I got a chance to read my friend Ivan Guan’s book Fire your retirement.
For those who have not come across his content, you can read his financial sharing at SG Money Matters. Ivan have been writing for some time, introducing us to tax saving strategies and good plans for retirements.
FIRE stands for financial independence retirement early. And this topic is close to Ivan’s heart for him to write about it.
This is possibly the first book on FIRE in Singapore on this topic (you can get the book here).
This is a light read and I think it sought to connect with those who are not so numbers focus, but about the qualitative aspects of life and money.
So here I will pick out some bits and pieces that I find interesting.
Crafting your mission statement
I seldom understand what do we do when we create a mission statement. And here Ivan explains that the mission statement should do two things.
The first is to keep you motivated when the going gets tough and secondly, to help you make the right choice.
For someone who have walked this path I think I can relate to his second point. You are going to have some really tough choices and often the overriding factor is whether it is what will fit your plan.
Do you chase returns when you should be risk managing?
I think the mission statement helps.
Ivan gives a good example for the first one. One of the tough work we do is the stuff we do for a new born baby. That is on top of our day job and other things in life. But we do it because it is our mission.
The Different Financial Trolls
One of the interesting aspects about blogging is dealing with trolls and Ivan puts a slant to how you could be trolled upon financially.
External financial trolls. You will faced many folks that have differing views, but some of their comments and gesture would affect you. Ivan explains that friends and family members can be some of the biggest ones. Sensible financial concepts, and the concept of FIRE is easily confused, misinterpreted, and when these folks try to talk you out of it, there are some emotional and monetary challenges there.
Ivan explains that why couples need to go for divorce counselling is because a big contributor of divorce is due to financial trolls.
Internal financial trolls. Ivan reckons that the internal trolls are more problematic. And I have to agree that it is.
The internal trolls are the part of you that will say:
- I will never be able to retire
- I’ll start saving next month
- Surely the government will do something about this
Internal trolls are manifested from your self doubt, procrastination and rationalization.
These are the products from your family, education and the success & failures you experienced
The Income Generating Asset Concept
Ivan explains that the duration of retirement should be extended due to our life expectancy or that we desire an earlier retirement age. Thus, your wealth needs to last for a longer duration.
Ivan’s way of looking at financial assets that are required in retirement is Income Generating Assets (IGA).
The criteria to be an IGA is:
- Generate predictable income
- Generate positive cash flow every year after you retire
- Do not need active management.
I think these are interesting criteria, and I would think many underestimate #3.
I think predicable cash flow is easy to get.
If you have 1 mil, you can just sell units slowly to get the cash flow. It is whether your predictable cash flow would last for the duration you need.
Ivan categorize the income that you could get into three categories:
- Bonus income
- Variable income
- Guaranteed income
And in the book, he sought to link the financial assets to the kind of income.
The one that you should be based on should be mainly guaranteed income.
One popular solution out there, which is based on CPF and a passive portfolio of exchange traded funds is not recommended by Ivan.
The main reason is related to the future growth of Singapore. For more, you can check out his book for more in depth explanation.
Another big reason was that most wealth builders are not wired to make sound investing decisions.
The way to secure more guaranteed income is through retirement plans. Ivan shared his original reservations about these plans, if you viewed them from the rate of return perspective. However you will not find a lot of things that fulfills the IGA parameters.
The books is a short read and I think it imprints how Ivan look at this topic of financial independence retire early.
It will be a good book to let your peers see what is the big deal about this path you are taking without going into the mambo jumbo that I usually go into.
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Here are My Topical Resources on:
- Building Your Wealth Foundation – You know this baseline, your long term wealth should be pretty well managed
- Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
- Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
- Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
- Free Stock Portfolio Tracking Google Sheets that many love
- Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free