[caption id="attachment_1371" align="alignright" width="243" caption="Photo by Gaetan Lee"][/caption] 2008 was an eye opener for me especially for one who experiences his first recession first hand. While I took into consideration a slowing economy, I did not expect it will become this bad.  Hence, I made a couple of bad decisions to invest in construction and shipping counters. The construction and shipping boom is well and truly over and I estimate it will take at least 5-10 years for them to recover. With news of retrenchment everywhere, I’m fortunate that my job is safe (for now). Our CIO only mentioned that there will be a head count freeze and there are no plans for a reshuffle but as we all know, top management is always fickle, hence we should always listen to such news with a pinch of salt. My current finances aren't exactly in a mess but the  plan was drafted at the end of 2007 and is no longer viable in the current economic conditions. In addition, I will have more commitments in the coming year such as planning for my marriage, starting a joint account and making a contribution towards my grandfather's living expenses. Faced with so much uncertainty and increased commitments, I will adopt a conservative approach to my 2009 financial plan. 1) Insurance This is a continuation of my insurance plan from year 2008 to terminate ‘useless’ policies and to use that money to broaden up my coverage. I only have one of such policies to settle and that is a 20-year endowment plan. 2009 will mark the 16th year into the policy and I know that most will recommend me to hold on to it until it matures because I will be able to receive a maturity bonus in another 4 years. The main reason for wanting to terminate it is to use this sum of money for marriage and a quick calculation shows that I will break even in 2009. If I continue to pay till its maturity date, my annual returns will only be about 3%. This figure is calculated based on the statement I received for 2007 when the economy was still sound but given the market outlook for the next 4 years, there is a high chance that my returns will be zero or even negative. I still have a few months before I am required to make a decision and I will be consulting with my agents and doing a more thorough calculation before doing so. Another portion of my insurance planning is to calculate how much premium I will require for the next ten years. On top of my own policies, I’m also paying for several of my parents’ policies i.e. hospitalization plan and rider and DPS. The premium in these plans increases after every age band. To simplify things, I calculated how much cash premium I will have to pay in the 10th year and set that amount aside now each month. Hence while a substantial amount of my monthly salary is in insurance, a small portion of it can be used as my emergency fund and if it is not utilized, it can eventually be used as my parents’ retirement fund. 2) Parent’s Retirement With their insurance taken care of, the next step is to ensure that they have sufficient for their retirement. This is especially challenging since they have practically zero savings. However on the bright side, I’m glad that my parents are healthy and still able to work. I have identified 3 main assets which can be used for their retirement.

• Flat. By far the most valuable asset. There is still an outstanding loan of about $100K and I hope that my parents will be able to continue working and finish paying the loan by age 65. After which, they can sublet the entire flat and stay with me or rent out a few rooms. The income from this should be able to provide them with their basic needs. The worst case scenario will be to sell the flat and stay with me. The money will then be used to fund for their retirement.

• Dad’s insurance. My dad has a life plan that has been enforced since 1987. Based on the benefit illustration, he will have about $50K when he reaches 60. However, he has taken a loan from it and the amount has snowballed. After consulting with his agent, I agree that there is no point in surrendering the policy as the returns has been pretty decent (about 3% annually). Hence, I’m setting aside another portion of my salary to repay this loan. As the loan is pretty substantial, I have roped in my mom to contribute a small portion. With my mom’s contribution, we should be able to repay the loan in 5years. I'm also using this as a way to force my parents to save.

• Mom’s CPF – Special Account. With a slew of new plans to help the elderly like CPF Life, I will be exploring ways to maximize the use of her CPF to help her in her retirement. However, like most Singaporeans, she’s distrustful of CPF and will want to withdraw the entire amount as soon as possible. It will take some convincing on my part.

3) Joint Account with my girlfriend. As of now, it will be used for marriage and will also serve as a primary savings account for my girlfriend. With this account, I hope to help her cultivate a habit of saving regularly. 4) Monthly expenses, Bills and other liabilities. There will be no change in my day to day living expenses but there will be a slight increase in my bills due to upgrading of my broadband. In year 2009, I will also have to help out in paying for caring of my grandfather. 5) Personal Savings. After taking into account all of the above, I will have very little left for my own personal savings. I'm aiming at using this personal savings as an additional fund for my marriage but sadly, I'm way off my targeted amount. Hence, the idea of terminating my endowment plan as I have discussed earlier. Another factor to consider is when I’m getting married. Naturally, with a longer time frame, I can afford to save more. [caption id="attachment_1375" align="aligncenter" width="300" caption="Budget 2009"][/caption] The pie chart above shows the various allocation of my monthly salary. Two important aspects are missing; The first is setting aside money solely for emergency use. I currently have 2 months worth of salary in a money market fund specifically for that. As what I have mentioned earlier, I’m paying more than what is  required for my insurance and together with my joint account and personal savings, I will be able to build up an additional 2 months of salary by the end of 2009. Granted this money is not meant for emergency use and in the event that I’m out of a job, I will only have 2 months before digging into those funds. This may inevitably lead to a delay in my marriage plans but given my current salary, this is the best I can do. The other option in the event that I’m out of a job is to have a less extravagant marriage. The second is money for investing. I believe it will be a waste not to take advantage of the depressed stock prices. However, as I won’t be setting aside any money for investing, I can only rely on my existing investment funds. I still have some cash left and I can sell some of my existing stocks to raise more cash. However, I dislike the idea of selling my stocks now at a loss and will be retaining the majority of them as I believe that they will pick up once the market recovers and besides, they have been providing me with a constant stream of dividends even in these bad times. In other words, I will only sell my stocks after taking into consideration all factors. With the limited cash that I have, I’m looking at the Phillips Share Builder Plan where I can do a DCA every month. More on my investment plan in another day. Epilogue The plan that I have drafted is based on my current salary and I assumed that there will not be a pay cut or reduction in my bonus. Any increment will be a bonus and I will use it for both savings and investing (50/50). However, I’m not going to take it as it is and will be actively looking for alternate sources of income. Since my passion is in IT, I will be focusing on that area. I will also be actively applying for a job and in doing so, improve on my resume and  interview skills. Another area that I'll be focusing on is training. The government has introduced several training packages and I will be looking at how I can benefit from that. I do not mind paying a little out of my own pocket. Marriage will be a new and important milestone in my life and on top of just setting aside an amount for wedding dinner, HDB flat etc, I'm also looking at my girlfriend's insurance to ensure that she is adequately covered. After which, I will be looking at how we can build up a education fund for our children and a retirement nest egg. As for TheFinance.sg, after a bright start to the new year,  readership became stagnated. I was also tied up with my own work and couldn't invest as much time as I wanted to. However, the thought of winding up the Finance.sg was never in my mind. It was only during the 3rd quarter of the year that I finally had the time to do a major overhaul of my site layout, add in new features and re-establish my commitment to my existing authors and also, to build rapport with new ones. I'm glad to say that readership is beginning to pick up and the icing on the cake is to meet up with like-minded people  from La Papillion's blog. Stay tune as I strive to turn TheFinance.sg into a reputable and major web aggregator for all local Finance and Investing blogs. Wishing All Readers, A Happy & Prosperous New Year!