The kind of life I want

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Most of the time when someone ask us “what do you want in life?”, we would often think of the fancy lifestyle we see in movies, living in a huge mansion, driving a Porsche, flying in private jets and partying on our own private yacht. And then we are reminded of how much money is needed to fulfill such dreams, so we stopped dreaming and tell ourselves to go back to reality and be contended with our pathetic little lives.

However, having a fulfilling life does not mean we need to be living in a huge mansion, driving a fancy car or having an endless supply of designer clothes to wear. Rather than asking yourself what kind of life you want (most people would either want a fancy lifestyle, or they do not know what they want), ask yourself what is important to you in life. More often than not, the things we want are actually very very simple.

The kind of life I want…

Being able to prepare breakfast for my loved ones every morning. Have a nice peaceful meal with them in our nice, cozy little apartment and see them off to work and school. Career wise, I’ll probably be working in a charity organization or with a welfare group or even my own company where I can focus on helping people who are in need. I would opt for a job where I can make a difference in others’ lives, than be in a high paying corporate job. I’ll have the luxury of working flexible hours, to be able to head home before everyone else, to prepare a sumptuous dinner for my loved ones.

Weekends will consist of waking up early, heading out for some shopping, or simply finding family activities to do. We will head out to different restaurants for brunch every week. In the evening, we will bring our kids to meet up with family members and friends, to do potlucks and dinners at one another’s place.

Every few months, we will go on short vacations to neighboring countries. Once a year, we will head to more exotic locations like the States or to Europe for a longer vacation.

I will be around to watch my kids grow up, be with them through their different life stages, rather than being stuck in a office job that robs me of my time and freedom.

What I have stated above are very simple pleasures in life which does not require living in a big mansion, driving fancy cars or owning a private jet. It does not require ALOT of money. However, financial freedom is much needed for my loved ones and I to indulge in such simple pleasure in our current society. We need money for us to choose what job we like to do. To be able to say no to high paying jobs which require many working hours in the office. We need money to indulge in our weekend treats at different restaurants. We need money to go on regular vacations, especially for a family with kids. We need money to buy our nice cozy apartment and to maintain it.

This is what money means to me. It is for me to buy time and freedom. I am saving really hard now. To build up a decent level of savings and investment portfolio, which can help me generate passive income in years to come. I hope to have my second and third properties as well, to generate passive incomes for me and my loved ones to live the kind of simple life we want.

How do you want to live your life? Start planning now and live it ūüôā

Simple steps to improve your financial health

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Are you constantly worried about money and wondering what to do to improve on your current situation?

Here’s a simple A to Z guide on how you can improve on your financial life:

1) Get Out Of Debt
No I’m not talking about housing loans. Those are good debts and you should take your time to pay them. Leveraging is useful to grow one’s wealth. Learn to take some risk and make use of the low interest rates to grow wealth.
On the other hand, credit card debts and other unsecured loans are pure evil, with exorbitant interest rates. Repay them as soon as possible. If you do not have self control, avoid using credit cards altogether and just stick to using cash and debit cards. Understand that if you need an installment plan to buy something, then you probably can’t afford it. Commit yourself to debt repayment and cut all unnecessary expenses and activities like shopping, eating out at expensive restaurants and going on exotic vacations. You do not deserve such treats if you’re still in debt.
Read here to learn how to get out of debt.

2) Save Money
From personal experience, the best method for saving money is not to “pay yourself first”, or to follow a budget to track income and expenses. The best method, is to set goals for yourself and know what you are saving for. All of us know the importance of saving money, but most of the time, people don’t save because they do not know why they are saving for. No one would sign up for a marathon or race not knowing what they are getting themselves into, or how far they have to run. Start saving money with the end results in mind. Are you saving for a house in 5 years time? A second property in 10 years time? Or an early retirement in 20 years time to enjoy life while you’re still healthy and strong? Do some calculation/ estimation on how much you need for each life goals and work backwards. For example, you need $200k to pay for the downpayment for a house in 5yrs, you and your spouse would have to save $3,333 a month combined to achieve that goal.

