How aggressively do you save?

Until a few years ago I was concentrating on building my business and never put much thought into personal savings or cash investments beyond an emergency fund. I am now socking away 17% of my average monthly income in a mixture of medium risk mutual funds and indices.

I was quite happy with the amount I was saving but after working on some spreadsheets and compound interest calculators over the past few weeks I realized that we could start cutting back and save much more aggressively for a few years, possibly up to 70% of my monthly income. That would be enough to retire comfortably by 40.

Going down this road we would be committing to a much lower standard of living for the next 10 years in return for a higher standard of living and easier life from our mid-40s until retirement. We would have to sell one of the cars, stop eating out, limit holidays and generally be much more careful about spending. I’m not sure if I can commit to it, but the 17% gets automatically debited by various savings schemes and we never seem to miss it. I think I could maybe get used to a 50% or even 60% ‘pay cut’ if it just leaves my bank every month and I never see it.

My wife is on board too, I give her monthly pocket money since she doesn’t work and we figured out if she gets half of it deducted automatically each month into a medium risk fund she will have around $2m of her own savings in 10 years.

Once you saw your savings and investments build up did it start to make you more excited about working harder to save even more, and how aggressively do you save? What is your long term goal and do you think it’s worth the medium term sacrifices?

[quote=“llary”]That would be enough to retire comfortably by 40.

Going down this road we would be committing to a much lower standard of living for the next 10 years in return for a higher standard of living and easier life from our mid-40s until retirement.[/quote]
Huh?

Dude! Pretty much every single person on this board is not even in same league as you appear to be, financially. You’re not even talking in the same language as the rest of us. I’d suggest paying for the advice of a financial analyst.

70% of your income??? Depends on how much you earn. Our family wouldn’t be able subsist on 30% of our earnings.

Darn. Sandman beat me to it.

Not worth it. My method is to save as much as possible while giving a budget that is big enough to enjoy life but small enough so you are careful with spending.

Currently that amounts to about 20% for play money (food/shopping/whatever), 10% for travel money, and the rest saved for now BUT I have no kids or mortgage, that of course would change things and at that point I would choose to save less and work a few more years than stop eating out and limiting holidays. (Although depending on where you live and how much you need the cars selling one of those may not be a bad idea… Cars are a horribly bad money pit)

[quote=“cranky laowai”][quote=“llary”]That would be enough to retire comfortably by 40.

Going down this road we would be committing to a much lower standard of living for the next 10 years in return for a higher standard of living and easier life from our mid-40s until retirement.[/quote]

Huh?[/quote]

I know quite a few people who could have retired already but they choose not to. It’s nice to know you could if you wanted, then you can carry on working but on your own terms.

I’m not looking for advice, but thanks for the snotty reply.

I know as fact that there are at least 3 people in this forum making considerably more than me and a few dozen in the same ballpark but that’s irrelevant. This question could apply to anyone making $40k or $40m per month.

I know a very frugal couple earning $70k/month between them and they have been savvy investors since a very early age. They are lucky enough to have inherited their house so they get by quite comfortably and have religiously saved $50k/month in various long-term stocks since their early 20s. When they wanted to buy something or go on holiday they would supplement their income by working at home. Now in their early 50s they have decided to quit work and move the money into safer bonds with staggered maturity dates to live off part of the interest while reinvesting the rest to leave their children.

I am supposed to be good at math, I should know how a little saved each month compounds over time into a very large mount. When faced with a real world example I was shocked into thinking about my own family’s future. I did a quick mental calculation and realised this quiet, unassuming pair of office workers is sitting on over NT$75m in liquid assets!

On the flipside I know a specialist engineer in his late 30s who makes over $400k/month and has himself admitted that he does have even NT$100k in liquid assets. I’m not even sure how he manages to spend it all, I think his girlfriend is helping him out with that.

I am somewhere in between those two attitudes but I am starting to get very attracted to the idea of putting in 20 years of really solid work and ruthless saving to live a relaxed jet-set lifestyle in my old age.

I wonder if other people are already much further down this road and have any comment on whether they regret wasting their youth on being frugal or if they are having a blast now the hard work is done.

Not worth it. My method is to save as much as possible while giving a budget that is big enough to enjoy life but small enough so you are careful with spending.

