Essential Food F.I. in Singapore with a Portfolio of $172,800 – Learn by Focusing on Just a Single Spending First.

Someone in my Telegram group asked how much we spend on food.

I checked my Actual Budget, which has a custom report function, and it shows that my essential food & groceries clocked in at $108 for the entire month of May.

This question sparked the idea of using just do income planning with one spending item. (If you stick to the end of the article, I will share the data on how much some of us spend on food.)

We can call this Essential Food F.I.

Most people would jump the gun and want to plan for an income for all their spending but they fail to realize that if you lump all your income needs together, most likely, it will lead to a very demoralising figure that you will spend a lot of years to accumulate.

And most struggle to understand why.

To understand better, let us not look at all your spending but just one spending item.

So let us try not to plan for our full retirement, or Coast FI or Barista FI, but just some financial security for our essential food spending.

How much do we need to set aside for that?

I would usually ask people these five questions to figure out an answer to the capital needs:

1. How important is your spending?
2. How long do you need to spend? What is the frequency?
3. Do you need the spending to be inflation-adjusted?
4. What is the difference between your current lifestyle and your desired lifestyle?
5. What is your starting income? How would you buffer? Through padding the income or through the income strategy or both?

Not all professionals use this but I told enough people that if you ask the right questions, it will help you plan well for something that meets their needs.

But first, let me help you relate how come my food cost is like this…

“How come your food spending is this low??”

[Essential food & groceries] is the category of spending for any food that is meant to keep Kyith alive and satisfied with living for long-term. I set this as a category in my budgeting app Actual Budget. This category does not include meals out with friends on special occasions, one-on-one meals, or treats for co-workers and family members.

Those are under another category call [Premium food]. We tackle the differences later.

Regular readers of Investment Moats would be aware that I do some sort of meal prep. I prepare my meals and cook myself for about 20 out of 30 days of the month.

You can read about it here: Meal Prep 2.0 – Cooking Your “Go-to” Meal that You Look Forward to Eating Everyday.

I do this so that I can:

1. Eat things that I feel satisfied and look forward to.
2. Don’t have to agonize over choices.
3. Don’t have to feel guilty of not eating enough vegetables or eating too sinful things.
4. Since I did this my LDL cholesterol seems to have fallen a lot.
5. $5.60 per day for two meals.

May’s food spending is low because I still have CDC vouchers (and it seems… there are still some more on the way!) and I would spend $40 of CDC vouchers on a month’s worth of supply of boneless chicken thighs.

If I eat out for survival food, regardless of the cost, I will clock it in [Essential food & groceries].

So a truer reflection should be $150.

If we divide $150 by 30 = $5 a day. That is quite close to my meal prep estimation.

With that out of the way, let us go through these five questions with my basic food spending.

Question 1. How Important is My [Essential food & groceries]?

If I don’t eat, I would probably survive for five days and then I would die.

That is probably how long my dad lasted in the last few days without food. I didn’t experience it but that is probably not a very nice way to die.

There are foods that I can live without that I spend in other areas of my budget but this one is more sticky.

Between Very Inflexible and Very Flexible Spending, [Essential food & groceries] will lean very close to very inflexible.

If this spending is very inflexible, it means I need to understand it and get it right.

If it is a spending like vacation that I can be more flexible (I think) then maybe I don’t have to think about the spending too much.

Question 2. How Long Do I Need this Income for My [Essential food & groceries]? What is the Frequency for this Spending?

Like many, I am planning for an income as if I will need it anytime.

The frequency will be consistently every month.

Now, to be fair:

1. If I take a 2 year sabbatical, I would need it for 24 months and not forever.
2. If I get unemployed for 4 months and I need this, then it is 4 months.
3. If I retire forever, then probably Minimum [forever, my lifespan]

You might think some of your income goals might be more concrete than this and that would make things easier. But if your needs are so vague currently, you can use this as a milestone approach for planning.

Build up capital for at least a 4 months unemployment, then 12 months, then 24 months and eventually perpetual.

The longer your need, the greater the capital.

The more you saved up, you build a longer runway for yourself.

Question 3. Do I Need This Income to be Inflation-Adjusted?

If some of our spending becomes too expensive, we will

1. Reduce our frequency of consumption.
2. Reduce the grade of what we consume.

My [Essential food & groceries] are pretty much optimised. There is likely no slack in my [Essential food & groceries], and so if items become more expensive, then I have no choice but to spend.

So I do need that inflation adjustment.

Okay, I don’t have a lot of fancy graphics in this post, so here is a chart of food item inflation in Singapore:

If you have problem clicking and viewing the chart in full then just give up. I might go through this more next time. This chart shows the annualized inflation rate for many food items tracked by Singapore Statistics from 2010 to 2023. For some items, we only have 10 years instead of 14 years of data.

