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4 Pillars of Early Retirement

The journey to your early retirement doesn’t have to be complicated, and sometimes it doesn’t require big change to your life. You simply be more aware of the decisions you made and doing more and better the things you have done right so far. Basically there are 4 pillars you need to take care of before and during your retirement:

1. Income Generating Ability

Money plays a very important part in your everyday life nowadays. Gone are the days where human can survive on the land they reside on and the environment around them. Unless you inherited a big pile of money, we all need to start from the same starting line when come to generate income.

If you were like me, you would be working for a company serving their customer. For the most of us, this the primary way for us to generate income. As saving rate is very important when we talk about retire early, the amount of income you are able to generate every month directly affecting your pace.

For example, it will be easier for a person who earning $120K per year to achieve 80% saving rate compare to another person whose annual earning is $24K. Although monthly income plays a very big role in determines the speed you get to your retirement, there are 3 other crucial pillars in life you need to develop.

2. Investment/Money Management Skill

I recall from some book I read before that financial education is very important in today world. Although I don’t agree his condemn on saving money, his words make some sense about getting ourselves financially educated. Currently I am reading few books recommend by people in this forum post, there are a few online free courses on investment and money management too.

3. Life Skill

Time is money. If you have a lot of money (like few millions dollar), you can really buy your way to your retirement. If you are normal person like me, you will need to invest some effort to learn skill that enhance your life without spending money (or maybe little money).

In my view, cooking skill being one of them. Other skills that I deem essential are cycling, various house improvement skill (paint your house, plumbing, flooring, appliance installment, etc…) and planting(grow your own natural food, good idea?).

4. Frugality

This is one of the trickiest pillars that hold your early retirement. With frugality (whatever your definition is for this word) in place, you won’t need as much income to fund your retirement. I am pretty confident I am doing quite well in this pillar. My expense last month is as below:

Rent: 8.51%

Parent: 8.76%

Food: 7.09%

Transportation: 3.55%

Credit card bill (2 more months to go!): 6.17%

Change to RM: 3.55%

Others: 0.5%

Saving (all going to loan repayment): 61.78%

I foresee my expense will go lower after I pay off my credit card bill and personal loan from my sister (thanks sis!). My transportation cost will go down also if I successfully execute my experiment.

So, I estimate my expense structure will be:

Rent: 9.22%

Parent: 8.76%

Food: 7.09%

Transportation: 1.77%

Change to RM: 3.55%

Saving: 69.61%

I am pretty happy with my progress now (retiring in 8.5 years sounds really good.^^). But I want to go further. I hope to achieve 80% saving rate and retire 3 years earlier. My focus now will be on increase my income because I think I have nothing to shave from current expense structure now and the only way to increase my saving rate now will be either increase my income or create another auto pilot income source.

Now is your turn to make decision. Decide which path you want to take to increase your saving rate and have more freedom now.

 

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Filed under Personal Development, Save, Spend

A Very Small List Of Saving Tips

1. Start an exchange network or join one
Everyone of us has some skills that other people don’t have. You might be good at repair water pipe but sucks at computer. Why don’t you trade your skills with them?

2. Use the library
Library in Singapore is very well developed, contains many resources for your consumption. Use it to slash your spending on  books, video or newspaper.

3. Take part in lucky draw
Take part in lucky draw from the free newspaper like Today or my paper. Get some free entertainment from the marketing budget of those big corporation.

4. Join freecycle Singapore
Singapore Freecycle (TM) Network is a place for people to give out their stuff which has no use for them.

5. Sell your old stuff
Sell off your untouched stuff for past 1 year to get some cash.

6. Create or join a babysitting support group
It might be a logistic challenge to get a reliable and trustable baby sitter for your baby. If you can create a support group among a few friends or family, that might be a solution.

7. Car sharing
It might be make more economic and environmental sense if a group of people can share a car when they are heading to same destination.

8. Have a pot luck party
Get each of your friend bring one dish for everyone.

9. Brew your own drink
Be it alcohol or coffee, I think you can find plenty of guide around the net teaching you how to do this cheaply.

