How to Become a Millionaire by 30

Becoming a millionaire by the age of 30 requires a combination of financial discipline, strategic planning, and hard work. Here are some steps that can help you on your path to achieving this goal:

1. Set clear financial goals: Define your financial objectives and create a plan to achieve them. This includes setting a specific target for how much wealth you want to accumulate by the age of 30.

2. Save and invest consistently: Develop a habit of saving a significant portion of your income and investing it wisely. Consider diversifying your investments across different asset classes such as stocks, bonds, real estate, or starting a business. The power of compounding can work in your favor over time.

3. Control expenses and live below your means: Avoid excessive spending and focus on living a frugal lifestyle. Differentiate between needs and wants, and prioritize saving and investing over unnecessary expenditures.

4. Increase your earning potential: Invest in your education and skills to enhance your earning potential. Acquire valuable knowledge, develop marketable skills, and pursue opportunities for career growth or entrepreneurship that can significantly boost your income.

5. Be strategic with your career choices: Make informed decisions about your career path. Seek positions and industries that offer high earning potential and align with your skills and interests. Continually seek professional development and aim for promotions or salary increases.

6. Create multiple streams of income: In addition to your primary source of income, explore other avenues to generate additional streams of income. This can include side hustles, part-time jobs, freelance work, or passive income from investments or rental properties.

7. Minimize debt and manage credit wisely: Avoid accumulating excessive debt and be responsible with credit cards and loans. Pay off high-interest debts as quickly as possible and maintain a good credit score, which can help you access favorable financing options if needed.

8. Seek professional advice: Consult with financial advisors or professionals who can provide guidance tailored to your specific financial situation. They can help you develop personalized strategies and provide valuable insights to optimize your wealth-building efforts.

Remember, becoming a millionaire by 30 requires discipline, patience, and a long-term perspective. It's essential to stay committed to your financial goals and adapt your strategies as needed along the way.

Living Below Your Means: A Path to Financial Freedom and Stability

In a world filled with constant messages urging us to spend and consume, living below your means can seem counterintuitive. However, embracing a lifestyle that prioritizes financial responsibility and frugality can have long-lasting benefits for your financial well-being. This article explores the concept of living below your means, its advantages, and practical strategies for achieving financial freedom.

What Does it Mean to Live Below Your Means? Living below your means simply means spending less than you earn and being mindful of your expenses. It involves making conscious choices about how you allocate your resources and being diligent about saving and investing for the future. Rather than succumbing to the allure of instant gratification, it involves adopting a more sustainable approach to money management.

Advantages of Living Below Your Means

Financial Freedom: Living below your means allows you to build a solid financial foundation. By saving and investing, you create a safety net for emergencies, pay off debts, and accumulate wealth over time. This financial security provides freedom and peace of mind, knowing that you have resources to fall back on.

Reduced Stress: Living beyond your means often leads to financial stress and anxiety. By living below your means, you can avoid the burden of debt and the constant worry about making ends meet. Financial stability brings a sense of calm and enables you to focus on other aspects of your life.

Increased Savings and Investments: By living below your means, you have more disposable income to allocate towards savings and investments. This enables you to build wealth, achieve long-term financial goals, and plan for retirement.

Flexibility and Opportunities: Living below your means grants you the flexibility to seize opportunities when they arise. Whether it's starting a business, pursuing further education, or taking a sabbatical, having financial resources at your disposal allows you to make choices that align with your goals and values.

Strategies for Living Below Your Means

Budgeting: Create a detailed budget that outlines your income and expenses. Track your spending and identify areas where you can cut back. Prioritize your needs over wants and allocate a portion of your income towards savings and investments.

Differentiate Between Needs and Wants: Distinguish between essential expenses and discretionary spending. Focus on meeting your basic needs while being mindful of indulgent purchases. Question every purchase and evaluate whether it aligns with your long-term financial goals.

Avoid Lifestyle Inflation: As your income increases, resist the urge to inflate your lifestyle. Instead, maintain a modest standard of living and channel the extra income towards savings and investments.

Seek Value and Practice Smart Shopping: Comparison shop, use coupons, and take advantage of discounts and sales. Consider buying used items or borrowing instead of purchasing new. By being a savvy shopper, you can stretch your dollars further.

Embrace Minimalism: Adopt a minimalist mindset by decluttering your life and focusing on experiences rather than material possessions. Simplify your life and reduce unnecessary expenses by prioritizing what truly brings you joy and fulfillment.