3) Protect Yourself and Your Loved Ones
All of us need health and life insurance as a form of protection, especially if you are the sole breadwinner at home. Singapore is a very expensive country with not much social welfare. You want to make sure that your loved ones are being taken care of if anything happens to you, or if you are not able to bring home the dough due to any unforeseen circumstances. Before going to a financial advisor, make sure you read and find out the different types of insurance out there, and have in mind the ones which are suitable for your needs. No offense to any insurance advisor out there, but there are some (a minority) who recommend products which earns them the highest commission, which are not necessary in their clients’ best interest. There are of course the few precious ones out there, that are doing their best to help their clients. It helps to source around and to identify sincere and helpful advisors.

4) Earn More Money
Develop yourself to increase your earning power. You do not have to subject yourself to that pathetic 5% increment every year. Upgrade yourself and learn new skills to stay relevant and always be proactive in your job. Also, do not be afraid to ask for an increment or promotion if you are doing a good job. Most employees, especially women, aim to be nice and often not ask for what they deserved. Stuck in a sucky job? We all have the choice not to stay in one. Do something about it.

5) Start Investing
Read, read and read. Talk to people who invest and ask about their strategies. Learn how to read the financial statements and calculate ratios to identify under valued companies. Read the news on the daily basis as share prices also react based on news and what’s happening around the world.

6) Plan for Retirement
Personally, I’m not planning for retirement but for financial freedom. I plan to work for as long as I can but not for money, it’ll be for the things I love doing. Plan for the end in mind. If you like to retire at the official age of 62, make sure you have enough money to last you till the age of 85, which is the average lifespan in Singapore. You will need at least 80% of your current annual income to sustain your lifestyle every year, factoring the rate of inflation over the years. Start planning early and invest early to beat inflation. It is never too late to start planning for such important life event.

This is a simple guide for total idiots who are clueless on what to do to improve on their personal finance. I will be doing installments to elaborate on each steps in the next few weeks.

Frugality is not a bad word

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People usually see being frugal as sacrificing the good things in life, and living life like a hermit. To me, it is simply a trade off for the not so important things, for the things that matter. Being frugal means being mindful of one’s spending. Just like it is important to be mindful of one’s health.

What I am trading off are stuff like buying 5 new dresses and a pair of heels a month, eating at expensive places (hawker food can be as good, at a fraction of the price and I don’t have to pay tax and service charge!), drinking and partying, doing mani and pedicure once every 2 weeks, and simply doing mindless shopping just because I’m bored. What am I “sacrificing? Things that doesn’t support my core value, for the things that meant the world to me. Things like being able to afford our first home, financial security, and a comfortable lifestyle are whats important right now.

Not everyone can embrace or accept frugality. If like me, you suddenly find yourself being frugal or saving money for things that matter, do not start going around lecturing your friends or close ones. It is exactly comments like “do you really need another dress?” or “you can save $300 a month by stop drinking coffee!” that annoys people and put frugality in a bad light. Your friends might enjoy shopping and buying stuff, but he or she might also be cutting down on areas like eating out at expensive places. We all have areas where we splurge on and areas that we cut down on. Remember, frugality is just a conscious effort to be mindful of one’s spending. It doesn’t have to rule your life.

Having 100k by the age of 30

Came across an article from the Straits Times (albeit an old one) and found myself getting all worked up. The article mentioned that it is possible for someone earning the average salary of $3,000 a momth to accumulate a savings of $100k by his 30th birthday. The following assumptions were made in this case:
1) Starting salary of $3,050 with 4.5% annual increment
2) A total annual salary of 15 months, consisting of 12 months salary and 3 months bonus
3) The ability to save 50% of his salary, with an average monthly expenses of $900

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I felt cheated by the article. How¬†could anyone save 50%¬†of a¬†$3,000 salary and live on a pathetic $900 a month (Salary of $3,000 – CPF contribution $600 – Savings of $1,500)? Don’t they have to go out and socialized and shop and buy stuff? Then I started¬†thinking of how unfair it is that some can afford to save 50% of their salary, while others like me have commitments to our parents and have bills to pay etc. How about life events like getting married, going for honeymoon, and getting our first home?

So much negativity in my head. I had to stop myself and asked why am I feeling this internal anger. And I realized why. This guy with an average salary could do it, but I couldn’t. To be fair, I was in a much better position than him¬†to accumulate 100K by the age of 30.

Why?

1) I started work way before him at a tender age of 20. I had 10 years to save while he only had 5 years.

2) I earned more than the average increment of 4.5% over the years.

3) I only had to save 20% of my salary to reach 100K, anything more is a bonus.

