How Much Do You Need For Retirement (Part 1)

From previous posts on “Needs and Wants” and “Inflation Rate”, you have got the idea and understand the condition of your actual needs. If you have not done it, do it now as these are important components to allow you to identify how much you need for retirement.

Inflation Rate

After reading my previous post, Needs and Wants, have you got the idea on how much you have spend on your needs and wants? Well, in order to know more in exact on the pattern of your spending, I suggest you to look into at least past 3 years records. Also, by doing so, you will be able to get your personal inflation rate.

So, what is inflation rate? It is a rate to calculate how the prices of goods are moving. If the rate is moving upward, we call it inflation. On the other hand, if the rate is going south, we name it deflation. Isn’t that simple?

OK, now, we always get the image that national inflation rate is between 2~3 %. Does it mean that your inflation rate is about the same? Don’t ever to think of that. You may surprise, after finished the exercise above, that your personal inflation rate is outpace national inflation rate. National inflation rate is calculated based on actual price movement with the weight assigned to each category. As for personal inflation rate, you weight on each category will be different from national. For example, when there is an increase in the price of sugar, the personal inflation rate for low sugar users will be much less than heavy users. Get the picture?

As you have categorized your spending into needs and wants, we require only needs portion to calculate personal inflation rate. The reason is very simple. Just imagine after you retire, will still have spare money on your casual spending or will you focus on what you actually needs?

Now, by dividing current year spending needs over the previous year and you will get the inflation rate. For example, your current year spending needs is $34,500 while previous year was $33,000, your inflation rate will be 4%.

(($34,500 / $33,000) - 1) * 100 = 4%

From this calculation, you should realize that, even if you spend only $125/month extra a month, you are actually creating 4% inflation. Wow!

So, go to work on your own inflation rate now and think about how to control it. Of course, in order to achieve financial freedom, one of the critical success factors is to learn how to control your personal inflation rate.

Needs and Wants

How well can you differentiate your needs and wants?

Generally, needs are essential things that are so important that your life can’t carry on without them. For example, clothes, food, shelter and transportation are everyone’s basic needs. Without them, we will find ourselves starve, cold and difficult to move and you the consequences.

Comfortable Retirement

Have you ever calculated how much do you need for your retirement? I bet some of you, even you have, might shock about the figures and wondering how to achieve it.

To Move On

It is a brand new year of 2010, what resolutions you have in mind? How are you planning to complete your resolutions?

It is very important to have your goals and objectives in written form. If you think it is not necessary as you can always remember it in mind, I bet you will never act towards your goals it is human nature. From my observation, human beings are rather passive if they have no motivations to move on. Motivations may include written goals and objectives as they act as a cue.

Daily Expenses Control

"Everything price up!!!".  Yes, living expenses nowsaday is a big challenge to middle and low income earners.

Of course, there are many ways to minimize the impact.  Some might opt for one more part time job while others may look for ways to spend less.

As for me, time with family is more valuable than part time job, I pick the latter.

REITs (Part 2)

Now, the next question is, when should you buy REIT? REIT Fund Managers report to Bursa its latest NAV on daily basis. As its NAV constitutes of the value of properties hold by Fund Managers, their value tend to be more stable than NAV of unit trust which subject to market value fluctuation of shares or bonds.

Therefore, the rule of buying REIT is to buy those reputable REITs with market price less than their NAVs. This is because, even the trust is liquidated immediately, the fund will pay its unitholders based on their NAV but not the market price. Therefore, if you are able to buy REITs that are less than their NAV, you are actually buying properties at discount. As I highlighted in my previous post, Direct Real Estate Investment vs. REITs, you only need to sell REITs when market prices are higher than its NAV, or else, hold them for dividend cheques.

In average, REIT in Malaysia is giving yield between 6~12%. All information about market price, NAV, dividend yield can be obtained from daily news paper or your online share investment portal.

Happy investing.

REITs (Part 1)

In my previous post, Direct Real Estate Investment vs. REITs, I have shared my view on the goodness of REIT in which I do not require huge upfront capital for properties investment; I do not need to carry any debt; I do not need to seek for suitable tenants; I can sell my holding whenever I like as long as my selling price is matched in Bursa; my fund manager will collect rental from tenants and issue payment as dividend to me.

Direct Real Estate Investment vs. REITs

Well, a number of investment gurus, such as Robert Kiyosaki and Azizi Ali, advocate getting rich from real estate investment on the basis on its features like:

1. a kind of force savings

2. good in value preservation

3. appreciating in value in long term

4. regular rental income ……

Book Review: How You Can Get Rich from Swing Trading

Even though I am neither a speculator nor a short-term trader, but I find this book is very useful in the sense of its ideas on identifying market sentiment to determine the right time to enter and exit.

Book Review: Warrent Buffett and the Interpretation of Financial Statements

What a book!  It mades the reading of Financial Statement become so easy and straight forward, from Income Statement to Balance Sheet and Cash Flow Statement.

As a matter of fact, I have been reading books on how to figure out Financial Statement effectively as I require myself to have the skill on identifying good public listed companies for investment.  However, after finishing these books, most of the time, I lost in the middle of no way as there are just too many ratio and interpretation.  This book, however, has totally change my view of Financial Statement reading.  I do not realize that competitive advantages can be identified so easily.  I believe serious investor so get one before any investment.

Happy reading