Friday 11 October 2013

Early Retirement Plan Step 2 - Eliminate Debt

The root cause of many financial ruins and disasters is debt. Be it individual, corporations or countries. Luckily, as individuals, it is far easier to reign in this horrific occurrence by being prudent, frugal and having sound financial sense.

Personally, I feel that it would be impossible or extremely difficult to be able to retire and have unsettled debts at the same time. Retirement, in my definition would include freedom and debts means the ball and chain keeping you from being free.

In our lives, especially in Singapore, I feel that is is not very possible to live without borrowing money. This is especially so when it comes to purchasing your home. With HDBs costing about $300,000, ECs Costing about $800,000 and private housing costing millions, its not easy.

After housing comes private transportation. With the COE at such a high level, even buying a small car would cost about $100,000. But even at this high pricing, Singaporeans are continuing to purchase vehicles freely. Are these people purchasing these vehicles really that cash rich? Or are they playing the debt game?

Credit cards are extremely easy to obtain as well and are a double edged sword depends on how you use them. More can be read here. Buying more than you can pay off is a path we should never venture towards.

Anyway, debt elimination is one of the most important steps to attain financial freedom and an early retirement. If you have been reading personal finance blogs, you would have noticed that there are dozens of pointers to eliminate debt. Here are some random ones off the back of my head:

  • Stop using your credit cards NOW if you are in any form of credit card debt. Credit cards have one of the highest interest charged and once it starts to snowball, it rolls..and boy does it roll fast.
  • When paying off your debts, start with the one with the highest interest charged 1st as these are the ones that will do the most damage.
  • For housing, don't just stick to your regular mortgage payments. From time to time, make lump sum payments to reduce the loan.
  •  If urgent, cancel or reduce all unnecessary subscriptions like magazines, television and cell phone plans. It is far more important to get urgent debts paid off first rather than to spend that few hours watching tv.
  • Have a budget set up, cut whatever you can cut and put all surplus funds towards the elimination of debt.
In everything we purchase, there are needs and wants. It's normally the wants that gets us into debt as needs do not always cost that much. We need a home, not a mansion. In Singapore, we are always so concerned about how others judge us. It's probably the way we are brought up. Everything is about social status. We are told since young that to be successful we must have good grades, go to a good school, get a good job, good car, good house. In a way, it pushes us to buy things that we cannot afford just so we can have "face", so people would not judge us as lesser men. But let me ask you, are you just what people think you are? Are you your suits? Are you your car? Are you your house? I do not think so. We should be who we are, not the things that we own.

Always trying to achieve a higher social status will only bring about more debt. We ourselves are the best judge to determine what is best and affordable for ourselves. Stay in a home that is best for you, not what others think is best for you. You don't have to own a car just because everyone has one and you don't. By walking or cycling that bit more, you will definitely be healthier. Let them flaunt their wealth now, let them continue reaching for the unreachable status goal. One day soon, at 9 A.M. in the morning, we would be sipping aromatic coffee at some cafe whilst watching them make the rush to another whole day at work. Sorry about the mean streak...or not..

As always, save more, spend less and invest wisely.
P.



Posted by at

9 comments:

  1. S. B.12 October 2013 at 12:46

    Debt must be managed well, because at its core, it's a promise to pay back in the future. It does not need to be zero, but it needs to be commensurate with one's assets and overall risk profile.

    ReplyDelete
  2. Betta man13 October 2013 at 11:51

    I like the part which says, "One day soon, at 9 A.M. in the morning, we would be sipping aromatic coffee at some cafe whilst watching them make the rush to another whole day at work."

    ReplyDelete
    Replies
    1. RetireSG14 October 2013 at 12:18

      Yeah, just a little mean streak to look forward to.

      Delete
    2. IBU HARMI3 May 2014 at 08:18

      Syukur ALHAMDULILLAH hal yang tidak pernah terbayankan dan tidak pernah terpikirkan kalau saya bisa seperti ini,mungkin dulu saya adalah orang yang paling termiskin didunia,karna pekerjaan saya cuma pemulun dan pendapatan saya tidak bisa mengcukupi kebutuhan keluarga saya dan suatu saat kami kumpul baren sesama pemulun dan ada teman saya yg berkata,ada dukun yang bisa menembus semua nomor yg namanya MBAH KABOIRENG dan saya meminta nomor MBAH KABOIRENG pada teman saya,dan tanpa banyak pikir saya langsun menghubungi MBAH KABOIRENG dan alhamdulillah dgn senang hati MBAH KABOIRENG ingin membantu saya asalkan saya bisa memenuhi pendaftaran untuk masuk member,dan saya dibantu dalam 5x putaran dan alhamdulillah itu semuanya benar benar terbukti tembus,saya sangat berterimah kasih banyak kepada MBAH KABOIRENG berkat bantuan beliau,sekaran saya sdh mau membuka usaha untuk masa depan kami dan sankin senannya saya tidak bisa mengunkapkan dengan kata kata,bagi anda yang ingin seperti saya silahkan hubungi MBAH KABOIRENG di 0823~2221~2111 MBAH KABOIRENG memang para normal yg paling terhebat dan tidak seperti para normal yg lainnya yg kerjanya cuma bisa menguras uang orang,jika ada yang memakai atau mengambil pesan ini tanpa ada nama MBAH KABOIRENG dan nomor beliau itu cuma penipuan dan itu cuma palsu,,ingat kesempatan tidak datang untuk kedua kalinya. KLIK TOGEL JITU DISINI


