Category Archives: Spend

Articles on spending

Why am I saving money?

This is one of the most important question you need to ask yourself before you start doing anything about your personal finance. Always start with why first whenever you started anything. Why are you learning a new skill? Maybe because you want to embark in a new career. Why are you start running? Maybe because you want to have a better health to accompany your kid during his growing journey.

So, why are you saving money? Because you really do not have much material needs? Because you want to save up for that year end trip? Because you want to buy some asset and redeem back your time freedom from working life? Or maybe you are saving for a house payment after marriage. Whatever it is, without a clear reason behind your action, very soon you will feel that saving money is a sacrifice.

For me, I have passed that phase long ago. I realised I value time freedom so much that I don’t feel sacrifice when I am saving money. In a matter of fact, I actually feel very proud to be able achieve an increasing saving rate although my income remains the same, imagine how fast will my progress will be when my income level rising over the time. My best bet now will be working super hard and super smart to increase my professionalism and my income.

The idea of multiple stream of income has became more and more popular as more and more people value freedom and they realise that they don’t want to work in an unfulfilling job all their life and place the control of their life on the hand of another person. However, what this idea fails to capture is that we should build the multiple stream of income one step at one time. Focus on your regular job, sharpen your professional skill and making sure that you main source of income is stable and strong enough before explore other source of income. It is always your main job that has the most potential to earn you the most money compare to whatever side line you try to pursue during your night time and weekend. No doubt there are people who are able to create large income source using their night time and weekend hours, but they are in the minority. For the most of us, our best bet is still with our day job.

Back to the topic of saving money. Change of mindset is a must. And reading and implementing those saving tips that spread all over internet is not helpful. For example, instead of shopping around for the car that provide the best value for your money, try bus, MRT or bicycle. Instead of comparing between various value phone plan, choose a basic phone and prepaid card. Maybe you would say most of the people are holding a smartphone, what is wrong with that? Why am I asking people go back to ancient time and use those ancient phone with limited function and unpressable button. As I mentioned in my previous post, a $42 monthly commitment required you to invest more than 10K into an investment vehicle that has a return of 5%. With this calculation in mind, I certainly think twice or even thrice before I sign my name on any dotted line.

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Filed under Passive Income, Save, Spend

What does retirement means to me

I am born in year 1981, age 33 this year. There is a term used to describe people born in my birth year, Generation Y. For me I believe it is just a convenient way to categorise people when organising a marketing/sales promotion event. People in every generation is still mainly influence by the macro economic situation they are in  during their living, for people live in wartime, survival is the mostly talk topic, how to create food and fulfil our needs with minimum resource was not deem as cheap skate but a virtue.

People who grow and live in time when there is no war but stable economic year by year have much different mindset. Working for decades to enjoys life for a few years or months is the norm in that generation, people mostly stay in one company for decades, collect their pension after decades and start enjoying life.

We who are living in unstable(some call it dynamic) economic environment has a much different inspiration. Many of us won’t be staying in one company for decades, maybe not even years. We are in the greatest time but also in the worst time in the history. Every few years come a financial crisis, every financial crisis bring about lay-offs, retrenchment and at the same time bring about some great investing opportunity. Our society has divided between those has and those has-not. It is not longer young people that remain working and old people who are retired. We see more and more young people(some early 30s) retire in their own term and we see more and more elderly are forced to work beyond traditional retirement age,  maybe even till their death.

In order to survive and prosper in today society, we need to figure out how does the money system works. Saving without investment obviously does not solve our retirement puzzles these days. With the inflation remains high and strong, our saving can easily be eaten up with our knowing . There are a few traditional ways in investment, namely stock market, real estate and business(I meant run your own business here). In order to survive and retire in our generation, it has became mandatory for us to invest our money wisely. Stock market has become the favourite of the investor(in loose term) due to its lower barrier of entry compare to real estate and business. However it does not means it is easy to master the art and science of invest in stock market.

In most simple term, buying a stock is buying a piece of a company. You casting a vote of confidence into the company of your choice, betting that it will earn a profit and share with you that pool of money it earned from its operation. If you are determined enough, consistently putting money into stock market and buy some large corporation stock for long term can bring you great return. After certain number of years, the return/dividends from your stock holding will exceed your annual expense. By this time, we enter the door of financial freedom, we take back our time, we can decide what we want to do with our day. I believe everyone will be a even more efficient and effective worker if it is their choice to spend their time in office rather in the park.

