As a follow up to my previous post titled "Better quickly obsoletes your job before your job obsoletes you!", I would like to briefly summarize the tactics to "How to quickly obsolete your job before your job obsoletes you", as follow:
1) When started working, save much more than you spend!
2) During the day, work you "work". During the evening, work on your "investment"!
Above are the 2 keys to being able to help you to be able to quickly obsoletes your job before your job obsoletes you!
The above is also the Solution to "Why you work so hard but you are still poor?"
You may ask: How much should you save from your salary?
Well, there is no hard core number or percentage, but the more the merrier!
To give you an example, when I started working, I saved 50% of what I earned.
5 years later, despite increase in my income, I kept my expenditure constant, and I increased the amount I saved to >70%!
When I have more money in my bank for rainy days, I started to spend more again and the amount I can save dropped to less than 50% (despite further increase in income).
I feel that average of about 50% is about the right figure because with 50%, for every year you had worked, you can afford to retire for 1 year! So theoretically, if you start working at 25 years old, and assume you can live to 85 years old, you would probably work for 30 years and by saving about 50% of your income, you can afford to retire at 55 years old and enjoy your retirement with no monetary worry for >30 years (assuming your return from your pot of fund is equal to inflation).
Friday, November 28, 2014
Tuesday, November 25, 2014
Better quickly obsoletes your job before your job obsoletes you!
The other day, I had a good discussion with my friend. He made a very good point indeed that I would like to share with the rest of you, that is:
"Better quickly obsoletes your job before your job obsoletes you!"
He was lamenting that while Singaporeans can now live longer and older, our job actually "obsolete" us sooner and earlier! What he meant by "our job obsolete us" is that we are more likely to get retrenched at an earlier age, and then subsequently unable to find a job that pays as much and is able to make use of our knowledge and expertise.
On the other hand, he said you would be pretty safe if you can "obsolete your job" by about 45 years old, which he means to say that you no longer need the income from your job to live and support your family.
He cited an example of a friend working in the hard-disk drive industry, and after getting retrenched at the age of about 45 years old, has not been able to get a full-time job that pays as much and able to make full use of his prior knowledge and expertise. He sent out several hundreds of resumes until he gave up because either he was judged as "over-qualified" or "too old" for the job or his experience is not relevant to the job, or the pay is so poor given the nature of the job that he give it a pass as it can't even cover his family living expenses (and taking up those job will jeopardize chance of him landing a good job in future). What did he end up as? Taxi driver! But the story does not end there - He was complaining that the taxi driver is being exploited and squeezed by the taxi operators with ever increasing high taxi rental charges while their taxi fare charges have been fixed!
According to my friend, many people in the middle-income families with no "connections" are finding themselves out of jobs at about 45 years old or thereafter, and having to resort to very large cut in pay when they take up another jobs.
However, those with "connections" are having a good time, with some apparently not doing much (if any) and getting paid several hundred thousands to millions of dollars a year!
So, his conclusion and advise to all of you out there is that "Better quickly obsoletes your job before your job obsoletes you!".
If you can't, then make sure you have the right "connection" so that people will give you jobs to pat your back! However, sad to say, having the right connection may have more to do with your family background / circle of friends and contacts and luck then the person's ability!
So, how can you "quickly obsoletes your job before your job obsoletes you"?
"Better quickly obsoletes your job before your job obsoletes you!"
He was lamenting that while Singaporeans can now live longer and older, our job actually "obsolete" us sooner and earlier! What he meant by "our job obsolete us" is that we are more likely to get retrenched at an earlier age, and then subsequently unable to find a job that pays as much and is able to make use of our knowledge and expertise.
On the other hand, he said you would be pretty safe if you can "obsolete your job" by about 45 years old, which he means to say that you no longer need the income from your job to live and support your family.