10. Cut down on driving
Singapore is not that big.

11. Cycle more
Again, Singapore is really not that big.

12. Up the temperature of your air con
Do your best, I know Singapore is hot.

13. Create your own cleaning product
It is really not that hard to do this. My mum do this all the time.

14. Line dry the clothes
Save some electricity, save some money.

15. Buy groceries from cheaper place
I think you know where yo go.

16. Use internet if you are making long distance call
If you have not idea how to so this, google for VOIP

17. Cut down on TV
Device that designed to waste your time, waste your money.

18. Study the tax rules
You never know what are you missing if you never check.

19. Check out credit offer
They are literally giving out money now.

20. Complain
Complain to get a refund or exchange with a extra thrown in if you received poor service.

21. Own less stuff
You will need less space and money managing your stuff if they can fit into 1-2 suitcase.

22. Eat healthy, be healthy
Choose healthy food, move around a bit every day.

23. Learn how to fix your stuff
Be it car, bicycle, TV, kitchen, etc….

24. Buy enough clothes
Not less, not more.

25. Shop online for clothes
Compare, and you might get a better deal.

26. Inherit toy from friends
I guess this make some sense since most toy will be out dated within few months.

27. Subscribe to free trial
Emphasis is on free, unsubscribe after the trial.

28. Go open source
Software want to be free!

29. Exercise at park
And you can use the equipment there, free of charge.

30. Get bargain by book your holiday earlier
Air ticket that bought 1 year ago can be really dirt cheap.

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Why It Is Important To Define Your Enough

We briefly talked about needs and wants in previous post, why I like the idea of early retirement extreme. We know that there are no needs or wants; it is just people value that determines what kind of consumption level they want. Below is the list I used on that post:

1. Dumpster diving.
2. Heavily processed food.
3. Home cooked food from pre-packed ingredient.
4. Home cooked food from fresh ingredient.
5. Food from hawker center.
6. Food from food court.
7. Gourmet meal from restaurant.
8. Fine dining

As you should know now, the amount of money needed to pay for each item on the list are very different, literally from zero dollar to an unknown amount of dollar (I never been to a fine dining session before, so I don’t know what is the cost there). Having said that, you are not limited to choose only the lower end item from that list, in fact you can choose anyone you like. Everyone situation is different and your income generation ability is unique to yourself. Who am I to tell you which restaurant or hawker center or rubbish bin you can go to for your next meal, right?

Your number
The key point is define your ending point, this activity will in turn define your “number”, the number you needs to retire, earlier or later. Questions you can ask yourself when you are going through various needs or wants in your life can be:

1. Do I really need things from this area?
2. What kind of quality can I accept in this area of life?
3. Where can I get them at the cheapest price (or free) at the quality I want?
4. Can I learn the skill to build/grow/fix/ them myself?

Why it is so important to define your enough? Because it cost you 45 years of your life. Let me illustrate through the below table:

Saving Rate Working Years
10 51
15 43
20 37
25 32
30 28
35 25
40 22
45 19
50 17
55 14.5
60 12.5
65 10.5
70 8.5
75 7
80 5.5
85 4
90 Under 3
95 Under 2
100 Zero

Assuming you can earn 5% investment return after inflation when you are saving, you will withdraw 4% from your fund every year, you will volume down your expense during year with lower return and you want your fund last you forever. The table is showing the years you need to work with various saving rate.

How long do you want to work?
The basic idea is the more percentage of your income you saved every month, the faster you are to achieve a retirement. Say you only save 10 percent of your income every month; it will take you 51 years before you can retire. Compare to a saving rate of 80 percent, it will only take you 5.5 years to retire, this is why I am saying it is costing you 45 years of you life (actually more than 45 years).

Why the huge difference with just a few more percent of saving each month? This is because what I call twin financial effect. By saving more of your income, you are at the same time reduce the money you need to survive thus it give you the double effect.

Money does not motive you?
If the money part does not motivate you to boost your saving rate, remember that all the stuff you acquire in your life require your attention, which means your time and energy. My weakest link is my obsession with books; I used to buy up to 10 books per month, it happened whether I saw some recommendation from some blog, TV advertisement or ever conversation with friend. After I set my target to retire early, I start to look at my option. What are the other solutions I can adopt to fix my obsession to buy book? I found library. Library is really an amazing place where you can find almost all the old book you want to read and the latest book came as early as 1 month after release. With increase my library card usage, I almost wiped out the expense category called book in my spending tracking sheet.

