In this post, I'll lay out some general guideposts and milestones to keep myself on track to achieving my goal. All calculations are based on the following assumptions:
- I continue holding a full-time job until minimally, age 40
- Very conservative estimate of salary appreciation at 3% p.a.
- My family is not saddled with unexpected costs (eg. health emergencies)
- One-off purchases (eg. wedding, house, renovation, furnishing) are paid without dipping into investment capital or returns
Current: Single and living with my parents
This is my current state of affairs and will likely continue unchanged for the short term (2-3 years). Current expenses: $800 per month (food, entertainment, transport, subscriptions, insurance, tax all in)
Within the next 3-5 years: Married with house loan, no kids
If my partner and I get married in the next few years, we would likely add a house loan to our expenses (additional ~$800 per month) which will be covered by each month's CPF contribution.
Estimated expenses per person: $800 + $130/2 electricity^ + $50/2 water* + $200 groceries + $40/2 fibre broadband + $50 buffer = $1160 per month
Assuming a 5% p.a. dividend rate, I would need 557k invested to earn enough in dividends to pay for 60% of our combined monthly expenses
>5 years from now: Married with house loan, with 1 kid
>20 years from now: Married with > 1 kid, house loan paid off
Ahh, the cost of raising a kid in Singapore. These 2 scenarios are so far removed from my current lifestyle that I'm not going to try and estimate the household expenses. Furthermore, referencing published averages I can't verify or cross-check will only contribute to 2nd/3rd degree estimation bias. I leave these calculations to another day in the future
Game plan
With just over a decade to achieve my goal of financial freedom by 40. I have divided my investment journey into three time-based stages:
Guideposts
- Capital appreciation
- Dividend reinvestment
- Aggressive approach
Focus
Build a deep foundation by picking good businesses to hold for the long-term
Milestones
#1Increase portfolio value to 100k by 2021
#2
Increase portfolio value to 500k by 2027
Guideposts
- Maximize gains
- Dividend reinvestment
- Balanced approach
Focus
Maximize returns from my investments while taking moderate risk
Milestones
#3Increase portfolio value to 1 million! 😎
Guideposts
- Capital preservation
- Dividend ladder
- Defensive approach
Focus
Preserve investment capital while distributing dividends evenly across the year. Re-balance and adjust withdrawal as needed, based on the wider economic conditions
Milestones
#4 Finalize and execute my retirement plan (check it out here!) which includes CPF Life, SRS and investments* Average water bill for a 4 room HDB flat (PUB, Singapore's National Water Agency)
^ Average cost of SP bills for a 4 room HDB flat(Average Cost of Monthly Singapore Power (SP) Bills)