Time really flies and it is last month of 2014! What are you working on these days? Reflecting on what you did for year or recalling some great moments of life? Or most likely scratching your head on Christmas shopping? {If you are looking for nice arty gifts, be sure to check out J’s studio sale 12/5-12/14 or her online shop!}
During this time of year, I got excited on updating my annual financial spreadsheet. From time to time, I also send emails to remind my friends to do “annual review” on their financial accounts. Some of my friends said that I’m obsessed with Excel, that’s right! I have my own spreadsheets for retirement planning, mortgage amortization, student/car loan payment, pension plan calculation, wedding planning etc… Some of you might have received some of my sample excel files.
Anyway, I have a “Retirement Saving Chart” excel file and I update it annually. In this file, I document all my retirement accounts with the following information:
- Starting Balance
- Employee/Employer Contribution
- Loan Repayment
- Gain/Loss
- Dividend/Fee
- Year-to-Date Performance
- Ending Balance
I suggest that you should record your all of your retirement accounts information, as well as your spouse’s. Somehow, I got annoyed when a married couple doesn’t communicate on their financial situation or doesn’t know how their spouse is doing with the retirement plan. They have no idea on the type of investments their spouse owns or how much in their retirement account. In addition, they don’t even know whether their spouse contribute to their 401K/IRA account! Is that a secret to have a retirement plan without involving your husband/wife? I don’t know why they are so shy to talk about their financial planning. Okay, enough for me to express my frustration! Haha!
Time has really flied. I graduated from college and obtained my 1st job about 15 years ago. However, it was around 10 years ago that I recognized the importance of focusing on retirement planning. From time to time, I felt a little bit of regretful that I should’ve taken consideration earlier, so I should be in a much better shape on financial planning now. It is one of my main reasons that I’m motivated to discuss this important message to the young folks. During Thanksgiving break, I had an opportunity to chat with my young fellows about opening up Roth IRA account and put money into retirement early. Nevertheless, they felt that I was talking foreign language to them. Oh well. It is what it is.
Okay, let the storyteller begins the L’s story! One day about 10 years ago, I remember that I picked up my 401K statement to review it and I complained on how little value in my account! The growth of my portfolio was like slow turtle walk. I questioned myself what I had been doing in the past five years. Well, part of it was my lacking of financial knowledge and commitment. Another factor was the mistake I made on some investment decision. I might have mentioned before that I invested 100% percent on my ex-company stock which sank almost to nothing. To give a little history, it was during the dot-com bubble burst period and many companies dropped 90% percentage of stock value or even went bankrupted.
All the sudden, I got an idea that I need to start putting those data into excel spreadsheet. I always misplaced those 401K statements and I was pretty sure that I would never review this information again. If I start plugging those data, I would discover the growth pattern over a period of time. Even though the figure was small at the beginning, I believe that it will grow if I commit myself to it.
In addition, I created an amortization and projection goal on how much I need to accumulate and how soon I will reach my financial freedom. It is sort of my benchmark or milestone to review each year and see whether I’m on track, or off track. In the past 10 years, I was off track on some years (if you read my previous blog post, you should know what situation I was in,) but, I was able to recover and back on the right track, thank to our additional contribution right after the market crash.
Last month, I had a chance to have a private conservation with a friend who is in his mid-20s. He told me that his retirement portfolio is kind of small, which is around 10-15K. I said to him that my portfolio were around that size when I was at his age. I asked him to guess how much I accumulate over 10 years period. He was shocked when I review the figure. He thought that I must earn a lot in my salary. I told him I have been working in SSB and he knows how low the salary is. My salary was remained in the same level in the past 10 years like most other people. I am hoping that this conversation would give him confident that one day, he can achieve his own financial goal.
While many people focus on increasing their salary, yet, I want to share my perspective on why increasing net worth is far more important than the salary itself. There are three ways to increase our net worth: 1) What most people think: Increase the income! or 2) Reduce the expense; or 3) doing both 1 & 2! When one’s salary is increased, s/he would have a tendency to have more luxury lifestyle. With the tax implication, every one dollar increase on spending, it needs to have about two dollar increase on income to offset it. No wonder many people complain about not having enough money to spend even their salary has been increased; it is an illustration of the hamster running on wheel. As you are read this and you think you are in that category, I urge you to break the “hamster” pattern and set a clear destination for your own future.
