Tuesday, May 31, 2016

Dividends and Interest Income for May 2016

This is just a rough estimate of dividends and interest credited to my bank account for this month:

Dividends = $1252
Interest = $197

Total = $1449

Sunday, May 29, 2016

How Much To Save Per Month

How much should one save every month? Well, this is really a difficult question to answer. And it is difficult to give a straight answer because it can be quantified in absolute dollar amounts (say, $500 per month) or it can be stated as a percentage of one's salary (say, 20% of household income).

Well of course, one will always hear that you should save 10% of your income. However, I personally think that amount is way too low. It probably is correct when you are first starting out to work and have a low starting base salary (say $2,500). After paying for rent and stuff, it is unlikely that you will have much to spare. So 10% (or $250 per month) is probably a reasonable starting point. But it shouldn't stay that way for long. You probably need to start saving more.

After all (and as a very simple illustration) , if you only have 40 years of working life (let's assume you work from age 25 to 65) and spend 20 years in retirement, common sense or simple mathematics will tell you that you are working for 40 years to support 60 years of living expenses. That means you should only be spending 2/3 (two-thirds) of your income in the first 40 years so that you have 1/3 (one-third) of it left for the remaining 20 years of your life. I am really making many assumptions and simplifying the entire financial planning process so it is really best if you work out for yourself what is a realistic amount. On that basis, saving 33% of your income is probably the way to be safe.

Does this amount sound alarmingly high? Well, yes it is. Life expectancy has gone up and the cost of living has also been creeping up slowly but surely.

Another way to come to a figure is to work out your desired retirement income (or monthly expenses you expect to incur once retired) If you just assume an average expenditure for a married couple of $5000 per month for 20 years, that alone will sum up to $1.2 million dollars in savings that are necessary. That is quite a large sum of money without catering for any buffers. If the couple has a combined household income of $120,000 per annum, it will take them 10 solid years of saving 100% of their salaries just to set aside $1.2 million.

So how much should one save every month? Definitely a lot more than 10% of your salary if you intend to be financially stable and secure. In fact, it might be better to err on the side of caution and save more while you are young rather than to wait till retirement and realise that you have to cut down on your expenditure just to stretch your retirement dollars.

Saturday, May 28, 2016

Baby Steps to Financial Peace

Most Singaporeans will probably not have heard of Dave Ramsey before. But anyway, Dave Ramsey is America's trusted voice on money matters. He also has something written on 7 Baby Steps to Financial Peace. The 7 steps are simple enough to follow and are listed as follows:

  1. $1000 for emergency fund
  2. Pay off all debts less the house
  3. 3 to 6 months of expenses in savings
  4. Invest 15% of household income for retirement
  5. College funds for children
  6. Pay off home loan early
  7. Build wealth and Give
The steps seem simple enough to follow and should be a useful guide for most people. 

I guess not many people take financial planning seriously.

Take this comment by sigdiamond2000 on financial stability for example. It is extremely hilarious. 


Sunday, May 1, 2016

Dividends and Interest Income for April 2016

Received a grand total of estimated $158 for dividends and $151 in interest income for April 2016.

Dividends came from one of my REIT holdings and the interest income came largely from my bank accounts which is yielding an okay interest rate. At the moment, I am largely relying on the OCBC 360 account (roughly 2.2% for first 60,000 and 1% for incremental increase) and their Bonus Savings account (0.8%). I also have the UOB account but have found it difficult to the credit card minimum spend requirement on that account.

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