I receive this question from a reader. Every time I receive posts on people planning to get married it makes me happy that the majority of Singaporeans are heeding the call of nation building.
We have a 30 year old chap writing in about the strategy that he should take to ensure he doesn’t miss out on the opportunity and find the most efficient path to build up $80,000:
After reading most, if not all of your articles and I start saving money in 2017, in general, to be able to embark on my wealth accumulation journey in 2018.
If you don’t mind, I need some advice before embarking on the journey of investing.
I am 30 this year, looking to apply for a flat this year. The flat should come in about 4 years so I have come up with a short time goal of saving $80,000 within this 4 years. Somewhere in between the 4 years, I should also be getting married and the expense of it will come from the $80,000.
I now have a cash savings of about $10,000, which incidentally can serve as my emergency funds.
My question is how do I best strategize to save my $80,000 without missing out on the opportunity to generate wealth starting from this year (from what I understand 4 years makes a big difference).
Now my reader Joe (name changed to ensure the girlfriend doesn’t find out he is planning all this in case he hasn’t “HDB flat proposed” her yet) is the sort of responsible person who sees something that makes sense and decides to plan for it.
When he is not sure he asks.
He has also work out the sum that he needs, which is $80,000. There is no break down how this $80,000 will flow but I suppose based on what he said it could be:
- Engagement Ring, Wedding Ring
- Wedding Photoshoot
- Wedding Banquet
- Home Renovations & Furnishings.
I think $80,000 is a reasonable sum to work with. I have friends who did all those in lesser sums. The bulk of the expenses would be the Wedding Banquet and Home Renovations and Furnishings.
However, depending on the generosity of your family members, friends and colleagues, you are likely to recoup a percentage of the wedding banquet.
The amount that is “lost” would be the number of tables that you be giving the bride’s family. That is up for negotiation.
You might not get the Flat at the First Try
Firstly, it seems Joe was anticipating that he ballots and is successful in his next try. That might not happen according to plan.
No matter. If the balloting was unsuccessful and he tries again it means that he have more time to build up this amount of money.
The Performance of Your Wealth Machine Matters Less to Building up $80,000 in 4 years.
I wrote not too long ago explaining that you do not have to force yourself to invest ASAP.
And it applies to some extend here.
Joe needs another $70,000 for his endeavor, if we include his $10,000 emergency fund.
Suppose he can put his money in the following financial instruments during this 4 year time frame:
- Hurdle Savings Accounts – 2%
- 4 year Insurance Endowment – 2.6%
- DIY Passive Index Portfolio made up of VWRD listed on LSE, STI ETF listed on SGX and ABF Bond Fund listed on SGX – Negative 20% to Positive 20%
- A REIT ETF – Negative 20% to Positive 20%
- Active Portfolio of Stocks – Negative 20% to Positive 20%
He is going to earn a rate of return that varies from 0% – 9%.
The table below shows how much Joe and his girlfriend needs to put away to get $70,000 after 4 years.
The minimum that Joe and girlfriend needs to put away is $1,500/mth. Notice that whether the rate of return of wealth building is 0% or 9%, he will need 3.48 years or 3.89 years.
When your time line is so short, the power of compounding and your rate of return matters far less.
If both of them are not high income earners, they have to dig in and save at least $1,500/mth together.
Learning to build wealth is important, and learning to build wealth early and start early helps because things do not work out immediately.
However, most financial planners will tell you that if your horizon is short, do not put your money in high volatile instruments.
If you do, there is a likelihood that instead of having $80,000 in 4 years, you have less than what is needed.
Then you have to find where to dig some money out.
This will leave you with the hurdle savings accounts like DBS Multiplier, UOB One Account, BOC Smartsaver, some Bond unit trust. Again, rate of return matters less.
Unless you put some money in cryptocurrency and the crypto’s price spike up. This is what happened to a colleague of my good friend. He had $2,000 in BItcoin which became $10,000 when it went up, and then switch to an alternate crypto which went up 3 times. That became a good part of the downpayment to a condominium.
In order for the above to work for you, some things need to happen in the next 4 years. If it does not, you are not going to get your $70,000.
To be safe, again, you have to save up.
If you have unique financial independence or lifestyle planning questions that you would love to hear what I think, you can write to me at [email protected]
Here are some of the through-provoking, financial planning questions or case studies readers have asked me and I have done a deeper dive on. They may trigger some reflections about your own financial situations and help you live a better life:
- The best strategy to save up $80,000 in 4 years to pay for the downpayment on a home
- A mid-35-year-old couple planning to have $2 million for retirement and getting one of them to stay-at-home
- Having a $550,000 portfolio, reaching Coast FI and thinking about making a risky career switch
- 3 years later, we relook the case of that $550,000 Coast FI situation
- Early retire with a $2.5 million dividend-focused portfolio due to health and stress at work
I invested in a diversified portfolio of exchange-traded funds (ETF) and stocks listed in the US, Hong Kong and London.
My preferred broker to trade and custodize my investments is Interactive Brokers. Interactive Brokers allow you to trade in the US, UK, Europe, Singapore, Hong Kong and many other markets. Options as well. There are no minimum monthly charges, very low forex fees for currency exchange, very low commissions for various markets.
To find out more visit Interactive Brokers today.
Join the Investment Moats Telegram channel here. I will share the materials, research, investment data, deals that I come across that enable me to run Investment Moats.
Do Like Me on Facebook. I share some tidbits that are not on the blog post there often. You can also choose to subscribe to my content via the email below.
I break down my resources according to these topics:
- Building Your Wealth Foundation – If you know and apply these simple financial concepts, your long term wealth should be pretty well managed. Find out what they are
- Active Investing – For active stock investors. My deeper thoughts from my stock investing experience
- Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
- Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
- Free Stock Portfolio Tracking Google Sheets that many love
- Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free
- Providend – Where I currently work doing research. Fee-Only Advisory. No Commissions. Financial Independence Advisers and Retirement Specialists. No charge for the first meeting to understand how it works
- We Cannot Always Be Shifting the Goal Posts When Doing Retirement Food Planning - March 21, 2023
- CPF’s New Personal Retirement Income Planner Tells Me I Secured a $1,430 to $1,770 Real Monthly Income to Successfully Cover My Most Important Retirement Lifestyle - March 18, 2023
- My Interview On Going Rogue @ Financial Coconut - March 16, 2023
Sunday 11th of March 2018
Interesting. With such a short time frame, investing in stocks/REITs is probably too risky - if there is a market correction or recession, he is going to lose a huge chunk of his investments.
Saving is probably the easiest way to achieve this goal. There's really no shortcut to cutting down on expenses (or earning more).
I took a look at some of the high yielding savings accounts recently, UOB One is probably the best place to park the money in the interm - 2.43% for first S$50,000
Monday 12th of March 2018
Thanks for highlighting the savings accounts.