Creating Your Money Ladder

Money Ladder

I am currently reading a book titled
"The Story of Rich" .

Rich in this story is about a small business owner who successfully sold his small business for an 8-figure amount and is waiting to retire.

However with the amount of money coming to his hands, he is pondering how to plan for it.

This book is part parable, part-non-fiction and how-to book on personal finance.

There is a particular chapter where the author mentions about creating a money ladder.For instance, if you have $400,000 of savings, you might want to split them into 4 portions.

• First $100,000 is used as emergency cash and is placed in a fixed deposit account.
• The next $100,000 can be invested in high growth shares for greater yield
• The next $100,000 can be invested in dividend playing stocks
• Last $100,000 can be invested as an opportunity fund.

In this way, one can ensure that they have sufficient cash when they need to use in an emergency and not have to compromise on growth in a stock market.

I realized that this plan may work if you have lots of cash upfront but i am thinking of this works if you have limited funds like $40,000?

Here's how I would split the $40,000

• $10,000 in emergency funds
• $10,000 small companies and high growth stocks
• $10,000 dividend playing stocks like blue chips and REITs.
• $10,000 in bonds.

What do you think?
Is this type of assets allocation effective or only works for those with a large 'war chest'?

Money Ladder

I am currently reading a book titled
"The Story of Rich" .

Rich in this story is about a small business owner who successfully sold his small business for an 8-figure amount and is waiting to retire.

However with the amount of money coming to his hands, he is pondering how to plan for it.

This book is part parable, part-non-fiction and how-to book on personal finance.

There is a particular chapter where the author mentions about creating a money ladder.For instance, if you have $400,000 of savings, you might want to split them into 4 portions.

• First $100,000 is used as emergency cash and is placed in a fixed deposit account.
• The next $100,000 can be invested in high growth shares for greater yield
• The next $100,000 can be invested in dividend playing stocks
• Last $100,000 can be invested as an opportunity fund.

In this way, one can ensure that they have sufficient cash when they need to use in an emergency and not have to compromise on growth in a stock market.

I realized that this plan may work if you have lots of cash upfront but i am thinking of this works if you have limited funds like $40,000?

Here's how I would split the $40,000

• $10,000 in emergency funds
• $10,000 small companies and high growth stocks
• $10,000 dividend playing stocks like blue chips and REITs.
• $10,000 in bonds.

What do you think?
Is this type of assest allocation effective or only works for those with a large 'war chest'?

How to Save $100k in 7 Years

This is my first post in Blogger and I am inspired to create this blog after coming
across this article in the Straits Times, dated 7 July 2013 article.

In this article, it shows how a young fresh grad, just straight out of school can save $100,000 in 5 years.

This article also assumes that

• You save 50% of your take home pay
• You are single
• You have cheap hobbies

• You are willing to make some sacrifices.

However, this article does not take into account the various 'milestone' events that can thwart a youngster's 'best laid plans' such as

• Student loans
• Weddings
• Honey moons
• New house
• Any other 'catastrophic' events.

After reading this article, I am inspired to safe $100k within the next 7 years.
In the next 7 years, I will be 40 and this is the goal that I want to reach at 40.
I am also hoping that combined with investments, I can exceed this goal. 

This is what I aim to to

1) Save 30% -50% of my take-home pay
2) Invest 60% into REITs and dividend paying stocks.
3) Start a part-time venture

I am also looking for a tracking chart to track my progress.

How to Allocate Your Money for Investing

I am recently researching into various ways to allocate one's funds for investing.

There is a book -"I Will Teach You To Be Rich" with an accompanying Blog with the same name at
http://www.iwillteachyoutoberich.com/blog/

advocates allocating your funds this way

• Short-term account

This is money that will e spent within the next 12 months.

So if you were to save about 10% of your monthly paycheck, you may need to allocate a percentage of that 10% into the three accounts. Take for example, a person who saves $1000 per month, he may need to allocate $300 to his short-term account to pay for forthcoming expenses like an upcoming wedding gift, travels in the year or for some 'unexpected ' expenses that may come up.

• Mid-term account 

This accounts is allocated for funds that will be needed within the next 3-5 years.

Your mid-term account is an account which will help you grow your wealth as well. 

Since these are funds you only need within the next 3 to 5 years, you can use these funds to invest in bonds, preference shares or currencies to earn higer interest.Again, you may allocate 30& of your savings to this account.

• Long term savings

Long term savings as the terms suggest is allocated to funds that you will need only 10 years or more down the road.  You can afford to invest in equities, preference shares, REITs and other investment vehicles that have a longer investment horizon but yield higher returns. Your long term savings are used for a down payment for a house, your desired vacation with your family, etc, etc etc.

This is another method of allocating your savings besides the investment approach used in the previous post.

How to Start Investing

I realized that most people have it backwards when it comes to investing.

To me, investing is supposed to be a tool to help you build your wealth and not a 'stumbling block'.

Hence in order to invest, one has to have one's finances sorted out first.That includes making sure that your basic needs such as

• day-to-day expenses are sufficient
• insurance needs are fulfilled
• emergency cash cushion is in place.

If you already have the above 3-pillars in place, then now'e the time to start to consider on investing in order to build greater wealth.

Here are the steps to take before you begin investing

• Sort out your finances
• Figure out how much you can invest monthly.
• If the amount is too small per month, you may like to combine cash from several months before investing. Alternatively, you can also invest in DRIPS or fractional amounts until you have built up sufficient amount to purchase the whole lot.
• Split the funds for investing into a separate account. 

How to allocate your investment funds

This is what I have read from the book Value Investing for Women" which I find useful here in terms of the allocation of funds for investing.

• Split up your investment funds into 3 accounts and label a) 30% into a Financial Freedom Account b) 30% of the funds are allocated when a mini-crisis happens c) 40% of the funds are allocated for buying when a crisis event happens.

Investing in D.R.I.Ps

Lately, I have been contemplating in investing in D.R.I.Ps of companies such as Wall Mart, MCD, Exxon Mobil etc etc.

However I am wondering if one can do so from Singapore. Will opening a USD stock trading account allow me to do that?

Ithink I need to research more on this.

Early retirement: AT 35

Fancy retiring at age 35?

This is a guest post I read over at http://earlyretirementextreme.com/when-to-retire-try-age-35.html

This is an informative blog which details how the writer working as a researcher was able to retire at a young age by saving 75% of his income. He has since retired and has 25 years of living expenses stocked up. Imagine a 25 year worth of emergency savings.

This blog has other posts and plans by guest bloggers on their on-going plans to retire early.

Really worth checking out if this is one of your plans to retire early.