Tuesday, April 13, 2021

How To Achieve Your Toughest Financial Goals - $100K dividends is it achievable?

In the financial blogging space, many new bloggers set their financial goals as achieving their first 100K by the age of XX. This age is getting younger from 30 to 28 to even below 25. Many years back, I also set this similar goal and achieved it at the age of 28. 

Something miraculous happens when we start to set goals. When you set a goal, your brain first evaluates the goal and start to plan how to reach there. Somehow or another, you'll realise if you're focused on your goals, your subconscious mind will think of new ideas and strategies to achieve it. When I was a secondary 4 student about to take my O levels, the school sent us on a motivational camp in a spur to help us achieve better results. I was from a neighborhood school (which surprisingly is no longer there now due to school merger in a short 10+ years), my results were average and often failed in many of my subjects. The worse thing is while I failed some of my subjects, I sometimes could still be the top 5 in my class. That's how bad all my classmates results were too. 

I had low self confidence and didn't think I would achieve much in life, same for the friends around me who are all just happy with average results. We didn't even think if we would have a future. 

During the motivational camp, the instructor asked everyone what all of us want to do for our future. He specifically went round each one of us to ask what's our ambition. One by one, each of us shared what we wanted to do. There are people who say they want to be admin staff, teachers, security officers, police officers etc.. Each one of the ambition, he challenged us to aim higher. For example, when someone says he wants to be a security officer, then he'll say why not you aim to be a security supervisor. When it was my turn, I said I just want to be a technician. He looked at me and said, "why not an engineer?" This sentenced changed the way I think. It triggered a response in my brain to think higher. Eventually, I passed all my subjects and went on to be an engineer for 6 years. I may have been just a technician if not for that challenge. 

The key to success is opening up our minds to greater things. If you've watched Bling Empire on Netflix, you'll realise the 2nd generation kids, who have rich and successful parents, are also very good in earning money themselves. They have seen their parents make a lot of money and believed they too could make a lot of money themselves. On the contrary, a child from a poor family may be limited by their thinking as they see their parents struggling to make ends meets. They would think they can only make a limited amount of money in life. But, the good news is this can be changed by changing the way we think and conditioning our mind to see greater things. 

Failure is not when we set too high goals and can't achieve it but it is when we set too low goals and achieve it. This phrase changed the way I think into believing greater things. Setting higher goals can really propel us to reach it even if it seems impossible. 


How To Set Goals To Achieve What You Want?

1. Think about what you want to achieve

This first step may seem like common sense but it is critical as this is the stage you should open up your mind and imagine the impossible. There are many advise out there which recommend setting realistic goals but this will again limit our minds. 

If you want to set a goal to achieve $1 Million in your 40s, put this in your mind first and don't think about how it is impossible or how tough it is to achieve it. Just put in on paper first and start imagining the possibilities.


2. Make your mind believe it can happen

When you set a goal and make your mind believe it can happen, your subconscious mind will start to think of ways to achieve it. The best way to make your mind believe it can happen is to look at other real life people who have done it before. Source from the internet those who have become millionaires at a young age and this will make your mind believe it is possible as others have done it before. 


3. Set milestones to know you are on track

The next crucial step is to set in between milestones so that you can review every 3-5 years to see if you are on track. Setting a goal of 1 Million by your 40s can have $100K, $300K, $500K in your 20s, 30s as milestones. For example, you can set $100K by age 28, $300K by age 33, $500K by age 38 before hitting $1 Million in your 40s. This is just an example of financial goals setting but the same principle can be applied for any other personal goals which you can to achieve. If you want to be healthier, you can set a goal to lose 10kg in 5 years and achieve 2kg in year 2, 5kg in year 3, 7kg in year 4. 