So, what motives you to cut down your expense and boost up your saving rate? Is it your children? Is it your partner? Is it your parent? Find your enough; spend your time with them.

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Why I Like The Idea Of Early Retirement Extreme

When I was searching for tips and ideas to retire early, to retire in less than 10 years, I found a growing community who embrace the idea of early retirement extreme. A guy called Jacob founded this idea. He uses his Renaissance Man concept to live for a year by spending only USD 7,000. To me, his life style is simply amazing and I admired his skill to produce some much for his daily use.

I took some numbers from his site, earlyretirementextreme.com to show his spending in year 2011 compare to mine:

Categories

Jacob

Me

Rent + utilities

USD 270

USD 200

Health insurance

USD 95

USD 10

Accident Insurance

USD 0

USD 10

Life insurance

USD 0

USD 2

Food

USD 100

USD 350

Martial art

USD 95

USD 0

Car

USD 50

USD 100 (Bus, MRT)

Dog

USD 50

USD 0

Internet

USD 20

USD 35

Student loan

USD 0

USD 83

Entertainment

USD 0

USD 180 (Books, movie, eat out)

Product installment plan

USD 0

USD 150

Medical

USD 0

USD 100

Parent

USD 0

USD 180

Total:

USD 680

USD 1,400

 

This is why I am a fan of the early retirement extreme. I have always considered myself as a frugal person and know how to use my money wisely most of the time. But seeing the table above, Jacob easily surpass me in supporting his life style (my typical spending is more than two fold of his).

Doubts
So, next come the doubts where how can a person surviving on this amount of money without going through a lot of hardship? I have the same doubts initially and I decided to find out from his blog and his books what is his life like post retirement.

It turns his life was not as hard as I initially thought it would be. He still owns things, meet friend, entertain him himself through some hobbies and having a healthy body. How can it be, you may ask. It is through the idea of Renaissance man. Instead of spend money on buying solution to the problems he encountered in daily life, he spend time learning that skill to solve the problem himself and free himself from dependence on other people if the problems occurs again in future.

His extremely low food cost sometimes bring concern from people whether can they obtain delicious and nutritional food with such a low budget. Also, with such a low budget, people think that they will miss out a lot of delicious food from the restaurant. I forgot the exact words he uses in his book, but the idea here instead of spend so much money to buy the solution (delicious food in this case) from the restaurant, why don’t we just learn the cooking skill that enable us to cook that delicious food we like?

Needs vs Wants
He also talks about the ideas of needs and want in his book. In his view, there is no needs or want; there is only people value. For example, let’s talk about food here. There are many choices (in ascending order according to price) exists to fill up our stomach:

  1. Dumpster diving.
  2. Heavily processed food.
  3. Home cooked food from pre-packed ingredient.
  4. Home cooked food from fresh ingredient.
  5. Food from hawker center.
  6. Food from food court.
  7. Gourmet meal from restaurant.
  8. Fine dining

It could be argued that eating from dumps will be too extreme and too dangerous (I agree with that too) for a life style. But I think there will be less argument that home cooked food from fresh ingredient under a good chef (hopefully is you) can provides a delicious and nutritional meal with a much lower cost compare to items 5,6,7,8.

Summary
In summary, early retirement extreme is achievable if you are willing to make the necessary life style choice and constantly improve yourself by learning more life skill.

Data Source: Early Retirement Extreme: A Philosophical and Practical Guide to Financial Independence

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How To Enjoy A Delayed Gratification

We are living in a society of abundance now, with plenty of products to chose from the market place. Although we all know that the optimal strategic is delayed gratification because the price of the product eventually go down after the initial marketing boost is over. But knowing in theory and apply it in reality is different, I guess it is in our gene to enjoy instant gratification because we human has been living in a world of scarcity for so long before the industrialization came along and boost our productivity.

So, in order to curb our desire to own everything the second we saw them, what can we do?

