Things I Am Doing Now To Speed Up My Retirement

Early retirement require careful planning and strict implementation of that plan. Every event along the journey has the potential to screw up your progress and set you back a few more years behind your retirement schedule. One of the key is how much are you spending each month, as a percentage of your monthly income, so I have been carefully doing several things which I thought might helps me speed up the process.

1. Keeping as little stuff as I can

I owns very little stuff, maybe less than 100 items if I excluded my books. My weakest link in stuff ownership always lie with books, I am currently in the process of transfer my books into electronic copy to clear up the storage space in my room. I have pretty much cleared out stuff that I didn’t use for the past 6 months and still looking at a few items that I used in the past 3 months.

This declutter activity is quite tedious, you will need to dig out things that you didn’t know were still there and making decision to continue store them or discard them. Another better option might be share them out on the freecycle site, a man trash might be another man treasure, you never know.

Throwing out stuff is difficult, it represented a decision you made in the past, an item you exchanged it with your hard earned money or maybe a sweet memory you shared with the people you loved. Throwing stuff feel like admitting that you made a mistake in the past, wasted a resource from the earth or destroy a sweet memory. In my opinion, by not throwing/giving out those stuff, you are making a bigger mistake. Souvenir that remind you of a sweet memory can be an exception here, other than that you should evaluate every item you owns in term of cost and benefit. Is this item giving more benefit than it cost me? Remember an item not only cost you a physical space but also a memory space in your mind. The less you owns, the less you need to worry about.

By keeping as little stuff as I can also helps me to make careful decision when buying a new item. More consideration and cooling off time was given to myself before I take out my money and bring home another new item.

Of course this is a personal choice, some people will keep stuff they used at least once for the past 6 months and some people will keep up to a year. Just make sure you have a adequate amount of stuff that don’t put too much stress on you.

2. Use a cheap cell phone plan

My personal cell phone plan is dirt cheap. I owns a Nokia phone which I bought for SGD 49, and I used a prepaid plan on this phone. A top up of SGD 20 give me about a month of usage, and the phone battery last me 2-4 days on a single charge depends on my usage. I never into smart phone although I does owns one smart phone for business purposes. It is mainly for instant chatting, checking email and making call.

Cell phone plan is a tricky one because it is a monthly expense and it is not fixed for most of the people, especially for the post paid customer. Small monthly expense always sneak out from people sight because they are small, not as obvious like big expense like mortgage or car loan. But consider this, a monthly expense of 50 dollars will needs an investment of 12,000 dollars with 5% return to support. How many of us has 12,000 dollars saved? And how many of us has them in an investment with 5% return? I would think that most of us are on the other side of the game, we carry a monthly expense of 30 dollars here, 60 dollars instead.

Choose a cheaper cell phone plan, it will do you good long term. 🙂

3. Get a cheap hobby

I confess, my hobby is not very cheap. Every year or so I need to buy a new pair of basketball shoe, that will be about 100 dollars, every week I spent 4-5 dollars on the rental of the court, I spent about 60 dollars on basketball and countless of energy on the game. But you no need to follow my footstep, you can do better than me actually. There are tons of free or almost free hobby you can take up.

Let’ start with the almost free hobbies first. One of them is reading, reading the books you borrowed from the library. It is not entirely free because you do need to pay to get your membership card done. But I think that investment is worthwhile, you get to entertain,educate yourself this way with very little money. Like to read exciting/romantic/mystery story? There are a bunch of fiction selection lying in the library waiting for you to pick them up. Like to build/knit/repair/learn something? I am sure you too can find a book teaching you what you want from the library.

If you are sport enthusiast, I bet you have no problem to invest some money to up your game a little bit. But it is always wise to evaluate your level before commit a sum of money into the latest sport gear. If you are not a professional badminton player, whether a racket weights 85g or 86g might not be an issue to you, and if you are not a competitive cyclist, a normal mountain bike would be fine for your weekly cycling trip. My point is, don’t overspend on equipment before you ever reach that level of competency, it is a waste of money. If you just want to get a little exercise, just walk. Walking should be the least costly hobby I can think of. If your budget allow, buy a pair of sport shoe for your walking session.

4. Buy enough clothing

I don’t really shop for clothes, except an occasionally trip to buy some working clothes. Most of the casual clothes I have now has lasted me for several years, some ever 10 over years. The key term here is enough, enough is different for everyone. For me, I keep 3 sets of working clothes, about 10 set of T-shirt/polo-T/short pant for casual wear. My working set cost me about 100 dollars a set, so there is about 300 dollars. I don’t keep number on my casual wear since most of them came from some many years ago, I guess my cost on owning them should be very low by now, probably less than 2 dollars per year per piece.

5. Go car free

This is really a no brainer if you are living in Singapore. With the price of the COE skyrocketing, it is making less and less sense to owns a car here. The cost of owning a car here is equivalent owning a house in Malaysia, if you are open to the idea of retire outside of Singapore, buying a car here is a no no no. Public transport here is not great, but it is decent. It still done its primary job of transporting people from one side of the island to the other. If you want to explore certain part of the island that is inaccessible by public transport (where are those place anyway?), there are enough supply of taxi that can fulfill you wants.

Remember you are not only save money going car free, you also reduce the pressure on the earth because there is less resources being pull out from the earth to build that car and less petrol is burnt to push that giant metal box you could have bought.

6. Watch less TV

or play less computer game. TV and computer game are like addiction, their obvious purpose is to entertain and deep down you know it is an addiction that you cannot just switch it off as you wish. I play no computer game nowadays, I don’t get much entertainment from staring at a screen and try to move my finger fast enough to kill some monster.

