Saturday, May 3, 2008

Conversation with a retired teacher

I met a retired teacher this afternoon and we chatted over a cup of tea. We discussed about leading a meaningful retirement and about how many young people like us find it hard to save adequately.

After complaining that people of our generation find it hard to save, he began to share his concept of savings that he adopts since he was a boy. What are his concepts?

1) The concept of "70-20-10" salary allocation

* Ever since he get an allowance from his parents as a young boy, he allocates his allowance strictly according to the 3 numbers.
a) 70 refers to 70% of his salary that he used for whatever necessary family expenses
b) 20 refers to 20% of his salary that he put aside as savings before spending
c) 10 refers to 10% of his salary that he put aside to pamper himself like going for a holiday and for his hobbies.
* The 3 numbers subconsciously allowed him to save a considerable amount for his retirement today and yet enjoying his life when he was working.

2) The concept of feeding a Beggar at home

* He always imagine that if he does not keep to his first concept and spends unnecessarily, he will become a beggar when he is old because he had failed to save.
* So whenever he has a strong urge to buy something which he may not need, he will tell himself that there is a beggar at home that he needs to feed today. Go back and feed the beggar first before deciding if he still wants to buy that item.
* 90% of the time, he will not go back to buy that item unless he really likes it a lot.
* This concept had stopped him from buying a lot of things which may not be necessary

What an interesting day chatting with him and I feel that this old concept can still be applied in our generation. Except that, in our generation, we must also know how to invest it properly.


Anonymous said...

Good sharing, Adrain. There aren't many like you in ntuc. I guess, you are more educated and knowledgeable and most important you have a heart for others. Your heart for your clients has cost you a lot in term of low income but don't be discouraged you will be rewarded. I have seen many of your colleagues, they are unlike you, unscrupulous and have qualms to fleece and rob their clients in broad day light. Adrain, keep up the good work. You have compassion. Heaven has eyes.

blackbox said...

It is true that many of the successful and rich people in the world are frugal people. Famous examples are Warren Buffet, the founder of IKEA, our own Tan Kah Kee.

I agree investing right is important. All Singaporeans have to save 20% of our gross salary with CPF.

It is unfortunate we are not given the independence of full freedom in investing our money in shares (only 35% cap), foreign-based ETFs and such.

To add on, CPF-SA can only be invested in lower risk instruments. This goes against the investing ideology that longer time horizon allows higher risks to be taken.

While the CPF is constructed to benefit most people, it seeks to punish those who can self-invest.

Anonymous said...

CPFSA in low risk. What is the return?

Anonymous said...

I have seen a lot of my younger colleagues going to work by taxis everyday.