How Much Is Enough?

[Heng]

^ and make sure that those are revenue streams representing a basket of currencies and better yet in Thai Baht (as well) if you're going to be staying here forever.

[tombkk]

A good yardstick (or meter stick depending where you're from) for me is: zero debt... no school loans, no credit card debit, and more importantly, if you're a business and/or home(s) owner you've paid off your mortgage(s) and all credit lines/overdrafts. For me that's absolute baseline or else you're leaving yourself open to a two front war... and then from there, you tally up all of revenues streams and THEN start asking yourself if that's enough and then some (for plans B and C).

Well, I'm a business owner. My company is not debt free, because debts decrease the tax burden. But we could pay my company car off and would be debt free. Now. we have overhead cost every month, which are met, but how about next year, or the year after? I don't thnk you have a clue about finance.

Yeah, business owner here as well. My companies are debt free (and one of the operations involves helping other people become in debt to it). Okay, some disclosure, a few do have unused overdraft facilities which are technically really light debt. I do see the benefits of debt for some, I just see the greater benefits of having little or no debt for others as well.

Oh, I've been through the required undergrad and MBA finance courses like anyone else and have more than a few good friends who are finance professors (a few of which are 'just' professors now because they helped crash and burn their finance companies in the 90's, all the while taking care of companies that at one time looked GREAT on the books and no doubt were enjoying some huge tax benefits) and know the spiel of the 'benefits' of leverage, maximizing your company's capital, tax implications, etc. I just don't buy into it. What isn't accounted for in their various calculations are the intangibles (say Forex rate flux, key suppliers go belly up, or you decide to just take the next 10 years off, etc.). Zero debt has almost no 'value' in finance because they don't know how to work it into any equations. Peace of mind has no value in finance. On the one hand you can always say 'oh well, we can just scale down...' and on the other hand you'll always have to say 'OH WELL we still have this debt hanging over our heads with interest running against us that never sleeps that we need to service but at least we'll be getting those tax deductions before we have to file for bankruptcy.'

What you are saying is all correct, except that I do believe that it is good for a company to have some debts. But that's a question of company policy. Nevertheless, my point was another: If the company is debt-free now, it doesn't mean that you can relax. You still have monthly cost you have to cover, and I have several employees who feed their whole family from their salaries.

It's an ongoing responsibility, and you have to make sure that money comes in every month, and more that is spent, for now and forever. Once you think you've made it Bill Gates and his company being an example, you can relax. How about you think you've made and it then turns out you didn't? Economies can turn, consumer behaviour can change, what is a successfull company now can be a failure tomorrow. My point: You can't relax just because your company is debt-free now.

[mca]

Getting back to the original question, I would say that you need to plan for 100,000Baht per month/1.2Mil per year, as a minimum.

What would the breakdown on your outgoings be to need that much minimum?

Edited October 11, 2010 by mca

[stander]

^ and make sure that those are revenue streams representing a basket of currencies and better yet in Thai Baht (as well) if you're going to be staying here forever.

Yes you are right, I have about 50% of my savings offshore and the rest here.I am here 24 years and I retire in 2 years time. 15 years ago I had a figure of 50,000 in mind, but that is not going to work now

[Heng]

A good yardstick (or meter stick depending where you're from) for me is: zero debt... no school loans, no credit card debit, and more importantly, if you're a business and/or home(s) owner you've paid off your mortgage(s) and all credit lines/overdrafts. For me that's absolute baseline or else you're leaving yourself open to a two front war... and then from there, you tally up all of revenues streams and THEN start asking yourself if that's enough and then some (for plans B and C).

Well, I'm a business owner. My company is not debt free, because debts decrease the tax burden. But we could pay my company car off and would be debt free. Now. we have overhead cost every month, which are met, but how about next year, or the year after? I don't thnk you have a clue about finance.

Yeah, business owner here as well. My companies are debt free (and one of the operations involves helping other people become in debt to it). Okay, some disclosure, a few do have unused overdraft facilities which are technically really light debt. I do see the benefits of debt for some, I just see the greater benefits of having little or no debt for others as well.