Currently that amounts to about 20% for play money (food/shopping/whatever), 10% for travel money, and the rest saved for now BUT I have no kids or mortgage, that of course would change things and at that point I would choose to save less and work a few more years than stop eating out and limiting holidays. (Although depending on where you live and how much you need the cars selling one of those may not be a bad idea… Cars are a horribly bad money pit)[/quote]

That’s exactly the attitude I used to have, but when you start plugging numbers into calculators you realize what you are missing out on in future. For example NT$5,000/mo invested over 30 years at 6%/year is something anyone could manage by putting their money into some kind of index tracking fund. That would be worth $5m after 30 years. Even after inflation you have a few million in the bank to enjoy or re-invest. If you stopped contributions but let it compound for another 10 years you would be sitting on nearly $10m. I know some people will be reading this thinking, ‘well, duh!’ but I really shocked myself when I started considering all this seriously

I used to think that buying in Taiwan was pointless with rent so cheap until I realized that mortgages were a forced savings vehicle. Everyone needs somewhere to live and unless you are lucky enough to have rich (grand)parents it’s better off putting the monthly housing cost into an appreciating asset rather than a black hole.

You are right about cars, if I’m honest with myself it would be no great hardship to scale down to something cheaper and I think we will do that when it’s getting time to replace the current model. I’m not sure about selling the second car though, it’s an old but reliable Subaru that would be worth hardly anything to sell and does not cost much to maintain. I think my wife would be a lot less happy if she was stuck at home with the baby every day and that was the real motivation to owning two cars.

I’m 37 years old now and have for the past few years thought an awful lot about what what my husband and I will need to retire comfortably. It’s quite a scary prospect for those of us who don’t have pensions, etc. (not that pensions are a great deal typically, but they are something). We save about 65- 75% of our salaries depending on the month / expenses that we have and will be able to semi-retire in about 10 years if we keep up the same rate of savings, which we are hoping to do, and then retire to a place where we can make enough for our daily expenses and have enough $$$ to buy a few properties and have a healthy nest egg in the bank. I’m just hoping the jobs we have now (or something similar) are still here ten years from now, but anything can happen and we may be in a situation where we need to seriously save for 20 years instead of 10.

I think that too few expats take saving money seriously enough, and I applaud your efforts.

I think it is a great idea. Retiring at 40 sounds great.
I did something similar, but I started at 38, I plan to be mostly retired at 50. I have two more years to go.

When I first came to Taiwan, I was on an expat package. I used to have about 25% of my check deducted for taxes, but since I had moved overseas, I was then exempt from taxes. I took that money that I used to pay in taxes, and put it into my 401K package instead. That was like a forced savings plan, so it was pretty easy to do. I never got to see the money, so never missed it.
Also, my pay was deposited directly into my US bank, so I had an automatic wire transfer sent to me here in Taiwan, I only had 30,000 NT sent a month, and I was able to do alright on that. I didn’t have easy access to the rest of the money from my check, so my account in the states built up nicely. I also did some investing in the Taiwan market with my NT money.

Like Llary, I also started working for myself. My wife and I have done pretty well, but we still keep a pretty frugal lifestyle.

We bought property both here and in the states for pretty reasonable prices, and we paid cash, so we are not getting soaked in interest fees. Last year I spent 6 months back in the states building on our land, so my retirement home is pretty much in place.

We are now in the process of opening a franchise outlet. After getting it established, we will let a local manage it.

I will also start doing some consulting work for a Taiwanese Solar company that is building some large scale solar generating power plants in the states. Be careful of the toes you step on today, they might be connected to the ass you kiss tomorrow.

Before I came to Taiwan, I was never a saver, I lived paycheck to paycheck. Always borrowing and paying huge interest and finance charges. The cost of living in Taiwan makes it quite possible to accomplish your goals, you just have to stick with it!!

Of course you could live on 20K, 30 years ago, try doing that now. The couple earned 70K, 30 years ago…whoa…they were rich man!! Half the Forumosans I know, earn 70K TODAY, (if not less)…Sandman has a point.

Seriously, a lot of people save aggressively but they do so by cutting corners and making a LOT of sacrifices, and they don’t do so so that they can retire at 40. They save so that once the kids are of a certain age and they are in their 40s, they can accomodate the extra expenses.

I save money for the kids education, not a lot and can’t do mutual funds coz both Hubby and I are money illiterate, but I do the old house wifey thing of putting away a certain amount of money every year. Every one in my circle laughs at this, coz my money is not ‘growing’ but I don’t know how to make it grow, so I’d rather just stash it in an account and let it accumulate. Another thing I have done is, I’ve bought gold. In 9 years since we got married, Gold prices have quadrupled…and I continue to buy itty bitty pieces, or even little coins, so hopefully the bullion in my vaults :roflmao: will pay off if the need arises. Hope it doesn’t.

Of course you could live on 20K, 30 years ago, try doing that now. The couple earned 70K, 30 years ago…whoa…they were rich man!! Half the Forumosans I know, earn 70K TODAY, (if not less)…Sandman has a point.

Seriously, a lot of people save aggressively but they do so by cutting corners and making a LOT of sacrifices, and they don’t do so so that they can retire at 40. They save so that once the kids are of a certain age and they are in their 40s, they can accomodate the extra expenses.