He cited an example of a friend working in the hard-disk drive industry, and after getting retrenched at the age of about 45 years old, has not been able to get a full-time job that pays as much and able to make full use of his prior knowledge and expertise. He sent out several hundreds of resumes until he gave up because either he was judged as "over-qualified" or "too old" for the job or his experience is not relevant to the job, or the pay is so poor given the nature of the job that he give it a pass as it can't even cover his family living expenses (and taking up those job will jeopardize chance of him landing a good job in future). What did he end up as? Taxi driver! But the story does not end there - He was complaining that the taxi driver is being exploited and squeezed by the taxi operators with ever increasing high taxi rental charges while their taxi fare charges have been fixed!
According to my friend, many people in the middle-income families with no "connections" are finding themselves out of jobs at about 45 years old or thereafter, and having to resort to very large cut in pay when they take up another jobs.
However, those with "connections" are having a good time, with some apparently not doing much (if any) and getting paid several hundred thousands to millions of dollars a year!
So, his conclusion and advise to all of you out there is that "Better quickly obsoletes your job before your job obsoletes you!".
If you can't, then make sure you have the right "connection" so that people will give you jobs to pat your back! However, sad to say, having the right connection may have more to do with your family background / circle of friends and contacts and luck then the person's ability!
So, how can you "quickly obsoletes your job before your job obsoletes you"?
What life-style you can afford with $1M to retire for 30 years?
Now, if you have S$1M now and would like to retire for 30 years, what life-style can you afford? How much money can you afford to spend per month as living expenses to last 30 years?
Well, based on my calculation, with S$1M now, you would be able to afford to spend S$3250 per month for 30 years (with 2% p.a. increase in allowance built-in)!
$3250 per month for a couple NOW (with 2% p.a. increase in allowance built-in) is really a comfortable living already.............
Assumptions I made are:
a) Average Investment return of 3% p.a.
b) Average Inflation of 2% p.a.
Above are realistic assumptions and hence totally achievable.
Given that average age of Singaporeans is 83 years old for men and 85 years old for women, if you have enough to retire for 30 years means that you can retire at 53 and 55 years old respectively if you are a woman/man !
Well, based on my calculation, with S$1M now, you would be able to afford to spend S$3250 per month for 30 years (with 2% p.a. increase in allowance built-in)!
$3250 per month for a couple NOW (with 2% p.a. increase in allowance built-in) is really a comfortable living already.............
Assumptions I made are:
a) Average Investment return of 3% p.a.
b) Average Inflation of 2% p.a.
Above are realistic assumptions and hence totally achievable.
Given that average age of Singaporeans is 83 years old for men and 85 years old for women, if you have enough to retire for 30 years means that you can retire at 53 and 55 years old respectively if you are a woman/man !
Monday, November 24, 2014
How much savings do you need NOW to retire with basic living in Singapore?
In my previous post, I estimated that the basic no frail cost of living in Singapore as of now for an old couple = S$1348 per month.
So, how much does a couple need to retire for 30 years from now if they just need S$1348 per month for living expenses and assuming investment return of 3% per year/annum (p.a.) on their capital and inflation of 2% per year? Note that my assumption has 2% p.a. increase in expenses built-in year after year (and not a flat S$1348 pm).
According to my calculation, the couple just requires a lump sum of S$420,000 to be able to retire now for 30 years!
Question 1: Is average investment return of 3% p.a. realistic?
A: Yes, 3% is already considered low. Don't forget Singapore Government gives 4% for your CPF Special Account and Medisave.
Question 2: Is average inflation 2% p.a. realistic?
A: This will depends on global economic situation and more importantly government's economic and monetary policy, especially when Singapore uses exchange as a tool to control inflation. Also, Singapore government has great control over medical costs via their economy of scale in operating all gov hospitals and polyclinics.
So, how much does a couple need to retire for 30 years from now if they just need S$1348 per month for living expenses and assuming investment return of 3% per year/annum (p.a.) on their capital and inflation of 2% per year? Note that my assumption has 2% p.a. increase in expenses built-in year after year (and not a flat S$1348 pm).
According to my calculation, the couple just requires a lump sum of S$420,000 to be able to retire now for 30 years!
Question 1: Is average investment return of 3% p.a. realistic?
A: Yes, 3% is already considered low. Don't forget Singapore Government gives 4% for your CPF Special Account and Medisave.
Question 2: Is average inflation 2% p.a. realistic?
