After Thought After Reading "Quit Like a Millionaire"

In early August 2019, when I was browsing a book catalogue of a local famous bookstore, I came across an introduction of the book which as shown over the left hand side. Even though I have achieved early retirement for more than half a year ago, the introduction of the book in the catalogue still make me to buy this book. 

The book author is from China and currently staying in Canada. Her poor family background has caught my attention on how she able to survive in high cost city in Canada. She hated her unpleasant full time job and wanted to quit as soon as she can. She, together with her husband, able to retire at the age of 31 with a net worth of $1 million. The author explained all these at the beginning of the book. In this review, I would like to pick up some points to share and discuss.

First, it is interesting to know that the book author doesn't advise fresh graduates to seek for job according to their passion (yet). In order to accumulate retirement fund sooner, the book author suggests that we must understanding whether the future job is able to give us positive return with reference to tuition fees we have paid. The author provides a formula and suggests fresh graduates to go for jobs with the highest POT (Pay-Over-Tuition). I strongly suggest you to play around with the formula. I did and the result caught me in surprise that how I was seriously underpaid at the initial stage of my employment which has resulted delay in my early retirement for years. Even so, with the knowledge of financial planning, I am still at a better position as compare with my peers who are still work hard for living.

Second, same as what I have been advocating, the book author also suggests to take care of your finance by yourself instead of letting the so-called experts to do so. Reason is simple. Those experts carry no responsibility on your loss while they are sure get paid no matter what the investment outcome will be. The book author is also advising to avoid high cost managed funds but index fund such as passive ETF due to cost concern. Lower the cost, higher the return. Unlike in the US, here in Malaysia, Bursa Malaysia does have a few ETFs listed but are not actively traded. Less active ETFs trading means you might not able to buy and sell freely as you wish. To me, this is an handicap. That's why I am still opting for investing in individual blue chips with solid financial background along with handsome dividend payout. The trick is to buy them when they are cheap. In a longer term, I earn both capital and dividend gain.

Third, the author subsequently share 4 Percent Rule to generate how much do we require to retire. This rule is assuming that a retiree starting with a bucket of cash and withdraw 4 percent from his/her portfolio every year and leaving the rest invested and 95 percent of retirees able to end up with balance of money by the end of his/her retirement. In other words, if "4 percent of your portfolio matches your living expenses, you have 95 percent chance of making it thirty years without running out of money" (page 163). In short, all you need to do is to use your yearly essential expenses over initial total fund available during the year. Should your result is less than 0.04 or 4 percent, you are 95 percent sure you will not run out of money for the next 30 years. Well, mine one currently is about 3 percent. It is a lot lower than 4 percent. So I am not so worry about available fund and continue to enjoy my retirement life. One point to note is that my own initial fund used has excluded provisions which are yet to be utilized. Yes, these amount are in my account and yet to be used. In order to know how my tough is my fund's ability to meet retirement requirement, I have excluded these provisions from my initial fund. Despite of doing so, the result is at 3 percent which means I have a peace of mind during my retirement as I have sufficient cash to fund it.

Now, even you meet 4 Percent Rule, you still face a 5 percent chance over the risk of out of cash. The book author suggests Yield Shield and Cash Cushion. In short, it is a matter of having buffer cash. Based on her experience, the worst market downturn in 1920s took 5 years to recover. By using her formula, you should know how much you need to have this cash buffer. The book author invests heavily in ETF which might not perform well during market downturn and she uses Yield Shield and Cash Cushion to avoid her to be out of cash for living. To me, no matter what, emergency buffer is required no matter what situation we are having. Keep your emergency buffer liquid is the key.

Forth, another interesting suggestion by the book author is that she able to get paid to travel. What she has been doing is to travel to developing countries with relative low living expenses than where she is staying (Canada). She realizes that, by doing so, the traveling expenses could be lower than the instance of without traveling. Well, to me, this could be true. However, I am staying in a developing country, where could I travel then???

Last, but not least, the author advises that we do not need life insurance anymore should we attain early retirement. It is true but she did not explain that how about in case of illness which may eat out our savings. Therefore, you could kick your life insurance out when you are able to retire early but not critical illness insurance.

As a matter of fact, the key success factor for the book author to be able to retire at the age of 31 is her frugal mindset and lifestyle. Low living expenses has resulted in relative lower retirement fund requirement. Live with your needs with less wants is the key. This is what I have been strongly suggesting.

Above are just a few points I pick up to share. The book is easy to follow and gives fresh suggestions and ideas, unlike those standard and boring finance books. Happy reading.