4. Make it specific to visualise how it can be achieved

Achieving goals now lies in the details of the specific ways to achieve it. Let's go back to the example of achieving $1 Million in your 40s. You'll need to know exactly how much income, how much you need to save and invest to actually reach this target. Without this visualisation, you will not know what to do. If you look at my financial goals, I break it down into specifics of how much income I should be earning, how much I can spend, how much I should save and how much investment returns I should be getting. 

Once you write down the specifics, for example, earning $5K income, your subconscious mind will think of ways to achieve it and go along that path. In the midst of your journey, your mind will let you know which is realistic and which is not. For example, if you put an investment return of 15%, then along the way you may realise that it is not sustainable and focus on earning more income or controlling some spending instead which is more attainable. Your specific steps on how to achieve your goals will change along the way and that's ok because your end goal is still the same, just the strategy changed. 


Setting a goal of $100K annual dividends. Is it achievable?

I now have a dividend income target set for myself below. The dividend income goal should reach $60,000 per year, equivalent to $5000 per month when I reach the age of 50. If I continue working till my 60s, I would be able to achieve a more than $100K dividend income. Is this achievable? Yes it is as I've seen many people who have achieved it and I've also put it in a spreadsheet on how much I need to earn, how much I can spend and how much investment returns I need to get to achieve it. The dividend yield is based on 5% to achieve what I have set out below. 


Anything is possible as long as we set the goal to achieve it. It may be a long journey and many people will give up halfway. The one who persevere till the end will reap the rewards of achieving that goal. 

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Tuesday, March 2, 2021

Building a 5 figure dividend portfolio

7 years ago when I started this blog, I wrote about the start of my financial journey towards financial freedom. Being consistent is not easy, painstakingly building up my net worth and investing in boring stocks throughout the years. The financial goals I set for myself in my financial goals page were met surprisingly even without me actively tracking it. As I approach age 33 this year, I am thankful for all the knowledge I've learnt through other blogs, friends and learning while writing too. 

Back in 2013, I was inspired by financial bloggers who manage to have 5 and 6 figure dividends from stocks annually. While most people just save enough money for retirement in their old age and start to draw down their savings during their retirement years which can probably last about 10-20 years only, this group of bloggers were able to retire earlier with 6 figure ($100K+) annual dividend income which can last for a lifetime. I thought this was a good method to journey towards financial freedom. It is easy to visualise and plan for the future with dividend income method. After 7 years, I managed to finally achieve a 5 figure dividend portfolio from stocks although this is still many years away from the financial freedom target. 

While this 5 figure dividend income may seem like its a lot for many people, it is actually just a basic requirement for financial planning. Moving forward, I expect most of my savings to come from dividend income as expenses will take up almost all of my monthly net take home pay. I can imagine people who do not invest will have problems reaching their retirement goals in the future as inflation continues to kick in and cost of daily living goes up even higher.

My dividend income from stocks is projected to surpass $10K for the year 2021. This is done base on conservative estimates as most stocks have cut dividends starting from 2020. The dividends may come in higher if economic recovery happens this year and beyond. Let me share how is it possible to build a 5 figure dividend portfolio.


Build up your investment capital

When we first started out investing in stocks, the dividends from stocks will definitely be low. On a conservative basis, most investors should aim for around 5-6% dividend yield for your portfolio. Higher yield doesn't mean its always good as there is risk investing in high yield stocks too. 

With 5-6% dividend yield, a $100K portfolio will give you $5000-$6000 in dividends annually. To build up a 5 figure dividend portfolio, you need $200K and more. It is therefore important to set goals to build up a sizeable investment capital when you first start your financial freedom journey. This can be done through finding ways to increase your income, saving up more and investing in growth stocks to compound your money. 

At the start, my dividends from stocks was only $1K+. It steadily increased to $2K, $3K, $4K before hitting more than $10K. Dividends from stocks can only go up with more investment capital. This is why it is important to focus on building up a sizeable investment capital for dividend investing. 


