I have asked my wife to tender her resignation 2 years ago as we are experimenting new stuffs in our life.
You see we have accumulated about 2M in our financial assets 2 years ago.
So i thought that her current job does not make sense for her to continue working as there are time cost for me to fetch her to work and to pick her up from work everyday. This is due to the fact that we are staying in a not well connected by MRT area to her workplace.
Bo bian - our BTO only cost us 350k (5 room) 7 years ago...
So i did my calculation and i told her let's try a new project, if our net worth drop below than maybe she go back to work lah. Anyway never try never know mah.. If we never try to walk we be on wheel chair now also mah..
Wah it was challenging as our thinking is like the ah siao type.. People will says that you are still young why retire why do nothing etc...
Actually we are not doing nothing, we are using our free time to keep accumulating knowledge we are doing research on stocks and how to allocate our wealth and read a lot of news books about successful people go out walk walk travel see see. is not doing nothing okay...
This bring us to the concept of the 2 percent more alpha ... that we are talking about it today .
You see below is the template of a 10% average return and a 12% average return this is what we hoped to achieve min. Long term average market return is about 8-10% in equities.
going forward this return will be much harder i think due to so much QE around the world that inflate everything..
I have been doing average 14% on average last 7 years. If i can do 16% on average going forward wah than hor seh liao ..
The opportunity cost
U see if you accumulated 2.5M of financial Assets (money that can be deploy must be liquid.)
below 40 years old it make no sense to work if you do not try to see if you can do it a not.
Base on a yearly return of 10% one can draw down 100k per year which i think more than enough to survive in singapore for 2 pax.. when i have a kid i budget 130k a year lah .... than i squeeze 0.5% more alpha... (thats the challenge for myself)...
one would have 26M by 70. you see the key is that when u have accumulated 2.5M the hurdle rate to breakeven is actually 4% thats why the 4% rules state that to withdraw 4% every year of your financial assets can hardly make you broke if you know how to invest.
The cost of not knowing how to invest... when u have 2.5M to start with ...
you will need to work as if you draw down 100k per year your wealth can last you only 32 years ... with a 1.7% FD rate so the different is like 26M in year 30.. if i do year 40 or year 50 i think we will puke lah but don't need forecast until so far lah ....
so if i were to get a job i need a job that can pay me 100k (drawdown plus the short fall) 26M
in total is about 29M lah round of become 30M .. == need a job that pay me 1.2M a year min as the income from job still need to be tax.
The 2% more alpha...
If you can do 12% average you get 47M instead of 26M another 20M to spend...
seeing the different in the wealth off we go to try to achieve that...
*note my wife will go back to work if our Net worth drop below 2M now we got 3+ that is net worth include car house cpf etc....
We are monitoring our progression ...
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