Oh, I've been through the required undergrad and MBA finance courses like anyone else and have more than a few good friends who are finance professors (a few of which are 'just' professors now because they helped crash and burn their finance companies in the 90's, all the while taking care of companies that at one time looked GREAT on the books and no doubt were enjoying some huge tax benefits) and know the spiel of the 'benefits' of leverage, maximizing your company's capital, tax implications, etc. I just don't buy into it. What isn't accounted for in their various calculations are the intangibles (say Forex rate flux, key suppliers go belly up, or you decide to just take the next 10 years off, etc.). Zero debt has almost no 'value' in finance because they don't know how to work it into any equations. Peace of mind has no value in finance. On the one hand you can always say 'oh well, we can just scale down...' and on the other hand you'll always have to say 'OH WELL we still have this debt hanging over our heads with interest running against us that never sleeps that we need to service but at least we'll be getting those tax deductions before we have to file for bankruptcy.'

What you are saying is all correct, except that I do believe that it is good for a company to have some debts. But that's a question of company policy. Nevertheless, my point was another: If the company is debt-free now, it doesn't mean that you can relax. You still have monthly cost you have to cover, and I have several employees who feed their whole family from their salaries.

It's an ongoing responsibility, and you have to make sure that money comes in every month, and more that is spent, for now and forever. Once you think you've made it Bill Gates and his company being an example, you can relax. How about you think you've made and it then turns out you didn't? Economies can turn, consumer behaviour can change, what is a successfull company now can be a failure tomorrow. My point: You can't relax just because your company is debt-free now.

It's all relative as to how much is enough and how much one can relax. I owe a lot of my relatively relaxed lifestyle to being debt free. I keep an eye on my businesses but at the same time I've rarely had any business problems cause me to lose any sleep, cause me any health issues *because* we're operating in the black, well out of the red with operating expenses well under control. I have an aunt who has recently had bypass surgery... she's worth more than me overall, but also has to juggle around X00 million Baht in debt... I'll take my smaller business operations and my health, thanks. And yes, I'm familiar with the concept of going concerns. We're in it for the long haul and focused on capital growth just like anyone else. I know debt can be used as a huge hammer to magnify your swing (have seen several family members do so) and that it can be a useful tool for those with no foundations at all ...but it also can be huge weight if you miss or even just get a so so cut (again, have seen plenty of family members make huge plumes of smoke because of debt) on the ball. In general I think most people miss on their swings and sometimes become all too comfortable with having that extra weight hold them down. I think that given the opportunity, a lot of them would jump at the chance if they could erase all of their debt at the flick of a switch and become a more modest scaled down enterprise (or individual).

Being debt free (or even just extremely low debt) is good insulation against those downturns and I'd argue that businesses (and individuals) in such situations are much more likely to weather the storm than those operating 'hand to mouth' and juggling due dates for interest payments. And then there's always plan D (plan A,B, and C in the bank)... it's super easy to get into debt if required in emergencies, especially if you're a relatively cash heavy firm (ala Singapore Airlines for example) in the odd case that your cash reserves aren't enough, but not as easy if you're debt heavy (ala... well pick any of hundreds of carriers).

[Loz]

i'll never forget my first ifa. proper twunt. i admire you guys juggling business with staff. i think managing personal finance is a big enough job. ten years ago my friends couldn't understand why i wanted to pay 100K a year in tax. i thought it was an awesome goal. now i'm more excited about reading philosophy. funny how things change.

[Chunky1]

Getting back to the original question, I would say that you need to plan for 100,000Baht per month/1.2Mil per year, as a minimum.

That might be enough if you are aiming for the bachelor shoe-box + beer bar monsters life style but you still need to account for inflation. 100k/month in 10 years will probably have the purchasing power of around 30k/month in 2010 baht.

[britmaveric]

^or might have purchasing power of 150K in ten years time. Thing is Chunky you can't predict the future too many variables in 10yrs time.

