11 HARD TRUTHS
That's Painful But Crucial To Your Retirement Journey
By Damian Pang & Isabelle Oh
December 2018
1. MAKE MORE MONEY
Obviously?! Surprisingly this is often ignored in the name of passion, inertia or ignorance. Wealth accumulation is actually simple math. The more we earn over to our monthly lifestyle needs, the more we save.
Can one really retire if monthly expense is $1,500 and income is $1,600? To speed up the savings process, imagine a running tap pouring into a bucket with a gap at the bottom:
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Up the Tap (e.g. better paying job, promotion, skill upgrading, passive income) or
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Patch the Gap (e.g. simple lifestyle options, cut subscriptions, public transport, less restaurants)
2. MANAGE YOUR EXPECTATIONS
Putting a little reality-check on our's ideals is the fastest shortcut to retirement. Instead of wanting that luxurious $10,000/month lifestyle, can we settle for a comfortable $4,000 one? Impact is instant, effort required halves immediately. Simplicity simplifies retirement.
3. MODERNIZE YOUR EXPERTISE
Met an ex-colleague from the cosmetic industry, she is 61 now. Back then she was asking me for help with excel/power-point. Today, she's a business consultant for online cosmetic marketing!
As brick & mortar retail are being rapidly replaced by online shopping, she embraced digitalization bravely by undergoing training with Chinese firms like Taobao & Wechat (Yes, she even learnt coding!) and emerged as a leader in her existing field of expertise.
Structural unemployment can derail our retirement plans. Have the foresight to learn, upgrade & prepare now.
4. MACRO OVER MICRO
Enjoy the present while saving for the future. Exercise prudence when making life's big choices instead of micro-managing daily small ones.
One decision (ignoring investment side of argument) e.g. choosing a $600,000 HDB 5-Room over a $1.5m condo trumps a lifetime of sacrificing our beloved Starbucks for 3-in-1 coffee. Think big, save big!
5. MAXIMISE YOUR CPF & RELIEF
Loans/taxes are like bad cholesterol, interest/relief are like good cholesterol. A touchy topic with differing opinions but these are some ideas we can explore after consulting our financial advisor first.
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Cash over CPF for home-loan
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Try pay back accrued interest in CPF
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Voluntarily CPF Top Ups
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Irreversible transfer of CPF OA to SA
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Re-finance home loans when due
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Contributing to SRS then use it to invest
6. MEMORIES OVER MATERIALS
The lesser we desire to own, the more money and time we have to pursue whats truly meaningful. Time & undivided attention are the most precious gifts to our loved ones. A cottage filled with love is better than a castle filled with emptiness.
7. MIRACLES ARE SELDOM REAL
Our journey towards financial freedom is like a game of Snake & Ladders. While rolling the dice to reach the end point is important, we need to watch our greed which puts us at risk to scams/investment pitfalls, or we may find ourselves back at square one.
8. MOTIVATE YOUR SPOUSE
Running together is faster than doing a piggy-back. Two lovers committed and contributing towards a common goal is like a nitro-boost in a car race!
9. MARGINS ARE IMPORTANT
This is from a sermon by Rick Warren. When we build more margins into our schedules, there will be less anxiety and stress in our lifes. Imagine packing 5 meetings one after another and the first guy turns up late. Margins can be time margins, financial margins or energy margins.
Focus on doing few things well instead of doing many things averagely. This promotes excellence, prevents stress related burn-outs, lesser need of retail therapies/getaways, ultimately allowing us to thrive in both our careers & relationships.
10. MAP FINANCIAL YARDSTICKS
What you don't track, you don't improve. I set little financial milestones to attain by a certain age. I remember proudly print-screening my bank account after hitting my first $10K before setting out to reach my first $100K.
Each time I made a promise to myself that I will never fall below that amount. Set small advancing net-worth goals and celebrate every victory!
11. MONITOR YOUR INSURANCE
Never thought a financial planner will say this? Well you heard it right. Do reviews, keep essentials & cut the fats as our needs changes over time. Consult your trusted advisor first of course :
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Review regular investment link plan as mortality costs rises with age?
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Lock in investment profits?
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Downgrade hospital cover?
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Reduce coverage if kids grown up/loans paid?
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Let child take over own plans?