The Overflow System

Everyone has different ways to save money. Some segregate it by the amount needed while some segregate it by the differing levels of priorities. Whichever your case or reason for saving is, we all have to admit that having that savings is important. Save to invest, save to buy something nice, save to go on a holiday or saving for retirement. Everything starts with putting aside that 1st dollar. I do not know what methods you use but here is what I do.

Firstly, I come up with a list of all the things that I would require the money for - just for stuff with larger monetary outlay. For example :

Annual fixed expenses - For insurance, road tax and stuff like that.
Emergency funds - For unexpected expenses like hospital bills, home repairs or unexpected loss of cashflow.
Large Scale Holidays - For example, I want to go on a month long holiday in 2020 to Alaska.
Impulse Funds - For rare occasions when I feel like I deserve to indulge as I rarely buy stuff anymore - even gadgets. I'll just let this fund grow till I eventually want or need to buy something.
Renovation Funds - As I am getting my new home soon, in hopefully about 6 months, I would need money for renovation and furniture. Now, my home is something that I do not want to stingy with as it would be where my wife and I would be living so I guess I'll need a reasonably large amount of funds here.

Secondly, I would determine the level of importance and the amount of time I have before I would have to utilize the fund therefore setting its priorities. Here is an example

1) Annual Fixed Expenses
2) Renovation Fund
3) Emergency Fund
4) Large Scale Holiday Fund
4) Impulse Fund

The reason I did not put emergency fund as my top priority is because I have already set that aside and will only top it up should I ever utilize it. The large scale holiday fund and impulse funds share the same level of importance so any funds flowing into them will be split 50/50

Anyway, here is how the overflow system works. When funds come into the bank, a portion 1 of it would firstly be set aside for monthly expenses. Portion 2 would be set aside for savings and investments. The third portion would then be put into a holding account. This holding account would then be put to fill up the items on the list. Starting with item one. When that reaches its target, the funds would then overflow to item 2 and so on and so forth. It might sound a little tedious or complicated but once you get used to it, its quite a good way to do things. I love having a system so I don's miss out on important stuff.

How do you prioritize and save for items on your list? Sharing is caring - so please help each other out with ideas.

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

Financial Compromise = Long Lasting Happiness

Due to the weather being pretty warm and humid last Sunday, my wife and I decided to go for a swim.( To be brutally honest, all we did was soak.) On past occasions that these soakings occurred, we always  got to talking about our future and also our financial plans and goals and this time was no different.

Sometimes, we would disagree and more often than not, irritation would get the better of us. Thankfully this time, this was not the case and I found this discussion to be extremely insightful. The main topic revolved around what we valued more and what we valued less. I found that we had very, I repeat very different views on money and material items. I realized that the reason why I prefer to save and invest is because I value money and freedom high above any material items I could purchase.

That being the case, why would any normal person want to trade something he/she loves more for something he/she loves less. I would not want to trade money to buy new clothes but I would trade money to invest to earn more money to give myself financial freedom.

My wife on the other hand stated that she would want to work till the normal retirement age of 65 as she wants to be able to continue buying anything she wants....which is practically everything. I felt that is was fair as she would be trading something she loves less(money)   for something she loves more (bags, shoes, clothes..and the list goes on..)

In the end, soaked and wrinkled like raisins soaked in rum, we came to a compromise which would invlove 2 step.The 1st step was that we would, together, work towards reaching an investment portfolio value which would give us enough passive income to cover all our basic needs. This would include stuff that we could not live without like utility, mobile phone charges, food and stuff like that.

The 2nd step would proceed after we have achieved step one. It would be that whatever else we earned after step one would be used to do whatever we wanted, or more likely, whatever she wanted. The 1st priority will no longer be to save but to spend. Although this goes heavily against my nature, I felt that it was only right since she went along with me for part one.

That said, the important thing was to have no more debts and enough investment income to last till the end.

What kinds of compromise have you made with your spouse or even yourself? Are you happy with the compromise? We must always seek balance and try to provide happiness for our significant other. If one party is not happy in a relationship, it will be extremely hard for it to blossom.

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

Want Something? Do Something!

We are all creatures of comfort, we love to dream and talk about having this and achieving that. We all know that talk is easy, talk is cheap but we stick to it without any form of action anyway. How many times have we seen someone else selling an idea we had years ago but did not put in the effort to get off our butts to kick start something?

Why is it that we do not always have enough drive to get something started? Majority of us would cite reasons such as:

• It might not even work or sell.
• What if I fail?
• I do not know how to do this?
• How do i even start?
• What if no one supports my idea and people start laughing at me?

From what I see, it boils down to 2 main issues, fear and laziness. Sometimes, we just need to want it bad enough or be pushed to the edge to give ourselves no choice but to bite the bullet and jump in. Would you want to put in the effort and take the risk of starting your own company if you are currently having a secure job with a comfortable salary?