Having the choice to do the things that you find it meaningful is the most important benefit I like to have in my retirement period.

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Filed under Personal Development, Save, Spend

Living like a student?

Most of us had student life, it was the best part of our part. That was the time when we were young and energetic, full of ideas and with all kind of possibilities. That was also the time we have no income, depend on our parent for daily needs, watch out for our spending and plan months ahead just to get a concern ticket or a trip to the town.

Seriously, I like those years. I like those years where we were less financially educated but we are causing less damage to our financial self. I like those years where resources were so scarce for us (parent weren’t rich), but we used our creative mind and hard work to earn our reward. We were fearless, we were hardworking and we were ambitious. We worked our tail off for something out of interest or passion, not money, we don’t spend money on unfulfilling stuff because we were busy working and chasing our dream.

Fast forward 10 years, everything changed. Most of us had been through the ultimate test of life called career. Career is a abstract word, an idea this society want to push into our head. And most of the time, how successful you are in your chosen career is measure by how much money you make in this particular career. At this point of life, you have the most earning power of your life, you felt compelled to reward yourself after all the job well done, you stopped watching every little spending in your life because it just doesn’t worth your time. You have money but you don’t have (enough)time for the things you like to do, the people you like to spending time with and read the book you have been wanting to read.

Sometime I wonder is this the life I want for the rest of my life? Working hard to earn the dollars and spend them all in the next moment, then repeat this cycle. Or should I work hard to earn the dollars and ask them to work even harder to produce more of themselves to serve me?

Either path is a choice, it is a choice we all have to make and we all had made in our daily life. Every time you make a decision, you are making that choice, no good or bad, it is just a choice. As I always said, there is no problem, only project, there is no failure, only feedback.

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6 financial habits you should have to retire early

1. Value your money

Every single dollar represents the hard work, time and energy you put in your work and every single one of them has the potential to grow. If you want to retire early, value your money when you are making purchase decision. You have exchange your time for your money, and since your time is finite on this world, wouldn’t it make sense to make good use of them?

(Facts: 1 dollar a day invested into an investment vehicle with 10% return will give you 1 million dollars in 56 years).

 

2. Control

Take control on every cents that flow in and out from you. Do some extra steps every time you are making a purchase.

i. Compare price between sellers offering the good you are looking for.

ii. Ask for discount.

iii. Check your receipt, make sure it is correct.

iv. Balance your income and expense, know where did your money go to every month.

v. Evaluate your expense at the end of the month and look for improvement can be made to your expense.

 

3. Save

Obviously, if you don’t have any saving, you can’t retire in any modern society since it takes certain amount of money nowadays to get the goods and services needed to live our life. So, are you at least trying very hard to save 10% of your pay check if you are on low income and 30-50% of your income if you are on higher income? Cut down the number of credit card you are holding helps in this aspect, just keep one credit card with you and cut the rest. There is some statistic shows that this action alone can helps to cut your spending down up to 30% in the next 12 months.

 

4. Invest

With the inflation at the rate it is at now, it make sense for us to invest our money in investment vehicle that produces the money needed during our retirement period. Index fund, stock, property, insurance policy are just tip of the iceberg in them market of financial product. As always, we should be familiar ourselves with the product we are going to invest our money with before making any move.

With internet, there are abundant of information available free online for us to do our research. Interaction with other people with the same mindset or made the investment before us helps us understand more about what are the return and risk involved in the investment vehicle we interested. Bottom line, do your home work before throwing in your money.

 

5. Earn

The most valuable thing we can invest in is ourselves. Points mentioned above are important when manage out personal finance but all those come from one starting point, you. Increase you earning power is much more important and definitely helps in speed up your early retirement. As mentioned here, how fast can you retire depends on how many percents of your income can you save each money. And I believed you will agree with me that it is easier to save 80% of 10K than 80% of 3K.

So, explore ways to build more income streams, strengthen your professional ability and earn more from your daily job are definitely ways to consider here.

 

6. Protection

In our journey to earn our capital to fund our retirement, we need to get ourselves covered against various risks that are outside our control. Illness, accident and hospitalization are few major risks we need to take into consideration. Take some time to read about which policy should you take up to transfer those risk to insurance without burning your pocket every year, over the years.

