Hi, everyone! This is Jerry, the author of this blog.
HK government has recently made a new policy encouraging people to save early for retirements. It is called Tax Deductible Voluntary Contributions (TVC) scheme. It is like the mandatory provident fund (MPF). The contribution could only be withdrawn at the age of 65. However, the amount you contributed is tax-deductible. The cap is $60k.
For details, please visit: http://www.mpfa.org.hk/eng/mpf_system/system_features/tvc/index.jsp
In order to find out if this TVC is worth investing, I will first calculate how much tax is deducted through maximizing TVC.
If you make $15k per month, you will only save $780.
Since your original tax is $780, you only have to contribute $39k in order to deduct all your tax.
Tax deduction: $780= 0.052 months of salary
Contributions: $39000=2.6 months of salary
It looks unattractive at all when you compared the tax saved and the contributions, not to mention the liquidity of the money sacrificed. Worse still, we haven't counted the management fee which will probably eat up your $780.
If you make $30k per month, you will save $8700.
The original tax is $17.7k while the deducted tax is $9k.
Tax deduction: $8700= 0.29 months of salary
Contributions: $60000= 2 months of salary
Though the tax is nearly halved, it is still not quite attractive unless you don't have better investment options.
If you make $40k per month, you will save $10200
The original tax is $38.1k while the deducted tax is $27.9k.
Tax deduction: $10200= 0.26 months of salary
Contributions: $60000= 1.5 months of salary
This may be attractive if you have idle money. Yet, you still have to look into the details of the fund and compare the cost of it with that of investing by yourself.
If you make $60k per month, you will save $10200.
The original tax is $78.9k while the deducted tax is $68.7k.
Tax deduction: $10200= 0.17 months of salary
Contribution: $60000=1 month
Similar with the previous group. If you have some spare money, you may consider TVC. Otherwise, it is better to invest it yourself.
Even though TVC may be not attractive in numbers, it sill have some advantages. For example, you could use it to diversify your portfolio. Some funds help you invest in stocks outside Hong Kong while some funds helps you invest in bonds. Besides, it is helpful in developing a saving habit as the money is automatically deducted each month.
All in all, as the Chinese old saying, "A faulty move causes you the whole game." Before putting your money in TVC or any other investments, you should look carefully the terms and the fees as well as the reputation of the provider.
Thank you for your reading! See you next time!
Disclaimer: I am not a certified financial planner. Any articles here should not be considered financial advice.
Saturday, April 13, 2019
Friday, April 5, 2019
FRUG1001 How to Make A Budget
Hello, everyone! This is Jerry, the author of this blog.
I decided to start a new series named FRUG1001. Yes, it is the freshman course of frugality. I will take about ways to lead a frugal yet fruitful life. This is the first 'lesson'. I would like to talk about how I draft my budget each month.
As we all know, in order to keep our expenses in check, making a budget is essential. As digital payment methods become more common, we become less sensitive to the pain of paying our bills and hence more easily over-spend. As a result, it is important to make a budget which make me more aware of the money we have.
I summarised into three easy steps of making a monthly budget.
1. Know your spending habit
First of all, you have to divide your spending into categories such as transportation, food, housing, clothes, phone bill, travel etc. You might not name all the categories at once but you might add some more categories later on.
Just one quick tip. It is better to separate one-off or irregular spending from daily spending. For example, I will have a category 'social gathering' and 'travel' instead of putting them under 'entertainments'. This allows you to track where your money goes.
2. Calculate the numbers
Then you calculate how much you will spend on each category. This is not a very difficult task for a full-time working class in Hong Kong as most of us have quite regular spending habits. For example, we take the same buses or train to the same working place on weekdays. We could always google the ticket price of the public transport.
As for food, lunch in Hong Kong costs around $30-50. You could simply multiply that with the number of days you will eat out. Similar method could be applied to hanging-out. You multiply the average amount of money you spend on hanging out with how many times you hang out each month.
3. Sum them up
last but not least, you could get the total sum by adding up the numbers of all categories. Personally, I will add an extra 10% as a buffer because usually there are some unforeseeable expenses. I have an Excel sheet to help me do this job so that I do not need to reinvent the wheel every month.
That's it! Making a budget is not difficult at all. It just takes some time at the beginning, but once you get used to it, it's a piece of cake yet a very powerful tool to keep your spending low and saving high!
Go ahead and try to make your own budget! Thank you for reading!
