My mother recently gave me 800,000 baht after getting money from my grandmother. It is not much, but it can be used as an instalment for my own house in the near future. I don't have any debts, but I don't have any savings either. I earn about 60,000 baht a month.
I have just begun saving by allocating 3,000 baht per month to a cooperative, 5,000 to a long-term equity fund (LTF) and 10,000 to a bank savings account. Is my savings plan good enough, or can I do better?
My goal is a house priced about 2.5 million baht.
What should I do with the gift from my mother to make my dream come true as soon as possible?
ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA Don't look a gift horse in the mouth. While 800,000 baht may not seem a lot to you, I think the words you should say to your mother are "thank you".
Before splashing out on that dream house of yours, you need to set your priorities straight. First, you need to set aside a rainy day fund of about six months' worth of living expenses. Secondly, go after the low-hanging fruits in the form of tax-deductible mutual funds such as LTFs and retirement mutual funds (RMFs).
Essentially, these are free gifts from the Revenue Department for people to invest for their retirement. I would make full use of the tax benefits of 30% of gross income with the maximum cap of 1 million baht for both types of funds, including provident funds if you are offered one by your employer.
With these two priorities in place, you can afford to look at what is left in your monthly cash flow. As you are currently debt-free, you can afford to be a bit more generous about the house. That 800,000 baht can definitely go toward a down payment. However, I would cap the monthly repayments at about 20% of your gross income.
My daughter has just graduated. Her first salary is 15,500 baht plus 3,000 for petrol costs per month. I want to convince her to start a financial plan now. What is a proper plan for a 23-year-old first-jobber?
ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA You can start by telling your daughter that her name will be left out from your will and she has to stand on her own two feet. That should be enough to convince her to get started on a financial plan.
I was paid 14,000 baht a month for my first job 30 years ago. Something must be wrong if newly minted graduates are still getting the same wage. Apparently, men are four times as likely as women to negotiate their first salaries. Learn to negotiate by looking up sites such as Glassdoor.com and Salary.com.
Taking that knowledge into face-to-face negotiations with an employer or prospective employer can have a significant impact on your daughter's finances.
The difference between saving 10% or 20% of your income is significant over your lifetime. A 23-year-old who makes 20,000 baht a month and saves 10% of income would have more than 4 million baht at age 65 if they earned 6% interest. That doubles to more than 8 million when you save 20%. Right out of college is the best time to do that, as you are used to living on the cheap.
Marry well. The most important decision in most people's life is deciding whom they marry. Being happily married can be a great boost to your financial health. Sadly, however, almost half of all marriages eventually end in divorce.
I did not get married until I was 42. I am not suggesting that your daughter should wait until she is in her 40s, as no one wants to marry an old spinster. You need to go into a marriage with your eyes wide open, a bit like when companies enter into a merger. Love can be blind, so back to my first point. Negotiate hard and, if she is lucky in love, one plus one may not equal two but 10.
The Thai Financial Planners Association is the Certified Financial Planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted through email@example.com or the TFPA webboard, www.tfpa.or.th
About the author
Writer: Thai Financial Planners Association