What are you going to do with your year end bonus?

It’s the time of the year again, where Orchard Road is lined with bright glittery lights, and Xmas trees standing proud and tall in malls. My hubby and I headed to town last Saturday, hoping to do some early Xmas shopping for our yearly gift exchange with friends. But alas, the crowded mall and long lines at cashiers turn us off and we head straight to queue for our dinner instead. It’s the time of the year whereby people are generally in a good and giving mood, and it’s not just because Xmas is a few weeks away. “Most of these people must have gotten their year end bonus and increment!” I told my hubby, and he nodded in agreement! Having (more) money always put people in good mood.

So what do most Singaporeans do with their year end bonuses, after working hard for a full year? I guess it can be broken down into a few categories:

1) Buy, buy, and buy:
During the first two years of my working life, my bonus allows me to buy things I couldn’t afford to buy during the past 11 months with my miserable monthly salary. This happens to a lot of people. We see bonuses as a mean whereby we can finally buy what we have been lusting over the past months. It usually involve some big ticket items like a designer bag, gadgets, upgrading of cars etc. For boyfriends and husbands, it means splurging on your beautiful girlfriend or wife, and you get her a Tiffany and Co earring, or a Pandora bracelet for Christmas. For parents, it means buying the Wii game set or the latest iPad Air that your kid had been begging you for the past one year. For newly weds, it means a nice painting for your new home, or getting the matching set of cutleries that you absolutely need. For the materialistic princess like I was, it means getting the latest designer bag to outshine your colleagues.

2) Clearing credit card balances:
I started carrying a balance in my credit card since the age of 24. The amount started small, like 2-3k in credit card balances, and the first thing I did when I got my bonus was to clear the outstanding amount. It started with one card, then two, then three… Until I lost track of it. I sure hope not many people are like me, for it sure feels lousy to be dumping your hard earned money to repay debts.

3) It disappears from your bank account a few months after you got it:
I can so relate to this! Sometimes, after clearing my credit card debt, there will still be a little bit of left overs, but hey, it just disappears out of thin air a few months down the road. I still remember the first time I had my 5 figure bonus (about 12k after CPF contribution), and I cleared about 4k in debt. I thought to myself, after clearing my debt, I still have 8k left. That’s still ALOT of money for me to save! And I promise myself I’ll save the balance. A month later, I subscribed to 2k worth of my company’s shares, and a few months later, the remaining 6k really disappears into thin air, not to be seen ever again. And then I wonder, how many people are like that?

You save or invest it:
Yes, you decide not to splurge, to save or invest your hard earned money, and watch it like a hawk. How many of us can behave like we did not receive our bonuses, and resist not spending a single dime? I did it with my last year’s bonus. The first thing I did when I receive my bonus was to hunt for a good Fixed Deposit rate. I still remember waking up early on a Saturday morning, with hubby in tow, walking around the mall asking for rates from the different banks. I finally deposited my money with UOB, into a 4 months FD. Albeit some bad decisions and splurging on bags during my honeymoon (yes, the old me resurfaced briefly), I still have my hard earned savings and part of my past year bonus to show for in my bank account. And remember the 2k worth of shares I bought with previous bonus money? It was one of my best money decisions EVER. I sold the shares last year, and 3years down the road from the day I got that bonus, the proceeds still forms part of my net worth (albeit not a lot). I dare say, the rewards associated with saving and investing is way way way greater than splurging on a branded bag or two. And again I wonder, how many people are like that, choosing to save their bonuses rather than spending it.

I’m really really excited about getting my bonus in a few weeks’ time. Not because I have a wish list of things to buy, but for the fact that I’m getting closer and closer to my goal. That is, to retire early to do what I want and whenever I want, and gaining financial freedom.

Officially Debt Free!

Just a short post and a quick update. As of today, I’m officially debt free! No more instalment plans to service and no more ready credit loan to repay. How wonderful is that? From now on, I have $500 more in disposable income. This means I have $500 more to spend on ME, MYSELF & I! I’ll have one less commitment/fix expense per month, and slightly more freedom!

