tag:blogger.com,1999:blog-51185278573357504342024-03-13T11:53:53.710-07:00Fighting 4 Financial FreedomF4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.comBlogger28125tag:blogger.com,1999:blog-5118527857335750434.post-72114449182695074582019-02-21T00:34:00.000-08:002019-02-21T00:38:40.557-08:00Financial Freedom - Is It Right For You?<div class="MsoNormal" style="background-color: white; color: #222222; font-family: Arial, Helvetica, sans-serif; font-size: small;">
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The journey towards financial freedom is not a walk-in-the-park. It requires an <i>unwavering</i> desire to achieve the goal, <i>sustained</i> persistence and dedication in the face of skepticism (both internally-generated and externally-influenced), and <i>enduring</i> mental and physical discomfort (some say hardship, depending on your personal threshold) for the many sacrifices (in the form of delayed gratifications) one has to make. Stretch the journey out over the very long term, it is not surprising that only the minority stays the course.<u></u><u></u></div>
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So what exactly determines a person’s chance of success in this quest for financial freedom? Though I am in no way financially-free (yet), having stayed the course for a few years now, and having experienced the swing from being optimistic to pessimistic, and now to being realistic, I thought I could share my own personal reflection on what made me stay the course, and what I think is the one most important factor affecting one’s chance of success in this quest.<u></u><u></u></div>
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<b>Financial Freedom – A Goal Like No Other</b></h4>
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Making the decision to work towards financial freedom is one thing – after all, it sounds cool and adult-like – but actually committing to that decision and having it as one of the main considerations for almost every choices you make is quite another matter altogether. Like most other long-term life goals that are worth pursing, the quest for financial freedom cannot be worked on only from 9am to 5pm, Monday to Friday. To have a reasonable chance of succeeding, you have to measure (almost) all aspects of your life against that objective, and make the necessary adjustments, both major and minor ones, to align your life to it. You have to “live” the goal, not just “work on it”.<u></u><u></u></div>
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And I am not exaggerating.<u></u><u></u></div>
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Unless you are born with a spoon made of precious metals, or are among the top earners in your country, the only fast enough way (read: within your working lifetime so that you can enjoy the “<i>freedom</i>” part of “<i>financial freedom</i>”) to have your passive income exceeds your expenses is to keep the latter to a minimum. Trimming your expenses necessarily means that there will be discomfort, lifestyle adjustments, sacrifices, and not to mention the numerous occasions when you have to go against your wish and put off buying that dress that you are sure to elicit “<i>Gosh! Where did you get this dress from? You look dead gorgeous!</i>” kind of responses from your friends. But, if you are dead serious about achieving FF, you must be dead serious about cutting expenses, and lo-and-behold, expenses can be cut in ALL areas of your life, including when you are sleeping (e.g. using the fan instead of air-conditioner).<u></u><u></u></div>
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Depending on how much and how fast you want to achieve financial freedom, the measures/changes you adopt can be calibrated accordingly. But in general, you can expect the journey to include drastic changes to your current, probably wasteful lifestyle.<u></u><u></u></div>
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<b>The One Thing that Makes All the Difference</b></h4>
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Given the level of involvement and commitment required of anyone who wish to achieve FF, it is inadequate to treat it just like any other goal. Unless you are extremely disciplined, and want FF so much that you are willing to put up with “pains and sufferings” for the long term (and possibly for the rest of your life because you are expected to continue keeping your expenses low even after achieving FF), you are likely to give up mid-way through the journey. Even if you do attain FF, does it make sense to stay the course when you are struggling to make sense or justify your commitment day after day? If you are not happy with your FF-lifestyle, then is it a goal worth pursuing in the first place?<u></u><u></u></div>
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That brings me to the one critical factor that determines your chances of attaining FF, and whether or not you should be pursuing it in the first place: <b><i>Values & Beliefs (V&B)</i></b>.<u></u><u></u></div>
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Okay, I cheated. That’s two factors, not one. But I am no literature student, and I am not about to dissect and analyse the differences between the two. I see them as the same, and I think this understanding should suffice for the discussion here.<u></u><u></u></div>