This is a small tip my psychotherapist friend teach me to overcome my obsession of books. Before I used this technique, I am buying about 4-5 books per month and I see no end to my obsession and I am running out of space to store all those books.

After using the technique, I am more in control of my buying desire. I am able to pause for a while before I make the purchase decision. And I am now have more patient to wait for that book to be available in the library for loaning, which does helps a lot to reduce my book budget. In some month, I ever managed to completely wipe out my expense on book purchase.

This is how it goes:

1. You saw something (be it guitar, book or iPad) you think you want to have it.
2. You look at yourself as an external party, something like another person who know what are you thinking.
3. And you tell yourself something like “ok, this me is seduced by latest product again, he is falling to the marketing plot again. When is he going to wake up?”
4. By looking at yourself as external party and asking all those question, maybe it helps to delay your purchase decision because you are not so engaged right now with the product and you can have a better judgment whether is this newer product going to add value to you or not.

Hope this helps.

 

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How To Retire Early By Setting The Correct Goals

Goals are important to us, it helps us to focus our energy to achieve the things we want to achieve. Everyone has something they want to achieve/get in life, countless of books have been written to teach us the tactic to set goals (set goals, make plan, motivate yourself, etc.…) so I won’t be repeating those tactics here.

 

Linea Goals

Usually we set what I call linear goal that only go one direction in a predetermined career path or detach from life. For example become the department manager by next year or earn a certain amount of money in 5 years. The shortcomings of this type of goals is it only improve one area of your life and does not contribute the overall happiness of your life, what is worse is sometimes it consumes values created from other area of your life

What I want to say is the “What” component in the goal setting activity that helps in achieving early retirement. The concept here is easy, focus on learning productive skills rather than owning stuff, finding the things that blend your work and life, doing the activity that increase value in you life be it health, social network or better skill. What you need to take note is that activity should not consume value created by other activity.

 

Cancellation Effect

For example, your goal of earning more money should not be cancel out by your desire to own more stuff or your goal to become manager should not cancel out by hurting your social network. Each goal you set should be increasingly helps to provide value to your overall happiness and speed up your ultimate goal we are talking about here, your early retirement.

When you receive a promotion and a raise in the salary, do not go out and spend those additional money you have now. More stuff does not make you happy for long term. When you learn how to cook a delicious meal on shoestring budget, do not buy everything from the market and cook a meal that enough to feed 5 persons when you only have 3 person in your household. Throwing the leftover to rubbish bin is a waste of your new learnt skill and it is hurting the planet.

 

Be Creative

Be creative in sharing your new skill. Let’s talk about the same example above; cook a delicious meal on shoestring budget. You can use your new skill to cook a big meal, invite your family and friends over to your house, enjoy a night of laughter and fun, and ended the night with better bond among the members. With the raise you are getting now, you are able to save more percentage of your income now and you should be happy because that helps speed up your retirement and give you more options.

 

 

 

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How To Setup A Standing Desk With The Least Money Possible

Due to the nature of my work, I spend a lot of time in front of a computer to serve my customers and spend like 8-12 hours sitting every day. I am quite a health conscious person so when I see blog post titled “Why sitting can make you die earlier” or “Sitting down for too long will kill you”, it bother me.

Based on some of the number I gathered online, a typical career where you spend 6-8 hours sitting down in office every day may cut about 15 years of your life off you. There is also research where if you are a female, you are 37 percent more likely to die than your female friends who are sitting less, for male that percentage is 18 percent. Whatever it is, it does not sound pretty to me.

So, I was planning to transform my existing reading desk into a stand desk with the least money possible. It turns out there is a lot of resource online teaching you how to setup a stand desk, a simple type “how to setup a stand desk” into google or youtube have given me a lot more advice than I previously thought I going to get.

The height of the stand desk should be about same height as your belly button or slightly higher to rest your arm when you are typing. But how should you build your stand desk will depends on your current situation.

You Don’t Have A Desk Right Now

If you don’t have a desk right now and thinking to get your stand desk, the choice might be simpler for you, just go to IKEA or any furniture shop you trust and get your stand desk.