How about if you just found out that your current employment company was going to fold soon? Would you be pushed to take the leap and start your own because you have nothing to lose? ( Just an example )

What I'm trying to say is that, if you do not have that drive to get something done, you have 2 choices.  The first is to find a partner who is action oriented. Someone who will get the ball rolling and push you along as well. The other is to develop a mindset that to start that something is what you really NEED and have no choice but to push yourself off the edge.

Whatever the method and whatever the reason, the most important part of anything is the 1st step. Without it, no one is going to get anywhere. It relates to everything from your new start up, your savings plan or even getting the leaky faucet fixed.

 Get something that you have been procrastinating on done today, take the 1st step, no matter how small and get the avalanche flowing.

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

Just.One.More.Dollar

Dear readers, somewhere along the way, roughly in the past 2 years, I have come to realize something. Sometimes, the extra dollar saved is not worth the sacrifice you have to make. Yes, I know that every dollar counts but there must also be a limit to how much we can compromise our lifestyle and the lifestyle of those around you.

After achieving your set target for the month, saving those extra dollars will not bring forward the earlier retirement date by much. I would say at most a year or two.  Now let me ask you this, would it be worth it to sacrifice for the next 20 years or so just so that you can retire that one or two years earlier? I say no. I do not want to compromise my current lifestyle too much for that. You must know when enough is enough.

What I think we should do is to create a smooth path, one that we enjoy all the way till the end. In moderation of course, and not one where we have to suffer first and enjoy later. In everything we do, we have to think about the people around us, our spouse, our children or our parents. It does not mean that if you do not mind the suffering, they won't mind it as well. They might be appearing to do so just because they do not wish to let you feel disappointed. Spare a thought for them, and if you can afford it, spend those extra dollars to make their day brighter and happier.

I guess this will be a short post. Got so many things to do, so little time.

Anyway, I hope we will not be so overly obsessed with savings that we forget the reason to which we are saving or neglect our loved ones.

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

The Rat Traps to Savings

Dear readers, to save money is one of the most important, if not the most important step to financial independence and retirement.Without this step, nothing will be achieved. No emergency funds, no investments, no safety net. So why is it that so many out there who are able to save still not saving or saving way too little?
I guess the main reason is that they have hit one of the several Rat Traps. Rat Traps are traps that stop you from getting out of the Rat Race. It traps you and keeps you there until you die. Sad but true.

For today's post, I'm going to talk more about the Rat Traps that keep you from saving money. I hope that you are not currently caught in them and if you are, I sincerely hope that you will realize it after reading this post and get out of it and eventually the never ending Rat Race.

So without further ado, here they are.

1. Ready, get set.....NOTHING 
• The hardest part to doing anything new is to get started. There are so many thoughts running through our heads that keep us from taking that first step forward. The 2 largest killing factors are fear and procrastination. For savings, it's mainly procrastination. We always have something we need the money for first, so wait. Too lazy to open a savings account, so wait. Remember, every single day you procrastinate will delay your target date of retirement. Push yourself out of your comfort zone, tell someone or everyone that you are going to start a savings plan and do it. This will push you to not procrastinate and friends and family will from time to time ask you how your plans are going, thus reminding you to keep on doing it.
2. Inconsistent Savings.
• If you are not saving on a regular basis, you will not be able to form the habit of saving. Your conviction to save will be too rubbery. You might fall into the trap of eventually telling yourself, why save and stop saving altogether. Combat this trap by setting up an automated savings account. Most banks have these and the best part is that you wont even have to think about it.
3. Eenie meenie minee mo!
• This trap is, to me, the deadliest of all traps. Conflicting goals. It makes you weigh and choose which situation is the more important one. Conflicting goals are when  you have to choose between saving for that period, or using it to go for that year end holiday you and your family have been talking about all year. If you save, you will be on target to retirement. If you spend on the holiday, your family would be happy. So hard to decide...Set your priorities right, and sometimes, its okay to compromise. The best thing you can do here is to, if you know that you are going to spend on a year end holiday, start setting money aside throughout the year for it. This way, you will not eat into your retirement portions of your savings and your family will be able to have a nice holiday.
4. I'm going nowhere..forget it.
• This is where most people get caught, they have taken the 1st step, and the 2nd and maybe even reached the 10th step. But at a certain point, you will definitely start to doubt and wonder whether all of this is worth the effort at all. Your savings and investments seem to be going nowhere. The balance doesn't even look like its moving. But please, you have pulled yourself this far. Nothing good is ever free or easy. There is a saying that the 1st $100,000 or the 1st $1,000,000 is the hardest and as you go on, it gets easier and easier. Just put one foot in front of the other and keep on going. Set mini goals in between this large goal to keep yourself motivated. Set yearly or monthly goals to save a certain amount, invest a certain amount or pay of a certain amount of debt. This helps, trust me.