I save money for the kids education, not a lot and can’t do mutual funds coz both Hubby and I are money illiterate, but I do the old house wifey thing of putting away a certain amount of money every year. Every one in my circle laughs at this, coz my money is not ‘growing’ but I don’t know how to make it grow, so I’d rather just stash it in an account and let it accumulate. Another thing I have done is, I’ve bought gold. In 9 years since we got married, Gold prices have quadrupled…and I continue to buy itty bitty pieces, or even little coins, so hopefully the bullion in my vaults :roflmao: will pay off if the need arises. Hope it doesn’t.[/quote]

Divea, you are doing well to save for the kids, and also to put some away for yourself. The gold you bought 9 years ago was a great investment, I don’t know that I would still buy at today’s prices. Maybe you could try some low risk CD’s, the gain isn’t huge, but better than a passbook account. :thumbsup:

Thanks. What is a CD??? I do keep buying gold even now, its a cultural thing :laughing:

[wikipedia]http://en.wikipedia.org/wiki/Certificate_of_deposit[/wikipedia]

[quote]A certificate of Deposit or CD is a time deposit, a financial product commonly offered to consumers by banks, thrift institutions, and credit unions.
CDs are similar to savings accounts in that they are insured and thus virtually risk-free; they are “money in the bank” (CDs are insured by the FDIC for banks or by the NCUA for credit unions). They are different from savings accounts in that the CD has a specific, fixed term (often three months, six months, or one to five years), and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.
In exchange for keeping the money on deposit for the agreed-on term, institutions usually grant higher interest rates than they do on accounts from which money may be withdrawn on demand, although this may not be the case in an inverted yield curve situation. Fixed rates are common, but some institutions offer CDs with various forms of variable rates. For example, in mid-2004, interest rates were expected to rise, many banks and credit unions began to offer CDs with a “bump-up” feature. These allow for a single readjustment of the interest rate, at a time of the consumer’s choosing, during the term of the CD. Sometimes, CDs that are indexed to the stock market, the bond market, or other indices are introduced.[/quote]
:bow:

Wow, thanks for some great replies. :thumbsup:

I always used to be a terrible saver because it seemed kind of pointless, I had very little to live off while trying to build a business and US$50 or $100/month just didn’t seem worth saving so I spent it in the pub or on gadgets. Now I am kicking myself because that US$100/month started just 10 years ago could have bought a house.

When things finally took off and I was making a decent income I had lived off almost nothing for so long that I just wanted to enjoy it. I had been putting chunks of money into savings when things were going well but saving nothing when things were bad or I just wanted to spend more.

I mentioned to a certain Forumosan that I really needed some forced savings plan and he set me up with something that was attractive because it automatically debited my overseas account for x amount each month and it was not easy to mess around with once set up. I could probably have got a slightly better deal on fees etc. if I went directly through a discount broker but I knew I just don’t have the discipline (most people don’t).

After I realised that I didn’t miss the money when it came straight out of my account each month I figured I could spare more and set up some other forced saving schemes. Now I am already used to having a liquid income of y - x and don’t even know what I spent all that extra money on!

That initial forced monthly plan kickstarted my savings and it’s amazing how you find ways to budget or make more money when you don’t have easy access to those funds any more.

Dollar cost averaging and compound interest have only just lit up in my head as amazing tools to build retirement wealth - I feel quite stupid about squandered income that could have been saved.

They are not from Taiwan but they have been here for a long time. They moved to Asia when the company the husband worked for went bust. I love their story because they an eccentric and financially savvy but otherwise a very normal, boring working couple.

Hey, I have been self employed all my life and I am often ashamed about how little I know about financial issues. I had no idea where to start when getting into all this stuff. Even as a financial idiot it’s better for me to put money into a mirror fund plan that skims high percentage fees and still end up 7-8% per year better off than put my money in a 0.5% bank account. That extra 6-7% compounded over years is a huge deal.

Although I spent most of what I made when I was younger, I’ve always avoided debt like the plague. I’ve also been fortunate to have received some money from my family. For the past six or seven years though, I’ve been aggressively reading about finances and investing, and saving money for such.

We only have one salary which is a teacher’s salary in Taiwan, i.e. bugger all. We save more than 60% of it, although there are certain annual costs, so maybe it’s more like 50% (some of which we manage to budget monthly). At the start of every month, we withdraw a certain amount of money and that’s all we withdraw for the month unless there’s something absolutely dire that comes up. We take the money that we withdraw and put it in envelopes for different categories, including one for emergencies and another for medical costs (anything left over we save part of or sometimes spend), and I also pay death and disability insurance. That way, money accumulates in my bank account. Any extra miscellaneous money we get means we withdraw less next month. When I have a reasonable amount of money in my account, plus a buffer, I transfer it to my brokerage.