What do you do when you receive your annual statement? What do you do when you have extra income?
During this time of year, I got excited on updating my annual financial spreadsheet. From time to time, I also send emails to remind my friends to do “annual review” on their financial accounts. Some of my friends said that I’m obsessed with Excel, that’s right! I have my own spreadsheets for retirement planning, mortgage amortization, student/car loan payment, pension plan calculation, wedding planning etc… Some of you might have received some of my sample excel files.
Anyway, I have a “Retirement Saving Chart” excel file and I update it annually. In this file, I document all my retirement accounts with the following information:
- Starting Balance
- Employee/Employer Contribution
- Loan Repayment
- Gain/Loss
- Dividend/Fee
- Year-to-Date Performance
- Ending Balance
I suggest that you should record your all of your retirement accounts information, as well as your spouse’s. Somehow, I got annoyed when a married couple doesn’t communicate on their financial situation or doesn’t know how their spouse is doing with the retirement plan. They have no idea on the type of investments their spouse owns or how much in their retirement account. In addition, they don’t even know whether their spouse contribute to their 401K/IRA account! Is that a secret to have a retirement plan without involving your husband/wife? I don’t know why they are so shy to talk about their financial planning. Okay, enough for me to express my frustration! Haha!
Time has really flied. I graduated from college and obtained my 1st job about 15 years ago. However, it was around 10 years ago that I recognized the importance of focusing on retirement planning. From time to time, I felt a little bit of regretful that I should’ve taken consideration earlier, so I should be in a much better shape on financial planning now. It is one of my main reasons that I’m motivated to discuss this important message to the young folks. During Thanksgiving break, I had an opportunity to chat with my young fellows about opening up Roth IRA account and put money into retirement early. Nevertheless, they felt that I was talking foreign language to them. Oh well. It is what it is.
Okay, let the storyteller begins the L’s story! One day about 10 years ago, I remember that I picked up my 401K statement to review it and I complained on how little value in my account! The growth of my portfolio was like slow turtle walk. I questioned myself what I had been doing in the past five years. Well, part of it was my lacking of financial knowledge and commitment. Another factor was the mistake I made on some investment decision. I might have mentioned before that I invested 100% percent on my ex-company stock which sank almost to nothing. To give a little history, it was during the dot-com bubble burst period and many companies dropped 90% percentage of stock value or even went bankrupted.
All the sudden, I got an idea that I need to start putting those data into excel spreadsheet. I always misplaced those 401K statements and I was pretty sure that I would never review this information again. If I start plugging those data, I would discover the growth pattern over a period of time. Even though the figure was small at the beginning, I believe that it will grow if I commit myself to it.
In addition, I created an amortization and projection goal on how much I need to accumulate and how soon I will reach my financial freedom. It is sort of my benchmark or milestone to review each year and see whether I’m on track, or off track. In the past 10 years, I was off track on some years (if you read my previous blog post, you should know what situation I was in,) but, I was able to recover and back on the right track, thank to our additional contribution right after the market crash.
Last month, I had a chance to have a private conservation with a friend who is in his mid-20s. He told me that his retirement portfolio is kind of small, which is around 10-15K. I said to him that my portfolio were around that size when I was at his age. I asked him to guess how much I accumulate over 10 years period. He was shocked when I review the figure. He thought that I must earn a lot in my salary. I told him I have been working in SSB and he knows how low the salary is. My salary was remained in the same level in the past 10 years like most other people. I am hoping that this conversation would give him confident that one day, he can achieve his own financial goal.
While many people focus on increasing their salary, yet, I want to share my perspective on why increasing net worth is far more important than the salary itself. There are three ways to increase our net worth: 1) What most people think: Increase the income! or 2) Reduce the expense; or 3) doing both 1 & 2! When one’s salary is increased, s/he would have a tendency to have more luxury lifestyle. With the tax implication, every one dollar increase on spending, it needs to have about two dollar increase on income to offset it. No wonder many people complain about not having enough money to spend even their salary has been increased; it is an illustration of the hamster running on wheel. As you are read this and you think you are in that category, I urge you to break the “hamster” pattern and set a clear destination for your own future.
What do you do when you receive your annual statement? What do you do when you have extra income?