Having read about the traps, can you relate to any of them? Are you currently in one? Or did you manage to get out of all these traps? I sincerely hope that we will all escape these traps as soon as possible and get on with out journey towards an early retirement. To those that are still there, don't give up. Try again and never be afraid to ask for help. We come and go from this world alone, but for the span of time that we are in it, we are not.

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

The Spine of Early Retirement

I'm sure that most of you are familiar with some of the steps you have to take to reach early retirement, but bear with me as I repeat them once again for the benefit those who do not. These steps are not concrete and you can choose to take them or not to attain your early retirement but I believe that paths are similar to these. Only difference being your personal tweaks, luck and mistakes.

Without further ado, here they are:

• Start as Early as Possible - This applies not only to those seeking early retirement or financial freedom but to everyone. The earlier you start, the more time you have to allow the magic of compound interest to work. What's more, having more time allows for more margin of error. No one is perfect therefore we should always make allowance for mistakes.

• Manage your Consumption - One of the main reasons why most people are not able to save enough for an early retirement is because they spend to much. We are all wired to consume and many of us can't help it but conform. However, there is this rebel within us that does not want to conform, we want to break free from the norm - these are the people that are able to achieve extremely early retirement. Reduce spending now, stop spending money on too much wants, stick with the needs. You do not need that new hand phone just because it has a battery life of 1/2 an hour more than yours or a screen 1/2 an inch bigger than yours. Remember, you choose your enough, not your neighbor.

• .Cut down on Excess Spending -  I know it's often hard to form new good habits, but trust me, this will benefit you. For just 1 or 2 months, track every dollar you spend and at the end of the month, you will be able to see where you have been spending unnecessarily. These are the parts of your spending tree that you must prune away. If you feel comfortable keeping track of your expenses by then, you can continue doing so. If not, try to stick to your current monthly expenses less those unnecessary expenses and do a follow up 6 months later to find out your monthly expense status.

•  Be Frugal - This step is an acquired taste, once you get it, it becomes something you actually enjoy doing. However i urge you to do this is moderation if you are not alone in your journey. Your significant other might not share the same joys as you in being frugal. You have to take baby steps to let them see the benefits of being frugal. What you must do to be frugal is to view money as an extremely precious resource not be to exchanged for something of lesser value. For me, i feel that lesser value means items that bring no benefit or new experiences to your life. Most of the time, these items just bring you momentary satisfaction that last for a month at most. Not worth it.

• Never Trade Early Retirement for Happiness and Family - This is the last and most important key. You should never trade anything in this world for happiness and your family. What is the point of forsaking your happiness and family to gain early retirement? The point of early retirement is to be able to have time for both. Don't be over obsessed with retiring early that you forgo your current happiness or spend so much time tweaking your spreadsheet or monitoring your portfolio that you neglect your family. You have to set your priorities right.. what is most important in your life. For me, its family, for without them life would be quite meaningless even if u have all the riches in the world.

 I know that everyone will make mistakes as to err is to be human or was it to err is human... Anyway, i hope that on your journey to financial freedom or early retirement, you will make more right choices than mistakes. Ponder upon what is most important in your life, keep it close and never ever trade it for anything this world has to offer.

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

Thou Shall Not Covet

" Look at your own life to see what is enough, don't look at your neighbors to compare. " Saw this quote or something similar at a blog  i once read. My memory seems to be failing me. Can't decide whether it's due to me getting on in age or just too many things flying around in my mind.

The quote is so true. Since young, we have been 'trained' to always do better than others. Get better results than others, run faster than other, earn more than other or get a better car than others. We often look to our neighbors to compare but is one-upping our neighbor going to improve our lives significantly? There will always be someone else to compare with and in the end, it will form a never ending cycle.

Ask yourselves this, do you really need that extra million to retire? Do you really need that new phone? Do you really need a new car? Sure, these things are definitely nice to have, but do you need them? After earning that extra million, will you stop or will you want to earn another.. and another .. and another.

The important thing is to figure out what you deem is sufficient and work towards attaining that. If you want to get from point A to point B, especially in Singapore, a Honda Civic would do as well as a Porsche. Why get it just so you can feel 'better' than someone?

At the end of the day, what stays with you are memories of the experiences you went through and not the material things that you have accumulated. Don't get on the never ending roller coaster ride of endless consumption. Know what is enough and spend the rest of your energy enjoying the rest of your life.

P.

Dealing with Early Retirement Obsession

There will come a point, no doubt, in every early retirement preppers journey where he/she will become extremely obsessed. (At least i hope that its not just me.)