Living below your means is a conscious choice that requires discipline and a long-term perspective. It may involve making sacrifices in the short term but can lead to a more secure and fulfilling financial future. By adopting frugality and prioritizing financial responsibility, you pave the way for greater freedom, reduced stress, and increased opportunities to live life on your own terms.

How Much Savings Should I Have at 35

How much savings should one have at age 35? I think that is an interesting question that demands a good answer.

I was recently browsing an article when I came across something that caught my attention.

The article was giving a rule of thumb on how much one should have saved at age 35, 45, 55 and 65.

I am not too sure whether I recall the figures correctly but it stated that these were the sums required:
- @ age 35 = 1 times your annual income
- @ age 45 = 3 times your annual income
- @ age 55 = 5 times your annual income
- @ age 65 = 8 times your annual income

Saving in gold bullion perhaps?

What this means is that if you have an annual income of say, $100,000, you should have saved the same amount by age 35. At age 45, you should have saved $300,000 (3 times annual income). And at age 55 and 65, $500,000 and $800,000 respectively. This assumes no income growth.

I am wondering whether this is a realistic sum. I personally think it sounds realistic because assuming the person retires with am annual income of $200,000 , it means that he should have saved $1.6 million. Not very high but definitely a stretched and achievable target.

What do you think?

5 Ways to Save Money on Your Airbnb Booking

Airbnb is great for budget holidays outside Singapore until the unexpected costs come creeping in. Airbnb is a lifesaver when it comes to budget holidays. With hotels charging typically S$200+ per night or more in major cities, most of us can’t afford longer stays if not for renting. And if you’re racking up miles, there are a number of air miles credit cards that will give you points for making Airbnb bookings. Stay in an Airbnb apartment a one or two week often enough, and those points might mean a free flight ticket to a whole other location. All that aside, do watch out for some unexpected costs. Keep these under control and Airbnb will be an extraordinary budget tool for vacations:

1. Huge Transport Costs from Not Checking the Address

Even if the landlord doesn’t disclose the exact address, be sure to ask for a few local landmarks or the name of the neighbourhood. Remember that in large cities, you can rack up monstrous transport costs if you’re staying in a far-flung corner of the city. If you’re staying New York for example, there’s no point finding a cheap rental unit in the Bronx at S$90 a night, and then realising you need to waste an hour on a train ride or pay S$12+ for a cab to central Manhattan. Over a week, you’ll spend as much as you would on a more central apartment, and lose time besides. A simple way around this is to ask the host how much it costs to get to different places from the residence you’re staying in.

2. No Wi-Fi

If you’re on a working trip and you need the Internet to function, be sure to clarify that your host has wi-fi access. Otherwise, you will be spending a lot of money at cafes with wi-fi (you need to buy endless cups of coffee to justify sitting there), or probably over S$100 to get a prepaid, unlimited data plan. That’s assuming such an option exists wherever you’re going.

3. Cash Deposits

Some landlords will set a cash deposit as a term. As far as possible, avoid these people. Find someone else to rent from, unless you are truly desperate and don’t mind the possibility of never seeing the deposit again. Putting down a cash deposit means you have to leave when the landlord is around, to get your deposit back. If you leave and later try to get your deposit by mail or wire, good luck; you’re dependent on the good nature of the landlord. Some landlords will also make up excuses to deduct from your deposit, by citing “damages” or “losses”. The amount of the deposit and the involvement of a foreign jurisdiction will make it hard for you to fight for the money back.

4. An Absent Host

A lot of unexpected costs creep up when the host is absent. For example, what if you’re in London in December (i.e. in winter) and the heater system breaks? Or what if, due to theft or absent-mindedness, you misplace the keys and the host is far away in Hong Kong? These little accidents can cost hundreds or thousands of dollars, as they typically mean you will end up in a hotel. So if you can get used to the company, go for a hosted apartment.

5. Water, Toilet Paper, and Other Critical Amenities

Some Airbnb units come to you completely bare: no water (in some countries bottled water may be a necessity), no toilet paper, no food in the fridge, etc. If you are used to hotels, this may catch you off-guard; and your first night will be spent buying toiletries, stocking the fridge, and other essentials. Factor the cost of these into your trip, when comparing prices. If you really hate wasting time and money on these things, and the price difference is not too great, a cheap hotel may be better.

 [This article was kindly provided by SingSaver.com.sg]

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.

Ways to Save Money for A Downpayment

[Guest Post By Erin Vaughan]

Saving for the downpayment on your first home can really seem intimidating. After all, to get a good interest rate on a loan, you probably need to sock away somewhere between forty to fifty thousand dollars. That’s a lot of dough!

