I thought to start the new year on a wishful note, so that if I ever find myself in such a position today, I’ll be prepared!
$100,000 is a large amount — about a year in salary. But it isn’t life-changing in that I will likely still hold on to my job and have to continue working towards FIRE. $1,000,000 might be a different story altogether, but let’s deal with that another day. The foremost principle on my mind is to optimise the returns I can get from this $100,000. I also don’t like to blow it all at once and will probably spread out any investing and expenses over an extended period.
So with that much additional income that will place me in the 18% tax bracket, the first thing to consider is to limit the collateral damage that I’ll have to pay in taxes.
Step 1: I will most certainly max out the $16,000 and $15,300 tax relief by topping up my CPF and SRS respectively. This will effectively save me $5,634 (=$31,300*18%) in taxes. With the 4% yield, I will also collect another $320 (=$8,000*4%) in my CPF SA a year from now. The $15,300 in my SRS will channelled to my Endowus portfolio.
Those keen to consider using Endowus for their SRS funds can use my referral link to sign up. With $1,000 invested, we will both get $20 in Access Fee credits.
That leaves me with $68,700 to play with, which I might use to reward my family with a meal or even go on a nice holiday.
Step 2: Set aside $1,000 for treats with family and friends. Also set aside $7,700 for a nice holiday, which is on top of the $3,000 that I’ve already budgeted for the year. A $10,000 holiday for three should last us a couple of weeks or even up to a month, as our flights will likely be funded through miles. The wife will most certainly hold me to account if this really happens!
The remaining $60,000 will be split amongst investing in myself and the various investment vehicles such as stocks, robo-advisors and crypto.
Step 4: $5,000 for self-improvement such as taking up some courses to improve my investing knowledge and learn more about affiliate marketing and how to do sales better. I honestly think I need to improve on the latter because I’m not really a natural at that. Going on courses also qualifies me for some tax relief (up to a maximum of $5,500), so that’s a double-win!
Step 5: $5,000 set aside for business opportunities and investing in this blog that is my side-hustle. So far it has done quite well as readers have followed through on some of the referrals and I’m benefiting somewhat from all this writing. But I really have to step it up further for this truly be a viable source of passive income. Some of it might go towards running ads or even go towards paying a freelancer to spruce things up further.
Step 6: Finally, allocate $10,000 to stocks, $20,000 to robo-advisors and $20,000 to crypto. As I have a larger proportion invested in stocks, I will likely allocate less there. I will still be on the lookout for opportunities to pick cheap value and growth stocks as usual. I will then DCA into robo-advisors and crypto, probably on a monthly basis of about $1,000. So the funds will definitely deplete after 20 months, but perhaps even earlier if crypto prices really plunge and I spot an opportunity I can’t miss.
Those keen to consider using Stashaway can use my referral link to sign up. With any amount deposited, we both get up to $10,000 managed for free for six months.
For crypto, I mainly use Coinbase and Hodlnaut. Those keen to consider Coinbase can use my referral link to sign up. With a buy or sell transaction of $100 USD, we will both receive 10 USD. I’ve written more about Hodlnaut which you can read about here.
In summary:
- $16,000 to CPF top-up
- $15,300 to SRS top-up
- $1,000 to treats for family and friends
- $7,700 to a family holiday
- $5,000 to self-improvement
- $5,000 to investing back in my side-hustle
- $50,000 to regular investing ($10k to stocks, $20k to robo-advisors, $20k to crypto)
What will you do with a $100,000 windfall?
Making Cents 