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<b>V&B as a Strong Predictor of Success in the Quest for FF</b></h4>
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V&B is a strong predictor of success in the quest for FF because it determines the way you view and feel about the difficulties, challenges, hardship, and sacrifices you have to make. Some V&B supports you in the journey, while others work against your effort. Let me illustrate with my own personal experiences.<u></u><u></u></div>
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I am someone who cares about the environment, and values simplicity and minimalism over excesses and extravagance. If I need to get to the supermarket to buy some groceries, would I choose to drive (10 minutes) or cycle (15 minutes)? The choice is an easy one for me, even when I put aside the financial considerations. Because moving 1.5 tonnes of metal to the supermarket just because a 67kg me needs to get there to buy some 3kg worth of groceries is such an outrageous and wasteful way of using energy, and that cycling is infinitely better for the environment than driving, the choice to cycle comes naturally to me. My V&B guided me towards that choice, which, coincidentally, is also one that is financially-sensible. I face no internal struggle throughout the decision-making process, nor feel like I am “sacrificing” my comfort for my goal, because <u>my V&B is congruent with my FF-goal</u>.<u></u><u></u></div>
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In contrast, my parents-in-law values comfort and good food. They believe that living life with a certain (read: high) level of comfort is important, and culinary experiences provide them with much joy. To them, petrol cost and parking charges are small prices to pay for the comfort of sitting in an air-conditioned car. To be sure, they are not wasteful – they drive a modest Toyota even though they could probably afford a Mercedes Benz – but because their V&B accord “comfort” and “good food” a high level of importance, giving up their car for the bicycle and premium-grade Wagyu beef for chicken wings will naturally feel like a big sacrifice. Identify a few more “sacrifices”, and you can be certain that my parents-in-law will be ditching the FF-goal in no time.<u></u><u></u></div>
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TL;DR: If your values and beliefs naturally lead you to make financially-sound decisions, you are more likely to stay the course over the long haul.<u></u><u></u></div>
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<b>V&B as a Litmus Test</b></h4>
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Examining your V&B is also useful in predicting your level of happiness <i>after</i> you’ve attained the FF goal, and therefore whether you should pursue it in the first place. Unless your FF goal accounts for a substantial increase in expenses once you have attained it (not recommended as this would make the goal an even more difficult one, thereby further diminishing your chances of staying the course), chances are you will be required to maintain the same lifestyle as you were living<i>before</i> achieving FF. Therefore, if the journey towards financial freedom is already unbearable for you from the beginning, my guess is that you will not find happiness in achieving the goal. Simply put, your V&B is not aligned, and thus the FF goal is not suitable for you. In such cases, be kind to yourself and work till the statutory retirement age, and save up enough to last you till your final days.<u></u><u></u></div>
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<b>Afterthought</b></h4>
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While the idea of financial freedom might sound <i>appealing</i> to most, it is certainly not suited for all. Everyone is made different, and we should assess our own temperaments, personal inclinations, and perhaps most importantly, your V&B to decide if achieving FF is a goal that makes sense for you.<u></u><u></u></div>
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*The above is a sharing of my experience and introspection. As you might have noticed, I made many assumptions – the more glaring one being that living a financially-free life necessarily means having to live frugally. I believe this holds true for the majority of the working class, though this might not stand for the strong earners.<u></u><u></u></div>
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F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com0tag:blogger.com,1999:blog-5118527857335750434.post-70198009686628123562018-05-30T18:52:00.001-07:002019-02-21T00:40:16.825-08:00Networth Update<div class="separator" style="-webkit-text-stroke-width: 0px; background-color: transparent; clear: both; color: black; font-family: Times New Roman; font-size: 16px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; orphans: 2; text-align: center; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">
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Taking stock of what you own and owe.</div>