So how will I be using this $500? I’m definitely gonna reward myself, and no, I don’t mean splurging on shoes or bags. I’m gonna reward my future self by saving this amount of money, adding to my emergency fund.

And one more thing I’m sure of. I’m never getting into consumer debt again 🙂

Mentality of young working adults in Singapore

Sorry guys! It’s been a long long time since I last wrote anything. I really missed writing, and time just passes by so quickly unknowingly!

I’m sure many of us would have come across this video clip from the channel 8 show 118, where a young man rants about his difficult life situation caused by our current society.

Here’s the English translation:
“I’m not the only one who is desperate to make money. Do go around asking other young people. Who’s not worried? After graduation and after serving the army, I’ll be 23-24 years old. In a blink of an eye, I’ll be 30. Within these few short years, I need to settle down, get married, have a place of my own, and start a family. How are these even possible without having money? A HDB unit easily cost over 300 – 400k. Let’s talk about the daily necessary expenses. If you work in the CBD area, you need to take the train on a daily basis. If you happen to be late or be in a hurry, you’ll need to spend money on cabs. Transportation can costs up to $6-$7 a day! As for lunch, the cheapest meal you can find still cost you $5-$6 a day. A cup of coffee at a coffee joint set you back by about $6-$7! And in order to response to the government’s encouragement on setting up a family early, I need to find a girlfriend. To find a girlfriend, I’ll have to bring her out on dates, dinner, movies, overseas trips once in a while, and to throw in a designer bag or two! Even if I look like a celebrity, no girls will want me if I don’t spend on her. And how about those who have plans to upgrade themselves or to further their studies? They need to take up study loans, and to give family allowances at the same time. When it’s time to settle down, a wedding banquet easily cost over $1,000 per table, while wedding photography package cost $3,000 to $4,000! All these cost money! My generation doesn’t ask for a luxurious lifestyle. We just want to maintain the basic standard of living. To do so, we have to earn more to sustain ourselves. I’m sure you wouldn’t want your son to come to you asking for money to pay for his wedding, or money to pay for his own flats. Yes, I do agree my methods in earning money is too extreme and I’m in the wrong. But the fault doesn’t lie with me, it lies in this society!”

So what’s going on with the younger generation these days, you may wonder. Or do you find yourself agreeing with what the actor had expressed in the show? Looking at various websites such as “The Real Singapore”, it seems that many young people do find life to be quite difficult in Singapore.

Personal thoughts. Being a young Singaporean myself (okay, maybe not THAT young anymore), I do find that cost of living did went up quite substantially over the last decade, especially in terms of housing and owning a car. But what do you expect? Inflation happens globally, not just in Singapore, and government has to maintain control over the number of vehicles on the road, and Singapore only has so much land area. I also feel that it is how you choose to live your life that’s the deciding factor whether things are affordable, or not.

I’ve been working in the CBD and town area my entire working life (almost 10years now), and I realised lunch can be very cheap, or very expensive. Again, depending on your lifestyles. During my younger days, I can spend more than $20 on lunch almost everyday. But hey, you may not be aware, but there are still $3.00 chicken rice or soup noodle in town! As for drinks, what I’m doing now is to refrain from ordering drinks from the coffee shop and just head back to the office for some H2O or coffee or tea from the office pantry. It’s free, and it’s healthier too!! As for transport, I spend less than $100 a month on public transport, and trust me, I stay more than an hour away from my workplace.

As for settling down, getting married and buying a place of your own, such life events isn’t unique only to Singaporean youth. If you watch what you spend and consistently save up over the years, you CAN afford to get married and have your own place. And don’t forget, you’re not bearing these costs alone, you have your significant other facing what lies ahead with you.

Forget that girl that needs you to wine and dine her, bring her for overseas trips, and for you to buy her designer stuffs. MOST Singaporean girls are not like that. At least not me and the circle of girls I hang out with. Only a gold digger would want you to constantly spend on her, and I’m sure if you’re a guy, you wouldn’t want to have someone like that as your wife. Someone who would just take, and not give, who wants to enjoy life and expect you to do all the hard work. (I have so much to write about girls like that, but let’s save a full post on that, for another day).

