Money for Monkeys (continued)

Introduction

I think it may be useful to state and explain what each definition encompasses so we can move on with the right footing. You may want to refer to the entities below either as yours alone or as a combined one with your spouse.

1. Annual / Monthly Income
• This is the amount of money you earn in a year or a month.

2. Annual / Monthly Expenses
• This is the amount of money you spend in a year or a month.

3. Annual / Monthly Savings
• This is the amount of money you save in a year or a month.

Yes. These are the only concepts you need to know for 'Money for Monkeys'. If you require it to be simpler, I shall have to crack my brain for it.

Goal of managing money

We will begin with the end in mind. One needs to understand the concept of living within one's means.

Looking back at the definitions given, the goal of this whole thing is : to ensure that one's 'expenses' is not more than one's 'income', with a good surplus for a sound savings scheme for unforeseen eventualities, future plans and growth of wealth.

Only then, would you gain financial independance.

Income

For the common man like myself, this refers to the paycheck we get from our employers. It does not vary much, so we can easily use this amount of money to base our expenses and savings calculations on. Do not include bonuses in your monthly income component, since bonuses are less predictable and so that we could use the annual bonuses to pay for annual expenses such as road tax, insurance and children's school books instead. Do not include overtime pay or allowances too, unless it is something which you would get every month - and use a conservative figure as well.

There are less-common men too - whose monthly salaries are not fixed. They either have their own businesses or that their salaries are pegged to their performance and economy - like car salesmen and real estate agents. Usually, the salaries will be cyclical in nature - meaning that it may be higher in some months than others. If you have been working for many years in this line, use the average or median salaries (whichever is lower) as your income to use, to base your expenses calculations on. If you are very new, then try to use your basic salary as a start or let yourself stabilise first before planning to splurge on high-level expenses.

Of course, there will be others who have multi-sources of income. This includes the likes of teachers that gives outside tuition, the professional footballers that sells satay and the pasar-malam warrior that does import-exports on Ebay whilst collecting rent on several condo units he bought before the IRs were planned; amongst others. All the same, use the average amount that you bring home each month, or even lesser if you wish to be more conservative in your calculations. Don't cheat !

Expenses

This is the tricky part. Unlike income, which usually has a specific figure every month - expenses can grow beyond your wildest imagination. There are the monthly ones and the annual ones too. So, it is very important to understand what is a need and what is a want. Put your expenses in a priority order and in categories. The fixed amount first - things such as bills. Then comes the other luxuries in life that you perhaps can do without. Each of us will put priority to different things, so I will just put up a general example here.

Fixed Monthly Expenses (Bills)

1. Housing instalment
2. Parents’ monthly allowance
3. Electricity
4. Water
5. Kids' school fees
6. Kids' tuition fees
7. Kids' monthly allowance
8. Home phone
9. Handphone
10. Car instalments
11. Internet
12. Cable TV

The part on housing instalments, you need to put up only the cash top-up portion only, if any – the CPF parts will usually settle by itself, unless your monthly CPF contributions is lesser than your monthly housing instalments. There will be a lot more bills of course, if you bought other things such as plasma tv, solitaire diamonds and lorenzo furniture through monthly instalments or your itchy hand tend to swipe the credit card a lot. The thing is, we should compile this up and monitor it every month. If some things have to 'go' then we can easily see which one is of the least priority too, whether it is the car or the cable tv or even kids' tuition, it is up to us. Do use a simple excel sheet to help with the basic functions of adding up the figures, if possible.

Variable Monthly Expenses

1. Food
2. Transportation
3. Health care
4. Personal care
5. Donations
6. Entertainment

Food is to include both home-cooked and outside meals, picnics, snacks and even the chewing gum bought in JB. Health care includes vitamin supplements, dentistry or life support programmes such as dialysis, whilst personal care includes one’s cosmetics, sunglasses, clothings, toothbrush and other accessories. Donations may be placed in either fixed or variable expenses. Other than the usual donations, it also includes wedding gifts, birthdays and other celebrations. The Muslims may want to include the ‘zakat harta’ in either the monthly expenses or the annual expenses to be discussed later. Entertainment shall include hobbies, watching movies, going to the spa or visiting Ah Meng at the zoo. Again, add in more rows if required – but keeping the categories as general as possible will be less confusing. This thing can only work if the expenses are religiously tracked, so that it may be clearly understood where the money is going to.