4) I did have an average of 2 months bonus over the years.

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It is a shame that I had never bother to save and build wealth until this year. It could have been easy for me, but I never got started until recently and am playing catch up now.

Kudos to this guy. He is admirable and I am no longer mad at him.

How Rich People Think

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They always say the first step to getting rich is to study those who made it, and to adopt their thinking. This post isn’t exactly a book review of “How Rich People Thinks” by Steve Siebold, but more of discussing some of my favourite points in the book which I believe in, and which enlightens me as well.

– Middle class worries about running out of money, world class thinks of how to make more money.

Normal folks worry about having to pay bills, their mortgage loans, their children’s education etc. They find themselves in a position whereby there is nothing left to save for at the end of the month. While on the other hand, the rich are making so much more that their bills took care of themselves, and not only are they able to save, but they are also able to invest or take advantages of any business opportunity. For the rich, there are always ways and methods to make more money.

– Middle class thinks about spending… World class thinks about investing.

The normal folks think it is impossible to be rich so they don’t see the point of saving and investing for their future. They rather spend money on material things and on entertainment to make themselves feel better. They are not able to see so far ahead into the future, hence they are not able to resist instant gratification, to buy that new pair of jeans, new designer bag, or that flashier car. The rich plans far ahead and knows how to make their money work hard for them, even when they are not busy making money.

– Middles class has a lottery mentality… World class has an action mentality.

How many times have you heard others saying they will become rich when they won the lottery? Rather than leaving such chances to luck or fate, the rich become rich by doing something to make it happen. They never stop learning, they find their passion, and became so good at doing what they love that they make money from it. They take risk and never give up even if they fail numerous times. They can fail 72584937 times, but they just need that one time to succeed to make a difference. The poor wait for outside factors to rescue them from poverty, winning the lottery, inheritance from a rich relative, or for some woman, finding a rich husband is the solution for them.

– Middle class is waiting to be rescued from financial mediocrity… World class knows no one is coming to the rescue.

This is similar from the point above. Normal folks just sit around, feeling sorry for themselves, resenting the rich, and hope that a miracle will happen to them, and one fine day they will become rich. That day never came. What’s worst, they pass on such mentality to their children. I remember my father always tell me he will buy me this and that when he won the lottery. After 20years, it never happen. For so long, I had such a mindset too, digging myself into debt and hoping someone or something will rescue me from my predicament.

– Middle class believes money changes people… World class believes money reveal people.

I believe if someone of good values become rich, they will do even greater good than before. Similarly, if someone of ugly character become rich, they will misuse or abuse their wealth. Problem is, movies and the media only portray the bad sides of wealth. That is what normal folks choose to believe, that wealth equates to greed. They think that being wealthy is bad, so they make themselves feel better by being mediocre their whole lives.

– Middle class believes money is about status… World class believes money is about freedom.

Similar to another point in the book, “Middle class believes people seek money for power, world class seek money for control”.

If you ask someone what will he or her do if he has a windfall and he’ll tell you about that fancy car, big house and expensive suit he is gonna get when he is rich. All these represent status of wealth. That is why so many lottery winners squander away their winnings within a few years and became worse off than before. They use money to buy things, to buy status. The rich understands that money buys time and choices, not just status. With money, one can choose to quit their meaningless job or get out of unpleasant situations. They can hire help to take care of the mandate aspects in their lives and focus on the important things like their health, loved ones and contributing to a cause they believe in. In short, having money is about having the freedom of choice.

– Middle class lives beyond their means… World class lives below their means.

The rich are able to live below their means not just because they lead a frugal life, but because they earn so much money, regardless of how they spend, they are still able to save and invest a large portion of their earnings. While it is important to save, one should also focus on earning more by constantly learning and improving oneself to develop a win win situation whereby one can afford a luxurious lifestyle, and still have enough financial security for their retirement etc.

– Middle class believes the more money you make, the more money problems you will have…World class believes the more money you make, the fewer problems you will have.

Similar to another point:

– “Middle class equates money with stress, world class equates money with peace of mind”.

– “Middle class never makes the connection between money and health, world class knows money can save your life”.

I have heard people saying things like money cannot buy happiness, love or good health. To me, these are just excuses for staying within your comfort zone. For it is easier to not try at all, than to try and fail numerous times. I don’t think one will feel happy, being broke and not being able to pay their bills. And with the extra stress, how can one stay in good health?

