Category Archives for Money Saving Tips

If you want to retire, double your savings rate!

Everyone’s situation is different. The data from World Bank shows that Singapore has a gross savings rate of 47%, one of the highest in the world. Gross savings are calculated as gross national income less total consumption, plus net transfers.

you-need-to-triple-your-saving-rate-to-retire

Considering that the average working Singaporeans before the age of 50 contributes 37% of their monthly salary to their CPF account, it means only 10% of their disposable account is allocated to savings. That’s just not good enough if you are planning to retire earlier than the retirement age set by our government.

How to calculate your Personal Savings Rate

Here are the standard steps to calculate your personal savings rate:

Step 1: Add up your net savings (or losses) by adding both your non-retirement savings and your retirement savings for the year (all personal retirement contributions + all employer retirement contributions). I would not factor in capital gains or losses unless it is something that you can replicate every year. This number could end up being negative as well, if you had net debt for the time period, instead of savings.
Step 2: Calculate your total total income by adding your total take home income (after tax income) to your employer retirement savings.
Step 3: Find your Personal Savings Rate by dividing your total savings/debt (in Step 1) with your total income (Step 2).

Personally, I don’t include my retirement contributions to CPF when calculating my Personal Savings Rate because:

  1. The retirement contributions in my CPF accounts can only be unlocked at the age of 65. I want to retire before that so I need to build a retirement nest on top of the money in my CPF accounts.
  2. A significant portion of my retirement contributions is used to pay for my mortgage so I work on the assumption that they cancel out each other when I calculate both my savings and expenses.

Making small sacrifices will reap huge rewards

If you save 5% of your income, you can take 1 year off every time you work 19 years. On the flip side, if you save 90% of your income, you can take 9 years off every time you work 1 year! Here’s a chart from Go Curry Cracker that shows how many working years you would need, based on your savings rate.

working-years-by-savings-rate

Your money needs to work for you

After saving a large sum of your monthly salary, it’s time to make your money work for you. In order to retire early, you need to improve your financial status. If you currently have a credit card debt to clear, keep hacking at it by paying it off every month till it’s gone. If you are clear of high interest debts, build your investment portfolio by increasing your holdings every month.

Your money is no good sitting in the bank, earning a pathetic interest rate. The first rule of cash flow in cloud-based personal budgeting software, You Need A Budget is to give every dollar a job. Each dollar in your savings need a clear purpose and rolex. For example, 20% of your savings could go into an emergency fund in a bank account and the remaining 80% would be injected into your investment capital.

Increasing my Personal Savings Rate in 2015

Last year, I achieved a monthly Personal Savings Rate of 72.59% although most of that going into my real estate investment in Cambodia. With a small salary bump this year and a reduction in personal income tax, I increased my Personal Savings Rate to 81% because all the salary increase and tax savings is going into savings instead of adding new debts like buying a new car. As you work hard to grow your income, there’s no reason for your expenses to increase in proportionally to negate your income growth.

What is your personal savings rate?

How I reduced food expenses by 30% by bringing food to work

For the past few weeks, I’ve started packing lunches to work. There were quite a few reasons for me to do this. My office area only has a few reasonably-priced lunch and I don’t fancy myself dining in restaurants that often. It is also for health reasons as home cooked meals are definitely much more nourishing and healthy compared to food sold in food courts.

Here are some examples of the meals that I’ve packed lunches to work so far. I’ve included the Mickey Price (M.P) of cooking the meal myself along with the Usual Price (U.P) of eating the same meal in food courts.

