Just out of debt - what to do next?

[XiaoBao]

I am a British guy living in Singapore and have just gotten myself out of debt. At its peak it was $40,000 and I have had debt hanging over my head for the past four years. Thankfully though, I am now totally debt free which I am very pleased about, naturally. However, as a consequence of paying off all this debt, I have no savings at all, apart from just over $3200 which my employer has paid in to a special retirement savings account ($250/month). Whatever is saved in to this account (there is a $24k limit per year) it is offset against my tax, and it remains tax free until such time I make a withdrawal which I can do at any time. I have a savings goal of minimum $50,000 by December 2013 (this will be made up from some of my annual bonus, saving $3000 cash /month and the "free" savings I get from my employer) but I don't know what to do then. I live in Singapore where property is very expensive and as a foreigner I will need to put down a minimum of 20% plus 3% stamp duty (not to mention moving costs, legal fees and so on). Even a property of a million dollars will really not buy you very much so I have thought about buying a property in the UK (where I am from) and rent it out as a longer term investment where currently the rental market is quiet buoyant. My problem with this though is that I will continue to be paying rent in Singapore (currently $3200/month which I split 50-50 with my partner - this is considered exceptionally good value here considering we live right in the middle of town and have a spacious 2 bedroom apartment but its still money that disappears every month never to be seen again) and the economy in the UK is in a precarious position and there is a risk the value of any property I buy in the UK may actually go down in value in the short term. So, do I continue to save at the same rate beyond 2013 and build it up to $100,000 by December 2014 and then look to buy a property in Singapore which will be more viable with $100k or put the $50k to work in the UK - hope that property prices don't fall and a year or two down the line sell the property, cash in on the equity built up (from both paying off the mortgage and a value increase) and use the proceeds from that sale + cash savings made from my salary during the same period to buy a property in Singapore then? Any advice or suggestions much appreciated!

[laurend1985]

I agree with the previous poster, save 3 to 6 or 8 months for your expenses for you emergency fund. After that, you save for your home wherever that may be. CONGRATS on becoming debt free.

[Max G]

Renting a property if you are in another city can turn into a nightmare. Renting your house to someone while you are half a world away is not a good idea at all. You might not like what happen with your house if/when you come back to Britain. I would stock pile cash at the moment, save for retirenment and wait while your living situation clears up. Only When you know for sure where you are going to be for foreseeable future, you can start thinking of buying a house

[dontgopoor]

Congrats on becoming debt free. The world has changed for you. Ditto the other advice - continue to save.

Don't worry too much about what you'll do. If you have a great opportunity come your way your "war chest" of savings will come in handy. Otherwise, continue to save. But don't feel that you need to spend the savings.

Conventional financial wisdom says 3 to 6 months of living expenses in cash. I've always leaned to 6 to 12. Boy has that allowed me to do things that others can't. Study Warren Buffett - he keeps lots of cash around and when the world starts falling apart he picks up bargains.

Good luck. And yes, long distance landlording does not work.

[snafu]

Atta boy! Good on you for getting yourself out of debt. The economy in SQ is buoyant is it not? I'd start looking at an Index Mutual Fund with automatic monthly contributions. Meanwhile as sums build you will be reassessing whether you'll remain in SQ long term or possibly one of the other 'Tigers.' What is the likelihood or returning to the UK in 10 yrs?

The UK will need about 10 years of austerity programs if they plan to be on more solid financial ground according to the research I've been looking at. It is possible that housing will be more of a bargain by 2020.

[PetMom]

That is great you are out of debt!

Keep that way by making sure you always have an EF.

Make it a priority and always keep it well funded.

The EF is key to never needing to have a credit card again.

A debit card is fine as you have to be disciplined in your usage of it.

[XiaoBao]

thanks everyone!

Thanks everyone for your comments and suggestions. Its interesting to see a common thread re: emergency funds and being cautious about being a long-distance landlord. Its also interesting to note a few people saying not to worry too much as long as I'm saving, so I will definitely ensure that my savings plan is robust. I actually have no intention to return to the UK and live, the motivation about buying a property in the UK is simply because I can. Buying property as a foreigner is more complicated and in some countries not allowed, so if I were to buy a property in the UK it will not be for the sake of one day living in it (although I guess it always gives me that option). Singapore is actually more my home than the UK is (been here 16 years, my parents live here etc. I am considering leaving Singapore in the next 2-3 years but I am almost certain that I would return to Singapore afterwards) In the UK there is a scheme where landlords can rent out their property to a Housing Association for 3-5 years and they guarantee your rent during this period. It becomes their responsibility to find tenants (who are usually disadvantaged people, refugees, people needing urgent shelter etc.) you get slightly less than the market rate for doing this, but its guaranteed each month (regardless of whether there is a tenant in the property or not) and the rental is fixed for the duration of the contract. I am warned that when you get your property back though it may be in a pretty sorry state and you'll have to spend a lot to get it back up to standard but I guess this is the risk you take. Besides, there's no guaranteeing a 'regular' tenant will not mistreat a property either. Do let me know if anyone has any experience of being a Housing Association landlord.... but for now I will keep to my savings plan and take another look at the end of next year when I have a nice little pile of cash to play with. Thanks again everyone for your insights. Beautiful people.

[johnmartin03`]

Thanks

The best way to just get out of debt is that control your expenses. If you are drowning in debt then you must control your expenses, then you can just get out of this debt mud. Debt is really very big problem, and sometimes it is really very difficult to get out of it.

[elfen lied]

If you’re only paying the minimum on your debts, it will take the longest time to get out of debt. By the time you finally pay off your balance with minimum payments, you’ll probably have paid double or even triple what you originally charged. It’s only ok to pay the minimum on your credit cards when you have a debt-repayment strategy that requires you to make a big payment on one of your credit cards.