Invest in good dividend stocks

After you have a sizeable investment capital, you can look to invest in good dividend stocks. Take note that a dividend portfolio is built up over the years and not when you have a lot of money then you start to invest in stocks. The reason is that when you have the money, stocks may be at high valuations and thus dividend yields may be lower too. It is important to invest consistently to build up our dividend portfolio as stocks valuations become depressed. 

Most investors looking to build a dividend portfolio will invest in REITs or business trusts. The more common ones are shopping malls, commercial offices and industrial buildings. REITs need to payout at least 90% of the rental they collect from tenants to shareholders. A good dividend stock should be able to grow distribution per unit (DPU) consistently. For REITs, they can do so through asset enhancement initiatives (AEI) or DPU accreditive acquisitions. REITs also grow their DPU is their rental reversion is positive. This means they are able to increase the rent charged to their tenants when renewal comes. REITs which have properties at good locations are able to command higher rents over the years. 

Besides REITs, we can also invest in other stocks too. Some big companies do pay good dividends too with growth potential also. Stocks such as Comfort Delgro and Jardine Cycle & Carriage are currently trading at low prices due to the COVID-19 pandemic. Comfort Delgro has dividend yield of 6.5% whil Jardine C&C has dividend yield of 5.5% based on their 2019 dividend payout. If we believe that their stock price and dividend will recover back to 2019 levels after the COVID-19 pandemic, then these are good opportunities to accumulate such stocks to have both good dividend yields and capital gains as well. 


Manage risks by diversifying

Some investors may not believe in diversifying into multiple stocks to manage risks for a dividend portfolio. For me, I would think this is important as without diversification, the dividend portfolio may be destroyed in future. 

There are some dividend stocks like Eagle Hospitality Trust and Lippo Mall Trust which had their value depressed to point of no return. These stocks were trading at impressive yields of 8-10% at a point in time. But their stock value decreased by more than 50%-80% which negated all the dividends collected for many years. Eagle Hospitality Trust was even halted. If we had heavily invested into the wrong dividend stocks, the dividend portfolio would be destroyed. 

We would want our dividend portfolio to be as stable and as sustainable as possible for the longest time possible. Ultimately, the dividend portfolio is suppose to supplement our income for financial independence and the end goal is to achieve financial freedom living on a substantial 5-6 figure dividend income for the rest of our life. 


Final words - Don't just focus on dividend investing only

While dividend investing is a slow and steady way to build wealth with about 5-6% yields, we should not focus on dividend investing only when we are younger and do not have a sizeable investment capital. We should also include a mixture of growth stocks in our portfolio to compound our money faster. With a combination of dividend and growth stocks, we should be able to aim for 8% or more investment returns on a sustainable basis. This will enable us to build wealth faster through investing. 

I have done many projection before and have proven that without investing, it is very hard for many of us to build wealth enough for retirement unless we earn an extremely high income of more than $10K per month and save enough of it. Investing is an important part of wealth building and so is increasing our income. With an extremely low income, it is also hard to accumulate enough for retirement even if we are very good in investing. We need to have a balance of both.

If you're looking to build a sustainable investment portfolio, patience is key and staying invested in the market will enable us to build wealth and compound it over the years. In this way, we will definitely have enough for retirement and even more for financial freedom. The journey towards financial freedom continues.... 

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Tuesday, February 2, 2021

Is The Market At Euphoria Stage Now?

The stock market is going through some crazy ride in the past few weeks. I'm seeing lots of new investors entering the market to make as much money as they can for fear of losing out. When I look through Facebook, I can see some friends who have not invested before coming into the markets and showing how much money they have made through stock trading. Just yesterday, the Straits Times reported a NUS undergraduate who accumulated $100,000 gains through the hot stock, GameStop, by investing only $20,000. These are signs that the market is going through a Euphoria stage.

With social media and the internet, information spreads very fast where people will follow news and get into the market without researching much into a company's fundamentals. This was seen from GameStop where the stock price rose from about $18 at the end of December 2020 to $347 at the peak in Jan 2021, all these >1000% returns in a short span of less than a month. However, as with any markets, what goes up will definitely come down when there is no fundamentals for it. There are already people who tried to invest in GameStop at $300+ and got burnt when the price now is only $100+. 

