Tuesday, April 24, 2018


Wanted to share my thoughts on what is meant by FIRE. I've a disclaimer here - I've not read a single piece of literature on this subject matter and I'm simply deconstructing the word based on what I've read about the components and piecing it up together. So, if I'm wrong, don't get so hot and start flaming me and set me on fire for anyhow firing an article on fire.

FIRE does not mean financially indebted, retired early. It stands for financially independent, retire early. Let's break up into the two parts : financially independent and retire early.


Financially independent really just mean that you have an option not to work for money ever again. To be financially independent, we can go through 2 extreme models. Usually people take a path somewhere in between these 2 extremes. The 2 extremes are the networth method and the cash flow method.

The networth method is to have enough liquid assets after accounting for all debts, such that it can last you until you leave this place permanently. Let's say you know your annual expenses  and you project that you have 40 years from now till you expire. After taking into account inflation and money to pay off all your debts, you saved up 50 times your annual expenses. I think you are financially independent already. Most people can't do it this way, because the mathematics is just brutal. To pass the criteria, you either have to be an extremely high saver, be extremely low maintenance, have an extremely reduced life expiration date after retirement (either by delaying retirement age or die early), or all of the above.

It's not easy to do, but it's the most Conservative way because there's no reliance on any investment returns. Just hope that there won't be hyper inflation for extended periods of time and that the currency you saved in is still legal tender. But those are risk everyone will have to par take, not just you.

The other method to be financially independent is to go through the cash flow method. This means that whenever the income you generated passively, equals or exceeds your expenses, you are financially independent. There's a lot of negative connotation to the word 'passive', so let's elaborate on that. Passive does not mean lying on the beach, drinking cocktails while waiting for bags of money to drop at your lap. Passive means that you don't have to be actively present at the source where your money is made. Passive does not mean that there is no active involvement in the generation of income. It just means that you don't have to be there in order for the money to be made. With that out of the way, will the cashflow method be easier to achieve?

I think definitely much easier than the networth method. If I spend 3k a month, or 36k annually, and assuming I've a constant investment returns of 5% pa, I will just need 720k to fulfill the definition of being financially free, cashflow wise. On the other hand, if I'm doing the networth way, assuming I retire at age 60 and expire at age 90 (a good 30 yrs of life), I will need a comparatively larger amount of 1.08 million. And I haven't even included inflation.

But the relatively simpler status of being financially independent by the cash flow method has a drawback. It is very dependent on external  market factors, like the returns of your investments for example. I suspect people might hop between being financially independent and not financially independent in stretches of say 5 to 10 years. This method is obviously less conservative, unless u choose a very low investment returns, maybe to the tune of 2 to 3% pa, but correspondingly, the amount to cross the hurdle becomes larger. Interestingly, if you choose an increasingly lower investment returns, the cashflow method approaches the networth method. An investment return of 0% pa means that your passive income generated is simply the money you hide under the bed that u are withdrawing every month for your expenses. Not any different from the networth method.


To retire early, we must first know what is meant by early. Earlier than what? I think it's compared to the retirement age. Locally, that's like 65 years (maybe that is slowly being pushed later to 67 now, if it had not been done already). This means that as long as you are retired before age 65, you are considered early compared to others.

But is retire early the same as retired early? 'Retired' suggest the status is being forced onto you, while 'retire' suggest you actually force it on others. If you retire early, you force your boss to look for another replacement. If you are retired early, your boss forces you to look for another job. Crudely put, it's a matter of whether you got fucked or you fuck someone. Seldom do we see a situation where both the boss and the employee are on the same wavelength at the same time, with regards to the topic of early retirement

What are we retiring from? Not from life, hopefully, though it could be another morbid interpretation. Retire early from work most likely. Why retire early from work? Many reasons, and I list some below, non-exhaustively :

1) poor health, either personal or of closed ones
2) freedom to pursue other life goals
3) sucky work environment
4) for family

Because modern work entails being stuck in a work environment for maybe 70 to 80% of your waking hours, retirement from work means a lot of time is liberated to do other hopefully more interesting and worthy things. Unless, your work is interesting and worthy and pays reasonably well, so you don't mind spending close to 80% of your waking hours being stuck in a work environment. In fact, you might not even notice your environment, or the time spent, because you are constantly in a state of flow - that nice spot where challenge, skill and creativity all come together in a mass orgy that you can't help but stare continuously, oblivious to anything else.


