in the process.
- Attain new skills
Learn new skills to improve your value to your potential employers and attain a higher income. It also ensures a bigger pool of job options should you lose your job in a recession like Covid-19. Some examples of learning resources include Skillshare, Udemy and even Google Digital Garage. Some of them even give out certs to further supplement your resume if you complete their online course.
Put your money to work on appreciating assets like stocks, crypto or properties, the earlier you start, the faster it compounds. Compound interest is one of the most beautiful things in this world, as shown in the graph above. If you are unsure where to start, use a Roboadvisor or simply put it in an Exchange-traded fund (ETF) like SNP500 – investing in the top 500 stocks in the US. If you put in $1k every month to a $10k capital investment like SNP500 that gives an average return of 10%, you will have $217,186.52 in 10 years!
In contrast, a bank’s interest rate is only a measly 0.050%. The bank may also cut their interest rate anytime they wish to control the economy. In a crisis like COVID-19, the rates will drop like flies. The DBS multiplier account interest rate is now an average of 0.5% compared to 2019 at 2%.
Tools such as Walletburst helps you to calculate how much you need.
Plan ahead where you want to put your hard-earned cash. You may choose from high-interest savings account like DBS multiplier account or a cash management solution such as SYFE Cash+. Do note that the latter is not capital guaranteed.
Don’t take your foot off the gas. Building wealth and freedom demands consistency and discipline. One good example is to dollar cost average regardless of price in your investments.
- Be frugal
Live below your means and keep your expenses low even as your income increases. You will be more successful than those who spend more than their income. Find out your needs and your wants.
Minimalistic is the keyword to spending less by being content with what you have. Watch this awesome video to be enlighten.
- Eliminate debt
Pay off your loans before you invest! Keep good loans such as mortgage loans with low interests and prioritise repaying high-interest loans such as credit card loans first.
- Eliminate unnecessary spending
Before spending on a $1000 Gucci bag, ask yourself, “Is this a need or a want? Do I really need this?”. Don’t rush headlong into spending. Give yourself a week to decide whether you need that item; you will form a clearer picture if you don’t let emotions interfere with your thoughts.
One method you can use to budget your money is the 50/30/20 rule. The basic rule is to divide your income into three spending categories: 50% for needs, 30% for wants and 20% for savings or paying off debt. This helps to manage your money easily and ensure you stay consistent. If you have trouble with budgeting, you can use apps like Seedly, Toshi Finance or Price Kaki.
- Utilise resources
You can make use of various resources such as Repairkopitiam. They teach you how to repair your broken mechanical issues or even fix your home wiring problems free of charge!
- Kick bad expensive habits
Kick those bad habits if you wish to achieve FIRE sooner. You can take public transport instead of Grab or brew your own coffee instead of buying an overpriced Starbucks. These little things add up to your nest egg!
- Optimise your spendings
Ensure that every dollar you spend obtains the maximum possible value.
Shop often online? Use Shopback for cashback.
Buying groceries every week? Cashback or miles credit cards are great for that. You may refer to my guide on credit cards here. https://thecashcottage.com/credit-cards-is-it-for-me-a-guide-for-beginners/
Eating out often? Use Eatigo to checkbook in advance for a greater discount! Note that not all restaurants are available on that app.
You get my point, optimizing your expenses is a great way to get the value out of every dollar, but not to the point of obsession.
To sum up, Financial independence has no hard rules, there are many paths you can take, but the main three takeaways are to grow your income, save up and invest. If you can juggle these three points well, you are already on the road to FIRE.
That being said, you shouldn’t sacrifice enjoyment entirely just to get wealthy. The night is young, and you should go live and enjoy yourself without regrets! Finally, I will leave you with a quote, “The wealthiest person isn’t the one that has the most wealth, but the one most satisfied with what he has.” It is all about mindset.
If you have any more tips, do contribute down below!