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Why 35 to 50 Year Old Singaporeans Should Value Financial Peace More (Plus 6 Tips to Achieve More Financial Peace)

What is worse than being laid off?

Trapped in a bullshit job you cannot get out of. And when you leave, you the next job is also a bullshit  job.

I realized that in a strange week that I have been through. I bumped into a member of BIGS World on the train and had a long 30 minute conversation during our commute.

He is a financial adviser and was on his way to meet a client, who wish to draft up a plan for his child’s personal accident plan. My friend said the client was laid off. To make things more pain, the spouse is also laid off.

He made a comment that for some reason, the people around him, in his age group, seems to be in these situations a fair bit. He is just one year older than myself.

Probably last week, I got to know a friend of mine also lost his job in the financial sector during a corporate restructuring. He is the sole breadwinner with a child.

On Friday, I met up with a group of ex colleagues to celebrate one of them leaving a challenging position in his last company. That is my company. So in the group, I am the last one standing that is still in the company. On the way back I realize, one of them decide to voluntarily leave his challenging work scope as well, take a break and look for a job again.

Sometimes I wonder if we are all poor performers, or that all IT companies are like that. Everyone seem to be picking up more projects to manage, for the same pay and have more things on our mind, spend more of our waking hours thinking about our work. If the project is not more, it is a more challenging user vendor relationship (with you being either the vendor or the user)

When I got to office on Friday, I was clearing some of my archive mails, because the company gave us so little space to store our mail. Then I chance upon an old email by one of our vendor.

About 2-3 years ago he was retrenched by his own company (who is our vendor). He was about 44 back then. It came as a shock to us because he is the only one spending time to attend to our problems. A corporate restructure due to de-merger cut short his time there. I decided to message him to see how he was doing. Thankfully, he manage to find a job, albeit in a different scope.

When you reach the age of 40 to 50 years old, it seems to be an especially tender phase.

My friend Chris presented that we reach the most depressed state at 44 years old. This probably coincide with our mid life crisis, endure the most of a bullshit career, and where our parents start having some grave health problems.

I think that your financial life is increasingly not so linear. But even before our jobs become more dynamic due to disruption, your career at 40 to 50 years old is risky.

In the past, I thought that this is the most lucrative phase of your working career. In terms of income it is.

However, because you are paid well over here, management will evaluate what you bring to the table, and whether they are able to replace you with a young as capable, cheaper person.

It will be good if they give you a severance package.

However, some companies will choose to give you a greater amount of projects, stress you out, decrease your performance score, so as to create a valid reason to pay you less bonus and make you leave on your own. I wonder if we can report to MOM such practice.

How Much Do People Value Financial Peace?

What happen these 2 days, made me reflect upon people’s relationship with money as they approach this tender phase of employment.

It makes me wonder about the value of Financial Peace to people.

At investment moats, we talk a lot about wealth building through different type of financial assets, we talk about various aspects of wealth management, and we talk about philosophical concept of retirement, financial independence and security.

Financial Peace, is probably a philosophy like the various ideas behind retirement and financial independence.

When you lean towards financial peace, you tend to value safety over risk seeking.

You short financial worry.

Mentally, you decide to reduce your fat tail risks then manage things base on probability.

The opposite of financial peace is to be more risk seeking in life.

You buy a call option on financial worry.

In my circle, I am surrounded more by folks doing wealth accumulation. So inadvertently, the topic centers upon optimization so that you can build up wealth in the most optimum amount of time. Over time, how many people are more risk seeking and how many long financial peace?

I do see people being more conservative, but in truth a lot say they are conservative, but by standard measure, they are pretty risk seeking.

The concept of financial peace tends to be absent.

My friend who decide to voluntarily leave his job reads Turtle Investor’s blog. In his most recent article, he shares the milestones that a person like himself should have completed, or on his way, when he reaches 35 years old.