To reach FIRE is quite different from just FI. It's like you have 250 for your PSLE and feeling quite good about yourself, until you realised that everyone gets around 265. To retire early and also to be financially independent is like the top of the food chain, the king predator. You have to be so good at personal finances, managing your investment returns and also likely having a good career paying top dollar while living like Diogenes. Simply put, it's not for everyone, and you don't have to jump on this bandwagon because everyone else wanted to do it.

To see how hard it is to achieve this, let's just use a simple example. Say u stop school at age 25, and wanted to retire early and be financially free at age 40. I'm a soothsayer so I know you will expire at age 85, so that's a good 45 years of life after retirement that had to be funded by 15 yrs of work life. You also have to feed yourself during the 15 yrs of working life, so during that precious 15 yrs of income generating period, you have to earn enough to feed yourself for 60 years. In other words, every 1 yr of work you'll have to save for 4 yrs of non-work. That's a 80% saving rate for the 15 yrs of work that you do. How many can save at 80% rate for 15 years?

I can, if I'm single, lives with my family, eat simply, and life simply. Harder to do with a family, esp in Singapore. Not impossible, just very hard to do. That's why I say it's the elite of elites that can truly reach FIRE.

Even though FIRE might be hard to achieve, but we can always strive to reach FI. Interestingly, in the past when FIRE is not known yet, it's just FF (financial freedom) or FI (financial independence) here and there. So I must conclude that the retire early part is a pretty new addition to the personal finance jargon. Who knows maybe in another 5 or 10 yrs, we will be seeing people wanting to get FIRED. What's FIRED? Financially Independent Retire Early Debtfree.

But wait...isn't the purpose of being financially independent to actually pursue what you want to do? And what happened to the independence part? How come after achieving FI or FIRE or FIRED, we are still following the conventions set up others? Isn't it jumping from one corporate rat race to another financially free rat race? I admit these are different races altogether but you are still a rat if you're racing with each other to an arbitrary end game, not set by yourself. When your choices and happiness are dictated by others, you are not free at all. At best, you are less chained but still chained nevertheless.


You'll notice that I never said I wanted to retire early, so that's never a goal of mine. I'm happily and purposefully driven in my job and will be happy to continue working as long as others would have me. But I do intend to reach financial independence years down the road. Maybe when I'm 55? It's also never a hard target, more like a personal milestone or achievement if I can do it. If I can't do it, so be it.

That's why I hate it when people start to do competitive financial goals. Oh, I saved 100k when I'm 25. Nah, that's nothing, I saved 200k when I'm 20. I'm better, I saved 300k when I'm just 5. If you find yourself doing that, you have to reflect whether this is what you want. Is it any different from running the corporate rat race that you're so dying to escape from? I realised I'm part of this game somehow, so I stopped putting up a single post on my savings every year. If I ever do, it's more for my personal accounting (so that I know how much I accumulated each other). We save what we can, so you don't have to know what's mine. If I cause you to feel red or green, please accept my sincere apologies. I was young and insensitive, and I do not know the repercussions of my actions.

I know I have good financial habits. I save every month and I don't have devastating bad financial habits. I spend my money purposefully most of the time and I don't deprive myself from getting the quality of life that I want throughout this journey.

If I can live life without worrying much about money because I am secure and knowledgeable about it, I think I have already achieved what I set out to do - financial freedom.


Unintelligent Nerd said...

Hi LP,

Another great reflective post!

With the benefit of maturity, I now cringe at my older blog posts.

la papillion said...

