I was trying to determine the big ticket cash outflow in the near future over the weekend. The 3 biggest ticket items are car, property and wedding. I roughly know the first two and set budget for them already, so I need to estimate how much I have to cough out for the wedding.
I started by writing down the names of the guests I wish to invite for the dinner. At last count, there are around 85 people, with maybe another 40 more coming from friends of both parents. This works out to be 125 guests to be invited, or assuming a table capacity of 10 guests, a total of 13 tables. Let’s just raise it up to 16 tables, in case there are extra.
Since there are only a small number of tables, I thought it’ll be better to have a dinner at a high end restaurant rather than be contented with a middle range hotel. That needs to be worked out with my gf. So assuming $1200 per table, I need to fork out $19,200. From what I asked around, the wedding package of bridal gown plus photos/video should cost around $6000. Add to this the cost of the wedding rings/bands, which I budgeted to be at $5000, we’ll have a grand total of $30,200. To be on the safe side, I’ll increase it to $35,000, which is a near 16% markup for conservative budgeting purpose.
For car, my total budget is around $30,000, which I intend to pay 50% as down payment and borrow the rest so as not to over stretch my cash coffer. With this budget, I narrowed down to 2 cars – first is a new Kia picanto, the other is a 2-3 years old Honda jazz. I’m undecided as to which is a better bargain, but that’s not important yet in this planning exercise. I strictly do not want my budget to exceed $35,000. Period. Let’s just use the budget of $35,000 to begin with, and my intention of paying 50% upfront means I have to fork out $17,500.
For property, I intend to get a 600-800k property for investment purpose. Assuming a 30% down payment, I need to raise 180-240k cash for it. This might be a little too big for me to swallow, so I’ll have to look for co-investors to share the down payment and mortgage payment. Still, my budget for property is only 100k, so I either have to find enough people to share the burden or just reduce the size of the property I’m looking out for.
Let’s tally the figures:
1. Car purchase: $17,500 which I’ll need by end 2009
2. Marriage: $35,000 which I’ll need by end 2010
3. Property: $100,000 which I’ll need by around 2010 to 2012
Total: $152,500
Assumptions:
1. I have to pay all the things myself, which is quite a valid assumption for now. My parents are definitely not going to chip in. My wild card here is the contribution from gf and her family. I assumed my wild card doesn’t exist.
2. I heard people saying that I can recover 80% of the wedding banquet expenditure. Since my banquet expenditure is estimated to be $15,300, this means I can recover back $15,360. I rather not bet on it. Let’s just assume that I get nothing back.
Cashflow
Getting the car and the property will increase my monthly expenditure as I need to repay the interest and principal of borrowing. The car should set me back by around $1000 per month (includes everything) while the property should at most set me back by around $1000 per month too, assuming that I have 2 person to share the burden with. That will set me back by $2000 per month, meaning that I have less to save unless my income increases by an equivalent amount too.
Of course, the point of buying a car for me is to increase my income, so even though my expenditure is 1k per month, I might/might not be able to break even/make more. The second thing is about the mortgage for the property loan. Best case is that the rental can more than cover the mortgage, generating cash flow for me. Worst case is that there’s no rental and I have to bleed 1k per month till I exit from the property. I’m totally fine with the worst case scenario. The more likely scenario is that my gf can help to ease my burden for both of the debts I incurred, which up till now I have not considered yet. That will greatly improve my situation and most likely I can retain my savings rate of more than 50% monthly income.
3 yr plan from early 2009 to end 2011
I have enough cash to cover both the car down payment and the marriage, which I’m very glad. This means that till end 2010, I do not need to accelerate my savings (like selling off my stocks to raise cash). I have 2 years – 2009 and 2010 – to save up, which at my current rate of 50k per year, I should be able to accumulate 100k for the property at end 2011. The critical period is from 2010 to 2011, as I might need to accelerate my savings before the property market flies off. However, if the market from 1998 to 2003 is any indication of future trend, there might be a period of consolidation while buyers and sellers fight it out. If that happens, I will have more time to accumulate savings for property. If I purchase the property 3 years later at 2012, I’ll have even more cash to buffer.