Green!

At long last, my portfolio is green!

It definitely took quite a while, but I guess learning to have patience is important on this journey.

I've also managed to catch OCBC at 8.38 this week too.

So... what are my plans for the coming months?

In view that prices might be on the upward trend, I might focus on saving more money for this period and only investing on/off for now.

After all, for this period in time, I expect most of the growth in my portfolio to be largely from savings, and minimally from the dividends/growth.

Patience is key!

Saving for a rainy day

So we previously talked about savings for wealth growth.

However, having a sum set aside for unexpected events is at least as important, if not more so.

Surprisingly, many Singaporeans don't save, as reported a few years ago.

Why is having a sum of money for emergencies important? I'd like to give a few reasons:

1. Emergencies are probably unexpected and urgent. It can be sudden ill health, accidents, fire, unemployment etc. In such a time, the need for ready cash is sudden and substantial, and dipping into the remaining cashflow for the month is probably not going to be sufficient. Therefore, having a sufficient stash put away for such situations is necessary.
2. Having a sum saved for unexpected events keeps monthly cashflow steady. Even during an emergency, there are still regular payments that needs to be paid, such as mortgage, bills and taxes. One would not wish to be a situation where he has to default on these payments which may lead to further problems
3. Most importantly, it steadies the mind. With an emergency stash, one does not need to worry so much about not being able to feed oneself during such unexpected events. This will allow him to be less inclined to make foolish decisions in times of crisis, as he will be less panicky, having the reassurance of a sum to tide him through.

In fact, due to the above reasons, there are many who would recommend saving for a reasonable emergency sum first before seeking to pay off all debts.

How much is enough?

Many recommend having six months of monthly salary locked away as the minimum sum, with a view of holding a one-year stash value in time to come when one is more secure. I believe that this is a reasonable value, but I will be modifying it slightly for my own context.

For myself, I will be keeping $30k for my initial emergency stash, which will be locked away as a deposit in the bank. This is not quite 6 month salary level for our family, but I believe it is sufficient for now.

Firstly, it is fortunate that my job is relatively stable. Despite the poorer upcoming economic outlook, I do not expect to be unemployed anytime in the near future, and this would allow a slightly riskier emergency stash for the moment.

Second, as we tighten our family spending, we are able to save more. For now, this savings will be going into investment purposes. However, in times of crises, I should be able to divert this sum into whatever emergency it may be.

Third, besides mortgage, we do not have any debt. Using our past savings, we were able to pay off our renovations, housing spendings and credit card bills without getting a loan. Hence, our liabilities are minimal and we are able to take more risk.

As we proceed on in our financial journey, I do aim to increase this amount slowly but surely. As it is easy to forget, I will have to keep reminding myself of this periodically.

Savings

In my previous post, I learnt that having substantial savings is key to financial stability. Having looked at my family’s finances, I am starting to work out a budget that is sustainable and will achieve my goals.

So firstly, looking at cash inflows:

My wife and I have a combined monthly income of $8.5k, and after deducting CPF contributions, a take-home pay of $6.8k. According to this article, this puts us just under the median household income in Singapore in 2015. I am thankful that we have stable jobs to put food on the table.

Now, for expenditure, I’d be the first to admit that we were rather profligate with our spending for the longest time. Having regular dine-outs and travelling appear to be our biggest weaknesses. No doubt, travelling keeps us together as a family, where we get to spend time together without any work distractions or pressure, and eating out together is enjoyable, especially after stressful days.

Understanding this, we discussed and are now striving to keep spending to a more sustainable level. What are some of the changes we made?

1. We choose to eat at cheaper dine-out areas more regularly, such as hawker centres, where previously, we would frequent restaurants whenever we desire.
2. We have not made plans for the next holiday overseas, unlike previously when we would plan for the next holiday immediately after the previous one comes to an end.
3. We are striving to take the taxi less often if unnecessary, opting for public transport.
4. We record our spending so that we are aware of where our money go to monthly.

We are hoping that with the above changes, we will be able to reduce unnecessary consumption and save the unneeded spending. These are early days still, and we are only just beginning our journey!

Asset growing

As mentioned in a previous post, I want to grow my assets and pay off my liabilities as best as I can. How would I go about it?

What are some get-rich-quick schemes that are popular ?

Gambling?
Stock market?
Buy and sell property?
Throw a coin into the wishing well?

I must be thankful that one of the earlier reads I did was this post from SG Young Investment. In it, he convincingly argued for saving with a purpose. Namely, if one can save 75% of his income and invest it for 4% dividend yield, the dividends generated would be able to cover his expenditure in 7 years time.

Hence, the key to financial stability lies in consistent and substantial savings!

Analysing other get-rich schemes, they are unreliable and fluctuating, and should not form the backbone of my financial future. In other words, it is not wise to depend on them for something as important as my financial future.

And I don't advocate gambling!

Saving aside a portion of my salary regularly is something that can be done with good budgeting and planning. It is generally reliable and it promotes a good habit of not squandering wealth, and there are times I am surprised where the money all went to every month.

However, it does take a lot of discipline to record my spending diligently. There are also hiccups and unplanned-for spending that does make the budget record look awry. For example, as mentioned before, I will be moving to my new apartment soon, and am in the process of purchasing household appliances. This has easily wiped out all of my salary and savings for this month, and made a sizable dent in my savings.

The difficulties of keeping to a budget!

PS: The place I mentioned in my last blog post here is Nemuiro Hanamaru, located in KITTE at Tokyo main station. This and the aforementioned post are NOT sponsored posts.