The article sounds deceptively like CPF sponsored, but he lists down 3 milestones:

  1. You must have a fully paid house.
  2. You must have a good medical expense insurance.
  3. You must have a lifelong stream of income.

My friend said that he has fulfilled the top 2 and working on the third one.

He fully agrees with Turtle Investor.

The Virtues of Financial Peace can only be Appreciated When You Experience it Yourself

Or when you see someone close cause in the cross fire.

You see my friend had the guts to leave his job is because he lost his job once before.

Back then, it hit his family and himself much harder. I remember the time it took for him to find his next job was pretty long.  Luckily his wife is working.

During the time he was without a job, he decided to improve the way he looked by doing some YouTube work out called Insanity Workout. I think keeping yourself busy definitely helps things rather than not doing anything, not having a structure to your life.

It is also during that time he sought out to make sense of all these money stuff. And that is where he chanced upon AK71’s blog, which helped him immensely.

Upon finding another job, this time he is not taking things for granted:

  1. Paid off his mortgage
  2. Be very cognizant about how much his family of 3 plus extended family needs to run in an efficient manner
  3. While he left the company for a higher paying one (the existing job which he left), he never expanded his lifestyle, so he is able to channel this to increase his net asset value
  4. Ensure that their expenses can be supported be one person’s income
  5. Starts accumulating more financial assets

When he decide to quit voluntarily this time, his colleagues was incredulous.

This is because it seems, its not a very prevalent concept (among sales people) that if  you have a plan, prepare for rainy days, you can actually fire your boss.

When you have done #1 to #5, you greatly minimize your cash outflow and keeps your run rate low. As there is still one income, it greatly increases resilience.

You double down to short financial worry.

For the other friend who lost his job in the financial sector, he has always been prudent.

This is probably because he is the sole breadwinner in the family of three. This is what he has done:

  1. Be adequately covered in terms of insurance
  2. Paid off his mortgage
  3. Build up his financial assets and create several streams of income. When you purchase listed business who distribute dividend income, you diversify your cash inflow from your job. He built up a dependable wealth machine.
  4. Accumulate 12 months of annual expenses for emergency

Some folks tend to have the character to short financial worry.

If ever you questioned whether they are being too conservative, they lived to tell the tale that yes, financial peace is always a bullish play.

How do we achieve more financial peace?

Let me provide some helpful advice.

1. Don’t Let your Income Drive your Lifestyle Too Much

When we all start with low salary (probably not apply to those top performers who start off with $5,000), your disposable income might not get you enough of the essentials you need. So when the salary increases, your level of comfort gets better and better to obtain the essentials.

Passed a certain point, your salary may be too much for your current lifestyle. So you start looking for what pleasures your salary can buy for your family.

To have financial peace, sometimes you need to set aside the free cash flow from your disposable income after spending your essential expenses.

2. Building Up Emergency Buffer

For my friend who is retrenched, he probably has 12 month of expenses as emergency fund. For the one that quit on his own, he probably can last more than 1 year for his family of 3 and extended family as well.

This lessens the Impact of the surprising event.

We been through this topic a lot in the media but to a lot of people, this emergency fund concept is still very new (here is my complete guide on emergency fund)

The emergency fund is a way to compartmentalize your liquid assets.

The objective of the fund is to create your own “virtual loan shark” such that if there is something that you did not plan well for, or something out of the ordinary that happens, you can borrow from this virtual loan shark. If I term it as a loan shark, it means you have to return the money after lending from it!

Instead of facing the shame or awkwardness with borrowing from family members, or that high interest taking personal loans or a real loan shark, you take care of yourself.

These funds, buys you time.

The time to allow you to get a new job.

If you do not have this, you will face financial and social worry.

3. Be Aware of Your Baseline Monthly or Annual Expenses and your Floor Baseline or Annual Expenses

A lot of the fear we faced for a lot of things is because there are a lot of uncertainty.

For those who are able to handle things well, it is because within the uncertainty, they manage to find structure.

Financial Worry gets amplified because there is uncertainty over your own finances.

