At the end of every month, I will tally my bank brokerage accounts to visualize my financial status. I’ve finally reached a landmark. At 30 years old, I have $305,000 Singapore Dollars (US$226,000) spread out across 8 stocks and cash accounts. I will describe how I did it.

The Situation

In the course of my engineering career, I usually use graphs to look at complicated things. This habit has rubbed off onto my finances, so every month, I would update this graph. The top left graph shows how much physical cash I hold in my bank accounts and under my mattress. The graph on the top right shows how much my stocks are worth. The bottom right shows the monthly change. Negative means I spent or lost more money than my income. Positive means I saved or earned on my investments. Bottom left shows the total amount.

The Process of Making Money

1 National Service (NS or mandatory 2 year conscription)

During my schooling years, I lived “paycheck-to-paycheck”. That means I spent all my pocket money frequently. However, my dad temporarily lost his source of income during my NS days and I saw how tough things got. Because of the episode, I started saving conscientiously. When I finished my term, I started teaching high school kids for income, and contributed to monthly household expenses for my parents. In 2010, before university started, I managed to accumulate $8,000.

2 University Days

I was lucky enough to get a government scholarship overseas, with a monthly allowance. I went through the grind of working part time during university and managed to accumulate $50,000 in savings. You can read about how I did it here. Total wealth at this point: $58,000.

3 Inheritance

When my grandfather died, he left each of the grand children $10,000. I was a beneficiary of that money. It is not a huge sum, but it is not a small sum either. I had wanted to start investing, and since inherited money felt like it was free, I thought an excellent idea to use it to start my investing journey. Unfortunately, money that comes by easy usually leaves easy too. I lost $4,000 on a stock called Tesla, panicked and sold. At this point, I decided to start reading books and blogs to understand more about investing before committing more money. You read about the books here. Wealth at this point: $64,000.

4 Income from Full Time Job

I also started working on a $4,300 monthly salary, which is above median and below the mean salary in Singapore. After working for 4 years, my take home salary is $80,000 annually. It pays to work hard and work smart. I worked very hard in the 1st 2 years to bring myself up to speed on the things I need to know. Within 2 years, I achieved the technical mastery of many topics and understood company dynamics, beyond my seniors. I may cover how I achieved this in a different post.

All in all, I took home a total of $330,000 over 4.5 years. Total inflow after income and savings: $394,000.

5. Investments

Remember that I got burnt by Tesla stock and my own emotions? I finally learnt enough about stocks, companies, and the financial world to put the bulk of my net-worth into the stock market after doing the homework. Over 4 years, I made $20,000 in dividends as well as $32,000 in capital gains (a.k.a. the stock prices moved up). Total returns from the stock market: $52,000.

Total inflow after income, savings, investments: $446,000.

Spending Minimization

It looks like I took in quite a lot of money since I started tracking 10 years ago! However, wealth is like a leaky water tank. You need to increase the flow into the tank, and try to plug the leaks. Daily expenses and big one time expenses are holes you need to plug to turbo charge your bank account.

Daily expenses from transportation, food and medical/insurance costs in Singapore add up significantly. If you spend $5 on Starbucks and $15 on a cab ride everyday, that will cost you a mind-boggling $32,850 over 4.5 years. I repeat – a daily $5 Starbucks coffee and $15 cab ride will cost you $32,850 in 4.5 years.

Roughly speaking, I spent $94,000 over 4.5 years on daily expenses. This breaks down into the following:

$9,000 on term insurance, hospitalization insurance (roughly $2,000 a year)

$16,000 on food (roughly $10 a day)

$12,000 on transport (average of $7 a day)

$33,000 on parents allowance (roughly $600 a month)

$5,000 on knowledge-building ($1000 a year on courses, laptops, books, subscriptions)

$8,000 on social activities ($2000 a year to treat friends, relatives)

$7,000 on 2 overseas holidays

$4,000 on sins ($1000 a year on gambling, buying expensive gadgets, frivolous things that my wife thinks are a complete waste of money)

Balance: $352,000

I am not at the ideal point yet, because I still can cut down on sins, social activities and holidays. Reducing spending on food by cooking at home is something I can probably work on.

Strategizing on Big One Time Expenses

I got married, bought an apartment and paid for the renovation within the last year. My wife and I split contributions 1/3-2/3 for everything. Why this ratio? We follow 2 different schools of thoughts. Sometimes, we subscribe to traditional Chinese beliefs that males are breadwinners and should pay for everything. Other times, we believe that there is gender equality. So, combining the 2 schools of thought, we came to some fuzzy in-the-middle 33%-67% arrangement.

