In planning for my early retirement, one of the things that I mentioned in my checklist to retire early is that I need to take stock of what is my monthly expenses as well as preparing for an emergency fund. I need to know how much I need to retire early so that I can plan for how much I need to save or how much income streams I need to maintain.
Here is my breakdown of the expenses. You need to do this for yourself if you want to prepare for early retirement. Know EXACTLY where your money is going into.
- Housing mortage: SGD3,600
- Money to parents: SGD700
- Electricity and water bills: SGD170
- Internet and phone bills: SGD100
- Condo maintenance: SGD400
- Food and entertainment: SGD700
Total expenses: SGD5,670
Once I have this expense number, there are two routes I can take to know how much money I need to retire early.
Option one: How much to save to retire early
The most common option is to assume one’s lifespan and multiple that by your monthly expenses, adjusted for the inflation rate.
In my case, assuming I lived until 80, I would need SGD5,670 * (80-40) * 12 months * 1.04% (inflation) = SGD2,830,000. This is the amount I would need if I retired at 40.
Frankly speaking, I will never be able to save that kind of money by 40, not by a long shot.This is not a viable option for me at all.
The more observant reader might comment that if I sell off my property, I need much less than that. I agreed but having this property is an important part of my early retirement strategies. I will explain more in a future post on this.
Option two: Create multiple income streams to replace loss of income
I need to create income streams of at least SGD5,670 if I want to retire early but doesn’t have that kind of savings to last me through to my old age. This is exactly what I am going to do and my advice is for my readers to start this as soon as possible because the time factor can help you in so many ways.
I will talk more about my multiple income streams but in a nutshell, I hope to create additional income though
- Niche websites
- A side directory business
- Dividend income
- Rental income
Some might say that I am still not retired if I need to maintain a side business. That is technically true but I am at least retiring from my job and doing something I really like.
For the financial advisers out there who says my method is too rough, I have to agree. However, I am not drilling into budgeting. This is a broad stroke to let me know roughly how much money I need to retire early. The numbers will not that far off.