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WHAT IS THIS POST ABOUT</h3>
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To chart my progression towards financial independence, I will (try to) take stock of my net worth every half-yearly. The last time I did a review was in <a href="https://fighting4financialfreedom.blogspot.com/2017/05/networth-update.html" target="_blank">May 2017</a>.</div>
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I am going to use the same structure and format for this series of posts for consistency.</div>
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WHAT I HAVE</h3>
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Growing your networth bit by bit.</div>
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I've been staying with my parents-in-law and renting out my DBSS flat since Apr 2016, as detailed <a href="http://fighting4financialfreedom.blogspot.com/2016/12/turning-mistake-into-opportunity-and.html" target="_blank">here</a>. The monthly rental income of $2500 was used to offset the mortgage payment of $2665. Since Apr 2018, our waiver to rent out the flat expired, and the rental income dried up. We are now digging into our cash savings to pay for the mortgage. If interest rates should go up further, we might consider using our CPF savings to maintain the mortgage. </div>
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As before, I'm going to exclude the DBSS that my wife and I bought because we still have a big mortgage to service, which makes our flat more of a liability than an asset. </div>
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<u>Cash and Equivalents:</u></div>
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<li>Personal Savings - <b>$140,000 </b>[an increase of $30k]</li>
<li>Joint Savings with Spouse - <b>$45,000 </b>[$5k has been used for mortgage payments in Apr and May]</li>
<li>Daughter's Savings - <b>$19,000</b> [this amount will slowly start to deplete as we use this to fund her childcare fees]</li>
<li>Son's Savings - <b>$20,000</b></li>
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<u>FD and Equivalents:</u></div>
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<ol>
<li>Dad's CPF - <b>$26,000</b> (<i>Can be withdrawn with short advance notice as my Dad is past 55 years old. Basically, instead of him withdrawing from his CPF at age 55, I gave him $20k cash in Oct 16 and another $6k in Jan 18. I treat it as a 10 year FD yielding 2.5 - 4% p.a.</i>)</li>
<li>Mum's CPF - <b>$14,000</b> (<i>My mum has minimal CPF balances, hence I've decided to contribute to her SA and <a href="http://fighting4financialfreedom.blogspot.sg/2016/06/753-instant-capital-gain-538-yield-on.html" target="_blank">getting some tax relief in the process</a>. I am planning to contribute a further $7k this year. She will receive monthly payout from CPF LIFE when she reaches around age 65 to help offset her living expenses.</i>) [contributions made in Sep 16; Jan 17]</li>
</ol>
</div>
<div style="-webkit-text-stroke-width: 0px; background-color: transparent; color: black; font-family: Times New Roman; font-size: 16px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
<u>Personal CPF:</u></div>
</div>
<div style="-webkit-text-stroke-width: 0px; background-color: transparent; color: black; font-family: Times New Roman; font-size: 16px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">
<ol>
<li>Ordinary Account - <b>$68,000 </b>[an increase of $26,000]</li>
<li>Special Account - <b>$49,500 </b>[an increase of $13,500]</li>
<li>Medisave Account - <b>$54,500 </b>[an increase of $8,500]</li>
</ol>
</div>
<div style="-webkit-text-stroke-width: 0px; background-color: transparent; color: black; font-family: Times New Roman; font-size: 16px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
<u>Investments:</u></div>
</div>
<div style="-webkit-text-stroke-width: 0px; background-color: transparent; color: black; font-family: Times New Roman; font-size: 16px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">
<ol>
<li>Common Stocks - <b>$120,000</b> (<i>market value on 31 May 18</i>) [an increase of $33,000, mainly due to capital injection]</li>
<li>331 Oz of Silver - <b>$7,282</b> (331<i> x $22</i>)</li>
<li>Bonds - <b>$1,010 </b>(<i>market value on 31 May 18</i>)</li>
</ol>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
<b><u>TOTAL OWNED: ~$564,000</u></b> [previously: $444,100]</div>
<ol>
</ol>
</div>
<div style="-webkit-text-stroke-width: 0px; background-color: transparent; color: black; font-family: Times New Roman; font-size: 16px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; white-space: normal; word-spacing: 0px;">
<h3>
WHAT I OWE</h3>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-bottom: 8px; margin-left: 120.5px; margin-right: 120.5px; padding-bottom: 6px; padding-left: 6px; padding-right: 6px; padding-top: 6px; text-align: center;"><tbody style="margin-bottom: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<tr style="margin-bottom: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td style="text-align: center;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
