Financial Resolutions for 2009

As 2008 draws to a close, the curtain is about to fall on one of the worst years in terms of economic growth and stock market performance. While economies around the world have been battered by one piece of bad news after another, individuals also have to contend with strange fluctuations such as high inflation in 1H 2008, then sagging economic indicators and widespread retrenchment in 2H 2008, flowing into 2009. These have the effect of making one feel extremely jittery, gloomy and pessimistic. That would aptly describe my feelings and emotions as we start to usher in a new year, and can be summarized in one succinct word - PESSIMISM.

I guess with all the "damage" that's been done to people's wealth on a global scale, I of course was not spared the carnage either. Suffice to say that the feeling is like trying to collect raindrops in a cup to fill the cup up, only to realize (after one year) that the cup actually had a hole at the bottom and the water was slowly draining away; thus the cup could never really get full ! Throughout 2008, I was quite intent on building my wealth and to ensure I kept expenses and my liabilities under control, but somehow the entire year felt like my wealth was draining away, slowly but surely. I kind of get the feeling that instead of advancing in terms of getting wealthier, I was actually retarding. Granted, most people would have felt this way in 2008 as the global financial maelstrom wiped out most traces of wealth accumulation in terms of equities investing and also fund performance.

Entering the new year with a somewhat heavy heart, I had already listed down some financial resolutions for the New Year which I hope (somehow) can be fulfilled. Perhaps some of these will sound familiar to you as well, dear reader.

1) Continue to save 40-50% of my take-home salary and build up my savings. This should continue to be done because of the recession and the threat of losing one's job anytime. With a comfortable savings "egg", this money can then be chanelled into worthwhile investments should opportunities arise.

2) Look out for good bargains in the stock market, and adhere to value investing guidelines and margin of safety principles. For 2008 I pumped in a total of about S$80K into equities as there were many bargains, but of course the cons of investing in a bear market is that somehow you feel that your money is disappearing into some sort of black hole. The key is to remain focused, keep up with my companies and adopt a long-term view. I would expect decent returns in about 4-5 years time, but definitely not in the immediate term. In the meantime, I shall steel my nerves and continue to invest whatever spare cash I have.

3) Perform better money management and do more budgeting for household essentials, in effect "tightening the purse" more whenever I can. This is due to the ongoing recession and economic crisis which is creating uncertainty with respect to jobs. A dollar saved could be an extra dollar available for emergencies in future.

4) Continue to use public transport and avoid committing to a car. Somehow 2008 was a year whereby I heard of many friends purchasing cars - this could be because of the sudden dip in COE close to year-end and also because many friends started having kids, and so they felt that a car would be necessary for mobility and convenience. Since I do not have children yet, there is no necessity for me to get a car which would impose an unncessary burden to my finances and crimp my ability to build wealth for 2009. Even if I have a kid, I will assess if a car is 100% necessary as I have seen many parents coping with young children on buses and MRT. Worse case scenario, there's always the taxi.

5) Continue to ensure adequate insurance coverage for me and my wife. Insurance is a very important form of protection against death and disability and my insurance also includes a savings plan which helps me to compound my money over the years, while making it available for withdrawals should the need arise (for emergency). Hence, I have ensured that I have reserved sufficient funds to pay all my insurance premiums.

6) Continue to seek ways to improve passive income sources. I am glad to say that my dividend income for 2008 hit about S$6K, thus this is about S$500 per month which is fairly decent. However, I hope that this can be at least sustained in 2009,if not then I hope the drop is not too drastic as I know the recession will make companies conserve more cash. I am exploring other ways of obtaining passive income such as rental or monetising my blog further, but these are all very preliminary. At most, I will seek out potential tutoring opportunities and use that as an alternative form of income (not passive but what the heck).

With the above resolutions in place, I hope that I can survive 2009 without the sinking feeling that I am getting no more richer than when I had started out the year.

In 2 days time, I will write my year-end summary and thoughts for 2008 with respect to my investment decisions, as well as give a brief summary of my investment portfolio and the companies I own. It will of course not look pretty, but I intend to make it a learning experience so that I can become a better investor, and enter 2009 with an improved value mindset to be able to tackle the unprecedented challenges to the value investing concept. Stay tuned for that !