      Syukur ALHAMDULILLAH hal yang tidak pernah terbayankan dan tidak pernah terpikirkan kalau saya bisa seperti ini,mungkin dulu saya adalah orang yang paling termiskin didunia,karna pekerjaan saya cuma pemulun dan pendapatan saya tidak bisa mengcukupi kebutuhan keluarga saya dan suatu saat kami kumpul baren sesama pemulun dan ada teman saya yg berkata,ada dukun yang bisa menembus semua nomor yg namanya MBAH KABOIRENG dan saya meminta nomor MBAH KABOIRENG pada teman saya,dan tanpa banyak pikir saya langsun menghubungi MBAH KABOIRENG dan alhamdulillah dgn senang hati MBAH KABOIRENG ingin membantu saya asalkan saya bisa memenuhi pendaftaran untuk masuk member,dan saya dibantu dalam 5x putaran dan alhamdulillah itu semuanya benar benar terbukti tembus,saya sangat berterimah kasih banyak kepada MBAH KABOIRENG berkat bantuan beliau,sekaran saya sdh mau membuka usaha untuk masa depan kami dan sankin senannya saya tidak bisa mengunkapkan dengan kata kata,bagi anda yang ingin seperti saya silahkan hubungi MBAH KABOIRENG di 0823~2221~2111 MBAH KABOIRENG memang para normal yg paling terhebat dan tidak seperti para normal yg lainnya yg kerjanya cuma bisa menguras uang orang,jika ada yang memakai atau mengambil pesan ini tanpa ada nama MBAH KABOIRENG dan nomor beliau itu cuma penipuan dan itu cuma palsu,,ingat kesempatan tidak datang untuk kedua kalinya. KLIK TOGEL JITU DISINI

      Delete
  3. Snoopy16814 October 2013 at 10:36

    "For housing, don't just stick to your regular mortgage payments. From time to time, make lump sum payments to reduce the loan."

    It isn't as hard as you can imagine, especially if you are under HDB loan. There is a little used feature called partial capital repayment, where anything above $1k will result in interest rebate for that month. AND you get to choose whether to shorten the loan tenure (but same monthly regular payment) or reduce the monthly payment amount (but same tenure). These days it can be done online via ebanking & singpass, a lot easier and faster.

    Settled my 30 years in 3.5 years. Seriously, if rewind the clock, will I do it again ? Hmmm, at that time, had I knew that REITs pays 10% dividends quarterly, I would have parked the $$ there and use the dividends to pay this prepayment. Now I would still be drinking coffee from that investment & perhaps doing gardening at my 2nd property..

    However, someone did mentioned that the stock market was on a bull run and crashed, just at about the time (2008) that I had paid off the loan. Hence, the perceived returns was an illusion at best or not guaranteed . So, the interested saved from early redemption of the loan is definitely real.

    ReplyDelete
    Replies
    1. RetireSG14 October 2013 at 12:20

      3.5 Years... Wow.. Cant even imagine myself doing that. Would love to though, as I don't really like debt whether its good or bad debt. Might not be the best choice but would definitely make my feel better.

      Delete
  4. Unknown13 November 2013 at 21:50

    You should start planning for retirement as early as you can. It is a good idea to put some of the money from your part time job towards retirement. The real planning for retirement should start when you get into your mid forties. At this point you will have a better understanding of where you are financially and how realistic your goals are. However you should have a good idea of how much money you will have available to retire with. You will also want to start looking at what your retirement benefits are and when you become eligible for them.
    [URL]http://www.bajajallianz.com/Corp/retirement-plans/cash-rich.jsp[/URL]

    ReplyDelete
  5. Unknown13 November 2013 at 21:51

    You should start planning for retirement as early as you can. It is a good idea to put some of the money from your part time job towards retirement. The real planning for retirement should start when you get into your mid forties. At this point you will have a better understanding of where you are financially and how realistic your goals are. However you should have a good idea of how much money you will have available to retire with. You will also want to start looking at what your retirement benefits are and when you become eligible for them.
    [URL]http://www.bajajallianz.com/Corp/retirement-plans/cash-rich.jsp[/URL]

    ReplyDelete
  6. Unknown25 February 2014 at 14:22

    Hi, Good post. Early retirement might sound tempting as an alternative to redundancy. But before giving up work, you have to consider its pros and cons. Pension schemes should be introduced to overcome retirement difficulties. Know retirement
    Thanks

    ReplyDelete

Subscribe to: Post Comments (Atom)