So one of the remedy is to sought to peel away the uncertainty and find the structure.

This lessens the impact of the turbulent situation.

When you faced such turbulence in your life, you got to think of where you can reduce the cash outflow, so that you can get your money to last longer. In order to do that, you got to know what makes up your cash outflow in the first place.

Many do not have a good idea.

Those that are more assured here would be able to say “I need $3000 per month” firmly.

Are you able to?

If not its time to figure out your cash inflow and outflows (here is my complete guide on your personal cash flow statement)

When you have itemize your expenses, you can put them in 2 categories: the mandatory and the discretionary outflow. For some of those, you can break them up because you can have various grade of services.

For example, you can eat $10 per meal. That is high priced. You can eat $4 per meal. That is average priced. You can eat left overs. That is lowest priced. (note that I do not mean high price means high grade or quality, this is probably a bad example, a better one would probably be sending your children for tuition versus you teaching her yourself)

So this would mean that if you spend $1000/mth on family food, groceries, 40% of it are discretionary and 60% is mandatory.

Before you lose your job, you probably have a good idea where you can cut the discretionary.

So suppose the total disposable income is $7,200/mth and your family usually spend $4,500/mth and save $2,700/mth.

You work out that out of the $4,500/mth, $3,000/mth is your mandatory expenses.

So your baseline expenses are $4500/mth and your floor expenses is $3,000/mth.

Instead of setting aside a emergency buffer for 6 months of your annual expenses, $4500 x 6 = $27,000, base on your floor expenses, the $27,000 would last 9 months.

By doing this, you have war game the scenario of retrenchment and have systematize how to go into siege mode living. You could build up 12 months of your floor spending of $3000 for $36,000.

This do not work so well for folks who are already very lean. In those cases, their $4,500/mth can only be cut to $4,000/mth.

Different family can have different gap between your baseline expenses and floor expenses.

And a lot depends on your identity, how conditioned you are to your current life style, whether the family is sensible and flexible. For some family they can really cut down a lot and they feel less affected by the change in grade.

In the news recently, there are 2 separate stories on large families (6 to 7 children) trying to survive. Both live on the income of a single bread winner. One of them lived on the salary of $2500 but with subsidies, their expenses reached $3,000/mth.

You might or might not want to get to that stage, but if someone is able to survive on $3,000/mth it means that somewhere, the floor expenses can be reduced to a very low amount.

4. Strive to Increase Your Net Asset Value, So that You can Deleverage Easily When Required

For my friend who decide to leave his last company, and the friend who got retrenched recently, both of them prioritize deleveraging their major loan, which is their mortgage loan.

What do I mean by increase your net asset value?

In the past, I do recommend everyone to form their personal net worth statement (here is my complete guide to your personal net worth statement).

personal balance sheet net worth

When you tabulate your net worth statement, you are working out your assets, your liabilities. The difference between your total assets and your total liabilities is your net asset value, or total equity, or your net worth.

So for most people, their asset are their CPF and their home, whether is a dwelling or a dwelling cum investment. For some their assets includes their stock portfolio, insurance endowment, whole life insurances, and their car.

The common liabilities are the personal debt, credit card debt, tuition loan, vehicle loan and mortgage.

When we say that your net asset value is increasing, it means that your assets’ current value is increasing more than your liabilities. This can be done if your assets are appreciating in value faster than your liabilities. This can also be that you are adding more assets, or paying down your liabilities. Both ways increase your net asset value.

What is a financial worry here?

You get into Financial Worry when you purchase things that you thought are assets, but depreciates very rapidly, or do not hold much value. Your net asset value is declining.

At the same time, if you do not clear your liabilities, your liabilities accumulates value.

Assets value goes down, liabilities value go up.

Not a good situation to be in.

When you lose your job, or are evaluating whether you can change companies, you realize that you cannot deleverage.

You can deleverage by selling your assets that are liquid to pay off your debts. When you do that, you reduce your cash outflow.