The average inflation is 2.34% p.a.

Prices only go up but won’t go down. Well except for four items (Whole chicken frozen, Chicken wing frozen, Broccoli per KG, 6 cans of Beer)

You guys are skeptical and it is what it is.

The red bar shows our 2 vegetables and 1 meat cai png:

1. 2014: $3.09
2. 2023: $3.82

I am a cai png freak so I can tell you the most affordable cai png in Tanjong Pagar would cost around $3.40 for this (standard meat and vegetables). If it is in the most expensive town of SengKang it will cost $4.20.

In any case, I have drifted but yea, I don’t think I can choose not to consider inflation.

Question 4. The Difference Between My Current Lifestyle and the Desired Lifestyle I am Planning for

Many of us plan for F.I. based on our current lifestyle but for some, they are planning for a different lifestyle.

There can be a few differences:

1. Your current self may be different from the future self. A 25-year-old might have a great appetite but you can ask your 40-something year old friend whether they will eat the same thing.
2. Relationship with food may be different.
3. Eventually, many of us have high cholesterol, diabetes and high blood pressure or are flirting close to it, or are worry that if we don’t watch out, we will get into trouble.
4. Our social circle expands and we want to participate in more gatherings.
5. We eat less, but we wish for better quality in what we eat.

Most importantly, you may be planning for a different person and you might have an insecurity if you really understand the lifestyle of a person.

An easy solution is to throw “$40 a day!” and that can be enough but not enough for some of friends with unique habits.

If I were planning this at 25-years-old, I would never have thought that I would be very satisfied with two meals a day.

But this is the problem we face.

Talking to older peers may help us.

I used to lump the food cost for my parents, some my grandma, going out with friends together.

Eventually, my structure brain felt this isn’t the right way to look at it because:

1. My grandma eat with me often, until she doesn’t.
2. I have less control over my parents than myself.
3. More expensive meals with my friends can be so volatile. If I have other goals to focus on, I would often be in conflict mentally how to view this category of spending.

There are variation in frequency, and degree of flexibility if we lump everything together and so I eventually split them to [my essential food], [parents], [premium food].

Question 5. What is the Starting Income to Plan for? How much Buffer? How do You Structure Your Buffer?

With questions 1 to 4, we gain a better understanding of the nature of what we are planning for.

This understanding helps us to decide how much income we need to match our spending.

So if I spend $108 in May 2024, do I use $108 for our income planning?

Not quite.

Your understanding of your spending may tell you some of these spending are different:

1. The spending is lumpy.
2. You spend one or two times a year only.
3. The prices and quantities you purchase varies.

The reason my spending is $108 is because I used CDC voucher to offset some of the costs and I meal prep, which reduces the cost.

But is that the desired lifestyle I should plan for?

We should ask that question more for other goals that we plan for.

I see a lot of benefits in meal prep, but it is challenging to assume that I can always meal prep, or have the desire to meal prep. There may come a time where I need people to help me buy from the coffee shop below.

I know what I desire for food and in all likelihood that will go down over time.

While the meal prep can be very cheap, there is volatility in the price of ingredients.

For example, I would usually buy 10 of these broccoli for five days. That works out to be around $10.

Today, I did my usually round of purchase and the price: $1.30.

That works out to be a 30% difference!

This is not a 3%, 3%, 3%, 3% inflation.

While it may be cheap now, it is important to recognize that there can be a 50% price difference.

Typically, for spending that can be rather inflexible, we need to risk manage the income we plan for.

There are two ways to risk manage our eventual income stream:

1. We add buffers to cushion the volatility in spending need. For example, if we determine we need $2,000 yearly, we can add 10%, 20%, 30%, or X% to the income number. The question is how much.
2. We ensure that our income strategy won’t die if we need to readily take out more money from our assets when needed.
3. Or a combination of #1 and #2.

My strategy is:

1. Based on what I understand about my food spending, I choose to plan for 2 meals a day for 365 days a year, with each meal costing $6. This amount is reasonable for most eating out food today (2024). It is not extravagant but I can get a pretty good meal if I buy from most places. If I meal prep, I can eat until I vomit.
2. I use the safe withdrawal rate (SWR) income planning framework, where I assign an initial withdrawal rate of 2-2.5% to work out the capital I need. The SWR is a spending system which accounts for some challenging inflation scenarios such as the high inflation 1960s to 1990s so it is conservative enough.

So I plan for [$6 x 2 x 30 = $360 monthly or $4,320 yearly].

With a SWR of:

• 2.5%: Capital of [$4,320/0.025 = $172,800]
• 2.0%: Capital of [$4,320/0.02 = $216,000]

The capital needed is small but the spending is not a larger amount relatively speaking.

This income should last 60 years to perpetual.