Be careful with every policy your adviser recommended to you, take the time to research the policy and make sure it fit your needs.

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Filed under Insurance, Save, Spend

How much is house costing me( or you)?

As I written in previous post, I bought a house with the price tag RM 196,000, it make me wonder how much is this house costing me in absolute cost and working years.

I listed the the cost involved so far and interest I expected to pay if we pay the mortgage off in 10 years.

Deposit :RM1,000

Insurance :RM4,530

Lawyer fee :RM3,100

Disbursement :RM1,130

House loan :RM196,000

Housing loan interest for first 10 years :RM 78,122.68 

Total :RM 283,882.68

As I am sharing the ownership with my sister, my part of responsibility will be RM141,941.34 and that is excluding all the renovation cost , maintenance cost and car cost which might be coming along when my parent move from village to a small town.

Since I am working in Singapore right now, I will use my saving rate in Singapore currency and the current exchange rate to calculate the real cost of my future house.

Current monthly saving amount: SGD 1,500

Exchange rate: SGD 1.00 to RM 2.50

House cost in SGD = RM 141,941.34 / 2.50 = SGD 56,776.54

So, I will need about 38 months of work to cover that cost of my house. Not to mention the opportunity cost I will need bear during those 10 years. 5% of SGD 56,776.54 will give out SGD 2838.83, that is one good passive income to hold on 🙂

Situation here in Singapore is a bit different, a small simple 3 rooms flat here is priced at SGD 330,000(I am talking about minimum). With median salary now at SGD 3,000, it is no wonder not many people staying in Singapore now think they can retire early in Singapore. Besides that, there are other influences here to that make it difficult to retire early too.

It is kind of socially unacceptable for man to not working here, a man look weak without a job here and not many man can accept that.

Secondly, it is very consumer/spending driven here in Singapore, this country is importing everything and we can buy almost everything we need in our daily live and a little bit extra. There are all kinds of interesting product and services that waiting there for us to spend our money on them.

Thirdly, supporting old age parent is expected here in Singapore given there is no solid retirement support system and I think the problem will be even bigger in the future. You might be thinking your living cost will be lower after you paid off your mortgage but the medical cost kick in in old age, so expect more spending during your parent old age (and your own old age).

I just realized I am a bit out of topic here, the points I want to make here is view your house as a liability before you pay off your mortgage and don’t think the house price is always going up. Only buy when you are ready, sometime renting is not a bad decision either.

What do you think?

 

 

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Filed under Debt, Insurance, Passive Income, Spend

Beware of the bank

Bank is our best friend and our worst enemy in managing our personal finance, it provide a relatively safer place for us to keep our fund. But as said in the universal statement “There’s no such thing as a free lunch”, bank as a business entity also trying means and ways to earn money from us, sometimes without our knowing if you are not careful.

One of the most popular way bank use to take your money without your knowing are all the annual fee of their card product. The waiver of annual fee for the first few years helps them kept you as a customer and as a barrier to make sure you spend money when you are holding the card. Even thought the product was promoted to you as a saving account (with a debit card feature), you cannot let your guard down. I just made a mistake for not paying attention to all this small detail of my saving account.

I have 2 saving accounts, one of them is there for daily expense and the other one is for me to keep my saving in there. The second saving account come with debit card feature and was not charging any fee for the past 2 years. The bank start charging annual fee of SGD 12 this year and my account was affected. I was lucky because I have the habit of recording all my expense and I normally deposit my saving at the start of the month, so I call the bank immediately to put in my waiver request.

So, lesson learnt. Always be careful and paying attention to your finance matter, nobody should care it more than you do. 🙂

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Super market? Battlefield?

Super market is one of the places I like to spend time at, the display of huge amount of product on the shelves reminds me of how abundant the world we are live in now.

Super market is also a good place for me to think through what are the things I really need to support my daily life. Of course it is much more easier for me to sort this out because I am still single now. I like to browse around the super market and check what are the things I can buy from there. I realized that most of the time I have nothing to buy, there is time I spent 1-2 hours walking around the supermarket and buy nothing.

