Tuesday, December 14, 2021

Revisiting my FI - FI3.0

 I have been thinking quite a bit about my FI (Financial Independence) calculations. I think it is really important to get it right before one quits his/her job.

To calculate FI, I have been using the spreadsheet created by the Mad Fientist, with some modifications of my own to suit my own context. 

The most important variable in the spreadsheet is the Starting Balance  (aka 'net worth' in the spreadsheet above) which I feel is really important to get it right:

Questions that come to mind include:

  • Should it contain property?
  • Should it contain CPF?
  • Should it contain childrens' endowment funds (used for future uni fees)?
  • Should it contain bonds?
So here's what I think:

The starting balance should not contain property, because it cannot grow at the desired 8% per annum. For the same reason, the Starting Balance should also not contain CPF and children's endowment funds. The remaining payments for childrens' endowment funds should also not be included in the Starting Balance. 

For bonds, even though historically bonds do not have an 8% per annum growth rate, Starting Balance can contain bonds on the assumption that the overall portfolio (cash, bonds, stocks, robo-advisors, crypto, p2p lending) can achieve an 8% per annum growth rate.  

So we have:
Starting Balance = Total assets - Total liabilities - CPF - Childrens' endowment funds - Remaining childrens' endowment fund payments

A benefit of subtracting away CPF is that now CPF forms a buffer of sorts in the event that one runs out of money earlier than expected. CPF is my 1st buffer.

There may also be future increases in expenditure, one of which I can think of is childrens' pocket money. I have already included this in the current expenses under 'kids misc'.  Since children will not need pocket money to perpetuity, this forms another buffer. This is my 2nd buffer.

I have also reduced my withdrawal rate from 4% to 3% as recommended by articles such as this: 


The reduction in withdrawal rate from 4% to 3% forms my 3rd buffer.

Since achieving FI2.0 roughly 6 months ago, I have also been a bit less strict with how I spend. This lets me understand a bit more of my actual spending when I actually retire (ie. quit my job). Needless to say, my actual spending is higher than that budgeted. For example, spending on food can go up very fast if one is not careful. So I increased my budget for a few categories:

  • household spending is increased from $300 to $600 a month
  • eating out spending is increased from $550 to $600 a month

With the above considerations, I re-calculated my FI, and found that I will need 1.4 million to achieve FI3.0. I have 3 more months to go to achieve FI3.0:


  1. You can use the present value of assets(CPF) and expenses instead: https://www.bogleheads.org/blog/2019/02/01/early-retirement-and-time-value-of-money/

  2. Thanks for sharing this, FI Blog! Would you have a blog to share?