Roasted chicken drumstick with side salad (M.P: $4.91, U.P: $6.00)

  • Romaine lettuce ($0.98)
  • Bell peppers ($0.32)
  • Sesame dressing ($0.82)
  • Mushrooms ($0.65)
  • Dried olives ($0.98)
  • Chicken drumstick with thigh ($1.16)

Chicken salad with sesame dressing (M.P: $5.10, U.P: $6.00)

  • Romaine lettuce ($0.98)
  • Bell peppers ($0.32)
  • Sesame dressing ($0.82)
  • Mushrooms ($0.65)
  • Dried olives ($0.98)
  • Chicken breast meat($1.16)
  • Egg ($0.19)

Aglio Olio with chicken wings (M.P: $3.77, U.P: $6.00)

  • Spaghetti noodles ($0.48)
  • Bell peppers ($0.32)
  • Carrots ($0.18)
  • Mushrooms ($0.65)
  • Dried olives ($0.98)
  • Chicken wings ($1.16)

Chicken soup (M.P: $2.67, U.P: $5.00)

  • Homemade chicken stock (free)
  • Chicken breast meat ($1.16)
  • Carrots ($0.36)
  • Onions ($0.14)
  • Mushrooms ($0.65)
  • Frozen corn and peas ($0.36)

Japanese curry with chicken drumstick and chapati (M.P: $3.69, U.P: $5.50)

  • Japanese curry roux ($0.69)
  • Chicken drumstick ($1.16)
  • Carrots ($0.36)
  • Potato ($0.24)
  • Mushrooms ($0.65)
  • Onions ($0.14)
  • Chapati ($0.45)

From a budget perspective, packing lunches for work definitely helps to reduce my monthly expenses. Using the meals above as an example for a 5-day work week lunch shows a 30% reduction in lunch expenses.

I’m pretty sure that I can reduce my lunch expenses further with ingredients that costs lower. For example, I would use a store-bought roasted chicken, cut them into various pieces and keep them in the fridge for later use. The bones would be used to make homemade chicken stock which would then be cooked into delicious soup.

Do you pack lunches for work too? I would love to hear what delicious food do you bring to your office.

Reduced interest rates for OCBC 360 accounts could make me switch banks

OCBC has just announced new updates to the bonus interests offered in their OCBC 360 accounts. You can read the details below but in short, it’s bad!

ocbc-360-interest-rate-changes

The OCBC 360 account is a textbook case of showing how many hoops consumers would jump through for bonus incentives. It’s a win-win situation for both consumers and OCBC because the account provides the highest interest rate for consumer banking in exchange for the large amounts of bank deposits that consumers keep with the bank. I just don’t understand why OCBC would want to kill the golden goose.

What are the changes and how does it affect me?

The biggest impact to me would be the reduced interest rates for payment bonus interest because it was the easiest way to earn a good 1% interest per annum by simply changing my bill payment habits to making it online through OCBC’s online banking platform. It’s such a shame that the interest would be halved from May onwards.

The next bonus interest rate to be reduced was credit card spending. I had to make significant changes to my spending habits to ensure that I clocked at least $400 on my credit card instead of paying everything with cash. A 1% interest was enticing enough for me to do this but I can’t say the same for half the interest rate. The increase in minimum credit card spending amount from $400 to $500 only made things worse.

The only bonus interest that OCBC left untouched was salary bonus. That didn’t help me at all because OCBC only qualifies salary credits with the description, “GIRO – SALARY” and all other forms of salary credits will not receive the salary bonus. Unfortunately, the salary credit method used by my employer does not qualify for the bonus interest.

The effective interest rate that I will be receiving in my OCBC 360 account from May onwards would be reduced from 2.05% to 1.05%. Boo!

What I plan to do to my OCBC 360 account

Truth be told, switching from POSB to OCBC 360 account showed me how a good online banking platform should be like. I hate to close that account down if I didn’t have to, but OCBC is forcing my hand here.

The ability to set up sub accounts for Saving Goals is a life-saver for financial budgeting. I could use this feature to set up automated contributions to my Saving Goals each month to ensure that I pay myself before paying anyone else. Once the money has been moved to a Saving Goal, it can’t be withdrawn from the ATM unless I move the money out of the Saving Goal. As these sub accounts are simply virtual accounts within the OCBC 360 account, I would still be able to benefit from the high interest rates of the OCBC 360 account.

In the mean time, I will be looking at the saving account options offered by other banks in Singapore to see if it is worth switching to another savings account. The Standard Chartered Bank Bonus$aver account is one of the options that I will be exploring as they offer $1.88% interest rate for theirBonus$aver accounts as long as the account holder charges at least $500 on their Standard Chartered credit card.