Fixed Annual Expenses

1. Income tax
2. Kids’ school books
3. Road tax
4. Insurances
5. Club memberships
6. Renewal of licenses

Variable Annual Expenses

1. Travel holidays
2. Home furnishings/appliances
3. Personal purchases

This is the confusing part. Some people live their life just ensuring that their monthly income will be able to cover up their monthly expenditure, yet it is these annual expenses that lurks up from behind and render them helpless at times. A sound savings plan is thus, imperative to a successful finance management. I would personally recommend that the ‘Annual Expenses’ have its own part in the ‘Savings’ category, as highlighted in the next point.

Savings

Every little kid knows the phrase ‘saving for a rainy day’. Somehow, when we grow up we tend to forget the merits of having a good savings plan. While we work hard to gain more income and be conscientious of our expenses, we will need to be really disciplined to maintain the savings plan. It is similar to a diet programme, one may forget about it for a while and when one finally remembers, one has to start all over again from scratch. In any case, once you have decided on a particular amount you would need for monthly expenses, the rest will be kept for savings. You should have specific goals and a vision on your savings plan.

From my inextensive, in fact near-zilch experience, I would recommend 3-categories of savings with another 3 sub-parts in the last category.

1. Fixed Annual Savings
2. Variable Annual Savings
3. Life savings
` a. Emergency funds
` b. Future funds
` c. Disposable funds

After calculating how much you need for the fixed annual expenses, divide it up and get it ready before it is due. Then, put aside a specific amount which one is comfortable with, for the life savings. The emergency funds are of utmost importance, its significance being to protect oneself from a bad spell that insurance may not cover. Accidents, critical illnesses and unemployment are amongst the biggest worries. One may quickly realise that even though insurances cover perhaps a large chunk of an emergency, the small portion to be borne is still quite a hefty price to be paid in dire needs. In some instances, you may even have to pay for the bills first before you could make a claim – which is an ordeal that could take many months.

How much should the emergency funds be ?

Frankly speaking, I would recommend nothing less than a year’s income. Thus, if you earn $2000 a month, you should have $24,000 set aside in the bank as your emergency funds. It will take a few years to save, yet it is the most crucial part. One should save as much as they can while one is still single and without much responsibilities and ‘expenses’ to their name. The bulk of one’s bonuses in their younger years should be used to ready the emergency funds as quickly as possible. Of course, as one’s income increases, so does one’s cap for the emergency funds.

The variable annual savings should be a separate entity from the life savings. Should one plan to buy a new Bose Lifestyle 48 entertainment system, or wants to go to Machu Picchu in Peru for a holiday, it should be saved for, separate from the fixed amount one has set aside for the life savings. There may be some allowances to be made for weddings and first-time home downpayment though, according to individual preferences.

The setting up of the emergency funds itself may take a few years. The fun part starts when you are planning for the future. Everyone’s future plans are different. The more pertinent ones would be saving up for your children’s education. Tertiary education are getting more expensive nowadays. It is growing a lot faster than the inflation rate, and as parents – it may be the regret of a lifetime should one not be able to send one’s kid to university – especially if the kids are eligible and want to pursue their dreams through it. Other future plans may be to retire early, an upgrade to a bigger house, to set up one’s own business, or to buy a car. One thing leads to another – do not plan to just save enough for the downpayment of the bigger house or car. Each purchase should be calculated for and assessed to be viably sustainable in the long term.

For most of us, these future plans funds will take another few years to save for. Once this is up and running, then there would not be much worries that one has but to grow the money for retirement. The part on disposable income, is basically the last part of saving for the sake of savings. It should not be taken as unimportant as sometimes, they may be things which one may not have foreseen, and it could arrive a little shockingly, such as an invitation to join a business venture with a couple of old friends.

Investing

There are many ways of growing your savings. It will not really be covered here today, as that will be a whole separate topic by itself. However, there are a few things that one should know. Firstly, there are about 4 basic factors that you should ask yourself before investing.

