It's a new year again. How has 2016 been for you? As we begin the new year, it is time to reflect on my goals for 2016.
Here are some goals I set for 2016:
Advancing in my career
In 2016, I wanted to advance in my career after being in the same job for the past 6 years. I figured that if I continued to stay on, there wouldn't be much progression. I also wanted to go into another industry and utilise my degree, which was in Economics.
I have started a new job in January 2017. It's not easy to venture into the unknown, but I got a better offer with higher salary and I thought I should go for it while I still can. I'm prepared to face the challenges and excel in my work no matter what it takes going forward.
Saving at least 50% of my income
I set a goal to save at least 50% of my income in 2016, which I managed to do.
As compared to 2015, my expenses in 2016 had increased by about 90%, which meant I spent almost double of what I did in 2015. Thankfully, I managed to create additional income, which helped to offset my expenses for the whole year, and still allowed room for savings. This additional income came from stock dividends, writing, consultancy services and advertising income from the blog itself.
I'm happy to say the goals I set for 2016 were mostly achieved. However, as I have made plans to settle down with my partner in the next few years, higher expenses are expected. With that, my goal in 2017 is to plan for a life together with my partner, and for our future.
Goals for 2017 and Beyond
1. Buying a new home
I'm intending to save up for marriage and also for a house in the next few years. I will focus more on the housing part, where I plan to utilise my CPF savings. If not for the savings in my CPF account, I probably will not have enough to pay for it.
When planning my home purchase, I started off by looking at two key points:
- How much CPF can I use to pay for the downpayment?
- How much is the monthly loan instalment?
My budget for a house is $500,000, which is the average amount for a 4-room BTO flat in a mature estate, as seen in the November 2016 HDB BTO launch. We will want a property that is conveniently located near the MRT and also not too far away from town. I will probably pay a bigger sum of downpayment and take a $300,000 loan. The downpayment will be roughly $200,000, which we plan to pay for using CPF as well. For a $300,000 loan with a 25-year loan tenure and 2.6% interest, the monthly loan instalment will be $1,362. We want to make sure we have enough CPF funds to pay the monthly instalment and this amount is affordable for us. It is possible to settle housing matters just using CPF alone!
2. Rethinking retirement
With housing matters more or less settled using CPF, I started to think about whether I have enough savings to retire. Using our CPF for housing will entail some tradeoffs even though our house is an asset which we may monetise in the future. I would still want to have enough savings in CPF for retirement without having to monetise my property.
The questions above made me embark on a daring numbers calculation to unveil how my CPF account grows over the years. I'll use a simple calculation from age 25 to 35 based on the scenario and assumptions below:
- Starting balance of $5,000 in Medisave Account (MA), $18,000 in Ordinary Account (OA) and $5,000 in Special Account (SA) at age 25
- Median income of $3000 at age 25 and salary remains constant
- The interest rate of 2.5% p.a for OA and 4% p.a for SA and MA.
- No consideration for additional 1% interest in all the accounts
- Savings in OA is not used for housing
With all the scenarios in place, how much CPF do you think each will have by age 35?
The answer: $205,406
The CPF accounts continues to grow after age 35 and interest is compounded year after year. Even with CPF used for housing, the account should still continue to grow.
Now, retirement is not only about the lump sum but also about how much we may need per month for our daily expenses when we retire. For retirement planning, CPF LIFE plays an important role. If we have the Basic Retirement Sum (BRS) of $83,000, we will get $700 - $750^ per month at age 65.
However, $700+ per month isn't a lot of money to me. I will definitely plan for higher payouts for my retirement. For myself, I will plan for a monthly retirement income of $4,500, taking into consideration inflation. A sum of $249,000, which is the Enhanced Retirement Sum (ERS) under CPF LIFE will pay out $1,860 - $2,000^ currently. The various retirement sums may be higher in the future, which might allow me to meet my target of $4,500 monthly payouts that I had planned for.
If you aim to have more in your CPF savings beyond your monthly contributions, you can consider topping up under the Retirement Sum Topping-Up scheme. We can also enjoy tax relief of up to $14,000 when topping up in cash - $7,000 tax relief when we top up our own Special / Retirement Account and an additional $7,000 when we top up for our parents, parents-in-law, grandparents, grandparents-in-law, spouse and siblings. I have topped up my parents' CPF account in order for them to enjoy a more comfortable retirement when they reach 65. They will receive higher monthly payouts while I enjoy tax relief.
3. Focusing on my new job in 2017
As mentioned earlier, I've started a new job this year. It is a totally different job scope and industry for me so I will be learning new things and taking up new challenges to advance in my career. I will like to improve on my communications skills, build up my network and improve myself further.
4. Saving for the future
Saving money is still an important aspect in my life. However, over the years, I realised there is a limit to how much I can save if I do not increase my income. Changing jobs and creating more streams of income enabled me to earn more and save more in the process. Since I've started a new job in 2017, the focus will be on career advancement. I will be able to save 50% of my income easier with higher income now and in the future.
I will also be looking to increase my investments in stocks as I see opportunities to invest in the market the past few months and also in the upcoming year. Increasing my investments means more dividend income from stocks, which will also boost my cashflow and savings to redeploy in the market.
5. Relationship Goals
Besides money, relationships are important too. Because of my girlfriend's encouragement and support, I feel I have become a better person. I hope I have given her happiness and made a positive impact in her life as well.
For the year 2017, I will strive to create a more positive impact for the people in my life and also through my blog. I have been inspired before and it really changed my life. I hope I can also be an inspiration for people in 2017.
The New Year 2017
What are your goals for 2017? If you've not created any goals, it's good to spend some time to think of some goals you will like to achieve this year. Personally, setting goals has given me the motivation and purpose for my life. Why not set some for yourself and see how it works out for you?
^ Payout figures are estimates, based on the CPF LIFE Standard Plan and computed as of 2017
SG Young Investment is a financial blogger in his late 20s who has a passion for finance and investment. SGYI has written more than 300 articles on housing, CPF, investments and personal finance which to date, has attracted more than 3 Million views on his blog.
This article first appeared on SG Young Investment.