A: This will depends on global economic situation and more importantly government's economic and monetary policy, especially when Singapore uses exchange as a tool to control inflation. Also, Singapore government has great control over medical costs via their economy of scale in operating all gov hospitals and polyclinics.
Comments on Goods and Service Tax (GST) and Wealth Tax
In my previous post titled "Why you work so hard but you are still poor?", I mentioned that:
"When taxes have been tweaked and/or new taxes implemented by the Government, we are seeing more and more of such taxes in the form of Goods and Services Tax (GST) or other form of "wealth tax". For example, recently Malaysia just introduced GST. On the surface, we were told that these are "wealth tax" that only taxes the people who are "rich", but really what you are seeing is that such taxes, instead of taxing the genuinely rich (the top 1% income earners and rich businessmen), these "wealth taxes" are targeted at the majority of the population and middle-income families so that they do not tax the genuinely rich so much."
In this post, I would like to give further comments on such Goods and Service Tax (GST) and Wealth Tax.
Give you an example to illustrate these so-called "wealth tax" or consumption tax: If the government wishes to rise $1 Billion in taxes from a population of 1 Million, they could choose to:
a) Raise the income tax of the top say 1% genuinely rich (top 1% income earners and big businesses) by collecting $1 Billion from the top 1% or 10,000 people, thus each of the rich paying $100,000; OR:
b) Raise the tax from the majority of the 90% of the population or 900,000 people, thus each of them paying about $1,111.
We are seeing more and more that government preferring method (b) in raising additional taxes!
On the surface, doing (b) seems fair, until we diagnosed the incomes of the various groups:
(i) Top 1% people earn at least $500,000 a year!
(ii) The rest of the people do not even earn $200,000 a year!
For the past 20 years, the top 1% people's income increases exponentially compared to bottom 80% of the people! This also seems to be the case in Singapore!
Example, the lowest income earners earn about $500 per month 20 years ago and now they only earn $1000 per month (after the introduction of minimum wages in Singapore!). Ops, sorry, should be "Progressive wages" as some hard-core PAP supporters would like us to call it. To these people, "minimum wages" like those in US and the West are bad, while Singapore's "progressive" wages are good! Really? We can investigate left and right and up-side down and the Singapore's "progressive wages" include "minimum wages" as a core component, so isn't this a form of "minimum wages"???
On the other hand, the top salary people have their salary increased from about $500,000 per year to a few Millions $ a year!
What about the general people, like the fresh graduates pay? Well, 20 years ago, a fresh graduate from engineering course can get a salary of about $2,200 per month. Fast forward now, the same fresh graduate can only get a salary of about $3,000 per month or an increase of about 36%.
And oh, I should not forget to mention that cost of basic living is like having gone up by >200% over the past 20 years!
After knowing these above facts, would you still think that raising taxes via method (b) above is more fair than method (a)? After all, for past 20 years, the top-income earners have benefited the most and obtained several hundred % increase in salaries from Singapore's GDP progress (including the top civil servants and Ministers) vs the bottom 80% or so, so isn't it fair to ask them to bear more? Instead, they received an incentive of their income tax being slashed from 33% to 20% as a result of introducing GST!
Is it fair to make the bottom rang income people pay more taxes when they are already making ends meet with ever increasing living cost inflation as a result of their Govt's own policy?
Singapore's GST is a very good example isn't it?
Before 1994, there is no GST in Singapore, and the highest income earners pay 33% income tax and businesses pay 30% corporate tax. The income tax is progressive, and about bottom 40% people pay no taxes.
Since introduction of GST in 1994, GST has been raised to 7% while highest income earners' income tax has been slashed from 33% to 20% while businesses now only pay 17% corporate tax (vs 30% before 1994). This has resulted in significant tax reduction collected from highest income earners and businesses, and this short-fall in taxes have been made up significantly from GST collection which collects taxes from 100% population in Singapore!
Note that Singapore's GST has no tax exemption for basic necessities (unlike those in other countries, e.g. UK, Europe etc), hence hitting the poor and the lower middle-income very hard!
