Which baskets are you putting your eggs?

i have come across numerous advices and references on how to allocate savings to maximize your future income stream potential but i have never got round to doing it yet. 90% of my savings are still in the basket that guarantee capital preservation- which are all relatively low interest earning vehicles.

but then, my banker did ask me a very specific question during the last three financial check ups i had with him which i continuously has failed to answer with confidence. What are my plans? it makes sense to me that all financial planning should start with that. after all, it doesn’t make sense to set aside money for no reason. i initially thought in the past, “for the rainy days” is enough a reason. but that’s what emergency funds are for. surely, a house or education for future kids or around the world travels or financial independence in general are not emergency events. one does have to plan a timing for these specifically.

early this year, i did list all the events that need major cash outlay in the next six years. there is the 30% downpayment equity on a nice condominium in the city, a probable wedding and pregnancy, and the college education fund for my two remaining brothers who are soon attending sophomore and junior year in high school. i remember i grimaced at the figure i need to start setting aside for. add to that the fact that i still want to travel two or three times a year. and that i already lead quite a simple, basic lifestyle (not counting the traveling) that there are no major spending habits (aside from traveling) i need to get rid of to save me more money! and of course, i want to continue separately setting aside something for retirement.

taking one off the list at a time (e.g. to save up for one goal first before moving to the next) doesn’t look like a good idea for me. and so i decided that i am ready to plunge into allocating my savings for each of these goals by using the recommendations i got from Motley Fool website on how you should divide the $$$ you set aside as your savings (e.g. money you pay to yourself).

i tweaked the percentage a little bit for 2009 because there were already vehicles like the Pension plans which i have already committed obligations to due to the plans i took in the last 3 years. (the % within the parenthesis is Motley Fool’s recommended figures, the one outside is my allocation for 2009).

Real Estate Equity 28% (30%)
Retirement Savings Plan 24% (26%)
Stock Mutual Funds 10% (10%)
CDs, MM, and SA 8% (10%)
Individual Stocks 7% (6%)
Pensions 15% (6%)
Others (bonds, etc) 9% (10%)

i didn’t like the fact that 15% of the money i put aside every month is for the pension- even i think it is a too high. but i am not very worried about it because the moment my income stream increases, i will not allocate anything for pension anymore.

my real estate allotment alone will not give me the necessary 30% downpayment amount i would need within the next two years but as i already have a comfortable available savings buffer i set aside for this as of Dec2008, it is very possible that with a little bit change in my current income stream would put me right on track into owning my first real estate property. (for the first time in my life, that vision actually excited me!)

i feel that i am still on the right track. of course, coming up with this is merely a first step. i have to carefully look over the options unto which i shall execute this allocation. i am schedule to meet my banker/financial planning coach in the next few days so i can discuss this with him.

the allocation, though- CDs, MMs, and Savings Account- doesn’t leave much room for wedding expenses (my two siblings college education take priority over that). but then, to quote the immigration officer who cleared me from PI shores when Zsolt and i went to Lembeh, Indonesia for diving, i can always impose that responsibility on Zsolt.

but fuck it, zsolt and i can always elope to Fiji and get married there- with a bunch of strangers and awesome diving. and then, we can just get the entire fund from our travel allowance jars.


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