For those of you who like IKEA product, there are only 2 products you need to get to build a stand desk, Vika Veine table top and Vika Kaj adjustable table leg. They are available in IKEA Singapore and their links are as below:

Vika Kaj http://www.ikea.com/sg/en/catalog/products/20167782/

This is how it looks like

Vika Kaj

Vika Kaj

 

Vika Veine http://www.ikea.com/sg/en/catalog/products/40170953/

This is how it looks like

Vika Veine

Vika Veine

 

You Have A Desk Right Now

If you have a desk right now, it will be a little tricky because your options are much more. Me myself am in this situation so I seek advice from friends and family on how to build a stand desk cheaply. Most of the answers I received were not very attractive to me as mostly involved large purchase of new component.

My thinking is quite different after I read the book, Early Retirement Extreme; the idea of Renaissance man hit me when I was working on my stand desk project. I am going to use the existing resource I have on hand now to build my stand desk. After a few hours of searching and assessment, I found something:

– 2 cartons boxes, for my induction cooker and weighing scale.

– Books, tons of books.

– A creative mind.

My project started with this:

Sit Desk

Sit Desk

I need to lift up this desk for about 25cm and this are what I have done.

I take out the number of book I needed to build a higher version of mouse pad.

books height

books height

And I was lucky because that two boxes were about 25cm when stacked up.

box height

box height

This is how my desk look like when I lifted up my laptop.

Lifted up Laptop

Lifted up Laptop

And then my mouse

lifted up mouse

lifted up mouse

Here is the finished product.

stand desk

 

Ok, I know this is not pretty and they sure annoy some of you guys reading this post. But no problem, you can always follow my suggestion in the situation above, just go to IKEA or furniture shop to buy ready made stand desk.

So, I need to go lie down on my bed now after standing for about an hour taking picture and writing this post. See you in next post!

Note: If you have better idea, please share it in the comment area. Thanks!

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5 Short Videos You Should Watch Before You Start Cycling On The Road

As written in my previous post on saving transportation cost, cycling remains one of best choices if you want to save some money and get some exercise on your way to office.

Cycling on the road in Singapore can be an exciting (depends how you see it) experience, which I learn spent 4 months cycling on road. There are many things you need to prepare before hand and countless others you need to pay attention when you are on the road.

I was searching for some safety tips for cyclist in Singapore and came across a cycling safety series produced by Mr Brown. I think he made several good points about safe cycling in Singapore.

1. Dooring

He talks about certain things to take note when you cycling pass a stationery vehicle in this video

 

2. Riding too close to the left

Want to know when should you cycle away from the left of the road? Check out the video below.

 

3. Taxi and bus

Learn some tips on how to share the road with taxi and bus from this video

 

4. Taking the lane

Are you familiar with the idea of taking the lane? Do you know why taking the lane is actually safer for you sometimes? View this video for more detail

 

5. Squeeze

Do you like to squeeze through cars when you are on the road? Check out the video to see why it is not so nice to do that.

 

So, what do you think about the tips shown in the video? Is it helpful to your daily cycling trip?

Thanks Mr Brown for producing these videos. You can check out his blog here.

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How To Save On Your Transportation Expense

There are many choices of transportation mode you can choose in Singapore to get you from where you are to where you want to be (sounds more like a motivational quote). So what choice do we have to cut down on our transportation cost here in Singapore?

 

1. Car

This is the most expensive mode of transport in Singapore and I believe no amount of tips can helps to offset the cost of COE, but I shall do it anyway. So, here are some tips you may want to take a look if you are owning a car:

– Buy a fuel-efficient car

– Keep your car well maintained

– Keep tires properly inflated

– Choose a lighter traffic time to commute

– Keep a light load on your vehicle

– Purchase the petrol with a credit card

– Drive at constant speed

– Of course, drive less!!!

I never own a car, so I guess my list above is not comprehensive. It might seems too short for the season driver here, hopefully I did help you driver to save up some money.

 

2. Bus / MRT

This is the most commonly used transportation in Singapore. We have here a comprehensive bus/MRT network (although there is much room for improvement).

Recently, I joined a program called insinc, this program was setup to encourage its participants to shift their commute schedule on MRT system away from the overcrowded peak hour. You will win more point when you travel off peak and chances to win some random reward. I have won $52 since I joined the program, so far so good.