Over at Modernize, we know that saving money is all about the little things. A few dollars here, a few dollars there—it can really start to add up. Plus, there are some psychological tricks you can use to make the process less painful. Here’s some tips to bulk up that savings account!

Via Modernize

Make a Budget

The majority of your savings is going to come from your salary, so it makes sense to start analyzing what items your purchase regularly and what you can cut out. In a spreadsheet, list out your monthly salary, minus taxes and deductions for health care and retirement. Then list all your bills. Use your bank statement from the last month as you make this list—you don’t want to forget about smaller bills like that Netflix charge, or your gym membership. Then, analyze what you spent on everything else. You may think that you’re not spending any extra money—until you see it listed out, and you realize that you are buying that extra nail polish all too often or spending too much on coffee. If you think about it, there are probably at least one or two regular expenses that you can cut that won’t drastically lower your quality of life.

Pay Yourself for Not Spending

One trick that my friend has for saving money works like this: every day she goes without spending any money outside her budget, she “pays” herself five dollars. It may seem like just a little bit, but it really adds up! Or try using this 52-week savings plan, where you pay yourself a different amount each week of the year. A little bit at a time can really add up!

Via Pinterest

Resist the Urge to Spend

Spending is largely psychological. So if you feel like you’re depriving yourself for too long you’ll likely eventually break, go on a spending tear, and undo all your efforts. But you can resist! Science tells us that the pleasure of planning something is often rated more enjoyable than actually getting that thing. So next time you feel that itch for a shopping spree looming large, use that energy to plan for your dream home. Create a Pinterest board of ideas for what you want in your house, and don’t limit yourself to what is realistic. Go window shopping online for your perfect sofa, window treatments, or washer, and add them to your wish list instead of buying. You’ll get the same thrill of shopping without the expense! But if you just can’t stop yourself, buy yourself something small and move on. Spending energy beating yourself up for one slip-up is self-defeating.

Negotiate for a Lower Credit Card Interest Rate

If you want to buy a home, you’re probably already paying your full credit card payments on time regularly. (If not, stop what you’re doing, and go make a payment!) Having a great credit score makes it easier for you to play hard to get and argue for a lower interest rate with your financial institution when sealing the deal for a loan. But if you’ve been good with your credit card payments, you may be able to convince them to give you a better rate as well. Try it! Call them up and tell them you want a lower interest rate. They may just give it to you.

Via Pinterest

Consider Borrowing from Your IRA

This should be considered somewhat of a last ditch attempt if you just can’t find the funds any other way, but the government does allow you a one-time, penalty-free deduction from your IRA for up to $10,000 towards the purchase of a home. You’re going to want to think about this carefully—it is, after all, money you’re taking from your retirement fund, so it could make things hard later on. So consult with a financial advisor before making your choice. Also, keep in mind, what kind of IRA you have should also play a part when weighing this decision: deductions from Roth IRAs are tax-free, whereas you’ll have to pay income tax on the money you borrow from a traditional IRA.

No matter how you decide to save the money, make sure to save about roughly 20 percent of the total amount of the home you want to buy. This will give you lots more leverage when you go to get your loan.

Now congratulate yourself! By reading this article, you just made the very first step in your journey to owning your own home.

Simple secrets to building wealth

There are probably tons of books written on how one can get rich or become wealthy. Yet, the secret to building wealth is probably much simpler than most people can imagine. If I could choose three words to describe it, I think the appropriate words would probably be "income", "invest" and "persistence".

Firstly, without income, it is very difficult to become wealthy. The only instances one does not require income is probably if you have a large inheritance or you are starting a business (when you have the intention of selling it). At the end of the day, one cannot accumulate assets if one does not have income.

Secondly, one will need to invest.This can be in any instrument. But the idea is that you are only able to invest if you have money left over from your income after taking into account all your expenditure. In most instances, one is able to invest only when spare cash is available.

Lastly, it boils down to persistence. spending money today always seems more tempting and rewarding then saving it for a rainy day. This is especially so when instant gratification seems to be a large part of our culture today. We rather be seen with a Starbucks coffee in hand rather than saving that money and investing it. This is an everyday battle where our heart will tell us to spend when we really ought to be saving. In addition, one also needs persistence to continue saving and investing even when the markets are bad. This is probably very hard since we are all probably wired to try to avoid risk and danger. But the best time to buy is probably when the market is in its doldrums.

OCBC 360 Account Offers Incredible Interest Rates of over 3%

Recently, I posted about opening a DBS multiplier account that offered interest rates of over 2% depending on your cashflow with the bank.