Edited October 11, 2010 by britmaveric

[JPPR2]

Albeit this is a very good question, everybody's situation is and will be vastly different. Personal debt, personal expectations, life style expected, material needs or wants etc. There will not be a magic number that covers everyone so posting one will only confuse readers. Some will want the HUGE house in an affluent area, others the expensive car. Some will require both and more. Some will not want to live without western food and comforts. Distinguishing between wants and needs is paramount.

As I see it one of the key components in retiring is assessing your lifestyle and probably the biggest challenge for most westerners will be learning to live with less. Living with less is not a negative thing, in fact it is liberating. Less material needs equates to more resources available to relax and enjoy life. Retiring without a plan can be disastrous. I view retiring as not necessarily doing nothing but doing what you want on your terms. I have gone through multiple financial models and scenarios and I personally relish getting away from all the excessive behaviors of the western culture. Financial independence is they key to a longer, healthier, happy, rewarding life. All to often people equate happiness to a monetary figure.

My 2 cents

[Chunky1]

Not really. We know historical inflation rates and we know it's going to be worse than that with all of that global printing presses working 24/7, the consequence is of course higher inflation and potential hyperinflation. Take a look at Vietnamese rice exports vs Thai rice exports. The baht is creeping lower and lower and it will only be so long before the Thai government feels left out and attempts to defend its currency.

Everyone who thinks they are safe with their money under their mattress or in their 2% fixed interest account will be paying the bill. We are already in the end game of the collapse of the fiat monetary system.

I can't stress enough how terrible it is to be in CASH right now and in the future.

Edited October 11, 2010 by Chunky1

[Heng]

Getting back to the original question, I would say that you need to plan for 100,000Baht per month/1.2Mil per year, as a minimum.

That might be enough if you are aiming for the bachelor shoe-box + beer bar monsters life style but you still need to account for inflation. 100k/month in 10 years will probably have the purchasing power of around 30k/month in 2010 baht.

You're making two assumptions that may or may not be correct, Ch1. That he'll spend every last satang of his monthly revenue (and thus will not have any accrued income to reinvest) and second that the poster hasn't allocated funds (aside from planned monthly revenue) for a home/condo purchase.

[Heng]

Everyone who thinks they are safe with their money under their mattress or in their 2% fixed interest account will be paying the bill.

2% CAN be plenty if you don't spend it all. It's particularly plenty if you barely spend any of it.

[Chunky1]

I am allergic to being taxed.

[tombkk]

Being debt free (or even just extremely low debt) is good insulation against those downturns and I'd argue that businesses (and individuals) in such situations are much more likely to weather the storm than those operating 'hand to mouth' and juggling due dates for interest payments. And then there's always plan D (plan A,B, and C in the bank)... it's super easy to get into debt if required in emergencies, especially if you're a relatively cash heavy firm (ala Singapore Airlines for example) in the odd case that your cash reserves aren't enough, but not as easy if you're debt heavy (ala... well pick any of hundreds of carriers).

No, you are still not getting it. Debt repayments are tax deductable. We could pay the debt off with our cash-flow, but we choose not to do it. This has nothing to do with hand-to-mouth, but with financial strategy.

I believe you know what a balance sheet is, so you know it has two sides and a total number at the bottom. The important financial figures are debt-to-asset ratio, ROI, ROA and others. Having no debt is not desirable for a company. You mentioned in a previous post that you have an MBA and and know all these finance professors, and now you revert back to a simplification that simply doesn't cut it in business.

This is probably not the right forum to discuss this in detail, though.

[Chunky1]

Let's say that you owe $1000 or 1000 Snickers bars, one bar costs $1

You can print more money so that a Snickers bar costs $2 and you owe $1000 or 500 snickers bars.

By reducing the value of your currency, you lower the real dollar value of your debt.

All those Americans who worked their entire life and are relying on their pension for retirement - Guess what, you are going to be paying for those 500 Snicker bars.

Money printing is just another way for the government to tax it's citizens.