For illiquid assets like the home, depending on the equity value left, and the closing costs, you could sell the property and downgrade to a smaller one.  This will free up more cash outflow.

Financial Peace is not having the thought that you got to somehow come up with money to pay for these debt obligations that do not satisfy your life now.

In a certain sense, the aggressive wealth builder will have to live with some financial worry, or a lot of financial worry next time. The conservative wealth builder have to worry about much less, but they do worry if their wealth is growing fast enough.

For those that strive for financial peace, they would choose not to take on debt. They would pay off the mortgage to their dwelling, then choose a wealth building method that is not leverage based.

If not, they would be extremely measured, in that they set aside their liquid wealth assets to be adequate enough to pay off the mortgage/loan where necessary.

For example, their home value is currently $500,000 and they still have $250,000 in outstanding mortgage. Those who strive for financial peace would not aggressive pay down the mortgage. Rather, they will ensure that they build up their liquid assets in stocks, cash, deposits such that it move towards the $250,000 in mortgage/loan.

If they lose their job, in the worse cash they can liquidate those liquid assets to pay off the loan. If they have multiple loans, they can choose to use these liquid assets to pay off the higher interest or those loans that they cannot wriggle their way out.

They will not have that mental overhang of “someone hanging a pig head outside their door”. That is financial peace.

Whether you get hit by retrenchment or being forced to leave, is a matter of luck sometimes, so each of our probability is different.

In this way, if the scenario is that your career is great, your liquid assets will still continue to accumulate in value, and you do not have to activate it to pay down debt. Your home value will appreciate over time, and your cash inflow from your disposable income is intact.

There is always the middle ground for the wealth builder.

One of my more astute university friend is a property investor, so she often prowls the auction markets to look for deals in Singapore.

She shared with me that one of her risk management tactic is to ensure that instead of using all her available cash / CPF to down pay for the property, she would ensure that she has 3 years worth of mortgage payments as liquid assets. Should the property market be unfavorable that she cannot liquidate well, and that something happens to her job, she can keep the property for 3 years and not force to liquidate the property at poor prices (when supply outstrips demand). In a way, this is a very measured, asset-liability matching way of articulating how much liquid assets she has built up.

5. Build Wealth Machines that Provides Diversified Streams of Wealth Cash Flows

If you have one income, or two income,  your cash inflow is very concentrated.

If one stream gets compromised, your life will be more turbulent.

You can choose to channel part of the free cash flow from your disposable income into financial assets. When you learn to build wealth with these financial assets in a fundamentally sound manner, you have a wealth machine.

Wealth Machines - Investment Moats

You create a wealth machine when you fund it with capital, and learn to be able to grow the financial assets competently.

Your wealth machine, when required, would be able to provide you with cash flow.

Some common way of building wealth is through whole life or endowment plans that provides cash flow, stocks that provide dividend income, real estate investment trust (REIT) that provides dividend income.

Behind the sensible financial assets, there are real businesses that generate cash flow and earnings.

For example my friend who got retrench owns 11 different listed businesses. Each of them provides some dividend income.

Now when he gets laid off, he lost his main income, but the 11 business was unaffected by this event. They will provide him with a diversified stream of cash flow.

If a recession comes, and some of his business is affected, the impact to his dividend income may be temporary reduced.

However, the income is still diversified because not all of them will have their dividend reduced. Some might surprisingly increase.

If you bring in $24,000/yr, a reduction to $19,000/yr in total dividend would affect your living, but it is still better than having zero.

When you create wealth machine is to have the machine to be online, while you went offline.

6. Be Competent, Be a Dependable and Nice Person, Form a Great Network, have a Great Community

The first 5, deals a lot with money buffers or using money to build resilience.

#6 is different, but somewhat, still relates to money.

There are some friends who always seem to have that few more “lobang” to pull them out of a difficult situation.

I called this having a great network.