Duration - How long do you want to invest for?

Returns - Do you want income or growth?

Liquidity - Do you need to get to your money easily?

Risk - Understanding the nature of risk involved

As a rule of thumb I’ve set according to the plan stated above is that, to put in your emergency funds in a low risk basket such as fixed deposits in reputable banks, the future funds may take moderate risk ones such as unit trusts or some blue chip shares whilst the disposable income portion can go for the high risk junk bonds, securities or even commodities.

Summary

1. The goal is to ensure that one's 'expenses' is not more than one's 'income', with a good surplus for a sound savings scheme for unforeseen eventualities, future plans and growth of wealth.

2. Income is the fixed amount money earned a month. Bonuses and overtime are to be deposited to ‘Fixed Annual Savings’ to pay for ‘Fixed Annual Expenses’ and its surplus to be deposited to ‘Variable Annual Savings’ accordingly.

3. Expenses are divided into 4 parts;
-------• Fixed Monthly Expenses (bills)
-------• Variable Monthly Expenses
-------• Fixed Annual Expenses
-------• Variable Annual Expenses

4. Savings are divided into 3 parts and 3 sub parts;
-------• Fixed Annual Savings
-------• Variable Annual Savings
-------• Life Savings
--------------i. Emergency Funds (equivalent to a year’s wages)
--------------ii. Future Funds
--------------iii. Disposable Funds

5. Investment assessment should include;
-------• Duration
-------• Returns
-------• Liquidity
-------• Risk

6. As a rule of thumb, one may maximise use;
-------• Emergency funds for low risk investments
-------• Future Funds for medium risk invesments
-------• Disposable funds for high risk investments


Last Note

There are a lot of ways of doing things and I am sure that there are better ways of managing your money out there. The methods I propose here are just the basics – understanding how much we earn, living within our means, planning for the future and saving for a rainy day. As long as the basics are right and the intentions are true, then one would be able to live rather comfortably with a sound financial management plan. Do inform me if you disagree with any of my proposed ideas or concepts, I would be pleased to hear it. Do share with me some of your methods so I can learn them too. We learn better through sharing of ideas.

Reflections - A National Day Special

This was from an excerpt I wrote during Singapore's National Day, which was posted on friendster on 9th Aug 2004.

Truth sometimes hurts. And it will, for many of us when we’ve heard what is about to be told. It may hit a nerve, but it is intended to serve as a war-cry for continued improvements and preserving the way of life we’ve come to take for granted.

We need no reminders to remember what Singapore has achieved. Our fathers and grandfathers had toiled much to bring forth the luxuries we are so accustomed to, each day. And Singapore did it without digging for oil and gold from under its soil. We did it with the brains and brawn of our people.

The world is a fluid one with constant change. For us to remain competitive, we must change with the times, or perish like dinosaurs. It was found that what works for us in the past may not garner the same results in the future. The successes of our government in inspiring us, albeit using interventionist and paternalistic policies in crafting our culture – will eventually reach a nadir.

>
Nation in Celebration  

Most of us have seen the movie “I not stupid”. It is but a true rendition of what’s happening to us now. Our materialistic orientation may have gone too far in directing us towards economic and social-status objectives. This dire need for better quantifiable results – both in school and workplace, has somewhat made us myopic and less aware on the true objectives of knowledge acquisition or even our purpose in life.

A study conducted recently shows the cracks in our seemingly staunch workforce. We have found that the Hong Kong people were leaner and keener than ourselves. Singaporeans do not appear to be psychologically geared to be as independent minded and resilient. It was no surprise that Singaporeans are seen as government-dependant compared to our Hong Kong counterparts who accept responsibilities for their lives and livelihood.

Singaporeans have also picked up some pusillanimous traits – many are afraid of standing out and becoming an entrepreneur. The public sector had skimmed off talent with its high salaries, prestige and job security. The truth is hard to swallow – the Singaporean workforce lacks creativity and entrepreneurship capabilities to exploit global environments. Of course, we may have Sim Wong Hoo – the world class entrepreneur of leading sound-card maker, Creative Technology. But this is a far cry compared to Taiwan, that has, despite shortcomings including inefficient infrastructure and rampant corruption - has proven a much more effective incubator for entrepreneurs whose bright new ideas form essential ingredients for economic growth.

