Link to Prepay vs. Invest

#3 Using a standalone cash account separate from your investment portfolio: the traditional Emergency Fund

Link to 5 Different Ways To Build An Emergency Fund » Silicon Valley Blog About Money

Back to our home, with HDB’s 2.6% interest on a 30 year loan, it definitely makes it also a lot easier to shell out the $657 in loan repayments every month. At this amount, even if one of us should need to take a break from working, the other wouldn’t have any problem supporting the loan. Taking into consideration this figure and our cashflow, I’ve also set aside an additional $300 a month towards the repayment of the loan. After about a year and a half, I’ve been wondering about whether to keep it invested in a higher yielding instrument (have yet to find something suitable) or to quickly make a lump sum payment (Dad advises against it).

Is it better to invest or to prepay a mortgage? Neither answer is wrong — there are advantages and disadvantages to both.

Source: Ask the Readers: Is It Better to Invest or to Prepay a Mortgage? ∞ Get Rich Slowly

After doing some reading on the topic, I came across a great research article at Get Rich Slowly that mentions the various advice from financial planners. For my own case, liquidity is rather important as running On9 Systems is pretty much like having a kid who needs the occasional big expense/investment. Kinda funny how couple of years back, I wouldn’t really be thinking so much about finances whereas nowadays, everything goes into Microsoft Money I guess the best option would be to save (more), make sure emergency funds are well stocked for both of us and to try not to make big ticket purchases for the time being (like getting a car or even moving to a bigger place).

Total payments = $300 * 12 * 5 = $18,000.00
Total amount after interested (monthly compound interest) = $18,952.02

Of course, an instrument with a higher interest rate would be even better so shall keep a lookout for something that isn’t too risky

Any system in which the partners are open about their money habits is a good one. Ultimately, it comes down to this: Do what works for you.

Source: Which Should You Choose: Joint or Separate Finances? ∞ Get Rich Slowly

Pretty interesting read over at “Get Rich Slowly” on joint or separate finances for couples. In our case, Yh and myself started out having a joint account that we both agreed to contribute a fixed amount each month that could be used to finance various purchases (especially for our wedding and home last year). 

We actually had the account open when we were dating (around Jan 2005) as I had learnt a very good tip from an ex-colleague at NEC. That having a joint a/c makes it easier to spend on stuff when we do things together since we will both have to think about the purchase and not have one person feel like they are constantly paying for things.

Its been 2 years since and I’m glad we had such a system when we didn’t have to dig too deep into our own pockets to finance the furniture and wedding stuff. Now that we’ve finally completed our last installment, it’s time to channel some of the savings towards a higher interest account. (Maybank’s iSAVvy Savings Account is a good choice). 

Seeing as how my preferred car would be the Honda Civic, that would mean a loan of at least $65k at a repayment of $731/month for 10 years at 3.5% (Total interest paid of about $22k!). The good thing is I abhor debt so there goes the plan to get a new Civic.

Drive Free, Retire Rich explores the impact of carrying a car payment, and offers ideas on how your money can be used more wisely.

Source: Dave Ramsey Says ‘Drive Free, Retire Rich’ ∞ Get Rich Slowly

Link : Drive Free, Retire Rich

So what’s the other way I can get around without relying on public transport? Looking at the article referenced by Get Rich Slowly, Dave Ramsey offers a novel approach to car purchase. By investing the amount intended for a car, one can save on interest payments until such a time the amount saved can pay for a car entirely! And by keeping up these payments to oneself, the interest earned could potentially fund future car purchases. Seems rather interesting concept but than also means having to squeeze out $731 to invest. Time to do some math! 

My emergency fund requirements

Mortgage/rent for one month ________ x 3 = $___________

Auto loan for one month ________ x 3 = $___________

Utilities for one month ________ x 3 = $___________

Transportation for one month ______ x 3 = $___________

Groceries for one month ________ x 3 = $___________

Other debts for one month _______ x 3 = $___________

Total amount for emergency savings account = $___________

Source: Budgeting work sheets: Emergency fund work sheet