TV can be a good tool to spread message to the mass but I think it has gone bad in quality. Its sole purpose now will be getting more viewership to sell the ads at more expensive price. TV program nowadays do whatever it take to get people to stare at that screen, I saw inappropriate scenes in a cartoon show, more and more mindless program to shut down our creative mind and advertisements that try to sell us stuff.

I don’t know but I believe there might be a force somewhere try to glue us to the sofa to watch the TV after our working hour, try to prevent us from come up with new business ideas or inventing new stuff that might change our life. It is in their best interest for us to just be comfortable with our life, work for 30-40 years and buy product from them at the same period of time.

So, if you want to make some changes to your life, the first thing you need to cut down is your time spent on TV.

7. Maintain/repair things

I don’t have many things to maintain since I don’t really owns that many things. One thing I have proudly maintain for the past 5 years is my back bag, I bought it since 26 April 2008. For the past 5 years, it needed two maintenance action because 2 parts of the main zip came loose. I pulled out my thread and needle and stitch them back as shown as below.

IMAG0111 IMAG0112 IMAG0113

 

I am glad that I have not many things to maintain or repair, I guess this is added benefit from owning small amount of stuff. ^^

 

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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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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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What is mortgage teaching us?

Mortgage is one of the loan that having the longest loan tenure, lowest interest rate and most neglected commitment. I guess it is partly because it can be extend to 30 years or even 35 years and its monthly payment is so low. There are even countless advice teaching us how to choose a suitable loan package, how many percent of our salary should we direct to mortgage payment and how much we can afford.

For the past one year, I have been looking around for a place for my parent who are now staying in Malaysia. This was not in my retirement plan before because investment income is more important to me. To me, having investment income actually more stable than buying a house now. For example, if you are paying RM 989.74 a month for your RM 200,000 mortgage for 30 years, you are paying in total RM356,307.44. The interest of the mortgage alone has cost you RM 156,307.44 over 30 years( see image below, calculation from http://www.calculator.net/).

mortgage cost

At the other hand, RM 240,000 invested in an investment vehicle with 5% will give us RM 12,000 yearly and cover that mortgage for years to come. Currently, my savings is still quite low after paid off my student loan. I am still in the stage of saving money to accumulate at least certain amount of capital before I can try my hand on investment. There are many resources on the web now that provide basic knowledge on investment, teaching us what is stock, option,mutual fund, index fund, etc…  I am planning to spend some time on learning all these basic before I start putting in my own money into any market.

Renting or buying is always a debate topic when we are talking about housing. One simple rule of thumb when you are deciding whether to rent or buy a place is the property price. It is wise to rent when the property price is high and it is wiser to buy a house when the property price is low. How to decide whether is the current property price high or low? It depend on you, if you think you can afford the house, it is low, else it is high. It might sounds like a irresponsible advice here but it is also true because everyone situation is different. Only you yourself can decide whether you can afford a house, keep in mind that buying a house involves cost during the transaction and also renovation cost before you are even in the house.

Renting a house will not give you all this cost and you are free from all the hassle that come from owning a house. Another benefit come with renting house is you can choose your neighbor. If your neighbor happen to be some crazy people that like to making noise during the night, you can easily move to another place when your rental agreement expired.

 

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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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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

3 Lessons I Learnt From My Retrenchment

I was let go by my company on 10 July 2013. So for the past few weeks I have been busy with looking for a new job. I was landed a new job with more interesting job scope and more opportunities. During the process, I learnt a few lessons that I think it is valuable and I shared all them below.

Be prepared.

As I always said, I have been very happy in my previous job and I never thought I will be retrenched before I achieve my retirement. It might sounds silly to you but that was really what I was thinking then. I was thinking technical job should be quite stable, as long as I have the skills and I am fulfilling my duty, I should be pretty safe from retrenchment. I escaped the previous one so there is no reason why I cannot escape this one.

So, I was pretty much not prepared when I was let go by the company. My resume was not updated, my job site accounts have been sitting in spider web for the past three years and I don’t even have a LinkedIn account. So I quickly setup my LinkedIn account and start adding people like crazy everyday for every possible opportunity.

I also start pull out the resume I have not been touching for the past three years and updated it with my job experience in previous company. As I was writing, I realized I have the most stuff to write for the past three years compare to the previous five years. In this three years, I learnt a lot of technical knowledge, gathering requirement from customers, provide them dedicate and fast service when the issue is a product bug. But it is still a challenge for me to put all those down in words so I seek help from my colleague to help me check on my grammar, the descriptive words I should use and format that is best for reading( Most resume actually didn’t get read, and those which get read only have 6 seconds to impress the reader).

It is important to always be prepared for incident like job loss.

Be diligent.

Job hunting in some way very similar to the real hunting. You need to have the skill to make your weapon and fire them, but you also have to shoot at enough number of animals before you can get your preferred result. I have the skills from my previous job and I know they are valuable in the market. But it is still very important for me to go to market every day, talk to market people about the current situation and try for every possible position that is related to my skill. I have also applied to other positions that I know I will look really stupid if I was asked in for an interview, but I applied it anyway. It is a process I must go through, treat them as practice, and just keep going.

Be open

If there is job opportunity for you to try something new and learn new skill, take it. It is never too late or old to learn something new. In IT line, everything is changing very fast and anything you learn one or two years ago might not be relevant anymore. So no matter you are trying something new or stay with your old specialization, you have to keep learning. If your job is purely technical, enhance your technical skill till you are the go to person whenever your customer needs some technical advice. If your job is more toward sales/marketing, build that relationship and trust between your customer and you.

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