It now seems that OCBC has up the competition by offering a similar account that offers interest rates up to 3.05% . OCBC 360 account seems attractive as the bonus interest rates are also much more achievable.

To get the bonus interest rates, I will just need to credit my salary, carry out 3 bill payments, and charge $400 to an OCBC credit card. Each of the above gives a bonus interest of 1%. Together with the base interest of 0.05%, it adds up to 3.05%.

I think the offer from OCBC seems to be too good to be missed. Opening my account with them definitely.

Why I signed up for the DBS Multiplier Account

I recently signed up for the DBS multiplier account because of the higher interest rates that were offered compared to a normal savings account.

The process of opening the account was fuss free as everything was done online through internet banking.

Basically, the account offers a higher interest rate depending on the cashflow of that account. The cashflow is limited to a few items (e.g. salary), and various tiers of higher interest is offered if the cashflow exceeds different levels.

Considering that I had spare cash in another account, it made sense to just open the account and earn a higher interest rate for the time being. Besides, the interest is paid monthly!

Bank Promotional Offers for Higher Interest Rates

OCBC is having a Chinese New Year promotion where they are offering interest rates of up to 1.8% per annum or even up to 2% per annum (Premier Banking customers only).  The first offer is called the OCBC Bonus + Savings Account and the second offer is called the Premier Dividend + Savings Account.  The effective interest rate works out to be 0.9% p.a. and 1.00% p.a. respectively.  That is not too bad considering that a normal savings account usually offers much lower interest rates.  Of course, terms and conditions apply (e.g. fresh funds, etc).  But anyone interested ought to check it out.

At the same time, POSB is also offering an account to earn up to 2.014% interest per annum with a POSB eMSA 2014 account.  This requires one to set up a regular monthly savings plan (from $1000 to $3000) into the eMSA account in order to enjoy the higher interest rates.

I have not signed up for any of these accounts but think it might be worth checking it out.  Think the promotions might be ending soon.  So those who are interested ought to check it out really soon. Caveat emptor.

On the other hand, if you are not interested in all this, you might just be interested to read my previous post why it might make sense to top up your cpf account.

Why Topping Up Your CPF Might Actually Make Sense

Topping up one's CPF might actually make sense. I am talking about the act of actually making voluntary contributions over and above what you are ordinarily required to contribute either as an employed person or self-employed person. Here are some reasons why it might just be worthwhile.

1. You get tax breaks

Okay, this might not be a big deal to most people. But one actually gets a certain amount of tax relief (capped at a certain limit each year). So if your income is just slightly over a certain tax bracket, it might actually be worthwhile to make a voluntary top-up to pay less in income taxes. Yeah, it is nothing exciting. But if you have spare cash lying around, it might be something worth considering.

2. Higher Returns

For those who are not too savvy with investments, the CPF accounts might actually provide a higher interest than your normal savings account. Yes, some banks are now offering promotional interest rates of slightly above 2% but that is still lower than the 2.5% and 4% interest rate for the Ordinary.Account and Special/Medisave Account respectively. In addition, the first $60,000 in your CPF earns an additional 1% interest. So do the math and it might actually be attractive compared to the paltry interest rates of a normal bank account. Of course, there is no guarantee that the rates will stay that way since these might be subject to changes in the future.

Considering that some people might not be confident of getting a 2.5% or 4% returns on their investment, it might be worth allocating some of that to top up one's account.

Of course, there are some drawbacks in making voluntary contributions. Firstly, the money is locked up until you are allowed to withdraw your money at a certain age. So you need to be very certain that you will not need this money till retirement. Secondly, if you are topping up under the minimum sum scheme, it means you cannot get apply for future exemptions. All these disclaimers can be found on the CPF website.

I know this post is likely to draw some controversy since most people will never think about making voluntary contributions to their CPF. For others though, it might just be one idea that might make their retirement planning a whole lot easier.

Disclaimer: This post is not an investment advice. The author neither encourages or discourages his readers to make top ups to their accounts.

Saving for Retirement at 30

It’s starting to become the dream of more and more people, to be able to retire just after you leave your 20’s. So saving for retirement at 30 is sort of the new thing, the thing that many young professionals strive for  and something that can be in the back of people’s mind when they choose their occupation. The better job, the more money, and the earlier they can retire.

In a fluctuating world economy you have to take several things in to consideration if you’re seriously thinking about going in to retirement when you’re in your early 30’s. First of all, you need to look at how much money you can make in a month and in a year from your occupation. After that, the amount you can spare for an investment portfolio.

