哇，我在一月中写了这篇文，这个星期懒惰写就找之前存起来的文的来 post
最近在追看 Breaking Bad，看完后可能会和 Stranger Things 的评语一起写
------------------------------我是分割线------------------------------
#Summary at the bottom
#The fifth post I have written tonight, I post 2, the rest will be posted in the future haha
#Edited, I finished this post yesterday, I went yumcha with friends just now and also talked bout this coincidentally, hopefully everyone have a great work life ahead
Actually have many other posts still saved as draft, will post when I am not free to write weekly
Friday night is usually me enjoy blogging if I am not yumcha-ing with friends"
A LOT of my friends just spend what they earn
Having the good fortune to read the mindset changing book "Rich dad, Poor dad" at the age of 19, I know the importance of planning for retirement at a young age
Reason being
1. You have more time to compound your return ! Hence you get to retired at a younger age, common sense
2. The younger you start, the more times you are allowed to fail
3. It is not something incredibly difficult, it just take constant commitment
So let's start by calculating the amount you need for retirement, it depends on your lifestyle
I am a bit greedy, I would like to have a relatively comfortable life
I am calculating on the assumption that I can retire at 40, and live for another 40 years
When I am doing the calculation, I am actually overestimating by a lot as
1. My parents will be 100++ if they get to live another 40 years after I reach 40 year old
2. My children will be making money when I am around 50+ or 60
Also, in the calculation, inflation rate will be 3%
Needs
1.) Food expenses (To stay alive)
- I plan #planonly to have 2 to 3 kids, plus my parents, so it will be a family of 7
- a meal is RM10 per person, so 3 meals is RM 30, times 5 people will be RM 150 per day per 7 people
- RM 150 x 365 = RM 54,750 per year per 7 people
- Allow for 3% inflation for 40 years, and RM 54,750 for 40 years will be RM 4,128,219
2.) Electric/water utilities
- I am not very sure how much we pay for utilities, so I make it RM 2000 per month, which is RM 24,000 per year
- Allow for 3 % inflation for 40 years, it becomes RM 1,809,630
3.) Other BASIC necessity
- Make it RM 4,000 per month for a family ? (I really have no idea T.T )
- Hence, RM 48,000 per year
- For 40 years, it will be RM 3,619,260
4.) House
- OKAY this one I am still thinking as Malaysia property market is going to burst according to my idol, due to over supply and high valuation
- However I am not sure the prize of houses over 1 million will be affected
- The ideal house of mine will be garden + big room for my parents on ground floor + very big master bedroom so it is as if my wife and me are living on our own
- Anyway I am planning to save RM 2,500,000 for a house
- Also saving another RM 2,000,000 for renovation
- Total will be RM 4,500,000 ?
5.) Children
- Screw children, they will have to attend government high school
- Instilling good habits since they are small is so much more important than attending a privileged school. I have seen top students rise from Kampung, and worst students come from highly charged private school
- I changed my mind, 2 children will do. I just simply make it RM 1,000,000 per child ba.
- 2 children will cost me RM 2,000,000 until they are able to be independent
Wants
1.) Luxury items
- Personally I have not had a lot of spending on luxury item.
- Mostly I buy clothes few times in a year, I bought a Nitendo xds, also a pair of Oasis, and a pair of Puma shoes.
- But maybe my spending habit will change as my income grow, who knows
- Anyway I will have to cater to my wife and parents as well, so make it RM 500 per month per person, that will be RM 24,000 per year per 4 people
- In 40 years, it will be RM 1,809,630
2.) Traveling
- I am okay with traveling like maybe once or twice a year
- Make it RM 10,000 per year
- For 7 people, it becomes RM 70,000 per year
- For 40 years, the future value of the annuity is RM 5,278,088
3.) Cars
- I am really not a car person
- And my house really has no need for another car haha (we have 5 already damn)
-However I am guessing buying at least 2 cars will be inevitable as my car have to be replaced
- Let's make it RM 200,000 per car, so 2 cars cost RM 400,000
That will be all I am guessing ?
So the total of the future value of all my annual expenses will be
RM 4,128,219 (Food) + RM 1,809,630 (Electric/Water utilities) + RM 4,500,000 (House) + RM 2,000,000 (2 Children) + RM 1,809,630 (Luxury item) + RM 5,278,088 (Traveling)+ RM 400,000 (2 cars) = RM 19,925,567
After looking at how much I need for retirement, now let's see how to get there
Assuming I earn 5% interest on my total saving at age 40, using formula to calculate the value of RM 19,925,567 discount 40 years from my age 80 to age 40 using 5% discount rate
So it will be a simple formula of 19,925,567(0.95^40) and then we can see that
RM 2,560,677.60 is the amount I need to have when I am at age 40
(The difficult part is where I can find investment that gimme 5% annual interest which give me 5% return annually, as I am kind of worried about our national debt level so sovereign bond may not be a good option depends on how Malaysia fare when I am 40)
How to arrive to RM 2,560,677.6 at 40 year old, I am 24 now, deducting 3 months of internship, there will be 9 months this year where I earn degree holder salary, let's assume it is RM 2,800.