The wedding cost $20,000, net of gifts/ang bao from our guests. This cost was somewhat non-negotiable as our parents are relatively traditional. We tried to minimize spending on things like attire, photo-shoots, and decorations. For our apartment, we chose a small government subsidized flat, that cost $30,000 in renovations, applicances and $20,000 in cash down payment.

Since I contribute 67% to everything, the total damage was $47,000.

Net-worth after all that spending: $305,000. That’s what I have accumulated today.

So how did I do this?

Basically, I can break down my strategy into (a) increasing work related income and (b) investing.

(A) Increasing income from work

At work, I volunteered for anything that adds value to my bosses. I don’t believe in pulling long hours at work, but I am always reading about the field during my leisure time. At the office, I always volunteer to take up new challenges whenever the opportunities come up. I was always helping someone create things or learning how to do so. This earned me promotions faster than my peers, so my salary increased fast as well.

If you manage to pull this off early in your career, the effects add up greatly because 1, you get exposure to even more ideas / problems and thus get to build up your knowledge even faster and 2, because of compound interest.

(B) Investing

Investing is not just about allocating money to companies. It is also about allocating our time and energy.

The first step is to invest in our careers. Sign up for conferences, subscribe to journals, forums, and read them. Personally, I read about my field a lot, even outside of work. I often read about developments in engineering, economics, business and politics that affects my sector. I read academic papers to understand how smart people think. Doing this broadens our perspectives and increases our value at work. In the long run, it will speed up our salary growth. Many of my colleagues and friends treat their jobs as a chore, and are treated accordingly. Don’t be like them.

The second step is to invest in the language of money, accounting. If you can’t even manage a $10,000 account, how else are you going to manage $10 million if you strike a lottery? Stop day-dreaming about striking rich and suddenly knowing how to manage that million dollar portfolio. If you do not believe me, read very real stories like this and this. Start taking concrete steps to upgrade your knowledge. Once you know how to use it, start tracking your expenses, income, assets, and liabilities.

The third step is to get educated about investing from a monetary point of view. There are 3 ways to get very rich – owning real estate, owning commodities, or owning great businesses. Read these books to get started.

I like the way of investing in businesses most. Great companies are money generating machines, and you need to own one to be very rich. I own several through the stock market, and you can read about them here.

When you have a very stable income from your day job, you can start your own business or start investing in publicly listed companies.

Comments

1. Deviation from strict accounting practices

I do not count the property that I live in, a government subsidized HDB flat. My definition of an asset as something that can help me generate more wealth. Since I am living in the flat, I feel that it is financially closer to necessities such as food than it is to an oil well, so I don’t count it. I don’t count my CPF/compulsory government savings as well, because I’ve mentally allocated the amounts to paying for my apartment.

2. Aggressive money allocation policy

If you have noticed, I maintain a very small sum of liquid cash. Cash is 10-15% of my holdings and everything else is in stocks. Why this allocation? It is something called barbell allocation. I don’t like holding cash because it decreases in value slowly and surely over time. Each time you hear complaints about how prices are always going up, remember that it is the same as the value of money going down. It is helpful to think of money as vouchers that can exchange bags of rice. Every year you don’t use it, the amount of rice you can claim decreases. Use the money to buy a share of the company selling that bag of rice today. Better yet, buy over the whole company and start raising prices for rice.

Despite cash’s long term problems, if there is a sudden business/investment opportunity that comes up, I need it to participate in the opportunity. Therefore, this 10% cash holding is a comfortable point for me when looking at losses due to inflation versus speed to grab new opportunities.

3. Tolerance for volatility

Something as aggressive as my money allocation policy is not suitable for everybody. If you notice the progress of my net worth over time, you notice that the monthly changes are starting to get extremely violent. In 2018, the stock market dropped 20% from its peak to bottom. The downswing cost me $30,000. The upswings are similarly huge as well. If I followed the movements closely, I would be alternating between periods worrying about bankruptcy and periods thinking I am so good that I can quit my job and trade full time. Both unrealistic emotions are merely just that, emotions.

Am I scared? If I knew nothing about companies and was treating stock investment like soccer betting, I would definitely be scared. However, I understand the companies I invest in and I know they will do well 10 years from today. I will benefit more just focusing on my day job and shutting out the market noise.

As usual, I like to end off with a quote from a wise man. This guy was an inventor, businessman, investor, later US president and is also the guy featured on US hundred dollar bills.

“If you fail to plan, you plan to fail” – Benjamin Franklin

Plan out your success, and watch your wealth grow. Good luck.