Fixed Expenses

I've been inspired by 15HWW to calculate our fixed expenses every month. This is part of the ongoing effort to understand our expenses more, so as to lower any unnecessary expenditure if possible.

This is important as basic math dictate that income does not matter towards financial independence, but savings rate does. Millennial-Revolution makes the math concise and upfront, which is helpful for understanding how she gets her figures and conclusion.

Of course, it can be assumed that there is a minimum expenditure that we have to make monthly to keep our bodies alive and fulfill our obligations. Therefore, this is the sum that we will seek to clarify and reveal to ourselves today, so as to better understand our financial standing.

In my case, I will define fixed expenses as regular expenses that are very unlikely to change after two years. This will be separated from semi-fixed expenses, that are defined as expenses that may change every year or 2 years (especially for telcos, taxes). Other expenses would be variable/discretionary expenses, which will be another post for another day.

Fixed Expenses

Mortgage Loan by Cash	$     213.00
Mortgage Loan by CPF	$  1,880.00
Conservancy Fee	$        90.00
Term Insurance	$        16.00
Whole-Life Insurance	$     216.79
Total	$  2,415.79

Semi-fixed Expenses

Taxes	$     117.22
Internet	$             -
Handphone (Mr)	$        35.00
Handphone (Mrs)	$        35.00
Total	$     187.22

To be clear, the internet bill is $0 as it was paid upfront.

Therefore, our fixed and semi-fixed expenditure monthly come to a total of $2603.01.

The Rule of 25, which is used to estimate the size of portfolio we'll need in retirement by multiplying your desired annual income by 25 (with the assumption of a conservative 4% return on the portfolio), can be used here. We like to adapt it as the Rule of 300 (300 = 25 x 12), as 300 is an easier number to work with, and regular expenditure is often calculated on a monthly basis.

Using the Rule of 300, our minimum portfolio size for our fixed and semi-fixed expenditure would be 300 x $2603.01 = $780,903.00

Woah! And this amount will grow as we take inflation into account!

A closer look at the figures show that the majority of our fixed expenses comes from our mortgage. Housing loan is truly a killer! 

Another way to look at this is that we are still very far from reaching our portfolio targets...