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Anonymous

26 Oct 2020

Property

How should I go about earning the capital for BTO in about 5 years time? I am targeting 50-60k by then?

I am currently 27yo with a job that brings me $2400/mth home. I have my emergency fund of $10k set aside in Singlife account and ~$9k of additional savings. Aside from insurance which is already covered ($200/mth), I am investing $250/mth into digiportfolio, planning to invest a little bit more maybe in Syfe REIT+ portfolio. How should I go about earning the $50-60k for a BTO in about 5 years time? Does that mean I should only start saving/investing for retirement only after the BTO is settled?

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Duane Cheng

26 Oct 2020

Financial Consultant at Prudential Assurance Company Singapore

Hi there,

Based on my viewpoint, you have a goal which is to accumulate capital for your BTO, which is good! However, I feel that you could simplify the process by breaking down the numbers.

Firstly, to payoff your BTO, it can be a cashless transaction by utilising your CPF funds. If we are only looking at the next 5 years, your approximate accumulated OA funds would be 14k at Y5. If you duplicate this number for simplicity, to represent your spouse/fiance, that would mean approximately 30k worth of CPF funds to use for your housing.

If you were to save for the excess amount, to get a better/bigger flat, you should save at the side, and not put money in to the market for the purpose of housing. You can always invest concurrently, so you do not need to delay your saving/investing for the purpose of retirement. If you break down the figures, and you want 50k in 5 years, just save around 850 in extra liquidity, just for the sole purpose of housing.

Hope i was able to shed some insight on your situation!​​​

Pang Zhe Liang

26 Oct 2020

Fee-Based Financial Advisory Manager at Financial Alliance Pte Ltd (IFA Firm)

Cash Flow

Firstly, we need to have a complete understanding on our cashflow. Through this process, we will understand our earning ability and spending habit.

Here is a Guide:

Understanding Your Personal Cash Flow

Goal

Next, let's assume that the goal is to accumulate $60k for your BTO. In other words, that is equivalent to saving $12k annually, or $1k monthly.

At this point, we will revisit your cashflow to determine your saving ability. This helps us to understand whether there are any unnecessary expenses that we can trim.

Meanwhile, it is better to plan for your retirement today rather than to wait for your house to be completed first. This is simply making use of the power of compounding interest - start small, and let the amount build on its own.

Above all, the power of compound interest is stronger than to start later, with a higher amount or longer contribution period.

More Details: What is Compound Interest

Brainstorm

Thereafter, evaluate all the tools that are able to help you reach your goal. For instance, if you can find a tool that generates 3% yield annually, then you will only need to save about $925 monthly instead of the original $1,000.

For this purpose, you may wish to have a mixture of tools that generate guaranteed returns (lower risk) and some with volatility (potentially higher return).

The exact mix of portfolio will depend on your risk appetite as well as on your cash flow planning.

Budget

Finally, create a budget that is capable of helping you to plan for the future. The best way to do this is via automation.

How I do My Budget:

How to create a Monthly Budget

Don't forget to do regular reviews on stay on track to your goal.

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