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What is next for a 30 year old saving $36K a year?

Wednesday, September 2, 2015

On our road to financial security and financial freedom, if we are good savers, half the battle is won. If we make above average income and are able to save way more money than the average person, we could have won more than half the battle.

Y:
I have been highly focusing on saving money all these while, i seems to forget to grow the money.


Now that i am going to have a new home, albeit a small one. I do not want to want to put myself in a stage that i have to be consistently worrying about money. This is why i see that master AK has planned well and hope to point me in a better direction.


AK:
If you are a good saver and I think you are, that is half the battle won. like emoticon

As an investor, you have to think what kind of investor you want to be or most suitable to be. I will blog a bit about our conversation and a bit more later today.


For now, since you are a good saver, concentrate on doing it well. $3K a month means $36K a year or $360K in a decade. That is no small change.




Y:
I just wanna live and spend more time with my family, so i decided to work really hard for a number of years and save as much as i can when im still young. And right now, i think i am at the stage where i need to utilize the money i save to prepare for the next stage of my family.

 read your post of CPF SA account, so i plan to fill the SA account up when i still have the ability to do so.

just that, i am still figuring out all the STI ETF debate and reits dividend suitable for a short term investment. Personally, given i am such a "saver"-minded, i find it hard sometimes to let go of the money to invest. So i am still learning to take risk and go for whats best for me.

understand the risk of giving very specific advice as most likely Master AK will get blamed if things doesn't go as planned. I take your conversation as a sharing session, so that i can improve along the way. Thank you for taking your time to listen to me, Master AK!



Lots of money stashed away? That is a good problem!


AK:
OK, now I understand your situation and your mentality better. smile emoticon


If you are risk averse, then, risk free rates are what you should be going after. The only attractive risk free rates now are the ones we get from the CPF.


If you believe in saving money for retirement and if you believe in annuities, then, the CPF-SA is where you want to lock your money.


However, if you are not sure if you might need the money for a second property or to fund your children's tertiary education in future, then, you might want to do a voluntary contribution (VC) to your OA, SA and MA. There is no income tax relief for doing this unlike a CPF-SA top up but you will still get to enjoy pretty good risk free rates. wink emoticon


When it comes to investing, there is always some risk involved. You must be able to stomach market volatility. If you don't think you are the type, then, it might be a good idea to avoid.


If you want to try anyway, then, getting into an STI ETF through the services offered by POSB or OCBC and then putting in money regularly is probably less stressful an option.

Each one of us is different but we should be prudent and we should find our own way, a way that does the job and gives us peace of mind.

Related posts:
1. 30 years old with $150K liquid assets.
2. Greater financial well being is not beyond most of us.
3. Tea with Matthew Seah: OCBC BCIP.
4. Why should we buy a big and expensive home?
5. Get the most out of ASSI for financial security.

5 comments:

Frugal Daddy said...

He can consider bond like Singapore Saving Bond.

AK71 said...

Hi FD,

Oh, yes, we mustn't forget that option:
Singapore Savings Bond (Part 4): Good or not?

cheryl2010 said...

Hi AK

I would like to know, you suggested buying STI ETF via POSB or POEMS. How about buying STI ETF via SCB platform? I prefer this method as I can decide when I want to enter the market freely and there is no minimum commission.

What is the difference between buying STI ETF via POSB or POEMS versus buying via SCB?

AK71 said...

Hi cheryl,

On the topic of STI ETF, Matthew Seah has contributed guest blogs on the OCBC BCIP and POSB Invest-Saver. You might want to look at related post number 3 in this blog post.

Invest in the STI ETF through SCB? One would need to have a brokerage account with SCB. Personally, I don't have an opinion on this. If it does the job, it is fine by me. ;)

I will ask Matthew if he has anything to say to this. You will see his comment here if he has something to share.

Matthew Seah said...

Hi Cheryl,

Buying STI ETF on your own is definitely better than getting the banks to do it for you.

But there are some problems with this:
1. Fear and greed might cloud your decision to buy and sell.
2. SCB is a custodian account. Hence your shares will not be credited to your CDP account.

If you can overcome your emotions and make the right decisions to buy more when the market falls, and buy less as market goes up. Then DIY will be better. If you don't mind SCB owning your shares in STI ETF and you may not be able to get them back if SCB goes bust, then DIY with SCB is the best choice.

To add AK's reply, you may also want to read the comments on the few posts on ETFs that I have written as well. There are a lot more information in the comment section.

Currently, POSB and POEMS offer dividend reinvestment plan. So these will outperform OCBC in the long run. POSB is by far the best choice among the regular investment plans for STI ETF.

Regards,
Matthew Seah

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