R just turned 50. He still has 2 school going kids and it would be at least 10 years before they do not need to depend on him financially. His wife took on a less hectic job and as a result took a pay cut from her previous role. We met as R needed some career advice.

R is slightly frustrated at his job. The global company that he is in has the habit of bringing in someone from the head office to be the Country Head. R is technically the second man in his company’s operation in Singapore. Things go well when the relationship with the Country Head is good. However, the company rotates the Country Head often. Right now, R is not getting along with the current Country Head.

R feels trapped. He still has an outstanding mortgage of $1.5 mil on his existing property and his kids expenses are high. Cost of living in Singapore is high and his family lifestyle leans on the extravagance as he can afford it with his salary. Despite being unhappy, he still has the option of riding out on his current role until another Country Head gets assigned as the company needed his expertise and he evaluated that his likelihood of being retrenched is low as his company is still doing reasonably well.

Fortunately, R has the Midas touch in real estate. He bought his first property for $500,000 more than 20 years ago and sold it for $1.5 mil. He bought his next property for $1.5 mil and sold it for $3 mil. He bought his current property that he is staying in for $3.5 mil and right now he can sell it for $5.5 mil. He has no other investments besides the property and some reserve cash.

From a personal finance standpoint, he has 3 options

A. Ride out the current career situation and hopefully, his relationship with the next Country Manager will be better. At his age, he has to bear some risk if he does a career switch and the new role may or may not sustain the salary package that he is enjoying now. He will also keep his current property and hope that it will continue to appreciate for the next 10 years until his kids are independent and he is ready to retire.

B. Cash out on his current property at $5.5 mil, pay off the $1.5 mil loan and buy 2 properties at $2 mil each – one for staying and the other for rental income. Assuming the rental rate is at 3.5%, he will enjoy a monthly rental of $5,800. If property prices continue to escalate, he can enjoy some capital gain on both his properties when he retires in 10 years time, which is similar to Option A. In Option A, he will not be enjoying any rental income as he is unlikely to want to share the house he is staying in with tenants. On his job front, he can try to ride out his current situation but if the situation gets more sour, he has the option of switching to another job with no worry of an outstanding mortgage. On top of that, he is also enjoying a passive rental income of $5,800 per month.

C. Cash out on his current property at $5.5 mil, pay off the loan, buy a $2 mil property for staying and invest $2 mil in a mix of equity, bonds and REITS. Assuming he can get a blended return of 5% pa in his investment, he will enjoy a passive income of $8,300 per month. His property and investments can potentially enjoy capital appreciation. He is also diversifying his asset base. On his job front, he will feel more secure as he has a higher passive income than Option B.

So R is not in a bad position at all. In fact, I would say that his financial position is more fortunate than many others. I believe he has played out the different options in his head but just needed someone to talk it through with him. He felt a lot better after our conversation although I felt I have not contributed any new ideas to him.

What would be your advice to R?

TRI-O RETIREMENT PLAN is a simple way to help you get started on your retirement planning. Learn the FUNDAMENTALS and HOW TO GET STARTED. There is also a spreadsheet to help you CALCULATE your monthly savings and your project monthly income at retirement. You can check out our BLOGS on topics pertaining to retirement planning. Feel free to CONTACT US if you have any questions or comments.

I am sure all of us have frugal friends. I have known X for more than 30 years. We were friends in school, army mates whilst we were serving our mandatory military service and were also colleagues in one of the firm that we worked in.

X is frugal. There is a difference between being frugal and stingy. X is not stingy. X will buy you treats as a friend and will contribute his fair share in outings. His frugal lifestyle stands out.

He buys nothing branded. He takes good care of his things and can wear free company t-shirts for a long time. He use army running shoes even after the service. They were good shoes. He sets his timer on his air conditioner so that it turns off in the middle of the night and he turns off his heater midway through his shower to save electricity. He is fit. During one of the company outings, he decided to save a few dollars taking the cab and decided to hike more than 5 km from one location to the next. He got to sightsee that way. He is one of the few friends I know who actually enjoyed airline food. He takes his family for holidays but he optimizes special internet offers to get the best offers on air tickets, hotels and entrance fees in order to get the same enjoyment for less. We can keep on going on his frugal ways.

Early in our career, we were comparing how much we could save from our salary. We had identical starting salaries. I thought I had a great achievement by saving 50% of my take home salary. He said he could save 75% of his salary. He spent little and wasted nothing. This was before we were married but this included looking after our parents.

Through his frugal ways, X bought two properties. One to stay in and the other for rental income. He paid cash for both his properties (bought at different time). He is definitely one of the few I know who didn’t take a mortgage loan. He also invested in a bunch of mutual funds.

We are all in our fifties and although X is still working, he is ready to retire anytime. He still likes what he does but he knows he no longer has to work for money. He still doesn’t have high expenses and his kids will be graduating from college soon. His only luxury is that he bought himself a nice set of wheels in recent time and paid cash for it without any loan. He knows he can always sell the car at any time if he doesn’t want to continue to pay for its upkeep. The car is to celebrate his financial independence.

Although I admire his frugality, I know it is not easy to be like him. It takes a lot of discipline. Frugality definitely help someone to retire earlier. This includes being able to invest the monthly savings early so that the investment grow over time. In this case, X used a combination of rental property and mutual funds.

Unlike X as a good example of frugality, I am sure all of us have friends who have “no concept” of saving as well. They can spend every single cent in their bank account every month and even get into the credit card trap. If they do not change their ways, they will definitely have a hard time having enough to retire on, let alone retiring early. Hopefully, this article or Tri-O Retirement Plan can help them to be more discipline.

TRI-O RETIREMENT PLAN is a simple way to help you get started on your retirement planning. Learn the FUNDAMENTALS and HOW TO GET STARTED. There is also a spreadsheet to help you CALCULATE your monthly savings and your project monthly income at retirement. You can check out our BLOGS on topics pertaining to retirement planning. Feel free to CONTACT US if you have any questions or comments.