For many working adults in Singapore, work takes up a huge portion of the lives. So our happiness at work directly affects our quality of life and well being.
Lately, I noticed a common thread in my conversations with my friends and clients. They have been working for over a decade, some even 20 to 30 yrs and they say they are tired.
Tired of office politics,
Tired of working with difficult bosses,
Tired of the ever-increasing workload and stress,
Tired of being overworked and underappreciated
Many of them wish for a break and can’t wait for their retirement. But they endure and struggle to stay on their jobs because they still have mortgages to pay, young kids and parents to support. Some have in fact taken sabbatical leave to give themselves a break but eventually returned to work because of the lack of financial savings.
This is exactly how it feels like to be stuck in the rat race during the cashflow game.
The cycle of work -> collect pay check -> spend money and save what’s left after, repeated month after month, year after year.
Is there a way out?
Good news is there’s hope and it is possible to break free from this endless cycle. The key is to build up alternative sources of income that can replace one’s working income.
In general, there are 6 common sources of income
- Rental income from Property
- Dividends from Stocks or REITs (Real estate investment trust)
- Coupons from Bonds
- CPF Life (for Singaporeans/PRs)
- Income from private Annuity plans
- Interest on Fixed Deposits or bank accounts
Once we accumulate our alternative income to a level that is sufficient to pay for our required living expenses, we are no longer dependent on our working income. That means we are financially free and can enjoy our life the way we want to.
“There’s no one best type of income, only what suits you best”
Each type of income has its own characteristics and it’s pros and cons.
Some income are variable in nature such as stock dividends which can fluctuate depending on company performance but have growth potential, while others like CPF Life income are more stable and private annuity plans offer guaranteed income.
What’s important is to understand your own preferences and be clear of how much risk you can take. It is also good to have a combination of different income sources for diversification. For instance, one can set up a private annuity plan to provide a guaranteed stream of income to pay for fixed expenses and build up an investment portfolio to fund for lifestyle expenses such as travelling, shopping and entertainment.
First Things First
Imagine you are embarking on a journey towards your dream vacation.
Before you even set off, there are some questions to be answered. Where are you heading to? How far is it from where you are right now? What’s the most suitable mode of transport to get you there – is it by air, sea or road?
The 6 types of income sources mentioned earlier are the vehicles that can bring you along the path to your dream destination.
But before you get into the details about each type of vehicle and select which one(s) to use, there’s a key component that’s missing. That’s the travel roadmap itself, the route that connects where you are now to where you want to be.
Every one of us started differently and have different destinations. Someone who has been diligently saving since her 20s would be at a much better position than one who only starts in her 50s.
Destination wise, one may be contented with the simplest things in life with their loved ones, while for another it may be to travel and explore the world. Naturally, the income required for the latter would be higher and therefore requires different planning.
That’s why in my 5 Step retirement roadmap process, I first address the 2 fundamental steps of
1) Clarifying what you want and
2) Knowing where you are
Once the destination and starting point is clear, we can then look at the vehicles a.k.a income sources available and select the ones that best suits you to travel in.
Everyone will have their own unique freedom map because there is no one size fits all “retirement plan”. This retirement planning process is also dynamic, which involves regular reviews and fine-tuning along the way.
If you are tired of the rat race and want to get some guidance in mapping out your retirement roadmap, this will help.
Hope this article has given you some insights and ideas to kick start your journey!
To Your Success and Happiness,
Yong Hui
