#AskHannAnything: Funding For A Home And Retirement In Your Mid-30s

In my time as a certified charterholder, I come across clients whose financial queries range from “I have RM X in my account, should I buy a house or invest in the stock market?” to “I have RM Y in debt across home loan, student loan, and loan shark, and I’ve just been retrenched. What should I do?”. Normally, the services of a financial advisor/certified charterholder is chargeable by the hour, but in the spirit of cultivating financial literacy and making smarter money decisions, #AskHannAnything was born.

The queries posted in this series have been curated to cover an extensive range of issues, and all queries have been posted with consent and are not edited whatsoever (names may be changed for anonymity). With that, here’s this month’s top query! (Next month’s intro will be much shorter, I promise!)

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Hi Hann,

I am a 34-year-old Account Executive. Below is an overview of my personal finances, including my savings, investment plan, and expenses.

 

Savings/Investments
HLB Cash Account RM3,700

 

HLB FD 12 Months RM10,290
HLB FD 6 Months RM1,000
HLB FD 3 Months RM1,000
MBB Cash Account RM2,919
Public Mutual RM11,531
Amanah Saham RM18,613
EPF RM150,000
Total RM199,053
Income RM3,080 after deductions
Monthly expenses
Parents & Utilities RM600
Insurance RM351
Daily expenses (toll/petrol/food) RM400
Phone bill (postpaid) RM35
Gym/yoga subscription RM80
Health supplements/food, medical fees RM200
Misc RM200
Total RM1,866

In addition to these, I also have the following one-off expenses each year:

  • Car road tax & insurance: RM600
  • Medical card: RM650
  • Medical check-up: RM400 (June & Dec)
  • Travel: RM3,000

I have been in my current job at an oil palm company (operating overseas) for 9 years, with a 2-year increment and bonus. However, I plan to change my job as the company is not doing financially well, although the company still pays my salary on time.

My car has been fully paid up, and I set aside RM500 each month for retirement planning and placed into Public Mutual funds. 

I plan to use my 1-year savings for my wedding (estimated cost is about RM20k), which should be sufficient if it’s a simple wedding and we stay with family. I have already set aside the 12-month FD as part of the wedding fund.

For additional details, my boyfriend is currently a Grab driver, and earns around RM4,000 nett per month. Here’s a breakdown of his expenses:

  • Parents & Utilities: RM600
  • Car installment: RM550
  • Toll/petrol/food: RM1,000
  • Phone bill (postpaid): RM120
  • Family house installment: RM450 (total RM950, split with brother)
  • Miscellaneous: RM400
  • Total: RM2920

For the wedding, my boyfriend is saving RM1k/month and I’m saving RM500/month. After that, we will continue saving this amount and I hope that I can own a house in Klang in the near future.

Please advise on a practical financial plan for my situation. 

Thank you

Lee

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Hi Lee.

First off, well done on organising your finances well, having a reasonable savings habit relative to your income, and having a clear view on what you want to achieve financially. However, in order to create a long term financial plan, you should ask yourself several other questions:

  • When do you want to retire?
  • How much do you need to retire on?
  • Do you plan to have children or a bigger family?

This will give you a clearer picture that will help a financial planner to build a plan for you.

Meanwhile, having looked at your overview, I can give 3 simple ideas to follow:

Live the same, save more. By reviewing each line item of spending, you could be having the same lifestyle and yet have more money in your pocket. Just looking at the below, between the two of you, you could be saving an extra RM2,000+ without changing your lifestyle! For example:

    • Fixed deposits – you have more than RM10,000, that typically qualifies you for FD promotional rates, compared to the board rates that you’re getting. This will be a challenge in our current low-OPR environment, so perhaps you can also look into high-interest savings accounts while hunting for FD promos.
    • Credit card – your boyfriend in particular will benefit greatly from this. Assuming you and your boyfriend spend RM500 collectively per month on petrol, and use a petrol cashback card (some top cards can give anywhere between 5-10% on certain conditions), that could be an extra RM200 yearly.
    • Insurance + Medical Card – you mention you allocate RM351 per month for insurance (I’m assuming life insurance) & RM650 per year for your medical card. If you do your research online, I’m confident that you can find an insurer that can combine the two, and save RM100s if not RM1,000+ a year.
    • Postpaid line – most all-in (unlimited data, calls, SMS) lines in Malaysia as of 2020 should not cost anyone more than RM50 per month, so it looks like you are doing well there, but your boyfriend looks like he could be saving at least RM70 monthly by switching plans or providers (without affecting his usage). That’s more than RM800 per year!

Buy the right priced home. It is both a financial and emotional decision. To assist you in navigating the decision, here are some points:

    • Affordability – as a couple you indicate you are living with parents and jointly contributing RM1,200 monthly. Assuming that you want to keep that the same, that indicates that you should be looking at a mid-priced home at around RM300,000.
    • Downpayment – at a RM300,000 property value, most people assume they need to have RM30,000 (10%) available, but there are additional buying costs (lawyers, government duties) which range between 3-4% of the property price, so it’s best to ensure you have at least 15% to complete the transaction. It looks like you have in excess of that saved in various channels, so well done!

retirement-savings

Retirement/Savings Planning. Without knowing too much about your retirement goals, I can only give some basic tips, here they are:

    • Diversification – regardless of what you are investing in, you should always look to diversify. This may limit your upside as certain asset classes outperform others even over a long period, but diversification ensures a lower risk as your investment portfolio grows. Keep a healthy mix of cash, equity unit trusts (or ETFs), bond funds, property, etc.
    • Long term investing – since you’re in your mid-thirties, whether you intend to retire at 50 or 60 or 70, your investment horizon is considered long, so focus on the long term rather than quick investments.
    • Rule of 4% or 25x – In the absence of your goals, the one thing I will leave with you is, multiply your desired retirement income per year by 25x to get your retirement target portfolio. For example, if you decide between you and your boyfriend that RM100,000 yearly (RM8,333 monthly) is sufficient to retire on, aim for a portfolio of RM2.5m and this should be enough to retire on, taking into account withdrawals and inflation.

For a detailed financial plan, please do have a think about those questions at the start and then consult a Certified Financial Planner to create a long term financial plan for you.

 

#AskHannAnything is a monthly series where our co-founder, Hann Liew, offers advice to users who submit their personal finance queries. Want to pick Hann’s brain? Drop him an email at [email protected] with your queries. We will publish the most useful ones at the end of each month.

*by submitting your email, you agree to provide consent for it to be published on RinggitPlus.

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