Anything that can be solved by money is not a problem. Need repair for your car? Your television just broke down? Tuition fees for your child has increase? All these are not a problem at all if you are rich. I am not saying money can buy you a long life, but with money, you will have access to the best health care, medicine, and doctors available at your disposable. The rich definitely has a peace of mine compared to normal folks.

10) Middle class teaches their kids about money by example… World class does the same thing”.

I grew up with a mentality that money is a scare resource. In a normal family, you hear parents telling their kids stuff like “money doesn’t grow on trees”, or that “rich people are greedy”. Children grew up thinking being poor is noble, and that one has to get rich on the expense on others.

The rich on the other hand grew up with an abundance mentality. There are the few bad eggs that squander off their parents’ wealth, but the majority manage to build their family empire and bring it to greater heights. There are also many second generation self-made millionaires that earned their keep through their ambition, innovation, and rich mentality due to their upbringing.

Being rich is never easy, that is why the majority of us are just mediocre. The first thing you have to do is to open up your mind, stop wallowing in self pity, and believe that being rich is possible. Read about successful people and see what they did right in their lives and replicate their success. Do something, start saving, learn to invest, plan for your future, and stop complaining. You might not end up being a millionaire, but you will at least retire comfortably, bringing positive mindset to your children. Regardless, you will end up being in a better place than you currently are, just by opening up your mind and making an effort to save and earn more. If they can do it, so can you.

Expenses – Aug 2012 vs Aug 2013

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Sometimes, its not how much you earn, but how much you spend (or save) that has an impact on your financial life. I have known people who earned the above average salaries but still live paycheck to paycheck due to a flamboyant lifestyle. I also know someone who does not earn alot, yet is able to build up quite a substantial amount of savings over the years. I decided to look back on my spendings for Aug 2013 vs August 2012, to see how much I have cut down. I had a hard time sorting through my previous year’s bank statements and credit card bills as I didn’t used to have a budget system in place.

Recurring Expenses (SGD) Aug-12 Aug-13 Differences
Parents Allowance 827 815 (13)
Credit Card Installments 450 486 36
Income Tax 89 132 43
Insurance 208 208
Mobile Phone/iPad Subscription 155 105 (50)
Transport 230 100 (130)
Food & Entertainment 1,078 700 (378)
Shopping & Misc 439 199 (240)
Unaccounted for 640 (640)
4,116 2,744 (1,372)

1) Credit Card Instalment – Zero saving:

From the first glance, it looks as if I am repaying the same amount of debt as I had from a year ago. However, I had previously carried a balance on all of my credit cards (3 card in total), and $450 is just the minimum balance I pay each month. I was in such a mess that I actually did not bother opening the mails for my credit card statements, as the balances were just too painful to look at. I just automatically pay $150 a month, hoping that by paying the minimal amount, my credit card debt would magically disappear on its own. Now, $486 is the true value of how much I am actually paying each month, which is solely made up of 24 months installments I foolishly signed up for bags/facial etc a year ago. I no longer fear opening my credit card statements as they usually show a ZERO balance now.

2) Mobile Phone/iPad Subscription – $50 saved:

I managed to get a better plan on my monthly subscription hence the savings of $50 a month.

3) Transport – $130 saved:

I managed to saved $130 on transport from not taking taxis/cabs whenever I am too lazy to take the bus or MRT. Singapore is a very small and relatively efficient place especially when it comes to transport infrastructure. So taking a cab is more of a luxury than necessity most of the time.

4) Food & Entertainment – $378 saved:

It’s scary how much I used to spend on food and drinks and other leisure activities. Although the current $700 a month on Food is still on the high side compared to some of my more frugal friends, I am pretty happy with the savings of $300 or more, and think it is quite substantial. Eating out is one of those things that I truly enjoy, so I’m not too big on cutting down and being frugal on this area. Drinking and clubbing on the other hand is something that I am able to cut down on, hence the saving of over $300.

5) Shopping & Misc – $240 saved:

I only set a budget of $100 for shopping and misc items each month, so I had actually exceeded my budget for Aug 2013. Comparatively, I did stop shopping online which contributed to the bulk of my overspending in this category. I now cringed when I open my drawer full of new clothes that I had bought on impulse. They are now part of the clutters in my messy room.

6) Unaccounted for – total elimination!

