Wednesday, January 06, 2010

2010 - Moving forward

For the most part, I have little interest in either new year's resolutions or in making financial predictions. That said, I do have a set of goals or objectives which are subject to on-going review and the start of a new year is a good time to review them. I also have to recognise that it is next to impossible to plan financially without making some guesses or assumptions about the future.

I now have two years to go before I hit my number and am in a position to retire. It is time to start getting myself prepared for life outside the work force.

1. I need to keep my finances on track. Savings are still critical to this. My savings rate will need to be monitored. Given that we are now a one-income household, this is more important than ever. I hope to maintain a 40%+ savings rate this year

2. I need to start aligning my investments more closely with the intended asset allocation post retirement. While I do not have a fixed asset allocation in mind, I am overweight real estate so should focus on building up the equities side of the portfolio. There are also some investments which are now either too small or which otherwise serve no purpose which I should get rid of as a house cleaning exercise

3. I need to get a more exact estimate of our post-retirement spending. Starting 1 December, I have been recording my expenses on a daily basis and intend to continue this until at least the end of the year

4. there are a number of other tasks which need to be done to prepare for retirement. Upgrading my pathetic tech skills is high on the list. Sorting out medical insurance which will continue following my retirement is also a priority (life insurance will lapse at that point). the part of my social circle which is independent of work/clients/competitors could do with some maintenance as well

Independently of retirement linked activities, there are a few things to attend to this year:

5. change the life insurance policy to a non-US policy to avoid the uncertainty over withholding taxes

6. I would like to complete the Hong Kong Trailwalker this year

7. I would like to restart the novel I began writing during the Asian crisis (but without intending to finish it - I don't have that much free time)

8. a short holiday with mrs traineeinvestor without children. We try to do this every year, but missed in 2009. Since I will be in New York for business in March, we have decided to add a few days and spend the time there

9. spend more time doing photography. This is something I enjoy, but never seem to spend time on. I should get into the habit of carrying my camera with me more often. I am also thinking of spending some of my budget on another lens or two. Even though my EOS 5D mark 1 is now a bit dated and has a relatively slow auto focus speed, I see no need to upgrade - it is perfectly adequate for my needs

In other areas, I am hoping that work will not start to intrude on family time - 2009 was good in terms of work life balance. An improving economy could put that balance in danger.


thriftygal said...

hi traineeinvestor,

I was drawn to #1 on your list. You and I share the same savings rate (see my recent blog entry:

I am new to personal finance and don't know if this is a good rate or not. Are you counting your investment income in this figure? Here on the other side of the Pacific, 40% sounds like a really good rate, but again, I don't know if this is a fact.

One of the reasons I recently started blogging is to get a handle on, and improve my finances. (I am a total newbie in this regard and the only area I excel is in saving, as opposed to investing/cashflows/etc) I would be much obliged if you can weigh in and give your opinion.

traineeinvestor said...

hi thriftygal

Thanks for dropping by.

I doubt if there is a universal answer to the question about what is a good savings rate. A lot depends on (i) personal circumstances and (ii) personal choices.

In Asia savings rates above 20% are common for a number of reasons including (historically) a very limited welfare/health care system and greater political uncertainty. The fact that access to consumer goods was more limited (and still is in some places) also lead to higher savings rates.

At an individual level, my attitude is that people should save as much as they can when they can - there may well be times in a person's life when savning is more difficult than others - marriage, children, unemployment, career breaks, house purchase etc can all have an impact on the ability to save.

Personally, I think 40% savings is a really good rate (even allowing for the fact that we pay only 15% tax here in HK - if I had to pay US tax rates it would be pretty outstanding). I did manage 50%+ for a few years, but that will not be possible now that my wife has become a SAHM.

My savings rate does not include my investment income.


thriftygal said...

thanks for your comments. One more clarification. When calculating your savings rate, do you consider your pretax income or takehome pay?

traineeinvestor said...

savings rates are traditionally calculated based on gross (i.e. pre-tax) income. A bit hard for those subject to high tax rates, but....