Unlike Singapore – that has attracted more than 5000 MNCs here, with about half having their regional headquarters here, Taiwan builds MNCs themselves. Very few Singaporean companies take risks through succeeding or failing on their own merits. Without them, Singapore will have to continue to rely on MNCs – whose profits flow to foreign head offices. Singaporeans comprises the world’s most computer literate people and we have all the right infrastructure including a fibre-optic backbone linked to every home through telephone lines and Cable-TV connections. All these luxuries are in place – but how are we utilizing it?


More fireworks 

Our government understands this and realizes that all the things that made Singapore so successful today will make it unsuccessful in the future. It’s time to go to the mattresses. We have to change our mindset on a lot of things. We have to start asking questions. We have to challenge the norms. We have to learn to take calculated risks. We cannot rest on our laurels – we have to keep moving, improving and building a successful nation. Our fathers have done their parts – it is now up to us. As 9th August approaches, let us reflect on how we can make it count; how we can do our part and make our children and children’s children have a better future in this prosperous little isle, we call home.


Our home 

Have a wonderful 39th Birthday, Singapore ! :D

Back in the lock-up

Singapore's National Service (NS) is an obligation every male Singaporean has to go through. My NS had been prematurely disrupted to allow me to further my studies. Upon returning home, I had reported back to the Police National Service Department (PNSD) to resume and complete my NS. Presumably, I have 2 weeks left.

The medical check-up affirmed that my Pes status remained unchanged, and that I'm fit for all operational duties. The very first day of NS had been utterly boring. I was at first attached to the A Division PNS department, where I spent nearly the whole day reading Dan Brown's Da VinCi's code. There were not enough chairs and I felt out of place. The PNS PO tried to utilise my previous experience in the Service Quality Department to crack my brains for their WITs project. I turned the table around and told her that WITs is a group project - where we have to discuss on how we can streamline work processes and improve things. A newcomer like myself will not be able to help her as I'm not au fait with what they're doing and most importantly, how they're doing it. She gave me that queer eye, understanding that she's run onto a wall. A few hours later, she told me that I'll be posted out to the RHQ team B - doing lock up duty.

I guess its not such a bad idea after all. SI Henry, former OC transport is the in-charge for RHQ team B. I still remember the times when we played soccer together. He recognised me immediately and gave that similar wide-grin when his team conceded a goal on the pitch. A stout and cheerful man - I've enjoyed working under his tutelage and supervision, even though it's for a mere few weeks. The station sergeant, SSS Santharan had also been really helpful and understanding a supervisor. He even invited me to join the force, assuring that both SI and himself will recommend me into it if I'm interested. It's a really enticing offer - especially now that I needed money and a career most. But, as usual, I'll continue following my heart and keep the faith that I'll get a job in aviation line one day. I turned down their generous offer, politely.

During the couple of days working in the lock up, I had the chance to try out the various posts available there. It include processing person- in-custody (PIC), bail processing, body searcher, processing PIC's properties, clustered lock up and CCTV surveillance. I made quite a number of friends there but due to the limited time I have had in getting to know them better - I'm having this impression that I may not keep in contact with them much further.

The short stint there opened my eyes to a lot of things. People who are arrested comes in all various races, nationalities and languages. So too, were the variety of offences. Most of them however, were illegal immigrants from Sri Lanka, India, Indonesia, China, Malaysia and Vietnam. Many came to Singapore in search for work. There are also people who are arrested for not paying their TV licenses, drink driving, molest, shoplifting, affray and of course, possession of controlled drugs. The range of people are diverse as well - from teenage kids in school uniform to lewd old men who displayed their privates in public.

When my last day finally come - it dawned as a long-awaited ticket to freedom. I was smiling all the time, even though I just came back from KL the day before. I've met Farah there - together with fellow Singaporeans, Izwan and Fairuz (who stopped over in KL after their Hatyai trip) and Adrrian (who is there on a business trip). We went out for seafood dinner late at night - then caught a glimpse of Man United lucky win against Norwich. Thereafter, we went for pool for an hour or so before slacking at a mamak's place. The whole journey had been surreal and upon reaching home - a new working day was about to start. Albeit, it is also the last day I'll be donning the police uniform - at least, not until reservist.