In market psychology, this is known as Euphoria which is the riskiest time to invest in. 


The stock market is often deceiving and any profits can be gone in an instant. Paper gains will forever be on paper only unless we sell the stock and lock in the gains. Seeing the excitement in the market growing stronger, I've began to take profits on the stocks I have and lock in the gains. I believe there will be some retracement soon but the general market sentiment will still be up as we recover from the COVID-19 pandemic. This may take awhile though so while we await the recovery, there will still be opportunities to invest in good stocks.

In the span of less than a year, we have seen some stocks recovering back to their pre-covid levels for the STI. Those who have invested at the low would have gained around 30% returns. While this investment returns is nothing as compared to the 1000% made in some Euphoria stocks, we are at least assured that what we are investing in has fundamental value for the long term. 

In times of market mania, we should remind ourselves that what matters is long term investment returns as opposed to fast money from short term gains. While it is tempting to join in the excitement and get fast money, we should limit our exposure for speculative investing to money which we can afford to lose. It is ok to join in the fun but remember this fun can burn anyone if they're not careful. 

This market mania will certainly end one day. When the time comes, we will be happy we did not throw in our life savings and lose it all to speculative investing. 

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Sunday, January 17, 2021

My Experience Planning A Wedding During COVID-19

I breathe a sigh of relief that I could hold my wedding during the COVID-19 pandemic. So many things happened in the past 1 year which troubled and worried me so much. Firstly, our wedding had to be postponed from July 20 to Jan 21. It was the hardest decision I've ever made. We didn't even know when to postpone our wedding to as we're not fortune tellers and do not have a crystal ball to see what is going to happen for this pandemic. 

Making the decision to postpone the wedding was coupled with the mad rush to contact all the vendors to check on the availability of dates. I had the fear that many couples are also postponing so it will be hard to get any dates in 2021. We contacted about 5 vendors we had engaged and luckily all were able to accommodate our new date in 2021. 

With postponement, cost increase is also a factor and the fear of any of the wedding vendors going bust and thus losing our deposits. I have paid a few thousand dollars in deposits to several vendors already including the bridal shop where I had sign up a package for the gowns, suits, actual day photography. Thankfully, non of our vendors went bust by the time we held our wedding. 



Experience with Hotel venue
COVID-19 has affected the hospitality business in a huge way. For hotels, they do not have any tourists coming to stay and events were also not allowed to be held. For weddings, the number of attendees was limited to 50 initially then increased to a max of 100 now. 

We chose Hilton Singapore as our wedding venue 3 years back. This became the best decision we ever made. We were served by the wedding sales executive at the point of signing the contract and paying the deposit. Few months before our wedding, the sales executive went on maternity and we were than served by the sales manager. We postponed our wedding to 2021 and never heard from the sales executive nor the manager anymore from then on. I guessed they were either laid off or transferred to other roles. Blessings in disguise, we were now served by the sales director, Anthony, who provided us the best service we could ever ask for. 

We heard of many hotels starting to increase price or cut the perks as the number of tables were reduced. Many people decided to cancel their banquet but could not get back their deposits at all. Some had their 1 night stay in the bridal suite cancelled, others had their price per table increased by 20% or the wine and beer perks taken away. Hilton did not increase our price per table or take away our perks. Instead, we got more perks and experienced the most flexibility in table arrangement which we could ever ask for. Due to social distancing, the number of pax per table could only be a max of 8. Hilton used our per table price which we signed up back then and divided by 10 to derive the per head cost. They then allowed us to be flexible in assigning any number of guests per table and only charge us base on per head. So, I had some tables with 5 guests, some with 6, 7 or 8. They even went the extra mile to not charge for toddlers as long as we tell them not to serve food for them. This could not have happened in the past as most hotels will charge by per table of 10 persons regardless of how many guests were seated on each table that day. 