Let’s face it, unless you get a job that pays 8-10 thousand US Dollars every month you won’t have enough to get by for the next 50 years when you turn 30. So the best way of increasing your money if you have a steady job is by getting an investment portfolio. Invest your money in stocks, bare bonds, commodities, oil, gold and silver, and currency to get the best rate of return on your money.

Saving up for retirement at 30 with the help of an investment portfolio isn’t the easiest thing if you haven’t got
an idea how these things work. Then what you can do is get an investment adviser that can give you the best advice on where to invest your money for the best return.

We said previously that the money has to last for 50 years, and that’s true. The average life of a human is around 80 years, so if you’re looking at retiring at 30 you have to save up enough money for the coming 50 years. Now during your 20’s it is all about building your capital, that means a higher risk on your investments and putting more money in to markets that can have a large pay off.

When you decide to retire you will be thinking about keeping your capital, so making safe investments where you  will have a much lower pay off rate but much more stability.

The next thing to do is to choose where you’d like to retire to. The most common and cheapest places would be the Philippines, Thailand and even Singapore. South East Asia is becoming a more and more popular destination for Asians looking to retire early. Find out basic costs such as, average rent per month, health care, food, transportation and all the other things that you will spend money on in a month. When you find a reasonable estimate of what you need to get on well every month it’s time to start doing a bit of math.

Take your average monthly spending and multiply by 12. That’ll give you your annual spending. Take your annual  spending and multiply with 50 and you get an estimate of what you’ll need to get by for the next 50 years. So  for example in Thailand you might need 50 000 Baths per month, 600 000 Bath in one year and 30 000 000 Bath for the next 50 years. A way to save on your monthly cost is to purchase a house or apartment when you move over but that would mean you’d have to increase what you need before you actually move.

[This article is a guest post by a writer in Philippines.  Read more about retirement planning]

How Much of Salary to Save

Based on a recent online survey, it was found that 2 out of 3 Singapore workers were saving no more than 20 per cent of their monthly salary. How much salary do I save?

I figured that I am currently saving about 30% of my monthly salary.  This goes into savings plans, bank deposits or stock investments.  This is probably possible for me because I have kept my "wants" to the bare minimal.  Apart from the occasional dining at restaurants, I probably do not spend much on anything else.  No gadgets, clothes or whatever.  So most of my expenditure is really going into my needs and paying for the bare essentials.

Based on my rough calculations, I also figure that I am possibly able to save as much as 50% of my salary if I really want to.  But that will really mean cutting back on many of the "luxury" items that I can afford.  Saving comes really easy to me as I am pretty much of a saver rather than a spender.  I do not see the need to have or own the latest toys and gizmos.  Being frugal is perhaps part of me =)  And that is perhaps why I have written posts like:

1. What am I saving for?
2. Saving Money on Coffee
3. How Much to Save
4. Saving for My Child's Education

As many people have always advised, it really is not about how much you save.  The most important thing is to get into the habit of saving.  Try to build up an emergency fund and also set up a disciplined savings plan for retirement.  Thereafter, it should get quite easy as you discover more and more ways to save money.  Like they say, the first step is always the hardest.

Cancelled Cable TV - Woohoo!!

I cancelled my Starhub Cable TV just a few days back and I must say that I have never felt so liberated!  You see, I have not had the time to watch TV at all.  At least, TV is on my lowest priority list and I only manage to squeeze in less than 2 or 3 hours of "incidental" TV viewing per month.  I simply don't have the time for it.  And yet, I have been paying over 30 dollars per month for cable subscription.

Finally found the time to go down to Starhub and cancelled my cable plan.  I don't watch TV so I definitely do not need cable TV.  It was as simple a decision as that.  And just by that simple decision, I have saved myself around 30 dollars a month.  This decision was definitely not motivated by saving money since I have been thinking about cancelling my subscription for the longest time but was just too lazy to do so.

I am glad that I have finally done so.  I have just been procrastinating for too long. Just trying to cut out all the clutter in my life and focus on the real things that I enjoy doing.

My dear reader, what clutter can you removed from your life that you have been procrastinating for way too long?

Are You Ready to Manage Your Cashflow?

