Tuesday, November 30, 2010

How much retirement income i needed?

Recently, one of my friend asked me how much do i need for my retirement? I quickly answered him USD900 (RM3000)per month when i retired by the age of 55 then he just show me the calculation and shocked me that i need approximately USD280,000 (RM900,000)and it is based on the following assumptions;

Current age = 40
Return on investment = 6%
Inflation rate = 3%
Retirement age = 55
Number of years requiring retirement income = 20 years

When i think about it then i have few choices when i am retiring;

a. Reduce my living lifestyle (migrate to the rural area)
b. Save the money
c. Depend on my children
d. Delay my retirement age

Question across my mind, which choice is more realistic? What are my biggest retirement concerns?

It is a very broad question to ask simply because everyone of us have a different life goals, right? Some may just need monthly income of USD300 (RM1000), some may say nobody can predict what will happen tomorrow, cannot think too much and etc. I am worry that if i am ever to live longer and when can i retire?

I first heard the word 'financial freedom' way back in 1998 from one of my friend and it really inspired me simply because he dare to dream as he told me that he want to be financial freedom by the age of 40.

to be continued....

Saturday, April 25, 2009

Retirement Planning

During my trip to Kuala Lumpur and i met a taxi driver who born in the year of 1941, and i saw him very old then i asked him "Hai! uncle, DO you have children?" he answered me ' Yes, three boys' then i replied him like this "if each of your son give you RM200 then you should be no need to work", he asked me back "How many kid do you have?" then i answered him that 'i have two kids', then he said 'when they are working and each of them give you money, you also no need to work'. He asked me back 'Suppose each of your kids give you RM200 and one of them didn't give you on that particular month, how are you going to live?'

What is the message here? We are living in the high inflation and spending power, low interest era, money is never enough for everyone of us unless we are having a proper financial planning and spending habits. During a coffee talk with my friends, some of them said we don't know what will happen tomorrow, so we no need to worry so much about tomorrow. However, if i know i will strike RM1million tomorrow and do i need to know how many ticket i need to buy? and if i don't have enough money who should i borrow if order to get that RM1 million?

I am every amazing when i talk to a young guy and he told me that he would like to retire at the age of 40 and i asked him, how? then he told me his plan how he going to achieve his dream. For me it doesn't matter whether he can achieve it or not but what impressed me is he have a dream and a plan to achieve his dream. Question come across my mind, i am starting working at the age of 25 and if i would like to retire at the age of 55, and live up to 75 years old. Meaning to say, i work for 30 years to accumulate my wealth and spend it for 20 years. How much do i need? and it all depend on what type of lifestyle do i want when i am retire.

My recent trip to China and Hong Kong i saw a lot of old folks worked as early as 6am in the morning. Question come across my mind "What can i do if i am living there?", 'Can i compete with them"?

"Nobody plan to fail but a lot of us fail to plan"

Tuesday, March 17, 2009

Why We Need Financial Planning?

What is Financial Planning?

It is a process of considering of financial needs and objectives of a person. Most of the people thought that financial planning is only for the rich people, some may think that is selling an insurance products, or a process to get rich or i am not rich no need for me to do financial planning.

For me, Financial Planning is a process to achieve personal financial objectives and goals. It is just like when we would like to go for a vacation then we will do some preparation such as where to go (destination)and places going to visit, what to bring?, costing and budget, which hotel to stay?, How many day? and etc.

The major components of financial planning are;

1. Wealth creation
2. Wealth protection
3. Wealth accumulation
4. Wealth distribution

In general, financial needs and objectives for a family are;

Basic need : clothing, food, home
Family need : Children education, medical expenses, House
Social need : Vacation, car, children's marriage, entertainment
Old age need : Retirement expenses (depend on what type of lifestyle),
healthcare expenses, wealth distribution

Questions come across my mind;

How much money do i need for my retirement? What type of retirement lifestyle i want? How much money do i need for my children education? What will happen if something unfortunate happen to me? Who are going to take care of my family obligation such housing loan, car loan, credit card, family living expenses & etc? How do i pay my medical expenses when i have no income or when i am a liability to the company?

The "Chicken Story"

When i was in primary school, few months before Chines New Year or Festive Seasons, my mother will bought few chics to rear (each cost between 80 cents to RM1) and cooked it during Chinese New Year or Festive Seasons. However, when i was in secondary school, my mother will bought chicken from the cold storage shop during festive seasons. What happen now? I can buy chicken from the restaurant, food court or KFC whenever i would like to eat chicken. How much it cost? what will happen 5 years from now?

For me, we are spending our money much more faster than before as more and more channels for us to spend our money such as Chinese New Year Sales, Hari Raya Sales,Stock Clearance Sales, Year End Sales and etc. In addition, we are also can buy furniture and electrical appliance by instalment or credit card or salary deduction. We can buy hand phone by using credit card, pay our utilities bills by credit card also and etc.

I still remember, when i was in secondary school my father bought a 14 inches television (black and white) cost RM500 and he need to pay cash. Now, we even can drive away a vehicle (certain brand) without paying a deposit, full loan.