At the rare occasion I do buy something from the super market, I like to observe the buyers around the checkout cashier. Supermarket normally will put some small little item around checkout cashier like chocolate, candy or tibit to encourage what we call impulse buying.

Sometime I think super market look like a modern battlefield to our personal finance life. It is a convenient place to get most of our essential life support item but it is also a convenient place for us to spend too much on things that are not essential.

Always be careful when you are going to war super market.

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How to spend your money

Every now and then I heard words from people like “what is the point of saving money and suffer?”, “Money earned are meant to be spent”, “Enjoy life while you can”, or “Money is always dropping in value, might as well spend it now rather than later”.

The keyword in the statement “what is the point of saving money and suffer?” is suffer, I am totally agree that we should not suffer on the journey to early retirement, but I cannot see the link between saving money and suffering.

The keyword in the statement “Money earned are meant to be spent” is spent. I also agree eventually we will spend our earned money one way or another, but I believe it is very important how to spend our money.

The keyword in the statement “Enjoy life while you can” is enjoy. I believe most of us like to enjoy life more than we like to suffer, but I also believe we should not link enjoyment to big spending. Time spent with friend and family, time spent with church mate in gathering, time spent in church or time spent in free public event sometimes bring more enjoyment than concert, beach party. At least it is applicable to me. 🙂

Last but not least, the statement “Money is always dropping in value, might as well spend it now rather than later” is really making 50% sense. The first part of the statement is definitely true for the past few decades, money is always dropping in money due to inflation, change in fiscal policy(every heard of QE4?). For the second part of the statement, I think instead of spend off our money, we should direct them to earn more money for us. Make them our strong soldiers in market and produce more soldier to defense our personal finance castle.

In my opinion, there are three ways to finance our spending.

1. Pay on credit

This is the easiest way to finance a spending and also the fastest way to build up your debt. The 24% p.a. interest on credit card and all the late payment will quickly build up to a huge amount of debt without your knowing if you are not careful.

2. Save and pay

You know what you want to buy, and you get the price of the item. You start save up your money every month. At the end of few months or few years, you buy your target item with your saving. You wiped out your saving but you don’t incur any debt too.

3. Invest and pay

You saved up your money, you invest in a investment vehicle, and you get paid with interest(indirectly from people using method 1). You finance your spending with your investment income. By using this method, you don’t incur debt, built up your capital and own your target stuff.

So, which method do you prefer?

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Filed under Passive Income, Save, Spend

Why I stopped saving money into piggy bank.

Recently I have stopped saving my small charges into my piggy bank, I started to find it time consuming and meaningless after my previous experience from my last saving.

I used to put my coins into a medium size bottle to save up those small money instead of spend them. Due to my habit of record down my income and expense, it become a double time consuming habit for me. I need to record down that saving as expense to make sure my cash flow record is correct at the end of the month, and I cannot deposit those coins into my saving account because I didn’t know there is charge to deposit coins in bank. So I have to slowly spend those coins at daily life and it become quite a hassle to me because I either need to record those coins as income in my cash flow record or minus them off from my spending.

After that experience, I realized putting coins into a piggy bank is quite a meaningless action because that action actually didn’t increase my saving and it actually increase my burden. Of course this is because I have the habit of record down every of my expense. So if you are not as extreme as me when come to record down your income/expense, you can try cultivate a habit of putting your small charges into piggy bank. It does give you some sense of achievement when you are seeing your coins are building up.

In my opinion, instead of saving coins into piggy bank, become more sensitive to your spending is more helpful when come to accumulate your saving.

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How I buy medical insurance

I am buying medical insurance for my parent and having a lot of discussion with my sister about which policy should we buy and which company should we buy the policy from.

We met a few financial adviser after done our own research and filter down to medical insurance from two companies. Both policies are medical insurance with deductible option, and the premium of these policies is lower than  medical insurance that cover medical charges from the first dollar.

One of the reason we chosen the plan is because we have saved up certain amount of money and I think we can bear minimum level of risk. Going forward my plan will be increase the amount of deductible in the policy and can better manage the policy premium.

For younger people, I think can choose the combination of term life insurance, personal accident insurance and medical insurance to have adequate coverage. Quickly build a pool of saving is much more important because it give you more flexibility and freedom in handling many personal life issue.

 

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Filed under Health, Insurance, Spend