I bade farewell to them and walked out of the cantonment complex full of hope and spirits. My heart skipped a beat and spoke : "I'll start teaching tuition at AMP tomorrow. I'll finish my resume and pass it to Jeremy and Firdaus in a few days. I'll ask Magdeline again whether her mum requires a chauffeur for her kids next month. I'll call Mahirah, asking her whether her mum is agreeable to have me be her tutor for Physics and Chem. Soon, in one way or another, I'll get a job. And my cashflow, hopefully - will be perpetually steady soon."

When will "happily ever after" be achieved ?

I've told my friend that i'll start blogging again - and I shall try with to do it in a more consistent manner. However, as soon i started typing two days ago - a grimly event occurred. A sinisterly mortal sin, my brother had accidentally crashed my windows operating system. The laptop had been with me since my very first day in NZ. It contains not only my extensive collection of videos, mp3s, pictures and ebooks... all my previous assgts, thoughts, poems and my extensive contact list of friends are also gone. The loss is immensely disheartening.

Thus, I stopped my blogging then. I tried to think of all the ways possible to get my data back, albeit it became a futile effort on my part. Finally, I resigned to my cursed fate and reinstalled Windows XP Pro. The saddest part was that - the extra partition or virtual drive that I have allocated for my stuff had been breached too. This is because the system required the hard disc to be converted to NTFS format upon re-installation of Windows XP PRo (default was FAT32). The 2 drives had been merged into 1 and all existing data was gone.

Irritatingly, I have been experiencing such dire luck lately - thus I'm not able to be as angry as I probably should. I told my brother off lightly and explaining to him that since he could not take care of my things well, he had just been banned from touching my laptop ever again. Right now, I'm just trying to re-establish my contact numbers, emails, addresses and thinking of the possible people that might have these things and softwares that I need.

And guess what ? As I was writing this, Mohamad msged me on MSN - he said that the car he bought from me need some major repair works. The car failed WOF and required about $400 to go on road legally. After pondering over it, I think - it's better to split the cost than to have an unhappy customer. I paid him immediately through e-banking and thus able to focus on my other pertinent matters at hand. If these things do not get done and over with quickly, it'll eventually be a mental burden on my already heavy cranium.

Magdeline called me whilst I'm messaging Mohamad online and I was chatting with her whilst paying Mohaman through e-banking. She was telling me the usual stuffs, gossips and updates on some celebrities she was fond of. However, I dun think I should include what we spoke on, here - lest she gets mad. It was my day to complain and she was rather sympathetic of my plight. Those things in the laptop were dearer to me than anything else I brought back from NZ. It was like a diary of everything I did there....

Wilson called me whilst I was on the phone with Magdeline. He told me that the bridge game at Sara's place will be on the next day, and that there will be a birthday party for Esther the day after. I'm definitely going for both. I will not be working on both days, and I shall savour every occasion I can have with my friends before I get caught up in our infamous society's rat race. I passed him my new cellphone number. He offered to pass the number on to our friends. That'll be perfect, but I'll post it online soon anyways.

The energy I used to have and radiate upon the people around me is fading. Perhaps it has been like that since my days in NZ. The cornocupia of emotions sets my mind wandering in search of a reason. Has living in laid-back NZ made me less competitive and less inquisitive about life ? I'm still skeptical on the advantages of studying overseas. Although it opened up my eyes on lots of stuff, I'm afraid I might have picked up some undesirable traits there as well.


Diehard TPAC 

Looking at Heiril, Ruth, Anwar, Esther, Wira, Edwin, Raihan, Shir Li, Faisal, Stanley, Ismail and many other friends ceaselessly pursuing their goals - I feel really home. These people whom I spent most of my childhood years and carefree days have put their plans into action. The chess pieces are moving. The era that we've been talking, planning and getting ready for (during our school days) have finally dawned upon us. Watch out world ! I shall make my moves soon.