You will start counting every day and dollar you have to retirement. You will search for every book and blog for every single detail which increases your chance of early retirement. And if you are like me, you will tweak and tweak your early retirement spreadsheet several times a day before you feel at ease. Don't judge me, you will get to this point if you want early retirement bad enough.

The key point is to realize that this is merely a stage that you have to go through and that these are just the means and not the ends of your goal. I have to admit that i am still at this stage, although i feel that I'm exiting it for the next soon.

For those of you who are beginning this stage or are stuck chest deep in this obsession, here are a few pointers to hopefully help you out.

ps if you say you are not obsessed and immediately have to check your spreadsheet or  think of new methods straight after you read my blog...sorry bro.. you are.

To the therapy room ~

• First of all, like all problems like alcohol or gambling addiction, the most important step is to realize and admit that you are obsessed with early retirement. Only then can you see the full picture. Having this obsession for a short while is okay as it drives you to save more in the early stage. Dragging it out for too long is where this obsession gets unhealthy, not unlike any other obsession.

• Next, you will have to realize that after the initial stage of planning and savings, the small little obsessive tweaks here and there will at most shave a few days off your retirement. The time spent will not be worth it. You should instead be spending your time with your family. All you have to do is stick to your decided path and only tweak or tinker when you hit a major milestone or feel that your are drifting off your path.

•  Lastly, pick up as many new skills and hobbies as you can - inexpensive ones of course. There are 2 reasons for this pointer. The first would be that it takes your mind off constantly obsessing about early retirement. The second would be that these skills and hobbies are the things that will keep you occupied and your mind alert when you are finally into retirement.

There it is, my humble advice to you. I really hope it helps, however much or little.

My last parting advice would be to always share your plans, your feelings and even your obsessions with your family or spouse. I know its hard...as a guy to share his feelings..(Gals have no issue in this department..at least my wife doesn't - sometimes i think i should invent pills for verbal diarrhea).

Anyway, sharing will really bond you and take some burden off your shoulders. Remember that you are never truly alone. Family is forever.

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

Compromising on differing financial and retirement goals in a relationship

Being married has taught me several things in life. To be patient, go give and seek nothing in return, to always try to find a compromise and most importantly, to always have to work and put in effort into something or someone that means everything to you.

Firstly, i would like to say that like many other couples out there, my relationship consists of a spender (A.K.A the wife) and a saver, me. More often than not, especially after reading books and blogs on being frugal, i would start preaching about the importance of being frugal to my wife, C. Which almost always leads to 3 different scenarios. A hardly convincing agreement, a roll of her eyes plus sneer combo and the worst... the I don't agree to this, we should spend what we earn as a reward conversation.

Through the years i have known her, i have learned to compromise and come up with tweaks to my obsessive saving habits so as to integrate her obsessive spending habits ( 100 Pairs of shoes and counting.."'Retail Therapy" she calls it... ) into my life. One of the very effective methods was the use of the bad mood fund or the B.M.F in short. I can't remember where i read this from but thank you whoever blogged about this.

What is this bad mood fund you might ask? Well, its a simple concept whereby we set aside a sum of money every month and deposit it into a separate savings account. It is left there to accumulate till THAT WOMAN my loving wife feels like spending it -  bad mood or not. This way, she does not feel that she is being restricted or bounded.

I feel that it is extremely important to communicate with your other half to get a feel of their views on both your financial and daily lives. Find out what they think of your views of financial planning and retirement while in turn finding out theirs.

The key is to be comfortable talking to each other about money as it can be an extremely touchy subject. Once you have laid out everything on the table, you can then decide how best to work things out and compromise so that everyone is happy.

I wish you all the best in your financial and daily lives with your loved one/s.

As Always.. Save more, spend less and invest wisely
P.

About me and my goals

Where do i start? So many things to say but so little time.. I guess it's the same with life. So many things to do and goals to achieve but with such a limited time to do them. What if i could give myself more time to do the things i want to do? No, not by extending my life, ( although that would be nice in the distant future) but by retiring earlier than what most Singaporeans would call the norm. In order to do this, sacrifices will have to be made and rules will have to be strictly adhered to.

Through this blog, i will try to record my thoughts and methods i will use to achieve this early retirement. I am currently in my late twenties working in the engineering sector and I plan to retire no later than the age of 45. I am currently married and am waiting for my home. (Mortgage payments are a killer to my early retirement planning). As for kids, i am definitely planning for at least 1, hoping for 2. I am pretty sure that if i plan my finances well enough, my wife and I, together with our future kids would be able to live pretty comfortably when we retire.

I hope that through this blog, more Singaporeans would be encouraged to save more, spend less and invest more in order to be able to spend more time with their loved ones instead of sitting alone in a cubicle wherever they are in Singapore.

I'm kind of running out of time and would have to sign off here. Loads of work to do and daylight is running out. I'll be trying to post as often as i can with a minimum of 1 post a week. Till then, see you and live well.