For a comparison, for example in UK, basic living necessities (e.g. water, gas, and electricity), food necessities, medicine, children needs are all exempted from GST (in UK they called it Value-Added-Tax or VAT).
"When taxes have been tweaked and/or new taxes implemented by the Government, we are seeing more and more of such taxes in the form of Goods and Services Tax (GST) or other form of "wealth tax". For example, recently Malaysia just introduced GST. On the surface, we were told that these are "wealth tax" that only taxes the people who are "rich", but really what you are seeing is that such taxes, instead of taxing the genuinely rich (the top 1% income earners and rich businessmen), these "wealth taxes" are targeted at the majority of the population and middle-income families so that they do not tax the genuinely rich so much."
In this post, I would like to give further comments on such Goods and Service Tax (GST) and Wealth Tax.
Give you an example to illustrate these so-called "wealth tax" or consumption tax: If the government wishes to rise $1 Billion in taxes from a population of 1 Million, they could choose to:
a) Raise the income tax of the top say 1% genuinely rich (top 1% income earners and big businesses) by collecting $1 Billion from the top 1% or 10,000 people, thus each of the rich paying $100,000; OR:
b) Raise the tax from the majority of the 90% of the population or 900,000 people, thus each of them paying about $1,111.
We are seeing more and more that government preferring method (b) in raising additional taxes!
On the surface, doing (b) seems fair, until we diagnosed the incomes of the various groups:
(i) Top 1% people earn at least $500,000 a year!
(ii) The rest of the people do not even earn $200,000 a year!
For the past 20 years, the top 1% people's income increases exponentially compared to bottom 80% of the people! This also seems to be the case in Singapore!
Example, the lowest income earners earn about $500 per month 20 years ago and now they only earn $1000 per month (after the introduction of minimum wages in Singapore!). Ops, sorry, should be "Progressive wages" as some hard-core PAP supporters would like us to call it. To these people, "minimum wages" like those in US and the West are bad, while Singapore's "progressive" wages are good! Really? We can investigate left and right and up-side down and the Singapore's "progressive wages" include "minimum wages" as a core component, so isn't this a form of "minimum wages"???
On the other hand, the top salary people have their salary increased from about $500,000 per year to a few Millions $ a year!
What about the general people, like the fresh graduates pay? Well, 20 years ago, a fresh graduate from engineering course can get a salary of about $2,200 per month. Fast forward now, the same fresh graduate can only get a salary of about $3,000 per month or an increase of about 36%.
And oh, I should not forget to mention that cost of basic living is like having gone up by >200% over the past 20 years!
After knowing these above facts, would you still think that raising taxes via method (b) above is more fair than method (a)? After all, for past 20 years, the top-income earners have benefited the most and obtained several hundred % increase in salaries from Singapore's GDP progress (including the top civil servants and Ministers) vs the bottom 80% or so, so isn't it fair to ask them to bear more? Instead, they received an incentive of their income tax being slashed from 33% to 20% as a result of introducing GST!
Is it fair to make the bottom rang income people pay more taxes when they are already making ends meet with ever increasing living cost inflation as a result of their Govt's own policy?
Singapore's GST is a very good example isn't it?
Before 1994, there is no GST in Singapore, and the highest income earners pay 33% income tax and businesses pay 30% corporate tax. The income tax is progressive, and about bottom 40% people pay no taxes.
Since introduction of GST in 1994, GST has been raised to 7% while highest income earners' income tax has been slashed from 33% to 20% while businesses now only pay 17% corporate tax (vs 30% before 1994). This has resulted in significant tax reduction collected from highest income earners and businesses, and this short-fall in taxes have been made up significantly from GST collection which collects taxes from 100% population in Singapore!
Note that Singapore's GST has no tax exemption for basic necessities (unlike those in other countries, e.g. UK, Europe etc), hence hitting the poor and the lower middle-income very hard!
For a comparison, for example in UK, basic living necessities (e.g. water, gas, and electricity), food necessities, medicine, children needs are all exempted from GST (in UK they called it Value-Added-Tax or VAT).
Saturday, November 22, 2014
Why you work so hard but you are still poor?
