The Power of Saving

 I have written about the “ The Power of Dividend “ ( here ) and shared my view on the importance of dividend throughout my investment journey.  I try to visualize it through the chart as below which I published every quarter in my portfolio and dividend update.

image credit to thepeopleofasia.com

As I am not really good in doing analysis on financial detail for companies or trying to identify the next FANGs type of exponential growth companies, my investment philosophy is quite simple that buying those company with strong fundamental (a clean balance-sheet with fewer debts ) and have dividend pay-out regularly. Of course , buying at right timing especially during a crisis will give you a boost in your ROI but one need to take note also on the importance of diversification as well. ( More reading on My Investment Strategy –Part 1! Time & Timing –here )

The Power of Saving

Most of the time, we only think about ROI and dividend in our journey of wealth accumulation, but the importance of saving (at the different saving rate) will give you another thought  and perspective on "time factor"  and your journey to achieve F.I.R.E

There are many reasons for you to spend money but only to save money, which is very important to maintain healthy cash flow. Living within your means, and spending less money than you make is the  fundamental rule when it comes to saving money, but in our modern credit-based and FOMO society, the importance of saving seems to be forgotten by most of us.

Saving money should almost always come before investing money. Think of it as the foundation upon which your financial house is built. The reason is simple. Unless you inherit a large amount of wealth, it is your savings that will provide you with the capital to feed your investments.

This is a good article about the power of saving :

Building a wealth snowball from Getrichslowly.org

image credit from Getrischslowly.org

Quote “ If you only save 10% of your income, then the growth of your wealth snowball is largely at the mercy of market returns. If the stock market has several good years in a row, your wealth snowball embiggens. If it has several bad years in a row, your wealth snowball remains roughly the same size.

But if you save half your income, for instance, market forces have a minimal impact on how quickly your wealth snowball grows, how quickly you can achieve your financial goals. Sure, there’s an impact, but because you’re saving half your income, that impact is much smaller than it is for your friends who are saving less. “unquote

As above, it seems that if one can really have a higher saving rate than average (more than 50%), the importance of your ROI diminish as highlighted by the author. In that case, you may just invest in Index ETF if picking stocks by your own is not your cup of tea.

Among the local blogosphere or context, I could find these two important articles and advice which I would recommend for further reading. One is about the detail of “Your Personal Cash Flow Statement “ and the importance of maintaining positive cash flow ( By Kyith ) and the other one will be the “ Time Factors in Saving vs Investing “ on a different characteristic of time factors in Saving vs Investing by Uncle CW8888.

Your Personal Cash Flow Statement – The Complete Guide from InvestmentMoats.com

Time Factors in Saving vs  Investing by uncle CW8888

Time is an important factor in seeing your saving growth and same with compounding effect on dividend reinvesting but for overall ROI, especially on capital gain, the important of “timing” prevail, to some extent.

I don’t really calculate our ( STE & Mrs) saving rate in detail but I think with simple and fugal life-style, our saving rate is much higher than average. Even with current dividend income, we manage to save more than 50% of our passive income because we don’t spend money on “ things “ especially the luxury one, but rather on “ experience “ where you may find some of our holiday trips in my photos gallery ( here ).  

Yes !! we are buying another experience in the coming summer, one of our dream trip !! Guess where is this place  (base on below photos )? Hope to take such beautiful photos during our trip where I would be glad to share here... 😃

 

 
                                         

This will be my last blog post before Lunar New Year 2018, taking this opportunity, I would like wish all “ A Very Happy & Prosperous New Year “ may the Year of Dog bring you joys, love and good health.

Cheers !