LONGER-TERM investments take a back seat for Mr Solomon Tay, whose top priority is accumulating savings and ensuring his family is shielded from adversity.
Mr Tay, 40, the vice-president (V-P) of OCBC Bank group operations and technology, says: 'If I don't cater for savings needs and protection, my children and wife will be financially strapped should anything happen to me.
'We need to have sufficient protection first, and have sufficient liquidity in case of emergency needs, before putting disposable income into investments.'
His wife, Diana, 38, is a part-time human resource practitioner.
Mr Tay, 40, has set aside a cash buffer of six to nine months of expenses in case of emergency.
His careful approach to finances extends to his children. The father of a boy and a girl, aged seven and nine respectively, believes financial literacy should be taught from young and in a practical way. 'We give 20 cents to our children when they get full marks for their spelling test. They are then encouraged to use their savings when they want to buy toys.'
His humble upbringing drummed into him the habit of putting cash aside, to the point where he had saved 70 per cent of his pay before he got married.
He worked at fast-food joints from age 15 to help supplement the family income. He even managed to save $40,000 from four years of working - and that funded his computer studies degree in Staffordshire University in Britain.
Q What are your money habits?
A I put about 40 per cent of my monthly pay into an operating account that is meant for family expenses and savings.
About 15 per cent is parked in OCBC's Employee Share Purchase Plan and about 10 per cent is spent on insurance policies. The remainder is kept in my own account for expenses and savings.
I started participating in OCBC's share purchase plan in 2005. It helped me to save as it is done through a monthly contribution deducted from my pay. The contributions are then converted to ordinary shares at a preferential rate.
Q What financial planning have you done for you and your family?
A My financial planner helps me to map out my overall financial position, such as how much should be set aside for savings and investments. When it comes to the execution and purchase of unit trusts, I prefer to do it myself.
I use charting tools at finatiq.com to plot out the investment universe and track my portfolio. I check out track records of fund managers, research the performance of the funds and read their prospectuses before I make investment decisions.
I'm not an aggressive investor and 60 per cent of my portfolio is in equities, mainly Europe and Asia excluding Japan, with the balance in bonds. Some years, the returns are 10 per cent and the average annual returns are 6 per cent, which fall within my targets for beating inflation.
Q What about insurance planning?
A I've a combination of term and whole-life plans with a total sum insured of about $1 million. I have a couple of endowment plans that are maturing soon and a $100,000 critical illness cover as well as a private hospitalisation plan.
Q Moneywise, what were your growing up years like?
A My dad, a taxi-driver, was the sole breadwinner. Mum was a housewife who took care of my four siblings and me. We lived in a one-room flat in Tanjong Rhu and we were practically living from hand to mouth, and the children were taking turns working at fast-food restaurants to earn pocket money and also to pay for school fees.
For extra income, the family used to take on work such as folding paper items used for funerals, and threading strings into plastic bags used to carry drinks.
That was how we cultivated the habit of saving from a very young age. It also reinforced my financial principle in life - always live within your means.
Q How did you get interested in investing?
A In 1996, I switched from the government sector to the financial services industry. I was implementing banking, investment and trading related systems, and I had to try out the services myself to see what customers were experiencing.
After a while, it was quite natural that I started to appreciate what it means to maintain a good investment discipline. I still believe that good investment discipline will help to go a long way.
Q What has been a bad investment?
A An endowment plan that was paid for using my Central Provident Fund Ordinary Account.
The annual premium was a high four-figure sum. I bought it on impulse from a friend when I was in National Service and later realised that it was not relevant to my long-term financial goals.
It tied up quite a significant amount of my CPF funds and I wasted good money taking a loan from the bank to pay for my home when I could have mobilised these CPF funds.
I converted the policy into a paid-up plan so that I could stop the premium and I am still waiting to see what to do with it after more than 12 years.
Q What is your best investment to date?
A The unit trusts I bought through the Supplementary Retirement Scheme for the past four years. The scheme helps in tax savings, which amount to about 20 per cent off my tax bill. The unit trusts are also giving good returns of 6 per cent per annum.
Q What are your retirement plans?
A I aim to be debt-free by 50 and have sufficient savings to sustain a moderate lifestyle, which includes a holiday once a year. By then, I should be comfortable, with a monthly income stream of $3,000 from my investment portfolio.
It is a bit too early for me to be thinking about full retirement at the moment. I would probably go into semi-retirement, and work in a less stressful mode after my children have grown up and are self-sufficient.
