What do you do if you want to retire early but are concerned about the financial impact?

Prepare 2 important statements: (1) Budget statement List down monthly expenses as granular as possible as it helps to identify spending behaviour and patterns. (2) Networth statement List down appreciating assets and compute their ROI to determine whether it's growing at an acceptable rate. Else, it's time to make it work harder. List down liabilities (including mortgages). These are deadweight that needs to be cleared. Early retirement is impossible as creditors need to be repaid. Debt doesn't provide peace of mind. Numbers don't lie. They are a reflection of reality to understand our financial situation now and to determine whether we are on the right track for early retirement.

Set aside funds into different pool: (1) Emergency pool Set aside 6 months of living expenses. This buffers against potential retrenchment and buys time to seek employment with lesser financial stress and anxiety. (2) Survival pool At retirement, survival expenses such as medical, food and shelter remains. Allocate lower risk instruments like bonds and annuities to pay for such expenses. Don't risk our survival livelihood with risky instruments. This is a safety net. (3) Lifestyle pool Once safety net is created, focus on generating wealth. More wealth provides more options. Invest in higher risk instruments like equities and properties. Let time compounds. Meanwhile, regularly review its performance to keep it on track.

Bad Debt = Making others rich at our expense Examples: credit cards, personal loan Good Debt = Making us rich at others expense Examples: appreciating properties, profitable business expansion Tips: (1) Clear bad debt starting with highest interest. Investing to pay debt is not recommended. There's no certainty in investment but debt repayment is certain. (2) Don't be too greedy on accumulating good debt. There is no certainty that assets will absolutely appreciate and be profitable yet there is risk of high interest rates. Use the guidelines below: Total Liabilities / Total Asset < 50% Mthly Debt Repayment / Mthly Income < 35% (3) Debt is a double edged sword. Use it wisely.

Recall my earlier point. Survival pool is meant for lower risk instruments like bonds and annuities which provides steady stream of income. It's like a paycheck. Lifestyle pool is meant for higher risk instruments like stocks dividend, rental income or side business. These provides higher rate of return however they are not as steady compared to bonds and annuities. It's like a playcheck. Essentially segregating into 2 pool is a form of diversification. Don't risk something that we cannot afford to lose.

Health is Wealth. Accumulation shouldn't be at the expense of health, else it's just accumulating for our beneficiaries. Health deteriorates with age. A healthy lifestyle keeps hospital bills at bay. However there's no guarantee on health despite best effort to keep healthy. Investing in health insurance makes sense. Individual health plan is far superior than an employer sponsored as there is no lifelong employment guarantee. The next best alternative would be to ensure that the employer-sponsored health plan is portable. Typically health plan takes care of the inpatient and outpatient medical bills. To be have a comprehensive cover, explore personal accident, disability, critical illness and mental health insurance.