Worst Case Scenario As A Buffer

I learnt one important lesson during the FIRE journey. It is the importance of buffer. I always give a wide buffer on the expenses which I forecast to be incurring for the next year. This gives me the peace of mind and I will not be surprised by the shock should I decide to underestimate the expense. Although I give the wide buffer on the expense, it does not mean that I will have to spend all the allocated expenses for the year. The same thing applies in respect of the dividend generated by the investment portfolio. I underestimate the generated dividend amount for the next year. This will give me the surprise in the event if there is an increase in the generated dividend amount. I believe that the forecast of lower generated dividend and higher expenses will allow me to have overall buffer as I assume the forecast to be the worst case scenario. Any better than the said worst case scenario will be a bonus for me and this gives me the peace of mind.

WTK

Author: firewtk

A middle-age Singaporean currently having a minimalist and simple lifestyle. I am not longer in full-time employment with effect from 1 May 2019. I try my very best to write one post per day on this blog. The purpose is to share my prevailing thoughts to interested readers. It is up to the interested readers to decide whether they want to take action in embarking on the FIRE journey. I do not gain anything from this blog and it is solely for sharing hopefully for the benefits of all interested reader. WTK

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