![]() ![]() To achieve financial independence, we need to invest at least $930,000 in an investment property. In Singapore, some of the higher yielding investment properties currently have a rental yield of around 4.0%. If we are able to earn better returns, through a REIT portfolio giving us 6.0%, we would require a portfolio worth $620,000. This translates to needing a portfolio of close to $1 million. In addition to our emergency savings, we also each need an investment portfolio to replace a monthly salary of $3,100 or annual income of $37,200.Īssuming an investment in the Straits Times Index (STI), Singapore’s benchmark index comprising the 30 largest and most liquid stocks in Singapore, we would earn an annual dividend of 3.6%. It’s a little more tricky to estimate how much we need to achieve financial independence. How much do we need for financial independence? All it means is that we do not need a job to be able to afford our current standard of living. Retirement or early retirement, and financial independence are two different things.Īchieving financial independence also does not mean we are rich or living the lifestyle we aspire to. While we can leave our job, as we no longer require our salary each month, it doesn’t necessarily mean we have to. Read Also: Understanding CPF LIFE And Your Monthly Payouts When You Retire In SingaporeĪs long as we are able to pay for our monthly expenses, we can consider ourselves to be financially independent. This can come in the form of dividends from a stock portfolio, rental income from an investment property or even CPF LIFE after we turn 65. In other words, we have been able to replace our active income with passive income. We achieve financial independence when we no longer require a salary from a job in order to pay for our monthly expenses. We should calculate our own requirements for financial stability, as well as financial independence and financial freedom. We understand this is a broad generalisation based on the average household expenditure trends in Singapore, and each of our lifestyles may differ. Of course, we also need to be able to continue paying recurring bills, by holding down a job that will pay us a combined $6,200, or $3,100 each. ![]() In the latest Report on the Household Expenditure Survey 2017/18, households spent an average of $4,906 a month on goods and services.Īssuming we live with our spouse in a household, this means we would minimally need an emergency savings worth $44,200 or $22,100 each. How much do we need for financial stability? Achieving financial stability still centres around being able to actively earn an income in a job to pay for the important expenses in our lives. While achieving financial stability is admirable and important, it is very different from financial independence or financial freedom. ![]() The second part of it is equally important, requiring us to accumulate a six- to nine-month emergency savings buffer for unexpected expenses and saving up for foreseeable longer-term expenses such as a European holiday or our children’s university education. The first is about being able to pay for our recurring monthly expenses such as our home loan, electricity and water bills, phone and internet bills, groceries and food, clothes, insurance premiums, transportation, children’s allowance, car loan and even spending on some indulgences like going to the movies, eating at a nice restaurant, spending on branded clothing or buying electronic gadgets we really want. The fundamental notion of achieving financial stability is that we don’t have to get anxious about money. ![]() This usually comes when we initially enter the workforce, and start our lives by being responsible for our own bills, pay for our daily living expenses and even after we get married, buy our home and have a child. #1 Financial Stabilityįinancial stability should be the first financial goals we plan toward. While there may not be set definitions, we can still broadly look at what these terms mean and the objectives they represent. Read Also: 4 Things Singaporeans Need To Think About Before Joining The “Financial Independence, Retire Early” (FIRE) Movement This brings us to the three financial goals – financial stability, financial independence and financial freedom – we need to work towards in our lives. Instead of just dreaming about the lifestyle we wish for, we should be planning towards the financial goals needed to achieve it. That may feel like a dream, being able to leave our jobs and stresses behind to explore the world with our partner. Many of us may find ourselves seduced by articles we read online, detailing lifestyles about how a couple may have saved $XX million by age XX, and left their jobs to travel the world. ![]()
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