This is the most interesting category in my list of expenses. These are ATM withdrawal which I had never bother tracking and I do not exactly know what I spent on. It is possibly made up of food, misc items, mindless shopping, and taxi fares. This year, I make sure all my money is being accounted for using a excel spreadsheet that I created and now all expenses are accounted for. It feels great to be in control!

I used to think that there is no way to I can minimise spending and to start saving money. What I have here shows that through conscious efforts and the motivation to improve financially, IT IS POSSIBLE. It’s just a matter of how badly you want to save, to forgo instant gratification and save for something bigger like a fulfilling retirement, financial freedom, or even owning your dream home.

I am very happy with the amount I’m saving each month. A year ago, I had no idea saving money is so easy, After putting my mind to it and building a budget system for myself, it has become an habit. I now hope to maintain the same level of spending, and at the same time, to drastically work on increasing my income so that I can save more.

Things I’ve accomplished in my 20s

Came across an article some time back about a list of “20 things you need to accomplish in your 20s” and I thought I’ll do up a list of my own.

However when I was going through the list again, I realized I’ve actually accomplished quite a few items. So now I shall write about my so-called “accomplishments” and what I want to achieve before I turn 30 next year. Do bear in mind that the list below is just based solely on my life, on the little achievements that I’m proud of, so it might not sound as ambitious or exciting or noble as you would like it to be.

Proudly accomplished:

1) open a trading account early this year and learnt how to invest in Equities and value listed companies

Despite working 4 years in a bank, I had never taken an interest in financial products nor had I learnt about investing. It was only when I left the banking industry that I started reading up on my own and started investing in equities. I’m no expert, but within a few months, I did build up a nice portfolio of blue chips from various industries.

2) got out of debt and became a master of my own finances

It wasn’t easy climbing out of debt. But with enough motivation and by being persistent, it can be done. I’ve also created a budget worksheet for myself, sticked to it, trimmed unnecessary expenses, and started saving money.

3) finally knew what I want in life – financial freedom

This is my biggest “accomplishment” by far, in my own opinion. I’ve been drifting along in life for far too long, not knowing what I want in life. All it takes is a little bit of soul searching and asking myself questions on what’s important in my life. I wanted financial freedom, to be able to do what I want, whenever I want. It may sound very generic, everyone wants financial freedom, but there is a deeper meaning behind it. I asked myself what I would do if I’ve achieved financial freedom, if money wasn’t an issue from living the life I want. The answer is very simple. I want to spend time with my loved ones instead of spending most of my waking hours at work, stuck in a cubicle office. I also want to help people in need, to contribute to society, and to help others who were like me, to get a grip on their finances.

4) learnt to be happy with myself

Too often, we let ourselves get affected by people and things outside of our control. We get affected by others’ opinions and bashed ourselves internally by their words. Others can say and think whatever they like, we can’t control that, but we can always control our own thoughts, emotions and actions. No one can make us feel lousy about ourselves unless we allow them the right to do so. We are also very much affected by the things people own, like we see our friends driving a brand new car and we’ll then start to feel lousy with ourselves and try to keep up with the jones. There is this saying “we buy things we do not need, to impress the people we do not like”. It’s so true in our current society. I also believe that “if we buy things we do not need, very soon we will be selling the things that we need”.

5) read on a daily basis and to keep up with current events

Knowledge is power. There’s always so much to learn, to improve on, and I believe reading can help one become a better person. It broaden our world and let us focus not just on ourselves. There’s a bigger world out there than what’s happening in our life and in our circle. When our world become bigger, we learnt to be more understanding and tolerant of others, and learnt that not everything is about us. By keeping abreast with current events, we can make use of opportunities to make more money, to help us achieve what we want in life.

Ironically, I’ve only accomplished the above within this one year. That is, after I’ve sorted out my financial mess.

I also have a list of other things I’m working on to accomplish before turning 30 next year:

1) be more organized

I’m not the most organized person around and I do lose things or forget things easily. This is one area which I¬†need to improve on.

2) get the body I always dreamt of

I’m tired of complaining about my body. It is time to do something about it.0

3) spending more time with my loved ones

I’m getting married next year, so I hope to spend more time with my parents and siblings etc. For a start, I’m bringing my Grandma on a trip to Bangkok in December.

The list I’ve come up with is nothing impressive. It is my little ways of telling myself that I’ve grown, and became a better person.