Hi UN,

Haha, thanks :) Actually cringing when you read your older post is a sign of growth, so that's a good thing!

Singapore Man of Leisure said...



The strength of youth who does not know what cannot be done has morphed into the wisdom of experienced ;)

I still remember rolling my eyes on your posts detailing your book reading goals and annual savings. Snigger, snigger.

Feel like reading? Read.

Feel like spending? Spend.

If this is not freedom? What is?

Competitive financial freedom goal setting?

Reminds me of communist china during the Great Leap Forward years... That era resulted in the greatest man-made famine in human history....

I tell you. It would be a matter of time before the next generation of youths will come up with retire by age 30 goals!

la papillion said...


Hahaha, sometimes we have to go through the extremes to truly understand the middle moderate path :)

Retire by age 30?? The die early way is it? LOL

Anonymous said...

Hi there

While the idea of FIRE has gained traction and certainly is a worthwhile idea to consider, one also has to factor in the probability of certain unexpected circumstances (sudden illness, accident, etc) as well.

Say you're indeed able to live frugally and manage to amass enough assets with sufficient returns to successfully reach the FIRE goal. You're financially independent with enough passive cash flow to sustain you through the rest of your life without having to depend on an external source of income. What if one fine day, you're hit with one of the abovementioned unexpected circumstances and your expenses suddenly gets jacked up (increased medical care)?

Suddenly you find yourself in the unenviable situation of becoming un-FIRE again. With the added constraint that you might no longer draw the similar income which you previously enjoyed when you decided to "f*** the rat race" upon hitting FIRE status years ago (either due to poor health/out of job market for too long/boss has found a better and cheaper replacement).

Something worth thinking about, eh?

la papillion said...

Hi anonymous,

That's one of the major complications of FIRE, or life for that matter. Usually people will have some layers of financial protection against such things. One of them will be insurance products designed for such scenarios. The other will be money stashed in the CPF-MA account and the last will be the cash for self-insurance. I think honestly, nobody can really tank the worst of such medical circumstances, but should be able to withstand some hits without sacrificing much quality of life. If it's something major, then unless it's already included in the planning stage, we have to adjust accordingly.

That's just the financial part. The other part about it is to hedge against both a short life and a long life. Usually people hedge against a long life, hence retiring is such a problem, but I always joked that if we live an unexpectedly short life, retirement is never an issue.

Thanks for commenting, but can you pls put a nickname so that I know who to address? There could be many anonymous but only one you :)

EY said...

Hi LP,

I'd much prefer FILL - Financially Independent, Live Life :)

Maybe FILLED if I live by my motto that life is an adventure.

Financially Independent, Live Life Extremely Dangerously.


By the way, would like to thank you plenty many again. Shein got offered a place in both NUS and NTU. Likely to choose NUS. It's been quite a journey and he has come a long way under your patient guidance. Can't thank you enough. You keep up your great work!

la papillion said...

Hi EY,

Haha, then next time we can ask each other whether you have your FILL? lol

Wow, that's great news, very happy to hear that. I will also choose NUS over NTU, all things being the same. Great news :)

My 15HWW said...

Hi LP,

Let me be the first to admit that I was one who was/is participating in competitive financial goals.

The positive aspect is that somehow, subconsciously, you will just save more. The dark side? Well, you already established that.

When I started the blog, I desperately wanted to FIRE at 35. When you want to escape, even a day is too long.

Now, FI at 40 would be quite shiok. Maybe a few years later, I will push back by another 5 years?

Now, the bigger worry is if there is work for me, not the other way round. But considering I have been in this line for >10 years already, there should not be reason for worry! =p

la papillion said...

Hi 15hww,

Don't say you, I'm also like that in the past. I realised it's very toxic, and I'm also contributing to that, so I stopped.

Once you understand that why we need to FIRE, I think the timeline is not so important anymore. That's really freedom, because we're not bound by artificial constraints.

Regarding work, I worry about it all the time lol