Insinc-Account

If you are interested in the program, you can join it here. This is my referral link, thank you in advance!!!

Update: You can choose Cash buyout instead of spin for random reward, you get $1 for 1000 points your accumulated.

insinc-redeem-mode

 

You can make this change from the Settings on your navigation bar

insinc-navigation-bar

 

Update 2: It is a true deal and I just won $52 on insinc, you can join it here

insinc-reward-screen

3. Bicycle

This is the third mode of transport people use to get to work in Singapore. Based on my observation, there are not many cyclists in Singapore, at least not for daily transportation purpose. This is one of the cheaper choices if your daily bus/MRT commute is costing you a significant amount of your income.

However, this option is not easy. I tried it myself for about 5 months and there are many things you would need to consider:

– Shower facility

– Weather

– Traffic condition

– Commute hour

– And of course bicycle park

For season cyclist, the list above posts no obstacle at all. But for beginner I suggest you take into consideration of all the issues above and any other obstacle that are unique to your situation.

 

4. Run

Ok, I admit I have gone a bit extreme to even suggest running to office. It surprise me also the first time when I heard there are people run over 10km to get to their office and run the same distance back home.

But for people stay nearer (less than 5km) to their office (with shower facility installed), I think it might not sounds like a crazy idea. Just make sure your route to office is not overcrowded with traffic, else you will be breathing in exhaust instead of fresh air.

My office is 13km from my house, so my current mode of transport is mostly bus and MRT. So, what is your choice?

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The Only Number You Need To Pay Attention To If You Want To Retire Early

So, during my journey to early retirement, we talked about tracking spending, earning extra income, reduce your spending and calculate how much does your life worth. But amazingly, there is only one number that you need to pay attention to if you want to retire early (as soon as immediately!!!).

What is the magical number am I talking about here? That is your saving rate, which means the percentage of your income you are saving up. Before we talk about how many percent you should be saving, let start with some basic first.

Simple Math of Emergency Fund

If you are saving 10% of your income (no many people saving this much), you will need to work 9 years before you can take one year off (either voluntarily or not). If you raise your saving rate to 20%, you only need 4 years of work to take one year off. If you are really frugal and save 75% of your salary, one year of work will give you 3 years of off time.

By now, you might be thinking “chey! Another nagging blog post asking me to save as much as I can to enjoy delayed gratification later, I also knew that!” Interestingly no, that is not my suggestion here. Retirement planning should be unique to different individual and only you yourself know what is important to you and what is the price are you willing to pay for it (in term of money or time).

You can easily get all the hard, cold calculation on the web telling you how many years you will have to work before retire if you are having certain saving rate (one of them is here, you will need to scroll down to see the table).

What I am proposing to you is ignore those numbers first, put aside all the calculation, and look at these few area of your life which I think is more important to you right now:

 

Job (The activity you do to get paid)

I will assume most of you will be still working for money and your job is taking up most of your waking time. The question you need to ask yourself when you embark this journey to early retirement is “Am I running away from something (your job) I hate or am I fighting toward something I want?” I hope you can see the difference here.

Although the result of both motivation might be the same (retirement) but the end point can be quite different. In order to determine your motivation, you can play this “now what” game.

It is very simple, image you have now retired, ask yourself the question “now what?”.  If you can come up with more than one answer and they are not consists of “I finally don’t have to do XXXX now” or “Finally I can quit XXXX now”, you are doing fine.

 

Family

Early retirement is a gift, a gift you can give to yourself if you work really hard toward it. But don’t forget you are not alone along the journey, your parent is with you, you might find a partner, raise a baby.

Depends on your value, it might be perfectly ok for you to delay your retirement because you want to give your children the best (and most of the time also the most expensive) education he/she can get.

 

Yourself

You are the center of all this, of course you need to consider you own needs and wants. You will have to fulfill your own needs and wants before you can provide for someone you love, this is not selfish.

Life is unpredictable, although you can retire under 3 years if you save 90% of your income but important point is will you enjoy the journey along the way? Will 17 years of working and 50% saving rate sound more reasonable to you?

You call.

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