I will take McDonalds and Coca Cola stock as they can pass the price increase onto their consumer and because their assets also go up in value with inflation.

[Max2010]

Albeit this is a very good question, everybody's situation is and will be vastly different. Personal debt, personal expectations, life style expected, material needs or wants etc. There will not be a magic number that covers everyone so posting one will only confuse readers. Some will want the HUGE house in an affluent area, others the expensive car. Some will require both and more. Some will not want to live without western food and comforts. Distinguishing between wants and needs is paramount.

As I see it one of the key components in retiring is assessing your lifestyle and probably the biggest challenge for most westerners will be learning to live with less. Living with less is not a negative thing, in fact it is liberating. Less material needs equates to more resources available to relax and enjoy life. Retiring without a plan can be disastrous. I view retiring as not necessarily doing nothing but doing what you want on your terms. I have gone through multiple financial models and scenarios and I personally relish getting away from all the excessive behaviors of the western culture. Financial independence is they key to a longer, healthier, happy, rewarding life. All to often people equate happiness to a monetary figure.

My 2 cents

I agree with you JPPR2. As a business graduate in the west, we are trained to look for opportunities and to expand our business year after year in order to maximise profit margins of the shareholders. You often read of CEOs who get fired or have to fire X number of workers not because they made a loss that year but because they made LESS billion dollars than last year. In Japan, where I live now, the government is worried that the economy will shrink significantly in the future because of shortage of babies. I, on the other hand, look at it as an opportunity for the tuna fish stocks to recover and to save the forests of Brazil and Indonesia since Japan consumes 80% of all tuna caught worldwide and is one of the biggest importer of lumber in the world.

Being raised in Africa taught me a lot about slow lifestyle. We still have many mum and pop shops surviving till today because they are happy with 3% profit margin. Most firms are family owned for generations.Their businessmen do not worry much about unlimited growth expansions to maximize the profit. Most people work 6 hours a day with two hours of lunch break. My dad financed my 6 years of American university education by selling rice and sugar, one kilogram at a time. He worked in his grocery store for 30 years and never expanded it. How they finance their retirement? They get their kids/relatives to look after them. If they get sick, then, their governments will do their best to provide with whatever medicine they can afford. Rotary clubs and wealthy individuals chip in to finance few lucky individuals to be treated overseas. Most just die prematurely and the cycle of life continues. They might live shorter lives than the people in the west, but I believe that they live a much happier life.

Max2010

[Heng]

Being debt free (or even just extremely low debt) is good insulation against those downturns and I'd argue that businesses (and individuals) in such situations are much more likely to weather the storm than those operating 'hand to mouth' and juggling due dates for interest payments. And then there's always plan D (plan A,B, and C in the bank)... it's super easy to get into debt if required in emergencies, especially if you're a relatively cash heavy firm (ala Singapore Airlines for example) in the odd case that your cash reserves aren't enough, but not as easy if you're debt heavy (ala... well pick any of hundreds of carriers).

No, you are still not getting it. Debt repayments are tax deductable. We could pay the debt off with our cash-flow, but we choose not to do it. This has nothing to do with hand-to-mouth, but with financial strategy.

I believe you know what a balance sheet is, so you know it has two sides and a total number at the bottom. The important financial figures are debt-to-asset ratio, ROI, ROA and others. Having no debt is not desirable for a company. You mentioned in a previous post that you have an MBA and and know all these finance professors, and now you revert back to a simplification that simply doesn't cut it in business.

This is probably not the right forum to discuss this in detail, though.

Yeah, I know that, we chose the zero debt route regardless of the tax savings. BTW, I wasn't suggesting your business was operating hand to mouth. I was thinking of various folks and businesses in general. Debt to asset ratio doesn't come into play obviously and I think our financial strategy keeps our ROI and ROA well above the pack. Having debt is desirable for some and not for others. There are far more businesses in history that have collapsed from the weight of their debt than from the weight of their lack of debt. I'm not reverting to anything, feel free to to throw out some examples or counter the airline example that I suggested earlier.

Edited October 11, 2010 by Heng