Well, the IMSavvy site has recently launched an "Are You Ready" activity/movement/campaign.  And I was really glad that such a topic was actually chosen as it is a timely reminder for people to make sure that they are READY in terms of their personal finance.  It basically covers the 4 topics of:

•                      Managing Your Cash Flow

•                      Buying A House Within Your Means

•                      Taking Charge of Your Healthcare Costs

•                      Securing Your Retirement

Just thought that I would share some thoughts about my own personal experience regarding the first topic of managing my cashflow.  Based on the checklist provided at the IMSavvy site (http://www.cpf.gov.sg/imsavvy/ayr_list.asp?catid=1), there were a few questions and I hope to answer these questions as honestly as I can.  So here I go:

I Spend Less Than What I Earn Monthly

Yes, I do spend less than what I earn monthly most of the time.  The only times that I ever spent more than I earn was when I was either going on a holiday or spending on my wedding preparations/home renovations.  Otherwise, as a whole, I would like to think that for a typical month, I make a pretty conscious effort to spend less than what I earn monthly.  This discipline I guess was instilled in me since young - you never want to spend your pocket money before the week is over.  So likewise, when you are working, your monthly cash outflows should not exceed your monthly cash inflows unless for very good reasons (e.g. once-off big ticket items).

I Save At Least 10% of My Income

Generally, I would like to think that this is a YES for me too.  It really depends what is the definition of saving.  My definition of saving is basically income that is not spent on consumption.  So saving to me includes putting money in the bank, putting it in a regular savings plan or investing in stocks.  Well, some people will include their CPF contributions as part of their savings (and that isn't entirely wrong).  So different people probably have very different ideas about what actually constitutes savings.  For me, I do save >10% of my income over and above my CPF contributions.

Again, I must qualify that there are some months when I am a little less disciplined and splurge a little.  But with a regular savings plan that I have set up through an ILP bought years ago, more than 10% of my income does go into saving (at least based on my own definition).

I Have At Least 6 Months Worth of My Income as Emergency Funds

A big YES to this question too!  This was really something that I put off in the past and it was advice that I did not heed which I regret.  During then, I was young and rash.  I decided that the bank was paying me too little interest and decided to invest the majority of my money in stocks.  I had less than 6 months worth of my income in emergency funds even though I originally had set aside that sum of money.  Then came the time when I had to pay for some big ticket items and I was left with little choice but to liquidate some of my investments at a loss.  So if this is not good enough warning for you, please do set aside 6 months of your income as emergency funds first before you even start investing.  The last thing you want to do is to be liquidating your investments at a loss when a certain crisis (e.g. job loss) hits you.

I Pay My Credit Card Bills and Other Debt Obligations, in Full and On Time Each Month

Generally yes.  All my debt obligations are paid through GIRO so I do not lapse on it.  I do pay my credit card bills in full at the end of each month though not always on time.  This is simply because I forget to pay them or miss the due date as the credit card bill was lost in my stack of letters.  I usually call up the bank to waive the late charges since it is basically an oversight. I must have done that more than 5 times but they have always been more than willing to waive it.

I Have Adequate Financial Protection

Well, this is perhaps the toughest question to answer.  And my answer to this is probably a "MAYBE".  I know that I ought to be insured to certain levels (e.g. 10 times my annual pay for death coverage).  But all these are really rule of thumb calculations.  My protection level is slightly below those levels.  I would like to think that I am adequately insured with coverage for death, TPD, critical illness, hospitalisation and personal accident.

This is perhaps a good time for me to dust off the dust on my insurance plans and see whether it is time to review the insurance coverage for myself as well as my family members.

So how did you fare in answering these questions?  Any action you need to take if you have answered a "No" to any of the questions above?  Are you ready to manage your cashflow?

How Much To Get Married (Part 2) - HDB Flat

A few days back, I wrote about the cost of getting married in Singapore. In that post, I gave a brief outline on the items that a typical Chinese couple in Singapore would spend on. One of the big ticket items I identified was one's housing.

For most couples who have just started working and are probably not earning a lot (or born with a silver spoon), they will most probably opt to buy a HDB flat. This is perhaps the cheapest option unless you are willing to rent or stay with parents/in-laws.

When to rent

Some couples might opt to rent a flat or a room instead of buying their own HDB flat. This is usually due to cost considerations or because one is able to get a flat of choice. Others might simply want to be debt free and so choose to rent instead of buy. As a guide, one's mortgage loans (plus other debt payments) should not exceed 35% of the couple's combined salary. Most couples who have been working for 1-2 years should be below the $8000 combined income ceiling and should be eligible for a HDB flat.

In my personal opinion, it does not make sense to rent a HDB flat for long term since the HDB owner will most probably rent it out at a rate much higher than his or her own monthly mortgage payments. For e.g. if my monthly mortgage payment for my HDB flat is $1000, I will definitely rent it out at above $1000. This is common sense and so renting a flat is most probably a short term plan for most couples since it will be more cost efficient to pay the lower mortgage payments compared to the more expensive rent.