Lunch : RM 300, Transport : RM 408, Entertainment : RM 100, Others : RM 100
Saving : RM 1892
So I am saving RM 1892, and using stocks, my target is 3% per month
There will be 189 months starting 2 months later until I am 40 year old
Using simple annuity formula, my input is
1.) PMT : 1892 1/Y : 3% N : 189
I will have RM 16,765,043 when I am 40, far exceed the RM 2,560,677 required
of course it is assumed that I are good enough to earn 3% per month in stock market, and also it will get VERY hard to compound my saving when it gets larger
Now, maybe let's be a bit conservative, say I just save RM 1500, and make 1.5% per month
2.) PMT : 1500 1/Y : 1.5% N : 189
I will have RM 1,567,562 when I am 40, see the SUPER big difference ??
Let's experiment further
3.) PMT : 1892 1/Y: 1.5% N : 189
FV : RM 1,977,218
4.) PMT : 1500 1/Y : 3% N : 189
FV : RM 13,291,525
Now let's get real crazy and assume 4% every month, and RM 2000 saving, this time I will just need calculate the time for it to become RM 10,000 which then I can retire
5.) PMT : 2000 1/Y : 4% FV : RM 10,000,000
N : 135~136
which means that if I save RM 2000 per month, make 4% interest (not east, but doable) per month, I get to retire in 11.5 year, which is around 36 year old.
The hierarchy of importance of skill set is
1. Being able to compound your saving at high return (high return can be achieved with low risk, you just need to work very hard)
2. Start EARLY
3. Save money
SUMMARY
1.) Money needed for ideal retirement = RM 19,925,567
2.) RM 19,925,567 value at my age 40 using 5% discount rate will be = RM 2,560,677.60
3.) House = RM 4,500,000
4.) Total money needed at age 40 = RM 7,060,677
5.) Work hard, improve my skill, earn 3% per month at least, and also save RM 2000 per month
PMT = 2000 1/Y = 3% FV = 7,060,677
N = 158 OR 159
6.) Retire at 24 + 158/12 = 37 year old
最近在追看 Breaking Bad，看完后可能会和 Stranger Things 的评语一起写
------------------------------我是分割线------------------------------
#Summary at the bottom
#The fifth post I have written tonight, I post 2, the rest will be posted in the future haha
#Edited, I finished this post yesterday, I went yumcha with friends just now and also talked bout this coincidentally, hopefully everyone have a great work life ahead
Actually have many other posts still saved as draft, will post when I am not free to write weekly
Friday night is usually me enjoy blogging if I am not yumcha-ing with friends"
A LOT of my friends just spend what they earn
Having the good fortune to read the mindset changing book "Rich dad, Poor dad" at the age of 19, I know the importance of planning for retirement at a young age
Reason being
1. You have more time to compound your return ! Hence you get to retired at a younger age, common sense
2. The younger you start, the more times you are allowed to fail
3. It is not something incredibly difficult, it just take constant commitment
So let's start by calculating the amount you need for retirement, it depends on your lifestyle
I am a bit greedy, I would like to have a relatively comfortable life
I am calculating on the assumption that I can retire at 40, and live for another 40 years
When I am doing the calculation, I am actually overestimating by a lot as
1. My parents will be 100++ if they get to live another 40 years after I reach 40 year old
2. My children will be making money when I am around 50+ or 60
Also, in the calculation, inflation rate will be 3%
Needs
1.) Food expenses (To stay alive)
- I plan #planonly to have 2 to 3 kids, plus my parents, so it will be a family of 7
- a meal is RM10 per person, so 3 meals is RM 30, times 5 people will be RM 150 per day per 7 people
- RM 150 x 365 = RM 54,750 per year per 7 people
- Allow for 3% inflation for 40 years, and RM 54,750 for 40 years will be RM 4,128,219
2.) Electric/water utilities
- I am not very sure how much we pay for utilities, so I make it RM 2000 per month, which is RM 24,000 per year
- Allow for 3 % inflation for 40 years, it becomes RM 1,809,630
3.) Other BASIC necessity
- Make it RM 4,000 per month for a family ? (I really have no idea T.T )
- Hence, RM 48,000 per year
- For 40 years, it will be RM 3,619,260
4.) House
- OKAY this one I am still thinking as Malaysia property market is going to burst according to my idol, due to over supply and high valuation
- However I am not sure the prize of houses over 1 million will be affected
- The ideal house of mine will be garden + big room for my parents on ground floor + very big master bedroom so it is as if my wife and me are living on our own
- Anyway I am planning to save RM 2,500,000 for a house
- Also saving another RM 2,000,000 for renovation
- Total will be RM 4,500,000 ?
