My 3 Phases Of Barista FIRE Before Regular FIRE

This post is to document my plan for my Barista FIRE journey.  This may not be applicable for everyone, as this plan is drawn up based on my income, my needs, my expenses and my portfolio.  I am splitting my Barista FIRE journey into 4 phases, to enable myself to slowly transit to full retirement in time to come, but with the flexibility of part time active income that will cover any inadequacies in passive income during my journey.  The percentages shown below are just for illustration purposes, and subjected to change at different phases, but for me, it provides a guide on how I intended my Barista FIRE journey to be.

Some definition of terms to make my projection clearer:

a)     Monthly Total Expense (MTE): Total spending projected monthly, currently standing at SGD 4K.

b)     Dividend For Expenses (DFE): The amount of dividends I intend to use for spending monthly, currently targeted at SGD 1.5K per month initially.

c)     Annual Dividend for Expenses (ADFE): DFE x 12

d)     Total Dividends (TD): The total amount of dividends I project to receive annually.

The Plan

1)     Phase 0 (40 years old)

In Phase 0, it is pre-Barista FIRE preparation for myself.  Based on the calculations and plan I discussed last year, I will spend the first 1.5 years saving and accumulating a small portion of my dividend income in a high interest saving account to be used in the first phase of Barista FIRE.  Personally I have started this phase since July 2024.  The need for me to save up before any decumulation phase is because dividends received tends to be lumpy, where larger dividend amounts are harvested in April to September period, and much lesser dividends are received between October to March.  Therefore, to smoothen out the cashflow, and make future income more predictable, I plan to only spend dividends collected and accumulated in the previous year (targeted to be around 75% of my ADFE in the coming year, with the remainder reinvested), while TD collected in current year will be saved up for the following year (similarly, at least 75% of my projected ADTE in the coming year, with the remainder reinvested).

2)     Phase 1 (42 years old)

In Phase 1, DFE will cover approximately 35% of my MTE, while the remaining 65% of expenses will be covered by active part time income.  This phase may take approximately 1 to 2 years, and it will depend largely on two factors.  The first factor is how easy it is for me to continue getting new students to tutor (I will probably need a minimum of 10 students to tutor), while the second factor is how quickly my dividends can compound and grow.  Back in 2023, I wrote a post on my Barista FIRE timeline.  To date, this timeline seems relatively accurate.  Therefore, I think 1 to 2 years will be a reasonable timeline to continue to compound and grow my dividends to the next stage.  

In this stage, the ADFE used is currently 60% of my TD collected.  The remaining 40% of the dividends will be reinvested to further compound my portfolio.  I believe I will be comfortable to progress to Phase 2 when the ADFE falls below 50% of the TD collected in future. 

3)     Phase 2 (44 years old)

In Phase 2, DFE will cover approximately 60% of my MTE, while the remaining 40% of the expenses will be covered by active part time income.  This phase may take a longer time, approximately 3 to 4 years.  This is a reasonable timeline for me, as part time income requirement is not high.  As such, this shall be a comfortable stage for me where some work will keep me active, and I will still have some income documentations that allow me to qualify for refinancing for my Singapore property.  

In this stage, the ADFE shall be about 80% of my TD collected at that time.  The remaining 20% of the dividends will be reinvested to further compound my portfolio.  I believe I will be comfortable to progress to Phase 3 when the ADFE falls to below 70% of the TD collected in future.

4)     Phase 3 (47 years old)

In Phase 3, it is time for me to relocate to Johor.   By this time, I hope that my Singapore property's monthly mortgage and other house-related costs will be totally covered by the rental income, or if the sums do not work out due to taxes and miscellaneous costs, I may decide to sell the property.  This can shave my expenses down by about 30%, barring any unforeseen circumstances and without lifestyle inflation.  By then I hope that my TD will be able to fully cover 100% of my ADFE in Johor, with rental income from my Johor investment property as buffer for any unforeseen expenses.  However, this will work well if exchange rate stays above SGD 1 : MYR 3.  Otherwise, my plan may have to change when the time comes.

Reflections

Above are just my personal projections and plan.  I am sorry that I am not using specific amounts because I think it is not necessary for me to share too much specifics, and a rough gauge would be sufficient for others who wishes to know how I am going about it.  In addition, whether the plan set out above will work smoothly or not remains to be seen, therefore I do not wish to commit exact numbers at this point in time as situation may change.  

Nonetheless, I think this is the great part about Barista FIRE, because if my plan above is disrupted by any economic crisis at any point in time, where my annual dividends from portfolio is cut by a large extent, or for whatever unforeseen circumstances and my expenses increase to a much larger amount, I can try to toggle my part time work to possibly boost my active income to cover any shortfalls.  Flexibility is bliss.  Barista FIRE, here I come...!