Consideration on Financial Freedom #4

 Here’s the English translation:

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Regarding living-expense spending and cash (L), I have the following suggestions.

Because this money must be used and you can’t really take risks with it, you can consider:

• Bank time deposits (fixed deposits).

• USD: U.S. Treasuries, or U.K. corporate bonds (Hong Kong people don’t need to pay tax).

• USD: Money market funds (Futu has this type).

Do your own research on which interest rate is better and which option is more convenient for you.

Some people also like covered-call ETFs because they pay regular distributions, but I don’t agree with this approach. You may get distributions, but the share price could fall, which wouldn’t be good.

My own approach is to spread it across at least three years or more. For example, if annual living expenses are HKD 100,000: besides keeping enough cash in the bank for 2025, I would also allocate to U.S. Treasuries:

2026 — Different maturity dates, about 3 bonds, e.g., maturing in February, June, and September, totaling HKD 100,000
2027 — HKD 100,000
2028 — HKD 100,000
2029 onward — Other amounts, e.g., HKD 200,000

This way, I don’t need to worry about taking a big haircut if I have to sell bonds when I need money. Especially if I suddenly need extra cash, I can sell the bonds above. When stocks are doing better, I can sell stocks and buy bonds.

As mentioned earlier, in this example, you have at least one year of living expenses set aside. I generally allocate 5 to 7 years of living expenses into these bonds, i.e., HKD 500,000 to 700,000.

Having 5 to 7 years can help you withstand a stock-market crash period, and part of it can also be used for short-term trading when the market is low.

Kenzo
4 Dec 2025