Now what? How do I save?

APSG

I hope this is an appropriate place to post this...my first post and so I'm just getting oriented here.

I used to have a job that paid me a lot more than now, but lost it. I had some big liabilities like a new car and good apartment which I kept nevertheless. Not the wisest thing to do, but that's what happened. I had a fair amount of other debt (a lot to me - about 10k pounds).

I got a new job earning about a third of my previously overpaid job as my new company is...well....new. And broke. Hence my low pay. But being a co-founder it's what I want to do and am happy with....besides the pay (about 1,500 per month).

Between my car and my house, my salary is almost used up each month. But after having cut back on many other things I manged to salvage a few $ per month. Plus, I do freelance work which increases my pay by an extra 150-300 per month. (These figures are in pounds although I am in Singapore and earn S$ - I'm doing rough conversions).

So in a year of this relatively low pay with some smart changes and an unexpected windfall, I managed to pay off all of my credit card debts.

I only have one personal loan which I owe (about 2,300 pounds) but it's at no interest and there is no desperate rush to pay it back. I have a payment that will be coming in by the middle of Feb which will wipe that out.

So what should I do now and how do I do it?

For the first time in my life (almost) I've reached a point where I believe I can save some money.

How much should I try to have as some kind of emergency fund (in relation to my salary and/or monthly needs)?

At what point should I put money away in a structured/regular plan? How much should I have on hand for misc. stuff before doing that? One month's worth of pay? Two? Three? A year? (I can save about 10-20% of my salary a month from freelance work).

I'm about to turn 32 but have only now learned the very basics of financial mangement - this is after a dozen years of debt and stupid, shortsighted decisions (ignoring my debt thinking it would go away)!

I have 4 credit cards and still use them but pay them off the day I use them online so I carry zero balance at all times (except for between my purchase and the drive home to my computer to pay them off). I have been super strict and intend to continue this way forever.

But I need some guidance about saving now please.

Thanks. Singapore.

dunstonh

This is a UK site. You may want to try a site that is appropriate for your location.

APSG

dunstonh wrote:

This is a UK site. You may want to try a site that is appropriate for your location.

Yes, I know it's a UK site, but don't the basics of saving apply everywhere? Or are foreign posts not embraced here?

dunstonh

The basics are the same. You put some of your money to one side.

Where you do it is going to change from country to country.

cheerfulcat

APSG wrote:

Yes, I know it's a UK site, but don't the basics of saving apply everywhere? Or are foreign posts not embraced here?

You are very welcome to post here. The principles of saving and investing are universal. However, differences in tax laws ( among others ) mean that what is appropriate for an investor in the UK may not work elsewhere so you may get more precise advice on a forum based in Singapore.

There is a dedicated expat board at the Motley Fool as well as a few boards dealing with investing abroad - have a look at these -

http://boards.fool.co.uk/Messages.asp?bid=50919

http://boards.fool.co.uk/Messages.asp?bid=51253

http://boards.fool.co.uk/Messages.asp?bid=50920

Going back to your questions -

How much should I try to have as some kind of emergency fund (in relation to my salary and/or monthly needs)?

it is prudent to have 6 months' worth of salary saved ( some people say 6 months' worth of expenditure - I would go for whichever is the larger figure ).

At what point should I put money away in a structured/regular plan? How much should I have on hand for misc. stuff before doing that? One month's worth of pay? Two? Three? A year? (I can save about 10-20% of my salary a month from freelance work).

You can start investing regularly alongside the savings regime but I would be inclined to save the 6 months' worth of salary first, then move the regular payments to an investment.

In the meantime it doesn't hurt to educate yourself a bit further. Again, because the tax system is different where you are, UK-centric books are probably not a good choice in general but one which is a good all-round starter on investment is the Motley Fool UK Investment Guide. Alvin Hall's Your Money or Your Life is a good general personal finance book.

HTH

Cheerfulcat

grumbler

APSG wrote:

How much should I try to have as some kind of emergency fund (in relation to my salary and/or monthly needs)?

At what point should I put money away in a structured/regular plan? How much should I have on hand for misc. stuff before doing that? One month's worth of pay? Two? Three? A year? (I can save about 10-20% of my salary a month from freelance work).

Usually it is recommended to have about 6 months of living expenses in the emergency fund, although this depends on the country you live in. It is time to think about pension too.

I need some guidance about saving now please.

You can find all articles about savins in Savings & Investments section (see links on the left side), but all this staff is UK-related.

APSG

Thanks a lot, those are some good answers...I just wanted to get an idea for what I should save up on my own before doing a structured plan...so I'll aim for 6 months...

Thanks to those that answered.

al_yrpal

The Tiered Investment Fountain:
I think that saving and investing can be thought of as a fountain. The bottom tier is a savings account paying a decent (but miserable) rate of interest. The next tier is a 'nanny' investment like a tracker fund which is supposed to work on the principle that the stockmarket always goes up (which is doesn't). The next tier might be an 'auntie' type managed investment like an income fund (although some income funds have done spectacularly well over the last few years). The top tier might consist of shares, or 'hot' unit trusts which show spectacular short term gains. There might be other intermediate tiers.
As the idea of saving and investing is to build the overall fund up, what you do is build up from the bottom with sums that you feel comfortable with (eg possibly starting with that 6 months salary in the savings account), and then build up several tiers, increasing in risk until you get some high risk investments. The higher up the tree, the more frequent attention the saving or investment gets. The values of each section, and numbers of sections depend on what your attitude to risk is. As you make gains in the hot section, you pass the proceeds down the tiers of the until you feel comfortable with the security of your profits. Thus you limit the value of the upper more risky tiers tiers to limit your risk, because 'hotter' investments are more risky.
You could have a top tier that was paintings, art, vintage guitars, or Coi Carp. What , and how much you have where is completely at your discretion. An intermediate tier might be a property.

Its a strategy I follow and I find it that it rationalises the art of saving perfectly. After thrashing about for years, and losing wadges of cash regularly, by following it for the last 10 years I now consistently make money from savings and investments (although I did get singed in 2000, as did anybody that is honest).

The whole thing about savings and investments is that they can't just be left. Everything needs reviewing at regular intervals - the most risky things most often.

Good Luck

BTW, just seen the bit about the CC's. Personally, I put everything I can on the card to get points/cashback etc. After 56 days or whatever, you will have built up a tidy sum interest free which can be stuck in the bank. Just got back from a FOC booze cruise on Eurotunnel today, paid for with my points. Hit Brown where it hurts!

tomstickland

Start with safe savings and take advantage of any tax breaks. For example, in the UK we can save £3000 per year tax free in a mina ISA. (I'm not sure what you can save in a maxi Isa). After that I assume that you can access high interest savings accounts.
Next on the list after that are investments which might bring about a higher return but introduce some more risk.

al_yrpal

Another thought (given to me by an accountant many years ago). If you like antique furniture, furnish your home with it. If you buy a bit of MFI chipboard, next week its worth nothing. If you get fed up with an antique table you can sell it for real money and get one you do like.
Ten years ago I wanted a hall table, it was £500 from John Lewis. Instead I got an antique military secretaire for £400, its now worth £800.
Its a sort of saving really

APSG

Really good advice al_yrpal and tomstrcikland. What you posted al_yrpal makes so much sense...the biggest issue we have here in Singapore is low interest rates. Check this out:

Savings interest rates (% p.a.)
First S$3,000 (1,000 pounds) 0.1500
Next S$47,000 0.3750
Next S$50,000 0.5000
Above S$100,000 (33,000 pounds) 0.6250

But we also have very low taxes here...