I would say our lifestyle is pretty frugal, but we’ve also simply adopted modes of living and entertainment that don’t cost a lot of money.

In terms of investing, I have a guy who handles it for me. I spent a considerable amount of time reading up on this over the past few years and was fortunate to be introduced to someone also of the Benjamin Graham school of thought on these matters. He does things so much better than I could/would, so I’m in no hurry to take over that side of things. In the past year, I made about twice from my investments than what I would have if I had been working full-time as a teacher the whole time. Will things continue so well? Undoubtably, there will be good and bad years, and yet his long-term track record is considerably better than the market, which doesn’t surprise me given that he’s a value investor.

Neither of my parents is in particularly great health, so there’s the distinct possibility that within a decade I could inherit enough money to instantly allow me to retire. That said, I’m not relying on that. The big unknown variable for me is children (but we’re holding off for another couple of years to see whether we move or bite the bullet and put down some roots here for a few years), but if I were to try to get a better job elsewhere so that we could still save the same as we do now, or maybe even a little more, and based upon pretty conservative estimates of how much my investments will grow by, it’s highly likely that by 45-50 (I just turned 35), I will be able to retire completely. If we stay here in Taiwan, maybe it will take a little longer. We want to raise kids with at least one parent at home, rather than have them looked after by strangers so we can rush back and forth to work. I’d be quite happy to get out of teaching other than doing a few privates for fun as I don’t particularly enjoy it. Ideally, I’d like to homeschool my children and do so spending a few years in a few different countries (anything outside the expensive developed First World) where I would probably work just to get a visa, keep myself occupied and pay the bills. That way, my children could pick up some more languages and experience different things.

Needless to say, I have a very different way of looking at the value of money to most people. Most people bleed away great fortunes 30NT at a time and are forced to make certain philosophical compromises in order to pay for such lifestyles.

It’s obviously a lot easier to save if you are making more money, I only started saving after I started making more money, there was no way in hell I could do that properly before working for Taiwanese and not being some type of engineering genius. Even now it is hard to save of course…I’m working on running my own business so I can really start saving someday (by making more money!). Governments worldwide disciminate against workers with income tax meanwhile business owners can stash their cash far from the taxman.

Saving decades ago and saving now are two completely different things due to interest rates. The ‘miracle of compound interest’ doesn’t really exist anymore. Many accounts have a negative interest rate if you take into account inflation and currency fluctuation and transaction charges. Compound interest is sure hard to find uness you live in India or Australia (I was in India recently and they were offering 9% interest on savings accounts…some dude came up to the exhibition booth I was at and tried to get me to sign up to a ‘company loan’ , never mind that I was obviously not Indian…bit of a bubble there!).

Then there’s stocks and mutual funds. How many mutual funds made money over the last few years? It would obviously have been great to sock some money into Taiwanese stocks 2 years ago…unfortunately I didn’t. Now…a lot of stocks look they topped out to me. Then you look at commodities…a lot of them seem overvalued too…speculative money driving them up. Gold and silver and oil and food…they are all pumped up multiples of what they were a couple of years ago, great if you bought them then, hard to see much gain now and actualy high risk and not such ‘preservers’ of value anymore. Oil might be a good bet though.

The game is fixed by hedge funds…they pump up individual stock markets (most of Taiwan’s stocks are owned by foreign investment funds or at least the actively traded ones are) and commodities and then sell when they get enough retail investors to follow their lead and have pumped the currency up. I guess the game there as a smal time investor is to look at which stocks can give good dividends or to really know the company you want to invest in. It’s no use saying I invest in mutual funds if the mutual funds are invested in crappy stocks and stock markets or you started at the wrong time. I guss what I am saying here is that you’ve really got to go into things with your eyes open.

Anyway…going back to saving, CDs seem like the best of bad options for people who want to at least preserve the value of their money.

There are other way to make life easier though. Many jobs and careers are unstable these days, change is so quick. Maybe one partner has a government job and pension and benefits etc. Taiwanese public workers get 18% on their retirement accounts. So you want to be a good saver, ensure a good steady income first!

I’m not looking for advice, but thanks for the snotty reply.[/quote]

Generally llary you bring good topics to the board, but here I have to agree with Sandman. At your level you should be talking with a financial analyst as you aren’t dealing with the same salary a majority of people on the board dealing with. Which is a great thing in these times. That being said the conversation is illuminating, and hopefully will include some suggestions for those who aren’t making $400k a month and how they can make small productive steps in savings until graduating to CDs, investments,etc.

Llary, you say there’s no difference whether you’re talking 40k or 400k and you use terms like saving 70% of your income. I call bollocks that someone can live here on 12k a month. That’s not frugal, its borderline destitute!