In my last post of 2016, I reflected about my journey for last year. This first blog post of 2017 is about my financial plans for the next 12 months. Each year, I have a plan for my expenses. But it is more relevant to me this year as I have no active income at all and have to watch my spendings more carefully.
For 2017, I have an annual budget of 30k. The plan is to have 12k for living expenses, 10k for holidays aka experiences, 3.5k for insurances, 4.5k for any other spendings.
I prefer to earn my money first before I spend, and the 30k budget comes from the passive income I had earned in 2016. This cash is already in my bank accounts. All the passive income generated this year will be saved and used for next year.
If I have less passive income in 2017 for whatever reasons, I will adjust my budget for 2018 accordingly. If I follow this method, I will not spend more than I earned. Even though I am not working, I am aiming for an increase in net worth year after year.
So my financial plans are simple:
- I earn the cash first (from my passive income),
- spend accordingly to my budget (which I set up by the start of the year) and
- make appropriate investments with my savings (by being greedy when others are fearful).
I have planned for only 12k for my living expenses. This is money used for basic needs like food, utilities, transportation and exercise. It does not cover any holidays (I have a 10k budget for experiences), insurance bills (3.5k set aside) and other unplanned spendings (4.5k).
An interesting question is: Can I live on 1k/month for my basic needs?
Based on my prior experiences, I spent 14k in 2014, 13k in 2015 and 10k in 2016 for my basic needs. I was working 6 months in 2014, 12 months in 2015 and 8 months in 2016. The number of working months are an important consideration cos we tend to spend more money when we are not working.
This year, I may not be working much. Does that mean I will spend a lot more money since I have extra time to be bored and may consume more?
Over the years, I have honed my spending habits. I am frugal by nature and live a simple lifestyle. I like being a minimalist, preferring to spend on experiences than on material goods. I have all of what I need and most of what I want. I have little urge to buy more stuff to clutter my life.
I eat cheaply for survival (hawkers and food courts) but I also indulge myself sometimes at restaurants. But when I go to expensive places, I use food apps and credit cards to get discounts, often up to 50% off the menu prices. And these meals are wonderful experiences cos I have them only occasionally and at great value.
For me to live well, I only need food (cheap, delicious, simple chow), entertainment (sports) and companionship (hanging out with loved ones). I don need more clothes, shoes, gadgets etc. So now, I am pursuing the upper levels of Maslow’s hierarchy of needs like meaningful experiences and fulfillment.
When I go for holidays, very often, the only souvenirs I get are fridge magnets. Friends tell me that if everyone is like me, the malls would have gone bankrupt. Luckily, not everyone can be like me. I am glad for my low urge to buy stuff, both for the peace of mind and for the good it will do for our planet.
Of cos, it helps a lot that I own my own place, do not drive and has no real liabilities.
My 2 portfolios
I have 2 portfolios currently, one to support me till I am 65, the other to use after that. When I turn 65, the Cpf Life annuity scheme should kick in, providing me a monthly income of about 2k till I expire.
The first survival portfolio generates passive income for me to spend now. It comprises of cash, equities, bonds, gold and insurances. I earned 52k passive income from this portfolio last year. I have about 4% of my assets in gold that provides nil passive income. But it acts as an hedge against a doomsday scenario. My insurance policies mature when I turn 50 and I am planning to reinvest the proceeds into suitable instruments.
The second retirement portfolio is made up of SRS and cpf. I should be able to hit the ERS of Cpf Life when I turn 55, giving me a lifelong annuity income of about 2k from age 65 onwards. By then, I will also be drawing down my entire portfolio (both the survival and remainder of the retirement portfolios). I should have enough to last me for the rest of my life, barring unfortunate circumstances.
I am intending to do some part-time work soon (but I have been saying this for a while, and I am still chilling). I am hoping to save everything I earn to use for my upcoming holidays. I will start traveling again when the weather turns warmer for most parts of the world. So far, I have booked air tics to Melbourne in April.
I am also seriously considering a financial wager. I am still working out the details for this. When I have taken concrete action, I may blog about this plan of mine.
Dow Jones has reached a historical 20k milestone. The Sg market has risen >5% for Jan (Trump effect?). Most of us who are invested in the market must have seen an increased portfolio value. Wishing everyone a Happy Lunar New Year. May the Rooster year be one that we can crow about 🙂