When I was young, I have seen really hard working people, some even doing 2 jobs and working through week-end! We would want to think such hard working people would be rich sooner or later, but the facts tell us otherwise. In real life, many of such people are working hard to make ends meet, and they are still rather poor at the end of the day, having to work until they die to survive in Singapore! Why is this so?
I have come to the conclusion that hard-working is no longer the solution to getting rich because of the following global political and economic trend:
1) When a country's economy is in recession, their Central Bank now have a tendency to PRINT MONEY.
2) When money is printed, currency deflation/depreciation occurs. That is, your paper money CASH is worth much less than they normally are.
3) When currency deflation occurs, living cost inflation happened. The person can afford less and less or have to pay more and more for a living.
4) Currency deflation also suppresses interest rate, and your paper money CASH do not get much return in terms of interest earned (negligible compared to living cost inflation).
5) People who resort to working hard (and not smart) tend to be doing jobs that do not get much salary appreciation in this new world knowledge-based economy (not even fresh graduates in Singapore!). Their wage increase cannot catch up with living cost inflation.
6) People are living a longer life, and yet without being able to make much more and save much more for comfortable retirement (vs the escalating cost of living)!
7) When taxes have been tweaked and/or new taxes implemented by the Government, we are seeing more and more of such taxes in the form of Goods and Services Tax (GST) or other form of "wealth tax". For example, recently Malaysia just introduced GST. On the surface, we were told that these are "wealth tax" that only taxes the people who are "rich", but really what you are seeing is that such taxes, instead of taxing the genuinely rich (the top 1% income earners and rich businessmen), these "wealth taxes" are targeted at the majority of the population and middle-income families so that they do not tax the genuinely rich so much.
8) The above vicious cycle continues!
I have come to the conclusion that hard-working is no longer the solution to getting rich because of the following global political and economic trend:
1) When a country's economy is in recession, their Central Bank now have a tendency to PRINT MONEY.
2) When money is printed, currency deflation/depreciation occurs. That is, your paper money CASH is worth much less than they normally are.
3) When currency deflation occurs, living cost inflation happened. The person can afford less and less or have to pay more and more for a living.
4) Currency deflation also suppresses interest rate, and your paper money CASH do not get much return in terms of interest earned (negligible compared to living cost inflation).
5) People who resort to working hard (and not smart) tend to be doing jobs that do not get much salary appreciation in this new world knowledge-based economy (not even fresh graduates in Singapore!). Their wage increase cannot catch up with living cost inflation.
6) People are living a longer life, and yet without being able to make much more and save much more for comfortable retirement (vs the escalating cost of living)!
7) When taxes have been tweaked and/or new taxes implemented by the Government, we are seeing more and more of such taxes in the form of Goods and Services Tax (GST) or other form of "wealth tax". For example, recently Malaysia just introduced GST. On the surface, we were told that these are "wealth tax" that only taxes the people who are "rich", but really what you are seeing is that such taxes, instead of taxing the genuinely rich (the top 1% income earners and rich businessmen), these "wealth taxes" are targeted at the majority of the population and middle-income families so that they do not tax the genuinely rich so much.
8) The above vicious cycle continues!
4 pillars of Global Economy, 3 splattering
The 4 pillars of Global Economy I reckoned are: US, Europe, China, and Japan.
However, while US is still recovering from recession, and China is slowing down, Europe is in dormant and Japan is now in recession!
However, we don't need all 4 pillars to be flying to make money from investment, we just need to identify the one with back-burner and invest our money and bet on it!
So, most of my money now I now bet on US stocks and US$.
I have set aside some money for investing into European stocks and China stocks.
Japan? Forget about it! Chance of it recovering over the long-term is slim indeed!
However, while US is still recovering from recession, and China is slowing down, Europe is in dormant and Japan is now in recession!
However, we don't need all 4 pillars to be flying to make money from investment, we just need to identify the one with back-burner and invest our money and bet on it!
So, most of my money now I now bet on US stocks and US$.
I have set aside some money for investing into European stocks and China stocks.
Japan? Forget about it! Chance of it recovering over the long-term is slim indeed!