Tag Archives: saving

How to approach your student loan repayment (or any other debt)?

I came across a forum post talking about student loan repayment, the writer is asking for people to partner with him and held him accountable for his own student loan repayment schedule. I paid off my student loan last year, below are some of the things I think will help you if you are setting goal to pay off your student loan.

1. Calculate how much money do you need to pay back

This is the first and most obvious thing to get clear with before you start any repayment. Go to your online banking account, pull out your bank statement, call your bank to confirm the outstanding balance of your loan. Don’t try to do any of the steps below before you completed this step.

2. Set your mind on a target date with timeline & plan

Nothing get done until you get serious. Setting a target is not enough to achieve what you want to achieve, and this apply to your journey of student loan repayment too. After getting know how much you need to pay back to the bank, draw up a repayment schedule that is suitable for you. Be a bit more aggressive on the schedule by looking at your disposable income. For example, if you are able to fork  out $500 every month to repay your student loan, set a goal to fork out another $100-$200 every month for the same purpose. This might give you a little pressure but this is also a good opportunity for you to learn how to spend your money effectively and efficiently to support your life.

3. Do it together

Depends on your preference, you can invite your friend who are also have the same desire to pay off their student loan to embark on this journey together with you. Accountability to another person will ensure your chance of success because it give you a reminder every time you want to spend money on unnecessary stuff. You and your buddies also can encourage each other during this challenging period.

4. Take up second job

This is optional I would say. If you have a promising job, I suggest your give your 100% in that job and performs the best you can be at that job. However, after said that, take up a second job does few things that beneficent to your repayment target. Firstly, it will give you some extra income to put into your loan repayment and speed up the process. Secondly, you might be able to learn some new skills in second job that compliment your main job. Third benefit is not related to loan repayment, you might be making new friends on the job and expand your network.

5. Live frugal but comfortable life

Although I think this go without saying but I will mention here anyway. Frugal means different thing to different people, so I won’t be defining how should you live then be considered frugal. Bottom line is you are comfortable with the life style and spending habit you chose and willing to responsible for the outcome without blaming other people when you are unable to achieve your goals.

Other considerations

Well, we can always expect the unexpected to happen in life…

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Filed under Debt, Personal Development

Don’t let debt control your life.

I was meeting one of my friend and had a few hours talk that day. One of his idea intrigued me, which is about how took up mortgage and car loan make him a better person, a more responsible person. His argument to me was with more loan/mortgage, he felt he had more responsibility financially. It motivated him to work harder, went out to work more often, earned much more income. As the conversation get longer, I started to feel more and more uneasy with his ideas. Somewhere inside me feel that maybe he got the sequence wrong, it was not those debt/mortgage that made him a better person, he became a better and more successful person before he can afford those loan/mortgage.

It is a popular idea to divide debt into good debt and bad debt nowadays. Good debt by definition is the debt that can earn you money, create more cash flow for you, bad debt is the opposite side of good debt. Accumulate bad debt is easy, just go out there and buy that fancy car or that latest gadget on the shelf on credit when you have no idea how to pay off the other two credit card that you has used up their credit limit. Good debt is a bit tricky, I read a few books on this, and I still confuse. The idea seems to be you borrow money  you don’t have to invest in investment vehicle that nobody can guarantee its return. If return on investment of that vehicle is higher than the interest on the money you borrowed, you are called ‘leverage’ else you are ‘over leverage yourself’.

Right now, I am not ready to take on double risk for my own personal finance planning. Saving accumulation still the number one priority on my list now, professional development for a higher paying job is second on the list. Sometime I get into discussion with friend about whether high saving rate or high income is more important, that discussion always ended both parties agree that both are important. With living cost in Singapore maintain at certain level, you cannot have a high saving rate if your income is too low. In theory, a person with a monthly income of 10K, A and saving rate of 80% is having the same live style as another person with monthly income of 2K, B and no saving. In this case, if B is able to increase his income without increase his expense, his saving rate will be growing without his knowing and not affecting his life style.

Back to the topic of debt, sometime people don’t realise the effect from their purchase. Take smartphone as an example, a decent smart phone can cost up to $1000 now. Assuming a typical consumer change their phone every 2 years, which means he has a monthly instalment of about $42. This instalment is permanent unless his behaviour changes and stop chasing the latest gadget every two years. Now let’s see what did he gave up for that smartphone. In order to produce that same $42 every month with a investment vehicle that return 5% per annual, he need to invest ($42 x 12)/5% which means $10080 invested.

Of course I am not suggesting that you are not allowed to buy a phone unless you have $10080 accumulated in your investment. You are free to spend your money anyway you want since you have put in the hard work to earn that money. I just hope that before you make decision that will affect your monthly cash flow, you are fully aware what are you buying into and you are perfectly comfortable with that.

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Filed under Debt, Save

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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Filed under Save, Spend

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

How To Enjoy A Delayed Gratification

We are living in a society of abundance now, with plenty of products to chose from the market place. Although we all know that the optimal strategic is delayed gratification because the price of the product eventually go down after the initial marketing boost is over. But knowing in theory and apply it in reality is different, I guess it is in our gene to enjoy instant gratification because we human has been living in a world of scarcity for so long before the industrialization came along and boost our productivity.

