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Save 100% of your take home pay. What?

Wednesday, March 19, 2014

Oh my, is this another sign that AK is ageing? 

Did he just say save "100%" of our take home pay? 

Maybe he meant 10%.

Well, no, I really do mean 100%.


AK is not only ageing, he is growing senile! 

How is it possible to save 100% of our take home pay?

OK, assuming that we had a gross annual income of $50,000 and we took home $40,000 after CPF deduction, could we, at some point in time save $40,000 a year, assuming that our take home pay remains constant?

The answer is "yes". 


1. Save 50% of our take home pay each year. This amounts to $20,000.

2. If we invest to enjoy at least a 6% yield a year, in the second year, we would be able to save $21,200 or 53% of our take home pay.

3. Invest again to enjoy at least a 6% yield a year and in the third year, we would be able to save $22,472 or 56.18% of our take home pay.

Just keep repeating the process and the numbers are:

4th year, $23,820. 59.55%.

5th year, $25,249. 63.12%.

6th year, $26,764. 66.91%.

7th year, $28,370. 70.925%.

8th year, $30,072. 75.18%.

9th year, $31,877. 79.69%

10th year, $33,789. 84.47%.

11th year, $35,816. 89.54%.

12th year, $37,965. 94.91%.

OK, for those who are superstitious about the number 13, this is where you might change your mind.

In the 13th year, we would be able to save $40,243 or 100.6% of our take home pay.

Would you like that?

Of course, there are many things we can say about this blog post and being unrealistic is one of them. 

For one, it is almost unthinkable not to get any increase in pay for over 13 years. 

Also, it is quite possible that there could be a period of unemployment (or two).

Instead of being unrealistic, let us try being realistically optimistic instead. 

If we should get an increase in pay, what should we do?

Maintain the same lifestyle, if possible. 

Then, we would be able to save more and invest more.

So, for example, if our take home pay became $50,000 a year in the 5th or 6th year, we should save $30,000. 

Of course, there will be things we can say about this being unrealistic as well. 

What about the higher costs of living, for example? 

What if we should start a family? 

What if there should be unexpected expenses?

What about an emergency fund?

Obviously, this blog post cannot take all circumstances into consideration and it has also dispensed with the consideration of having an emergency fund which, by the way, is very important to have.

All of us have different circumstances but I think we can all agree that the decisions in life, especially those which involve money, can either give us a boost or slow us down as we work towards a financially secure future.

Isn't it more important to get down to doing it and not keep thinking about how this is impossible and that it is unrealistic. 

There are too many "what ifs" in the world. 

For those who are still hanging on to the "what ifs", try this:

"What if this really works?"

Would we rather have a chance of making this work for us or not at all?

Now, if I have captured your imagination, let me add another dash of excitement.

Is there a possibility that at some point in time, we might save 200% of our take home pay?

Related posts (The prudent stuff.):
1. A common piece of advice on saving.
2. 5 points you ignore at your own risk.
3. Very first step to becoming richer.

Related posts (The scary stuff.):
4. Not enough money to be married.
5. From rich to broke?
6. Financially prepared to be married?


B said...


200% income saved is such a stretch. But I know you will say if AK can do it so can you :)

AK71 said...

Hi B,

Nope, I won't say it. There are people who don't like me saying it although the statement was really meant to motivate readers into taking action and not meant to encourage anyone in using what I have done as a yardstick. :)

All of us have to work with what we have been given although there should be no stopping us from trying to change our circumstances for the better if we want to, unless, of course, we are severely disadvantaged.

SGYI said...

Hi AK,

Thanks for writing up the details on how to save 100% of take home pay. Just curious, why compound the interest only on the base savings of 20k instead of adding 20k each year and compounding it? I hope I understood what you were trying to convene.

Thanks for mentioning my post as "inspiring story" in your blog. I didn't know my story was inspiring until you mentioned it. Haha.

Indeed there are too many what ifs. Maybe just do it now and think later will be better.

AK71 said...


Er, I don't quite understand the question but what I have done is a rough back of the envelope kind of calculation. I am sure we can be a bit more or a bit less conservative and we will get different numbers. :)

This blog post is really more of a challenge. Do we like the end result? If we like it, are we willing to do what it takes? Can we do it? (Bob the Builder comes in at this point.)

Your blog post was what "inspired" this blog post. LOL. So, it was inspiring to me but I hope it would inspire younger readers too. Don't keep listening to an old fart like AK. He is from a different generation when things were different. -.-"

The funny thing about achieving financial freedom, the rules don't change over time. ;)

AK71 said...

For anyone who might be interested, in the above example, by the 13th year, we would have saved a total of S$377,637 (everything else remaining equal). :)

My 15HWW said...

Hi AK,

There's probably less than 10% who saves more than half of their incomes.

Most of these people are motivated by quitting their jobs or at the very least taking up less taxing employment.

So I guess out of this lot, less than 10% will reach a day when they will be saving 200% of their income since a 50% margin of safety should suffice for even some of the more conservative ones?

