Financial Independence Retire Early (FIRE) is always discussed as a single package. Get financially independent, then retire early.
Two peas in a pod.
But, discussing it like that often brings about the common counter argument to FIRE, being:
“I love my job, I want to work forever! Why do I need FIRE?”
Admittedly, most Singaporeans aren’t really thrilled with work, but I’ve heard this counter argument enough times that I feel like it’s important to address it (though, in hindsight, I may have a family of workaholics…)
Being financially independent and retiring early are two separate pieces of FIRE. Yes it’s true that you need to be financially independent to retire early, but you don’t have to retire once you become financially independent. It’s an active choice made by the individual.
Well, then why should you pursue financial independence without thinking of early retirement?
There has been an increasing trend in employers choosing to offer contract jobs as opposed to permanent positions. Fresh graduates or undergraduates in their final year should be well-acquainted with this fact. What this means is the job security of our parents’ era is slowly eroding away and for new joiners to the job market, it’s only going to get harder to find and keep jobs.
This greatly increases the importance of building a safety net, that is financial independence, to keep us afloat when times get tough. Even if you’re not financially independent yet, building a strong stash of assets will give you greater peace of mind if you do lose your job in economic downturns.
Moreover, automation and technology has disrupted industries significantly, with job losses expected over the coming decade. Even, traditional “iron rice bowl” industries such as Accounting are being disrupted gradually as automation will be expected to take on the more manual aspects of accounting. As such, the few jobs that remain secure are those in civil service or uniformed services (thank you gahmen).
More than that, entire industries are looking to be disrupted in the coming decade, such as Oil and Gas which may face restructuring with the push for renewable energy globally.
With financial independence or at least a solid nest egg, you are more prepared to take on these challenges and bounce back from setbacks.
You May Love Your Job, But Does Your Company Love You?
Even outside of retrenchments, we all know or have known superiors that were unreasonable or that just did not work well with us. Nasty superiors are painful to work with and can make life a living hell for you. On a similar tangent, good corporate culture can change over time as well. What is warm and welcoming now may gradually shift into toxic and politically-infused if management is unable to manage it well. Your job may be perfect now, but they may not be perfect forever.
As such, building up your finances are a good way to help you escape such unfortunate circumstances.
You Enjoy Work More When Money Is Not the Key Driver
Many Singaporeans don’t enjoy going to work. Most of the time, it’s because they don’t see much value in what they do. But they do it because they need the money anyways.
Even if you have not yet obtained financial independence, knowing that you have a sufficient and growing nest egg can allow you to choose lower paying jobs, if they are more fulfilling.
On top of that, many people enjoy their own jobs much more, with a greater financial stability. It allows them to take on tasks that they want and allow them to say ‘No’ more, without fearing for their own job security.
Being Financially Independent Is a Requirement Anyways!
Many adults I know rely a lot on CPF to retire. The current CPF Enhanced Retirement Sum for CPF Life is $271,500. This means at 55, this amount is taken from your CPF Ordinary Account (OA) and Special Account (SA) to form a retirement sum from which CPF Life payouts are made to you from age 65 onwards. But if you ask them how much they thought they needed to retire, many would give you figures upwards of $1 million (which is not wrong to maintain the average Singaporean’s average lifestyle).
Where is the balance of $728,500 coming from?
In fact, according to OCBC’s Financial Wellness Index, 78% of Singaporeans underestimated the amount required for retirement by more than a third! And 75% were not on track with their retirement planning either. Oh no!
The point I’m really trying to make is, striving for financial independence just means that you know that you’ll have enough at the end of the day and knowing that you’re going to be on track for it. Since you’re gonna need it eventually, you’re just getting a head start!
Financial Independence Is for Everyone and You Should Start Now!
I do believe everyone should pursue financial independence. After all, we have to retire someday, like it or not. Wouldn’t it be better to ensure we can make it there with enough for ourselves?
Remember, the best time to plant a tree was 20 years ago, the second best time is now. Start today, and reap the rewards in the future!
P.S. Not sure how to become financially independent? Check out my other post on How to FIRE in Singapore!
Photo by Avi Richards on Unsplash