I decided to start a new series named FRUG1001. Yes, it is the freshman course of frugality. I will take about ways to lead a frugal yet fruitful life. This is the first 'lesson'. I would like to talk about how I draft my budget each month.
As we all know, in order to keep our expenses in check, making a budget is essential. As digital payment methods become more common, we become less sensitive to the pain of paying our bills and hence more easily over-spend. As a result, it is important to make a budget which make me more aware of the money we have.
I summarised into three easy steps of making a monthly budget.
1. Know your spending habit
First of all, you have to divide your spending into categories such as transportation, food, housing, clothes, phone bill, travel etc. You might not name all the categories at once but you might add some more categories later on.
Just one quick tip. It is better to separate one-off or irregular spending from daily spending. For example, I will have a category 'social gathering' and 'travel' instead of putting them under 'entertainments'. This allows you to track where your money goes.
2. Calculate the numbers
Then you calculate how much you will spend on each category. This is not a very difficult task for a full-time working class in Hong Kong as most of us have quite regular spending habits. For example, we take the same buses or train to the same working place on weekdays. We could always google the ticket price of the public transport.
As for food, lunch in Hong Kong costs around $30-50. You could simply multiply that with the number of days you will eat out. Similar method could be applied to hanging-out. You multiply the average amount of money you spend on hanging out with how many times you hang out each month.
3. Sum them up
last but not least, you could get the total sum by adding up the numbers of all categories. Personally, I will add an extra 10% as a buffer because usually there are some unforeseeable expenses. I have an Excel sheet to help me do this job so that I do not need to reinvent the wheel every month.
That's it! Making a budget is not difficult at all. It just takes some time at the beginning, but once you get used to it, it's a piece of cake yet a very powerful tool to keep your spending low and saving high!
Go ahead and try to make your own budget! Thank you for reading!
Thursday, April 4, 2019
March Expenses 2019
Hello, everyone!
I am Jerry, the author of this blog!
Here comes the expenses of March:
Money for parents: $5500
This is the money I gave to my parents every month. If you are a foreigner, you may find it strange. Yet, this is a common practice in Hong Kong or some other Asian countries.
Food& Beverages: $1107.1
This includes the eating out with friends so it might vary month to month. I had a gathering with my old friends in college and hanged out once with my colleagues. Therefore, I spent a little bit more than last month.
Entertainments: $4349.2
Wow! This amount is 10 times that of last month. This is because I went to Vietnam to visit my girlfriend. I also did some online shopping. I bought some little presents for her as I didn't buy her anything on Valentine's Day.
Transportation: $499.3
This is a little bit above my average due to the gatherings. Yet, the actual amount will be less since the HK government is now subsidising our transportation fee for around $20-30 dollars per month depending on your amount.
Household products: $108
I bought a passport holder so as to avoid money loss again.
Mobile fee: $4307
I bought a new iPhone for my girlfriend as she lost hers.
TOTAL: $15870.72
I spent quite a lot this month. The saving rate is around 60% this month. Well, if I can travel back to March, I still couldn't figure out any ways to cut the expenses. I might choose not to eat out with my colleagues.
What about you? How much did you spend last month? Please let me know by commenting below! See you next time!
I am Jerry, the author of this blog!
Here comes the expenses of March:
Money for parents: $5500
This is the money I gave to my parents every month. If you are a foreigner, you may find it strange. Yet, this is a common practice in Hong Kong or some other Asian countries.
Food& Beverages: $1107.1
This includes the eating out with friends so it might vary month to month. I had a gathering with my old friends in college and hanged out once with my colleagues. Therefore, I spent a little bit more than last month.
Entertainments: $4349.2
Wow! This amount is 10 times that of last month. This is because I went to Vietnam to visit my girlfriend. I also did some online shopping. I bought some little presents for her as I didn't buy her anything on Valentine's Day.
Transportation: $499.3
This is a little bit above my average due to the gatherings. Yet, the actual amount will be less since the HK government is now subsidising our transportation fee for around $20-30 dollars per month depending on your amount.
Household products: $108
I bought a passport holder so as to avoid money loss again.
Mobile fee: $4307
I bought a new iPhone for my girlfriend as she lost hers.
TOTAL: $15870.72
I spent quite a lot this month. The saving rate is around 60% this month. Well, if I can travel back to March, I still couldn't figure out any ways to cut the expenses. I might choose not to eat out with my colleagues.
What about you? How much did you spend last month? Please let me know by commenting below! See you next time!
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