My husband and I did worry about the costs of getting married and getting our own place when we were younger, and so did our circle of friends. Turn out, life really isn’t that difficult afterall. After working for almost 10years, our HDB flats sort of took care of itself thanks to our CPF accounts. We only need a loan of about 200k, out of 460k, and repayment can be easily be made with our monthly CPF contributions.

As for weddings, having a wedding banquet at a 5 star hotel IS NOT THE NORM, although I do hear of couples making money from their wedding if they hold it at nicer venues. Spend within your means. A wedding can be simple and feels cozy without getting yourself into debt over it. If you or your significant half really want an extravagant wedding, there is nothing wrong with that if you can afford it. The key lies with proper planning and budgeting, and spending within your means.

And advice from a 30 year old just married woman to the 20 something out there, RELAX. Life isn’t hard if you work hard, make a decent living, plan and save for what’s important (no, not that bag). Learn to filter out what’s important and what’s not, and make decisions based on your life values. You’ll soon realised there are just too many areas where you no longer need to waste your hard earn money on.

The Road to Wealth

Look through the Forbes’ list of the richest people in the world and you’ll find the majority of billionaires to be successful business owners, from Technology companies to Retail Shop owners to Property Developers. So what does this implies? That the surest way to wealth is to have your own business.

I guess no one became a billionaire just by working for others, in a 9 to 6 job. However, not everyone have the passion, drive, guts, and interest to be business owners or entrepreneurs.

So what are normal folks like us to do to even become remotely wealthy? While not everyone can be a billionaire, most people can amass a million or two (or even more), within their lifetime or by the time they retire. All it takes is discipline and determination, having the right mindset, and good planning. Or like what a friend like to say, have a good system in place.

I do understand that everyone is different, and not all are interested in being rich or to be able retire comfortably. Some just want to enjoy life, be lazy and comfortable, and not work too hard in life. However if you are like me and dream of being rich enough to have a comfortable retirement or to leave at least a million or two behind for your next generation, then you should seriously be following these steps.

1) Earn more
If you’re lucky enough to be born in a first world country like Singapore, then you should realized that there’s opportunities everywhere for you to make more money. From starting your own blog shop to teaching tuition to taking up a second job. I have a few friends whom I totally admire, who are sacrificing their time and energy to earn more while they are still young, or fulfilling their dreams of being an entrepreneur on the sideline while working for others. Either that or be so good at your main job that you are getting good increment and bonuses year after year. Don’t complain that you’re not earning enough. There’s always something that can be done to improve your current situation.

2) Avoid lifestyle inflation
How many of us are spending more now that we are making more money? So much more than when we first came out to work. I sure am guilty of that. I remember during my internship days, $600 a month was more than enough for me to both spend and save. And now, with many of us having a salary of 10times over, we are finding ourselves not having the ability to save. It is important to look back at our younger days and reminisce of how “free” we were from material wants and stick to that. Resist the urge to spend your increment from now on, and try not to splurge your bonuses away.

3) Save the differences
It is so simple, but many of us are not doing it. You earn a paycheck, you pay for needs and some wants, and you save the rest. The bigger the gap between our salary and spendings, the faster our savings will grow. I have friends who are not exactly high earners, yet they have an impressive amount of money amassed due to prudent spending and wise investing. They end up doing better than most high earners!

4) Invest
Once you set aside your emergency funds, you should invest to grow your wealth. Learn to study and pick up good businesses and invest in them. There are many things we can look at. From ETFs to Blue chips to REITs. It is important to invest in order to beat inflation and to slowly build up a portfolio that generate passive income to fund your dreams, which at the same time, offers capital appreciation so that you are not faced with a declining net worth as you grow older.

I know the steps sounds really simple, but not many can do them, or are willing to do them. Those in their 20s and 30s think that they have all the time in the world to start when they have their fair share of fun. However, time passes in such a way that before you know it, the bulk of it is already long gone.

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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!