My personal financial goals

I need some long term plans to have an idea of how I should allocate my resources, and if that proves to be insufficient, to step up my effort to get more income and hence more savings. The biggest financial bomb so far is my resale flat. I got a loan of 501k from HDB, with a monthly installment of 2k over a period of 30 yrs. Let's do some math:

Loan amt: 501k

Total amt paid at the end of 30 yrs: 2k x 12 x 30 = 720k

Interest: 219k

Due to the curse of compounding, even at a low interest rate of 2.6%, over a long period of 30 yrs, the original loan amount of 501k becomes 720k. The total interest paid to them is 219k, which is almost half the original loan amount. 

I wanted to reduce my monthly installment to less than 1k per month, and in so doing, it will reduce the total interest paid for my loan amount too. My plan is to do aggressive down payment of the loan in the first 5 yrs and see how it goes after 5 yrs. A lot of things are varying over the next 5 yrs, so there's no point in coming up with a precise plan. Time should clarify my plans further. 

Each year, based on the minimum monthly payment, I will have to fork out 24k (2k x 12). I should aim to double that payment per year to 50k. Without touching on the complicated maths and just doing simple calculation, since I'm paying twice the amount of the required yearly payment (I'm paying 50k instead of 24k), I should reduce my loan duration by at least half. That means instead of clearing the loan in 30 yrs, I should be able to clear in 15 yrs and probably shorter than that due to compounding again. Let's take it as 15 yrs to clear the loan.

To clear the loan in 15 yrs (based on the above simple calculation), I will need to pay off 4k per month. Let's add 4k expenses (my average expenditure inclusive of everything is 2.8k monthly). 4k loan payment plus 4k expenses is already 8k, and I don't want to have zero savings at the end of the whole thing, so I've to factor in another 4k of savings per month. 4k of savings per month would roughly translate to 50k per year, which is my usual savings target. This means that my minimum income should be 12k per month.

This would also tie in with my 100k savings challenge per year. 50k of savings would be set aside, another 50k of savings would be used to pay off the housing loan. At the end of 15 yrs, I would have finished paying off the housing loan and end up with a sizable amount for retirement (50k x 15 yrs = 750k). I would be near 50 yrs old too. 

This is an overestimation of the figures. But I like to overestimate figures. I rather end up on the wrong but comfortable side of the error at the end of the whole thing. A few things can derail me off:

1. Children - as of now, there isn't any plans to have kids. Should that come in, then retirement have to be pushed back. My wife's savings and income per month, which had not been factored into the entire equation so far, would have to be considered. 

2. Inability to work due to illness - I'm covered by suitable insurance coverage for such events. If that happens, I'll have a monthly payment of around 2-3k per month. It's barely enough to cover my own expenses and so it's quite impossible to finish the payment early too. This is actually the worst case scenario, because if I've TPD or just plain ol' death, the home mortgage insurance would kick in and would ensure the house is fully paid up. My whole life insurance and term plans would also kick in so money shouldn't be a concern in that event. I can't increase my disability income benefits without exorbitant cost, so I just have to have enough savings. A backup plan would be to liquidate my stocks, but I'm not sure by then how long it can last. Well, every drop will have to count.

3. Parents - they do not have whole life plan nor term plan at all. At this stage, it'll be too exorbitant anyway. They do, however, have H&S plans, so the problem is thus TPD or critical illness that is not hospitalised. They have some savings, not much, but it can be the first line of defense. I've a elder brother too, that'll be the second line of defense. And I'll be the third line of defense. How much this event will affect me depends on how prolonged the illness will be. My guess is that everything would have to be delayed by an indeterminate period of time. 

4. Retrenchment - or simply drastic changes in my career environment that can greatly reduce my income earning capability. This is possible but improbable. I can't be retrenched easily so the problem is about finding more work. This would have to be sorted out in the next 2 years (I give myself 2 years to sort out this). Career backup plans? MOE teacher. I hope that with my academic qualifications, they would at least grant me a teaching position without even considering my experience in teaching. Passive income would have to come from somewhere to offset this risk of loss of income too. This stream of income will progressively be more important as I age. Have to work on this too.

I do not have to finish paying by 15 yrs of course. I would like to have the ability to pay off, or rather take it like this - I want to have an option but not the obligation to pay off my loans early. I can see the possibility of investing the amount saved to have a bigger amount in a shorter period of time instead. In short, my goals are:

1. Monthly income of 12k 

2. Savings target of 100k per year, or around 8k per month

3. Option but not the obligation to pay off my housing loans in less than 15 yrs

So there, I've listed out the rough plans for the future. They are related to each other, so most likely hitting one would also be hitting all at the same time. What's my next step? Go ahead and do it.