So, in order to curb our desire to own everything the second we saw them, what can we do?

This is a small tip my psychotherapist friend teach me to overcome my obsession of books. Before I used this technique, I am buying about 4-5 books per month and I see no end to my obsession and I am running out of space to store all those books.

After using the technique, I am more in control of my buying desire. I am able to pause for a while before I make the purchase decision. And I am now have more patient to wait for that book to be available in the library for loaning, which does helps a lot to reduce my book budget. In some month, I ever managed to completely wipe out my expense on book purchase.

This is how it goes:

1. You saw something (be it guitar, book or iPad) you think you want to have it.
2. You look at yourself as an external party, something like another person who know what are you thinking.
3. And you tell yourself something like “ok, this me is seduced by latest product again, he is falling to the marketing plot again. When is he going to wake up?”
4. By looking at yourself as external party and asking all those question, maybe it helps to delay your purchase decision because you are not so engaged right now with the product and you can have a better judgment whether is this newer product going to add value to you or not.

Hope this helps.

 

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Filed under Save, Spend

How To Retire Early With A Bicycle, Bowl And Bed

I realized I written more about sleeping and cycling than saving and investment here in this blog. This trend sometimes draw questions from friends and family asking “ How come your blog all talk about cooking your own meal, cycling to work and how to sleep well (doesn’t this important)? Shouldn’t you write more about money saving tips, spending strategy, banks with the highest interest rate or which stock is going to be the best performing star this year?”

So, in order to sell you guys the benefit of those, I done a calculation on the numbers involved when cycling to work, cooking own meal and sleep well in night.

1. Cycling
My cycling-to-office plan ended after 4 months. I can’t remember why it dies off but I do remember the number I saved during that period. Here it is:

Cost involved:
Bicycle cost: S$275
Lock: S$15
Helmet: S$30
Mask: S$70
Total cost: S$390

Saving / income:
Saving from 4 months of cycling to office: approximately S$280
Selling price of the bicycle: S$220
Total income: S$500

The end result was actually good for me, saved some money, got some exercise. I earned/saved about S$110 from 4 months of cycling and I am only talking about journey to and from office. During that 4 months period, I also used my bicycle to visit my friend who stays 20km away from me. So the total saving/earning could be more than S$110.

After went through the saving in absolute number, let’s look at the number through the eyes of investor. Let’s calculate how much money we need to save and invest to support this S$70 per month expense.

Investment return from cycling
Assuming our investment gain is 5% per year and it remains stable throughout your investment years. To get a positive cash flow of $70 per month, you need:

(S$70 X 12) / 5% = S$16,800

That sure sounds like serious money to me, S$16,800. It is not longer some trivial expense you always thought when you calculate them from the angle of investment gain and the amount needed to fund them. How long it took you to save up S$16,800? Or when are the last time you saved up S$16,800?

2. Cook Your Own Meal / Sleep Well
When it comes to benefit of cook your own meal or sleep well, it is more than number. Besides the obvious saving from lower food cost, lower entertainment and lower medical cost you get to enjoy life.

What do I means? I means you get to control what are you feeding your children with, I means you get to spend time with your parent while they giving your advice on how to stir fry that vegetables (I sure get many friendly advice from my mum), I means you will be in better mood when you are meeting your friend, talking to your husband/wife and I means you will be performs better at work.

What Should I Do?
If you are convinced like me, have not much talent in cooking but like to try out this cycling/cooking/sleeping business, one almost confirmed guaranteed failed formula will be try to implement them all at same time.

Just do one thing at a time, if your office is very far from your house, don’t cycle to office then, cooks some simple healthy lunch for yourself. If you absolutely hate exercise and cooking, don’t do it, just go to bed half an hour earlier than your usual sleep time or ever 15 minutes is good enough. Just do something.

So, did I convince you why am I writing so many posts about cycling, cooking and sleeping?

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Filed under Health

5 Short Videos You Should Watch Before You Start Cycling On The Road

As written in my previous post on saving transportation cost, cycling remains one of best choices if you want to save some money and get some exercise on your way to office.

Cycling on the road in Singapore can be an exciting (depends how you see it) experience, which I learn spent 4 months cycling on road. There are many things you need to prepare before hand and countless others you need to pay attention when you are on the road.

I was searching for some safety tips for cyclist in Singapore and came across a cycling safety series produced by Mr Brown. I think he made several good points about safe cycling in Singapore.

1. Dooring

He talks about certain things to take note when you cycling pass a stationery vehicle in this video

 

2. Riding too close to the left

Want to know when should you cycle away from the left of the road? Check out the video below.

 

3. Taxi and bus

Learn some tips on how to share the road with taxi and bus from this video

 

4. Taking the lane

Are you familiar with the idea of taking the lane? Do you know why taking the lane is actually safer for you sometimes? View this video for more detail

 

5. Squeeze

Do you like to squeeze through cars when you are on the road? Check out the video to see why it is not so nice to do that.

 

So, what do you think about the tips shown in the video? Is it helpful to your daily cycling trip?

Thanks Mr Brown for producing these videos. You can check out his blog here.

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Filed under Save