We can frame our income in different manner if I prefer. For example, if I am not so unlucky, I can frame it as I have capital of $216,000 and I can extract an initial income of 4% of the portfolio or $24 daily, $720 monthly, $8,640 yearly. Whatever that I don’t spend, I will prudently put back into the portfolio.

Now repeat Questions 1 to 5 with Your Other Income Needs.

If you don’t agree that I should constrain to just food, now you can try and expand and plan for an expanded need.

For your expanded need, ask yourself the questions:

1. How important is your spending?
2. How long do you need to spend? What is the frequency?
3. Do you need the spending to be inflation-adjusted?
4. What is the difference between your current lifestyle and your desired lifestyle?
5. What is your starting income? How would you buffer? Through padding the income or through the income strategy or both?

That is all there is to it.

But most likely, the lazy people will just say:

1. All my spending is important.
2. I need the income to last for 60 years or more.
3. I need the income to be inflation-adjusting.
4. Just plan for my current lifestyle (with wife, 2 parents, 2 kids and a mortgage)
5. I want enough buffers, both in income and in the income strategy.

And if your current lifestyle cost $10,000 monthly and we buffer for 20%, then I will tell you that you need $5.7 million lor (using a 2.5% SWR).

With most out of the way, let us try to answer some potential variations.

What if We Are Planning for Some Lifestyle Food Spending?

You would still need to cycle through the five questions.

I don’t have a good catch-all answer because what I have in mind, or what society have in mind may be very different from how you see lifestyle food spending.

I think that most:

1. Can be more flexible with their lifestyle food spending.
2. Believe that if they don’t have at least something, then this life is not worth living.
3. But yet, if money is really, really tight, they begrudgingly will adjust.
4. They don’t think that they can eat forever.

A most ideal system is to plan with

1. a less conservative SWR
2. and then adjust if they are unlucky that financial conditions are challenging
3. set a low spending floor (your income will not go below this floor)

1. You can use a dividend paying income system if you are a relatively good dividend stock investor.
2. Start with a 4-5% initial withdrawal rate with the floor of at least half your starting income. For example, if you need $15,000 yearly, the income will not fall lower than $7,500 yearly and the capital need is $300,000.

Your income may lose some purchasing power but because this spending is less important, you may be able to afford this.

Be Sure to Tell Your Planner that You Have Set Buffers in Your Income Needs.

If you say you need $20,000 for your spending and don’t tell me anything else about the nature of your spending, then I will either ask you these five questions or assume that you want a conservative plan.

The capital that I will come up with will be larger than what you have in mind because my income strategy have buffers.

But now your plan have buffers on top of buffers.

The plan is safe, but the numbers may look quite huge.

It is always good to have an open conversation of how safe the income system they are proposing and whether you have added some buffers to the income you are planning for.

How Much do Some of my Members spend on food?

A recent retiree spends $1,700 on food. Restaurant spending will be $30-$200 while normal food will cost $10 to $50. Our seemingly wealthiest spend $2,000 on food alone and $10,000 monthly for a family of 5 on food.

A young doctor will spend $200-$300 monthly on their own food and an additional $500-700 monthly if eating out, parties and drinks. An older single will spend $92 on groceries, $200 on lunch and dinner, and an additional $217 on beer and whisky if the person look at their spending log.

A single breadwinner for a family of six spends $500 on groceries and $500-600 dining out (usually for 3 pax) at mid-range restaurants one to two times a week (no hawker centre).

An older family spends $1,200 to $1,500 monthly on marketing and groceries for home cooking for family of 7. An additional $100 to $125 weekly at coffeeshop zi char. Total $1,600 – $2,000 monthly.

A late-30s person will spend $680 monthly on dining in, dabao and delivery and additional $630 on groceries for a family of 4.

So we have:

• Single: Lumpy $1,700
• Single: $300 and $700 split between essential and lifestyle
• Single: $300 and $250 split between essential and lifestyle
• Family (5): $10,000
• Family (6): $1,100
• Family (7): $1,500 and $500 split between essential and lifestyle
• Family (4): $1,300

So me planning for $360 monthly essential isn’t too far off.

Some Last Words

I always feel that the worst trapped souls are those who don’t have time & headspace to reflect upon which part of the lifestyle is important to them, that some spending do go of, or the plain lazy people.

And they cannot snap out of it.

You throw this to your investment or financial adviser and they are going to throw you this KNN number that you see liao, you also demoralize.

Don’t focus on tackling the whole puzzle but understand the rules of the game and just focus on solving a small part.

If you don’t like food, tackle your holiday vacation and see what happens.

Here are the relevant resources covered in this artlce:

1. My most essential spending, which includes this [Essential food & groceries]
2. Planning for #1 with a 2.0% SWR
3. The portfolio setup

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