Buy A Flat

Buying a HDB flat is most probably cheap if you have money in your CPF. If both couples have been working and have build up sufficient amounts in their CPF-OA, they most probably will have enough to pay the deposit for the flat. Occasionally, some might have to top up the amounts with cash as they might not have sufficient amount of money in their CPF-OA.

In other instances, when buying a resale flat, the owner might ask for cash over valuation. Understand that this ranges quite a bit depending on flat type and location. But as a guide, I don't think that one should be overspending in this area. For me, $20K will be the maximum cash over valuation that I will be willing to pay now. This is because the HDB has just announced that it will be building a huge supply of flats. This flats will be ready probably in 2012 onwards. Based on that, one can expect the prices to come down a bit so if you can afford to wait, do wait. But for me personally, $20K is the maximum cash over valuation that I will be willing to pay.

What do the rest think? Is $20K a reasonable sum to budget for cash over valuation? Or is it too much/little?

Making Saving Fun

So fun theory believes that something that is fun is able to change people's behaviour for the better. And I guess they might be right. So maybe the same idea applies. If we can make savings fun for people, perhaps it will encourage more people to save up for their retirement. Time to think out of the box.

Here are some videos from fun theory:

Retirement Planning

Are you planning to retire? Is the fear of retirement bothering you night and day? Are you sure about your retirement planning and whether you have enough savings?

Well, these are some of the most common questions that one might ask oneself several times while planning for retirement. Retirement can be said to be the phase of life where a person leaves or losses his employment or professional identity forever. In fact, I have even read newspaper articles that suggest retirement as a concept is actually fairly new in our human history. Afterall, people in the past used to work as long as they were able to. There was no such thing as a retirement age!

I shudder at the thought of retirement. Afterall, I find it hard to imagine sitting at home having nothing to do. Yet I can't help notice the trend that these days, older people are increasingly moving towards semi retirement by reducing daily or weekly work hours before they actually go into full retirement. I have seen many real life examples. Others have even gone a step further and taken a more radical approach - by suggesting that one can go on mini-retirements throughout one's life. (Read the 4 Hour Work Week and you will know what I am talking about)

In today's world with its ever increasing cost of living, it is hard to imagine somebody retiring and totally stopping work and not drawing an income. How certain can one be that he will not outlive his or her savings? Based on the average life expectancy of Singaporeans, I think the average male or female will live to age 80. But that is being average and if one happens to be above average, you could possibly be living till 90 or even 100! What if you had only enough savings for 10 years or 20 years and retired at the age of 60. You will be too old to find employment then!

There are in fact some employment opportunities out there that allows for flexi work arrangements for the elderly. Singapore is also introducing a Re-employment Act to make employers offer older employees some kind of employment even after the official retirement age. In the future, it is not hard to imagine that elderly folks can work from home as they have easy access to the computer and internet.

For me, I believe I will try to work for as long as I can. I have changed my thinking about retirement a few times in my life. In the past, I wanted to retire as early as possible. Now, I see retirement as something that I want to avoid. If I can find something that I love to do, I don't mind doing it for the rest of my life!

It is useful to note this: Your retirement age is not fixed by law; in fact it’s fixed by your potential and willingness to work. In short, a retirement that makes your retired life fun loving and worthwhile is the best retirement plan that one can have. In fact, I would not call it retirement at all but rather active ageing.

Getting Married - Steps to Take

I realised that a frequent question I get from people is how much savings one needs to get married. I am not that old but I guess being married- being a person that has walked down that path, makes me a qualified individual.

Or perhaps people know that I am a person who likes to plan ahead and seems to have everything under control. And that is why they ask me for advice.

Recently, when browsing through the IMSavvy site, I realised that it was one of the discussion topics too. So I guess I will chip in to the many opinions out there. But perhaps a better way is to tell you my story.

* * * * * * * * * * * *

I decided to get married when I found the right person. Of course, it is a commitment that one takes as you never ever know whether there might be someone out there in the world who might be prettier, or better suited for you. But one does not have time to meet all members of the opposite sex in the world so you take the leap of faith.

Having known my girlfriend then for sometime, I decided that enough was enough and I was ready to settle down. It was getting tiring to just date without anything to hold us or bind us together.

So I sat my girlfriend down and asked her how much we needed to get married. (Yes, I know it is not romantic at all). But for most guys, I guess this is the preparatory stage before the actual proposal. You just want to make sure that the both of you have sufficient resources to hold a wedding. buy a house, buy some furniture and if possible, go for a nice honeymoon.