So what am I alluding to?

You are rare indeed, AK! And kudos to you.

AK71 said...

Hi Stoical Keynes,

I actually believe that we would have a hard time finding people who save half of their take home pay consistently for even a few years. 1 out of 100 people, maybe?

If saving and investing are such popular topics, blogs like mine would be more popular than Xiaxue's. ;p

FoodieFC said...

if only life was so simple and straightforward =)

have a house to pay for =(((

SGYI said...

Hi AK,

Forget that I asked the question. I'm confusing myself too. Haha..

I'm glad my small and humble blog post is inspiring. Certainly hope it will inspire other people too. AK is not old. Still quite relatable to young people like me.

Money is a popular topic but saving and investing is not. These 2 don't seem to go hand in hand for most people. If someone blogs about spending money then become popular. Blog about saving money only a few people interested.

Tien Song Chuan said...

CPF helps you save!

AK71 said...

Hi FoodieFC,

Some people would argue that their homes are a form of savings or even investment. It could work out nicely for them over time. So, I shan't start a debate on this. ;p

AK71 said...


Oh, I am quite sure that the top blogs in fashion, food and travel would crush any of the top blogs in personal finance and investment flat! LOL! ;p

Reading your blog reminds me a bit of a younger me, when I was a lot more enthusiastic and energetic. These days, I feel a bit burnt out. It has been 4 and a half years...

AK71 said...

Hi Tien,

Oh, I like the CPF. It is a good system. In fact, I just did a VC to my CPF account this week. :)

SGYI said...

Hi AK,

The financial blogging community in Singapore is small. But I'm grateful for our small community of good people. I'm especially humbled by the comments I received on my blog for my 2 recent posts. Makes me realise that apart from making money, most of us do really care for people and the world. Isn't this why we started our blog in the first place? To share freely the information and help others along the way.

4.5 years is definitely long. Glad you're still in this community after so long. I have a feeling some of us bloggers will meet up one day. When it happens nobody knows. We're mostly anonymous but sometimes we know each other more than anything, sharing a common interest and philosophy in life. ;)

AK71 said...


I started this blog out of curiosity and boredom. I think you would remember I said this before. LOL. The blog found a higher purpose over time. ;)

As for our financial blogging community, there are both good and bad experience for me. So, I am pretty realistic. Anyway, there is no requirement for us to interact with everybody.

Time is a precious commodity. Spend it on what and who matter to us. :)

Unknown said...

hi AK

CMA hit a 52week low of 1.68. Would u be adding on? Is this a gd entry price if not vested yet?

Appreciate your advice. Tks!

AK71 said...

Hi Cindy,

I was looking at it this morning. :)

Fundamentally, the stock is undervalued. However, technically, it is possible for the share price to go lower amid weak sentiments.

So, if I were not invested yet, I might initiate a smallish position, keeping some powder dry in case of further retracement in share price.

I see stronger support at slightly under $1.50 a share, give or take a few cents.

Unknown said...

Thanks AK. Learnt from hard lessons of investing at the wrong price. For this, I'll monitor awhile more as I sell high selling volume today. Once it goes below 1.60, I might go in cos my funds are limited and hard to average down. Hope tmrw will have good bargains ... sometimes, I feel like a cheapskate esp. the longer I'm into investing, the more careful I'm with every cents. Unlike when I first started last yr, I feel more gang ho..hehe

AK71 said...

Hi Cindy,

You probably know that I use a hybrid of FA and TA in making decisions. It doesn't work all the time. Nothing does. However, it is the best I can find. :)

There is nothing wrong with being more cautious. In fact, it is probably a good thing. Better to not make money than to lose money. ;)

Anonymous said...

cheapskate investor == value investor :D

AK71 said...

Hi aceirus,

I think you have to send Warren Buffett an email and see if he agrees. ;p

Anonymous said...

Hi AK,

Would like to vouch for you.

Yes it's possible.

Have I done it? Erm... Check back with me 25 years later and I will tell you ok? 8P


AK71 said...

Hi Tree,

LOL. It is definitely possible. Whether we want to do it and how quickly we can do it will differ from person to person. :)

AK71 said...

We might not find 6% dividend yield all the time.

However, with the stock market weaker and quality blue chip stocks battered, I see stocks like Starhub, SingTel, SPH, ST Engineering etc. possibly offering more than a 5% dividend yield as their stock prices decline.

Could we see Mr. Market becoming more depressed and dividend yields expanding? ;)

AK71 said...

Reader says...
There's probably less than 10% who saves more than half of their incomes. Most of these people are motivated by a desire to quit their jobs or to take up less taxing employment. You are rare indeed, AK!

AK says...
All of us have to work with what we have been given although there should be no stopping us from trying to change our circumstances for the better if we want to, unless, of course, we are severely disadvantaged.

I actually believe that we would have a hard time finding people who save half of their take home pay consistently for even a few years.

Well, if saving and investing are such popular topics, blogs like mine would be more popular than Xiaxue's. ;p

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