If we are out of work for a long time, we somewhat becomes “damage goods” or employers would be wonder “why isn’t this guy working? Why aren’t people hiring this guy? Is there something wrong with him?”

I think the key to being able to leave a current toxic environment to move on to a new job is to have peers in the same industry, in different company, and have a deep enough relationship with them to ask.

A lot of my friends end up being acquaintances. However, I realize we were able to get mutually beneficial work to happen is if we have enough deeper relationships. And not many of us actively do something like that. Some of you might have a knack of doing something like that.

When the relationship is deep enough, you are not afraid to tell folks that you need to bail from this place and does your company have any opportunities or help look out for me.

Your friend would also face some risk recommending you or taking some risk with you. However, if you have always shown that you are competent, easy to work with, dependable have a relatively good work ethic, your friend would underwrite your recommendation into their company.

Unfortunately, for some of us, we left our organization with some questionable baggage. Being vocal about the pay, the management, how poor the culture is. There are some things that can be put across by not looking like you are someone who is always being played out by the organization or the management.

In our conversation, my friend shared with me how atrocious one of the workers under his charge is in terms of his production, commitment. If create such a narrative about yourself, unless the referral is your close friend, most people would rather save their prospective employers from having a problematic worker on their books.

We can all show a lot of our negative character even out of work context.

I remember my dad telling me about this neighbor who wishes we rent to her. Dad was saying its an option, however, given her usually behavioral tendency, you might not be able to tolerate her so much.

Thus being a nice person, even in a neutral context can be pretty difficult sometimes.

I think you guys would have some better examples here (and do feel free to comment below) but if you always have a great network, the end result might be that, even before you face difficulties at work, people are already bouncing ideas off you, whether you are willing to come and work for their organization.

In this way, you have a lot of options.

I am sometimes not sure if I should put this so low, because if we want to create a resilient main cash flow stream, this seem to be very powerful if we take care of it well.

Your network, extends to your community.

In the latest revised version of Your Money or Your Life, author Vicki Robins talked about how vital her community was for a person that is single.

When she had to do a hip replacement surgery and are in the recovery period, this can be very challenging for a single person.

However, what got her through this was that friends from her community came to support her and makes deal with it much better.

This is probably a lesson for the singles out there, who might run the risk of weakened health making them regret their decision.

Form a strong network and community now. Again, form deeper and meaningful relationship now.

Give to others before you need anything from them.

It doesn’t have to be about money all the time. You can gain or give advantages without using money as the medium of exchange.

One of the advantage of participating and facilitating some of these Freegan community is that you get to interact with people who held some values that are similar to yourself (Read Freegan, Dumpster Diving and Financial Security, Independence) .

Not everyone around you can take used things, eat food that are about to spoil, or food that people cannot finish.

However, if you encounter people like that, majority of them tend to be pretty nice from my experience.

Yesterday, I have away an old laptop bag.

I bless someone something that would serve a purpose in their life, but likely hard to sell it off.

I did not meet the person I bless the item with, nor do I know the name, but the person left me some Hershey Nuggets which sadly I cannot eat.

But I know that I have friends to pass this decadence to.

I could open the benefits I gotten from this community to another post another day, if you are interested to learn about it.

If there is one benefit, it is that I learn of another food source that I can tap in times of need.

I think if its not this, being part of certain trade communities, religious communities will give you a wide network that you can tap upon when you need help.

We will only see the Benefits of Financial Peace Indirectly

I don’t think I understand the concept of financial peace, or was introduce to this concept until months ago.

Yet, I think I am enjoying the benefits that this philosophy brings because the priorities of financial peace stems from basic wealth management, which I have been practicing.

And it is something that you might be practicing as well.

We won’t know if financial peace is right or we should long risk seeking. I think the sweet spot is that financial peace is one end of a spectrum and being financially aggressive at the other end. We will be gyrating between the 2 ends.


Explaining the Happiness Curve

I think we don’t talk about the different phase of money well enough, and do not have the data to show.

