Getting rid of materialism

I wouldn’t say that I’m completely rid of materialism. In fact, close friends of mine know that I’ve been having this watch craze lately, and am currently eyeing an IWC Portofino watch which cost a whooping $7,200.

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Gorgeous isn’t it? However, unlike before, I have a better sense of self control and I find myself having no reasons to get it. I will get this watch as a form of reward when a) I completed my ACCA, or b) I have a saving in excess of 100k, whichever comes earlier. Either way, there is still a year or more to go before I accomplish my goals. And who knows? Maybe by the time I accomplished them in a year or two, I may not want to spend so much money on a discretionary want after all.

Over the past year, I’ve come to a conclusion that there’s no end to materialism, it’s like trying to fill a bottomless pit. Many think that buying and owning things equates to happiness. In fact, it’s the total opposite. Think about it, when it’s the time one would usually shop and spend the most? It’s usually when one is unhappy and turn to retail therapy to make themselves feel better. Situations like stress from work, break ups, family problems and unfulfilling personal lives tend to make us shop more. Shopping gives a false sense of happiness, and a false sense of importance. It acts as a distraction from things we are truly unhappy about. When we buy things, we get attention and assurance from shop assistants and we feel a sense of importance. After the purchase is made, friends or colleagues usually notice it especially if it’s a big ticket item and we get attention from it for awhile. This again add on to us feeling important from our purchase. However, the root of our problem was never removed nor even paid the slightest attention to.

I had a bit of time by myself today, so I started asking myself why the sudden interest in watches. Why this strong urge to “reward” myself despite not having real reasons to do so? Is it because I’ve hit an income level of 100k per annum? Or because I’ve climb out of debt and am saving over 40% of my salary? Truth to be told, I wanted to get a watch to mask my discontentment at work, and out of boredom. I’m bored with my boring albeit well paid job. I don’t feel challenged and I’m not growing much career wise. Why not change job? Firstly, I’m not a quitter, secondly, this job offers me two important things. Time and money. Time to complete my studies, and money to build up my savings at a faster rate.

Therefore, I tell myself to focus on experiences, relationships, my goals, and on fixing my problems. Don’t focus on things such as that beautiful IWC watch. When we focus on being a better person, on improving relationships with people in our lives, we will then be fulfilled and material things naturally wouldn’t matter as much anymore. Having said that, I may still get that watch as a reward only when I truly deserve it, when I reached my personal milestones. We’ll see!

Total Expenses for 2013

Total Expenses for 2013

Total Expenses for 2013

I’ve been diligently making a conscious effort to cut down on expenses, pay down debt and save money, and seems like my hard work has paid off!

My expenses still seems to be on the high side mainly due to the fact that my parents have retired, and I’m giving them close to 1k a month. I’ve also contributed slightly over 8k for debt repayment. It’s still a painful reminder of the amount of debt I’ve dug myself into, but am glad I finally have control of my financial life!

Without debt repayment, my total expenses amount to $33,944 which is a comfortable $2,829 per month. I don’t think I can cut my expenses down much further as it is already on the conservative side.

So the golden question. How much do I need upon retirement?
Looking at this table, I probably need about $14,600 per annum for living expenses, which is about $1,217 per month. Do note that these figures have yet to be adjusted for inflation, it’s just a rough guide.

Here’s the breakdown on an annual basis:

Insurance – $3,000
My insurance premium is a 15yr term insurance which I’ll stop paying when I turn 39. However, I believe I need to step up on health care insurance due to old age, and premium usually cost more the older we are.

Phone – $600

Transport – $1,000

F&B – $5,000
I’m a foodie and I don’t plan to scrimp on food.

Travel – $5,000
I’ll probably not shop much or have much entertainment, so I’ll reserve $5,000 a year for traveling and vacations.

So what’s the minimum amount I need to have for retirement? A quick calculation shows $300,000 is enough to fund my retirement. A $300k portfolio with an average return of 5% per annum is enough to generate me $15,000. Just enough for the expenses listed above!

Why we need to have Emergency Funds

Lately I’ve been thinking about my emergency fund.

To most people, emergency fund means having a pool of cash to fall back on in case anything bad happens, such as to tide over a job loss, or to pay for unexpected medical bills. Besides saving for “bad” emergencies of cos, an emergency fund is useful even when our life is a bed of roses. (I don’t like to just focus on negative things).

Here’s why:

– you decided that you have enough of your boss and fire him/her. You can use your emergency fund to travel for awhile before looking for a new job.

– you decided to have a career switch. For people around me, most are already holding senior executive or mid management positions. We used 6 – 8 years of our lives to build up our existing careers, but we may realised it’s not what we actually wanted and decide to make a complete career switch, where we may have to start from the bottom all over again. We may then need to use our emergency fund for the short fall in salary.

– being a woman, it’s common to leave our jobs to care for our kids especially when they are still young, or at least for the first few years. Imagine you and your husband do not have an emergency fund and both your salaries are needed to fund your family expenses. You’ll be caught in a situation whereby you want to take full time off to take care of your kid but can’t.

– having an emergency fund also means that you can grab hold of any opportunity that comes along, like setting up your own business, or buying more equities during crisis time (50% sale!). While some may argue that we have our opportunity fund for that, sometimes, such funds are already being fully utilized and an emergency funds serve to step up on our exposure to such opportunities.

Now, where do you save your emergency funds? For me, majority of my funds are in a UOB Fixed Deposit account, and the rest in a UOB saving account. It is advisable to keep your emergency fund liquid so it’s best to save it in a Fixed Deposit account, or a saving/current account where you can have easy access to.

So how does one determine how much emergency fund to have? One friend suggested 6 months’ worth of salary, and another recommended 12 month of living expenses. After giving this piece of information some thoughts, I’ve decided to use the higher of 6 months salary, or 12 months living expenses, just to be on the safe side.

Unknowingly, I’ve been saving aggressively (I saved about 45% of my salary last year), and now have up to more than 12 months of living expenses up my sleeve. It’s time to step up on investing and I’ll move the excess funds into my opportunity funds for investments whenever the opportunity arises. I’ll also stop contributing my monthly savings into this account and to channel it to my upcoming Europe trip in Sep. Yay honeymoon!