Of course, on 2nd thoughts, I should have just bought a ring and proposed straight up, then do the planning later on. But like I told you before, I am really a planner kind of person. And it simply did not make sense to hide my plans from my girlfriend. (okay, i admit that I am not romantic)

Well, the conversation went well and she actually got excited. I think she was just happy that I was actually thinking of settling down. We did our math on a rough sheet of paper which I grabbed and listed down item by item the things that we had to pay for. In fact, she kept that sheet of paper and we still have that piece of paper as a sort of memory.

In short, we added up every single item we could think of that we needed and tallied the total bill. We then forecasted how long it would take us to save that amount of money.

* * * * * * * * * * * *

Now came the savings part.

As we were both working and literally quite fresh out of university, we basically were able to save quite a bit each month as long as we did not splurge on unnecessary stuff.

So it was actually quite workable. And we realised that we needed less than 1 year to save up for marriage. In this manner, we sort of revealed our finances to one another.

Good thing: we both did not have any debt.

Bad thing: we would be in debt the moment we got married as we wanted to buy our own place.

But that did not deter us and basically, we continued to save up fervently. Of course, I eventually did propose, buying the ring with a hidden stash of cash that I did not reveal to her at the start =)

Were there fights? Well...not really. We really stuck to the budget as the wedding day draw nearer. We tried to keep to the budget for most of the items and I am glad that such detailed budgeting helped solve a lot of the problems I believe couples face. As the budget was worked out by the both of us, we gauge all prices quoted to us based on what we have budgeted for. Anything too expensive...sorry...we looked for a lower quote. If there was anything that happened to be cheaper..then good..we saved some money.

The few months before the actual wedding was really a mad frenzy. Each weekend was spent trying to buy some item or furniture for our new home. The credit card bills came in fast and furious and it was not uncommon to be signing off thousands of dollars in a single shopping spree. But like I said, we stuck strictly to what we budgeted for.

I still remember that there were times I had to call up the credit card company to ask them to temporarily increase my credit limit so that I could pay for the big items. In fact, I have never ever spent money like that in my entire life before. Thinking back on it, I guess it is a phase that everyone has to go thru especially if you are getting your own place to live in. Furniture after all can be very expensive.

In fact, the renovations were the most expensive item that we budgeted for. But we decided that it was worthwhile to spend that money as we will want our home to be a nice and comfy place to live in.

* * * * * * * * * * * *

We counted down the months. As each month drew closer, our bank accounts got more and more depleted. It can really be quite stressful at times to realise that you are spending almost all your savings just to set up a home with somebody else. It was during this period that I really could see the sacrifices that my parents have made.

(I actually went further and started planning for life together and calculating our recurrent expenditure when we would move out of our parent's place and live in our own flat. It was then that I realised the amount my parents have been paying in terms for water, electricity, cable, etc over the twenty years of my existence. The amount they have spent on me must be lots!!!). Love you Mum and Dad!

* * * * * * * * * * * *

D-day arrived. It happened quickly and before I knew it, we were off to our honeymoon. When we returned home, we looked at the damage that the wedding had done to our finances, shrugged it off and decided that it was worthwhile. We did not spend a lot but it was still quite a substantial bit.

Nevertheless, because we did not spend our entire savings, we were able to start off our married life with a sure footing. (For example, even after our wedding and paying for all the bills, we still had 6 months of expenditure as an emergency fund set aside with room to spare)

Getting married is an expensive affair. It can be cheap if you want it to. But the best thing one can do is to sit down with your partner and work out the sums. Create a detailed budget and see whether some things are good to have and really necessary. The most important thing is open communication.

I hope this post has been useful for those who are planning to get married.

The writer has been married only once in his life. He does not plan to get married again. He thinks that weddings can actually be a lot cheaper if couples are willing to take the unconventional path of not having a huge celebration that Asians are so fond of doing. Perhaps a bbq or buffet will suffice in the future?

Saving for Child's Education

After many months of saving, I am glad to say that the amount in my child's POSBKids Savings Account has reached a nice tidy sum of $3,600. I have basically been putting all the red packet money that he has been receiving into his bank account. (For those who live overseas, the Chinese have a custom of giving these red packets which are filled with money for occasions like Chinese New Year, birthdays, etc).

So all these money has come in handy. Unfortunately, if I do a straight line projection, it shows that I will still be severely short of the $50,000 that I hope to accumulate by the time my child hits the age of 18/20.