5.) Children
- Screw children, they will have to attend government high school
- Instilling good habits since they are small is so much more important than attending a privileged school. I have seen top students rise from Kampung, and worst students come from highly charged private school
- I changed my mind, 2 children will do. I just simply make it RM 1,000,000 per child ba.
- 2 children will cost me RM 2,000,000 until they are able to be independent
Wants
1.) Luxury items
- Personally I have not had a lot of spending on luxury item.
- Mostly I buy clothes few times in a year, I bought a Nitendo xds, also a pair of Oasis, and a pair of Puma shoes.
- But maybe my spending habit will change as my income grow, who knows
- Anyway I will have to cater to my wife and parents as well, so make it RM 500 per month per person, that will be RM 24,000 per year per 4 people
- In 40 years, it will be RM 1,809,630
2.) Traveling
- I am okay with traveling like maybe once or twice a year
- Make it RM 10,000 per year
- For 7 people, it becomes RM 70,000 per year
- For 40 years, the future value of the annuity is RM 5,278,088
3.) Cars
- I am really not a car person
- And my house really has no need for another car haha (we have 5 already damn)
-However I am guessing buying at least 2 cars will be inevitable as my car have to be replaced
- Let's make it RM 200,000 per car, so 2 cars cost RM 400,000
That will be all I am guessing ?
So the total of the future value of all my annual expenses will be
RM 4,128,219 (Food) + RM 1,809,630 (Electric/Water utilities) + RM 4,500,000 (House) + RM 2,000,000 (2 Children) + RM 1,809,630 (Luxury item) + RM 5,278,088 (Traveling)
After looking at how much I need for retirement, now let's see how to get there
Assuming I earn 5% interest on my total saving at age 40, using formula to calculate the value of RM 19,925,567 discount 40 years from my age 80 to age 40 using 5% discount rate
So it will be a simple formula of 19,925,567(0.95^40) and then we can see that
RM 2,560,677.60 is the amount I need to have when I am at age 40
(The difficult part is where I can find investment that gimme 5% annual interest which give me 5% return annually, as I am kind of worried about our national debt level so sovereign bond may not be a good option depends on how Malaysia fare when I am 40)
How to arrive to RM 2,560,677.6 at 40 year old, I am 24 now, deducting 3 months of internship, there will be 9 months this year where I earn degree holder salary, let's assume it is RM 2,800.
Lunch : RM 300, Transport : RM 408, Entertainment : RM 100, Others : RM 100
Saving : RM 1892
So I am saving RM 1892, and using stocks, my target is 3% per month
There will be 189 months starting 2 months later until I am 40 year old
Using simple annuity formula, my input is
1.) PMT : 1892 1/Y : 3% N : 189
I will have RM 16,765,043 when I am 40, far exceed the RM 2,560,677 required
of course it is assumed that I are good enough to earn 3% per month in stock market, and also it will get VERY hard to compound my saving when it gets larger
Now, maybe let's be a bit conservative, say I just save RM 1500, and make 1.5% per month
2.) PMT : 1500 1/Y : 1.5% N : 189
I will have RM 1,567,562 when I am 40, see the SUPER big difference ??
Let's experiment further
3.) PMT : 1892 1/Y: 1.5% N : 189
FV : RM 1,977,218
4.) PMT : 1500 1/Y : 3% N : 189
FV : RM 13,291,525
Now let's get real crazy and assume 4% every month, and RM 2000 saving, this time I will just need calculate the time for it to become RM 10,000 which then I can retire
5.) PMT : 2000 1/Y : 4% FV : RM 10,000,000
N : 135~136
which means that if I save RM 2000 per month, make 4% interest (not east, but doable) per month, I get to retire in 11.5 year, which is around 36 year old.
The hierarchy of importance of skill set is
1. Being able to compound your saving at high return (high return can be achieved with low risk, you just need to work very hard)
2. Start EARLY
3. Save money
SUMMARY
1.) Money needed for ideal retirement = RM 19,925,567
2.) RM 19,925,567 value at my age 40 using 5% discount rate will be = RM 2,560,677.60
3.) House = RM 4,500,000
4.) Total money needed at age 40 = RM 7,060,677
5.) Work hard, improve my skill, earn 3% per month at least, and also save RM 2000 per month
PMT = 2000 1/Y = 3% FV = 7,060,677
N = 158 OR 159
6.) Retire at 24 + 158/12 = 37 year old
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