Besides being flexible with the table arrangement, the sales director often calls me to assure me and update me on any changes to government regulations. We wanted an additional night before the day of the wedding so that my wife could do the make up at the hotel itself on the actual day and were prepared to pay for the extra room night. To my surprise, Hilton offered the additional room without any charge. It was initially using the day use room which we have in our package for the additional 1 night but the sales director once again thought for us and mentioned it will be difficult to move our things from the day use room to the bridal suite so he initiated to let us have the additional night on the day before at the bridal suite instead. This made it so much better for us on the actual day as we had many items in the room. If we had to move the items from one room to the other, it would not have been a good experience. 

We had a live band package which we signed up for and this was converted to virtual live band instead due to government regulations of no live performance for weddings. Hilton initiated to help us contact our virtual live band vendor to test the connection just in case it doesn't work. On the actual day, our banquet manager Hasan and sales director Anthony were there to ensure everything is ok. They took care of our solemniser to ensure he has a space to park at L1 VIP lot so that he can arrive on time and contacted my sister in law to pick up my parents in law when they arrive. I'm not sure if this is the practice for most hotels in Singapore when it comes to service excellence but I really felt like a VIP on that day. I felt that Hilton has way exceeded my expectation on service standards and would like to express my appreciation for all that they have done for us in the midst of having our wedding during COVID-19.


Experience with virtual live band
Many wedding banquets have live bands nowadays to make it more lively. Me and my wife signed up a package for live band with Musical Touch more than a year back. Unfortunately, due to COVID-19, live band was not allowed but virtual live band was proposed for us. So, our vendor actually rented a studio and had the live band livestreamed to our wedding venue. I was initially skeptical of whether such arrangements would work as there are many considerations such as whether it will be as engaging, whether the sound quality will be good and whether the internet connection will be stable etc. To my surprise, everything went well that day. The virtual live band had good sound, it sounded like they were there on that day. There was no lagging or cut in internet connection also.  

We initially signed up for a 2 piece band only with emcee service. The singer was supposed to double up as the emcee for our wedding. However, as the singer could no longer be here at the venue, the vendor had to arrange for a separate emcee to come down. There were additional cost due to this arrangement. We were initially not too happy about this as who would like to fork out additional money when its not what you wanted but Musical Touch patiently explained to us the reasons. We had several exchanges before we came to the decision to fork out the extra cost to continue with the virtual live band and emcee service. This vendor was sincere and really provided good services on that day. They even had an additional coordinator came down that day to ensure the coordination for the march in songs and accepted songs dedication as per normal. I would definitely recommend Musical Touch for anyone who wants a virtual live band for your wedding during this COVID-19 pandemic.  

Cost of wedding
A wedding is often the first money bomb in our lifetime. I wrote an article 6 years back in 2014 on how much money is needed to get married and start a family in Singapore. Here is the article: https://sgyounginvestment.blogspot.com/2014/03/how-much-money-is-needed-to-get-married.html

The cost of wedding I calculated back then was: 

Cost of wedding after collecting Ang Baos: $19,000-$26,000. 

This cost included honeymoon which we couldn't go for due to COVID-19. If we add in a honeymoon cost of $5K-$10K, the cost I would have spent for wedding is in the range of $13K-$18K after deducting the ang baos collected. Yes it does cost 5 figure to get married in Singapore but I think all these cost are worthwhile to spend for your once in a lifetime occasion. I could also afford this amount as I've saved up significantly over the years since I wrote the above article and am fully prepared for the cost needed. It would not be advisable for anyone to take a loan for a wedding if you do not have the savings for it. 

All in all, we did not regret having our wedding at a 5 star hotel with all the good services which we needed to make the day better. We were happy, our guests were full of praise for the food and service and were happy too. This will definitely be something memorable when I look back in the future. 

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