Some of our careers are bonds, and some are like risky equity. And how thriving we are in each of the phase of age will depend on circumstances, and due to how we shaped it.

If there is one mistake of mind, it is how horrendously I misjudged that some of your compensation is linear upwards.

There will be circumstance that force you away from this linearity (read Your Income Will Not Stay High Forever and You Do Not Have to Be Vegetarian Forever – The End-Of-History Illusion Explained).

However, I realize that when you long wealth management, increasing your net worth, it is also sometimes a long on the financial peace philosophy and despite not knowing it last time, thing likely will turn out OK.

Within your plan there seems to be a lot of out-of-the-money call option on life.

Let me know your Personal Financial Peace Story

I am not sure if my BIGS World reader’s experience is the same for all but my sensing is that there are more evidence of this, despite how great the government paint the situation.

I do hope that both my friends and those readers who wishes to continue employ be able to find a better work position.

If not, that you can pivot to an industry, which puts food on the table.

If you have seen friends benefiting from having financial peace or friends who were bullish on financial peace, but it worked out horrendously, do let us know.

Your story matters.

Here are My Topical Resources on:

  1. Building Your Wealth Foundation – It is imperative you know these stuff as early as possible, because this is the most important stuff
  2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
  3. Learning about REITs – The Deeper stuff on REIT investing
  4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
  5. Free Stock Portfolio Tracking Google Sheets that many love
  6. Retirement Planning, Financial Independence and Spending down money

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Shaun Tan

Thursday 19th of December 2019

Hi Kyith,

Very good article! Especially the concept of - I'll call it - career striving versus other non-professional pursuits. In my 20s I assumed my pay would growth every year, at 10-20%, now in my late 30s I realise that this is still possible but there are serious tradeoffs associated with that. And when you're younger, tales of retrenchment tend to be secondhand. As you get older, you see friends have their careers derailed because simply, things change. That really hammered home the point of being as financially independent as possible, and instead of just spending like how all your peers spend, really challenging yourself to consider what gives life purpose and meaning. That usually leads to an answer that doesn't consist of a luxury item, and the rest of the financial spending and planning falls into place on its own thereafter ;-)


Sunday 22nd of December 2019

Hi Shaun, thanks for sharing. You seem to be around my age. I think when you get to a certain stage, there are other priorities than career. I think people prefer at least some form of stability in their lives but they could not get it now. It is ironic that we didn't crave for it when we are young but when we really need it, it eludes us.

Were these observations similar with your friends as well?

Jo Ong

Tuesday 12th of March 2019

"However, because you are paid well over here, management will evaluate what you bring to the table, and whether they are able to replace you with a young as capable, cheaper person.

It will be good if they give you a severance package.

However, some companies will choose to give you a greater amount of projects, stress you out, decrease your performance score, so as to create a valid reason to pay you less bonus and make you leave on your own. I wonder if we can report to MOM such practice."

It is very true! My husband was forced to write a Resignation letter on the very Letter Day! With 1 month's pay and asked to leave immediately! He was with the company for more than 10 years! Had his 10 years Long Service Award! He was overseeing about 13 projects & 2 of them were delayed and were not due to his part. Decreased performance score and asked to leave! He was all for the company, working during his 30+ days of hospital leave, hardly take any sick leave! He had difficulty looking for a job! Companies will not take him, over qualified. He was willing to take a pay cut. But they were afraid he'll leave when he gets a better paying job. He even wanted to change industries. Government talking about mid career change! He went to WDA, the officer helped with the matching and follow-ups. Companies registered themselves in this programme. Ironically, the HR does not even know they are in it. Some still want experienced people, they are not willing to train. Finally, he had a contract job which will be ending very soon. Applications have been sent, but no replies... I am a home-maker and I am going back to the workforce after 10 years! We are in our early 50s. We have used up all our savings and even borrowed some. It had been 2 years! We are still hopeful that something good will happen!

Thank you for letting me share our story!

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