Mistakes of financial bloggers
 

Now that the crazy busy period is behind me (at least for now), I am back to reading financial blogs both local and overseas, and both young and old.

Generally they all have the same goal - to achieve financial freedom or as some bloggers termed it "F.U. money". The motivation for financial freedom or to have F.U. money is to quit their day job and have the freedom to do what they want, when they want and more importantly to NOT do what they don't want to do. Some while away their time "looking out of the window".

Much as I like my job, I do also have many moments where I want to walk away, where I want to say enough is enough. Those moments came when I was in my 30s, 40s and 50s. Now at 56, I say "hack it" as these moments come and go.

So what's the mistakes that I think financial bloggers make?

For one thing, to achieve financial freedom, many bloggers adopted very frugal lifestyles. Calculating and tracking their expenses to the very last cent. Instead of going out and earning more, they spent their time looking at ways to cut spending and living very simply. It is one thing for an older person, say above 50 years old who have seen the world, to decide to live simply, but it is sad for a younger person, who have not really lived, to decide to live simply. When young and energetic, they should go out and make the best of their human asset and build up their financial assets. So they try and meet their financial freedom goal by cutting their expenses to the bare minimum in order to meet their meagre passive income.

The other mistake they make is that they actually quit their jobs when they thought they have attained financial freedom. By copping out of the rat race at a very young age, they are denying themselves their most important asset to make money - the human asset. By copping out early, they are also exposing themselves to the ever present danger of outliving their savings. Inflation risk is one of the more obvious risks. There are many other unknowns that can and will crop up along the long journey that will deplete their savings. The danger of having to go back to workforce at an advanced age is real and won't be pretty when that happens.

The third mistake the younger bloggers make is that they benchmark financial freedom from their limited viewpoint. They mistakenly thought because at 30, maybe 35, they can live comfortably with $40k to $50k pa, they could live with this amount for the rest of their lives. Well, things don't stay the same. As they say, change is the only constant. Needs and wants will grow and with them, expenses!

In conclusion, I want to say that we all want to live a comfortable life. We work hard, save and invest so that we can have a comfortable and balanced lifestyle. Going overboard by being too frugal and denying yourself the good things in life is not the right thing to do. Neither is quitting too young and wasting your time and talent.

Sound like a loser who read and quote a few up-end stuffs which he doesn't own and just to troll.

Well said and thank you for your comment.

You are my admiration.

Does your current passive income including the CPF interest? Example: "Interests, bond coupons etc : $52k pa."

I would continue to work if I have enough passive income (excluding CPF interest) that can cover my annual expenses.

Especially so if my HH income is similar to yours which I presume both are holding a higher position.

With the untouched HH income of $400K, I could choose to help the needy and have greater satisfaction than having not to work and unable to contribute freely to those than need it.

So are you retired or still in the rat race? If retired, what's your financial plan? If not, why r you still working...for money, status or pass time?

Not in the rat race.

Working to help the common good.

So noble of you to be working for free at charities.

Don't be like those who are on their 50s and already rich but still working to earn more and more. These are greedy people.

What's wrong with collecting more money?

Inflation and meagre interest rates
 

Yesterday's news on the HDB/URA car park fees increase starting 1 Dec 2016 is yet another reminder that inflation is ever present. Parking at HDB/URA car parks will go up to $1.20 per hour or $110pm for season parking. The 20cts increase may not be much in absolute terms, but it represented a 20% increase from the current fees. Who said inflation rate was low? This is only one example where inflation rate was double digit. Many other examples can be seen especially in food prices - bread, milk, vegetables etc... I used to pay $2 for my usual vegetarian beehoon for breakfast. 2 months ago, it went up to $2.20 per packet. 10% increase just like that.

Thus for retirement sustenance and planning, it will be prudent to factor in a high inflation rate (say 5% at least) in your calculations. I had been using 3% inflation in my calculations, but I will have to review it with a 5% inflation rate. Already at 3% inflation rate and to sustain our retirement expenses of $84k pa (or $7k pm) over 30 years, we would need $2.5m.

The situation is made worse by the fact that bank interest rates at all time lows. Normal savings interest rates are at 0.05% while FDs are not much better at below 2% (with conditions)

We always hold about $120k to $150k in savings deposits for emergency and unplanned expenses. This amount earns us a measely $30 to $50 a year in interest. However, thanks to a tip off from a colleague, we opened 2 DBS multiplier accounts and deposited $50k into each account. Other than opening the accounts we didn't have to do anything else.

We were already using the 4 types of transactions stipulated by DBS to earn extra interests - credit monthly salary into DBS/POSB account, use DBS/POSB credit cards, credit dividends into the DBS/POSB accounts and take DBS/POSB housing loans. My wife and i were able to meet the criteria for the top 2 tier of interest interest payments at 2.68% and 2.08% respectively.

Nowadays instead of earning $5 a month in interest per person, we are earning $110 and $88 per person per month without any effort. This was a small windfall for us as suddenly the car park fees were taken care of and then some! This was even better the SSB!

Good news for those who have bought your new car. COE supply will be cut so COE prices will go higher in the future. Cat A COE prices will go towards $60k and higher. Cat B COE prices will go to $65K and higher. Huat Ah!!!!!!