Fixed Expenses

I've been inspired by 15HWW to calculate our fixed expenses every month. This is part of the ongoing effort to understand our expenses more, so as to lower any unnecessary expenditure if possible.

This is important as basic math dictate that income does not matter towards financial independence, but savings rate does. Millennial-Revolution makes the math concise and upfront, which is helpful for understanding how she gets her figures and conclusion.

Of course, it can be assumed that there is a minimum expenditure that we have to make monthly to keep our bodies alive and fulfill our obligations. Therefore, this is the sum that we will seek to clarify and reveal to ourselves today, so as to better understand our financial standing.

In my case, I will define fixed expenses as regular expenses that are very unlikely to change after two years. This will be separated from semi-fixed expenses, that are defined as expenses that may change every year or 2 years (especially for telcos, taxes). Other expenses would be variable/discretionary expenses, which will be another post for another day.

Fixed Expenses

Mortgage Loan by Cash	$     213.00
Mortgage Loan by CPF	$  1,880.00
Conservancy Fee	$        90.00
Term Insurance	$        16.00
Whole-Life Insurance	$     216.79
Total	$  2,415.79

Semi-fixed Expenses

Taxes	$     117.22
Internet	$             -
Handphone (Mr)	$        35.00
Handphone (Mrs)	$        35.00
Total	$     187.22

To be clear, the internet bill is $0 as it was paid upfront.

Therefore, our fixed and semi-fixed expenditure monthly come to a total of $2603.01.

The Rule of 25, which is used to estimate the size of portfolio we'll need in retirement by multiplying your desired annual income by 25 (with the assumption of a conservative 4% return on the portfolio), can be used here. We like to adapt it as the Rule of 300 (300 = 25 x 12), as 300 is an easier number to work with, and regular expenditure is often calculated on a monthly basis.

Using the Rule of 300, our minimum portfolio size for our fixed and semi-fixed expenditure would be 300 x $2603.01 = $780,903.00

Woah! And this amount will grow as we take inflation into account!

A closer look at the figures show that the majority of our fixed expenses comes from our mortgage. Housing loan is truly a killer! 

Another way to look at this is that we are still very far from reaching our portfolio targets...

Dividends

Seeing as how we've collected all the dividends for this year, it is a good time for an evaluation of how much dividends our portfolio generated for this year.

Dividends for the year: ~$1670, approximating $139 per month

This is taking into account that the dividends for DBS is not in yet, but we're intending to take scrip for that counter anyway. Also, we missed out on the round of dividends in May.

We will be channelling the dividends back into the investment account for compounding when we find opportunities.

Health

Hi all!

I was sick with fever recently. This, together with muscle aches, served as a good reminder to our own frailty. Life is fragile and we must treasure our health when we still have it!

Health is something that many of us take for granted everyday. This morning, you will most likely  have woken up in the pink of health, and did you stop to be thankful that there are little to no impairments to your physical faculties? Indeed, as you hustle and bustle through another busy working day, there will be many things to worry about, but keeping healthy is unlikely to be a major concern for most.

Strangely, probably all of us know how to keep a healthy lifestyle generally, and rank it as something important to us, yet few put in much conscious effort to maintain it. This is evident by:

1. Obesity rate in schoolchildren rising from 10% in 2000 to 11% in 2013 and 12% in 2014.
2. Singapore has the 2nd highest diabetes prevalence among developed countries, rising from 4.7% in 1984 to 10.53% in 2015. This is only second to the USA

So, how does this relate to this blog? First, both health and financial knowledge are topics that the younger generation tend to give little thought to. Most do not take the time and energy to read up and gain knowledge on these matters. Despite acknowledging that keeping healthy is important, and working and striving hard to earn extra, many would consume excessive calories, and fritter cash away. 

Secondly, financial health is a form of health. Many (I hope!) would agree that accumulating money is not an end-goal in itself. A goal that many may like to aim for would be good health. defined by the World Health Organization as "a state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity", and I believe that financial stability serves as a support for this. However, one can easily see that being materially rich will not bring health by itself if one's health is poor.

Thirdly, being unhealthy is expensive! It is commonly said here that one can die in Singapore, but one cannot fall ill! This saying pays tribute to the high cost of healthcare in Singapore. Now, imagine the costs if one has a chronic problem, requiring regular medication and visits to the doctor. This may be little thought of and not planned for when saving for retirement. Moreover, poorly managed chronic conditions can lead to events such as a heart attack or stroke, which costs us further in health, and financially as well! A short stay in the Intensive Care Unit (ICU) and subsequent recovery in the general ward can easily cost up to a few thousand dollars.after subsidy.

So while we work on increasing our financial literacy, we should always keep in mind the purpose of it and not neglect other aspects of our lives that are at least as important.

Shifting house

I've finally shifted over to my new place!

It has been a very tiring week. We elected not to engage a mover as we did not have many large, heavy stuff to move over, such as mattresses, TVs and other household appliances. Therefore, we made many trips to and fro, shifting our items in batches. At long last, most of our essential items have been brought over and we are able to move in permanently.

With most of the large-item purchases made, we expect that spending in August should start tapering down. There are still appliances that we will still need soon, such as a rice cooker and vacuum cleaner. Hopefully, after spending for these items, we will have some savings leftover in August.

At this point in time, we are significantly behind our financial goal for this year. We will have to aim to be more prudent for the latter half of this year to get back in track. To do this, we have been inspired by 15HWW to classify our expenses into fixed expenses vs discretionary expenses, and track it as such.

Meanwhile, the first round of dividends have mostly been declared! A small amount perhaps, but still better than it has been ever. Will be using the dividends as further ammo, and reinvest it to allow compounding to work.