<a href="https://3.bp.blogspot.com/-HaES1bdqRDU/WF_Aq0MkP7I/AAAAAAAAAIo/PeiAwMvq4VEa2X3oH3sYs8FfuUbCTrOzQCEw/s1600/debt.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="395" src="https://3.bp.blogspot.com/-HaES1bdqRDU/WF_Aq0MkP7I/AAAAAAAAAIo/PeiAwMvq4VEa2X3oH3sYs8FfuUbCTrOzQCEw/s400/debt.jpg" style="cursor: move;" width="400" /></a></div>
</td></tr>
<tr style="margin-bottom: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><td class="tr-caption" style="font-size: 12.8px; padding-top: 4px; text-align: center;"><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
The burden of debt.</div>
</td></tr>
</tbody></table>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
<br /></div>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
I took on a car loan in Dec 2017. Yes I know, bad move, but with 1 infant and 1 toddler to lug along wherever we go, the car adds a lot more value to our lives.</div>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
<br /></div>
<ol>
<li><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
Outstanding Housing Loan - <b>$584,500 </b>[a decrease of $17,000]</div>
</li>
<li><div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
Car Loan - <b>$57,000</b></div>
</li>
</ol>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
<u><b>TOTAL OWED: $641,500</b></u></div>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
<br /></div>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
<b></b><br /></div>
<h3>
<b>MY GOALS FOR 2018</b></h3>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
My networth has been on a steady increase ever since I started working about 6 years back. Even with the birth of my two lovely children, we were still able to keep our expenses lower than our income. </div>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
<br /></div>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
However, I've made a decision for a career-switch. Though I hate my current job, I struggled with leaving because from Jul 18 onwards, if I'd accepted the promotion, I will be paid in excess of $150k p.a. </div>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
<br /></div>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
I will likely take on quite a big pay cut, but for my long term happiness and sanity, short term pain is necessary.</div>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
<br /></div>
<div style="margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">
I am happy to simply maintain my current level of savings for the next 1-2 years. Hopefully my paycheck will recover to its current level soon.</div>
</div>
F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com1tag:blogger.com,1999:blog-5118527857335750434.post-28903842206979541192018-01-05T15:29:00.003-08:002018-01-05T15:31:05.291-08:00Full Year Passive Income for 2017This is the first time I get to consolidate my passive income for an entire year as I only started on this journey in mid-2016. Although I don't actually "see" the income coming in month-to-month (as I am still relying on my active income for expenses, so my passive income goes straight into the common savings pool), it still feels great to see the consolidated numbers at the end of the year.<br />
<br />
So here are the numbers in graphical form:<br />
<br />
<a href="http://3.bp.blogspot.com/-sPNo2JYq_tw/WlAIu0llnBI/AAAAAAAAAPo/_k1Ie9bG0-4oQDlhXssHHQSBmZTzUZdtgCK4BGAYYCw/s1600/chart.png" imageanchor="1"><img border="0" height="262" src="https://3.bp.blogspot.com/-sPNo2JYq_tw/WlAIu0llnBI/AAAAAAAAAPo/_k1Ie9bG0-4oQDlhXssHHQSBmZTzUZdtgCK4BGAYYCw/s640/chart.png" width="640" /></a><br />
Interest income for the year = $4,147.75<br />
Dividend income for the year = $3,741.56<br />
<br />
<b><span style="font-size: large;">TOTAL Passive Income = $7,889.31</span></b><br />
<br />
This works out to be <b>$657.44</b> per month.<br />
<br />
Not too shabby.<br />
<br />
I remember a time when I had to teach tuition, 2 lessons of 1.5h each per week, to earn an additional $600 a month. This additional source of income can be entirely replaced already! (And indeed, I've stopped giving tuition as I wanted to spend more time with my two young children)<br />
<br />
I will do a consolidation of my net worth soon.F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com3tag:blogger.com,1999:blog-5118527857335750434.post-88285733241114351592017-11-02T18:03:00.001-07:002017-11-02T18:03:48.024-07:00The All New DBS Multiplier Account!<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-6gPz6wyh-XU/Wfu17LctTpI/AAAAAAAAAN0/fWBfTnBKg0gZnEIvPh4nZWdVfMxxdicqACLcBGAs/s1600/dbs%2Bmultiplier%2Baccount.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="793" data-original-width="1579" height="320" src="https://1.bp.blogspot.com/-6gPz6wyh-XU/Wfu17LctTpI/AAAAAAAAAN0/fWBfTnBKg0gZnEIvPh4nZWdVfMxxdicqACLcBGAs/s640/dbs%2Bmultiplier%2Baccount.jpg" width="640" /></a></div>
<br />
<br />
Well, finally DBS is catching up with the other banks. I think for the longest time, they have such strong local foothold that they are flooded with cash (probably from the older generation who still believes that DBS is backed by the government and therefore, is the safest place to put their money), hence negating the need for them to be more aggressive in pursuing new deposits. Finally they are waking up.<br />
<br />
Cutting to the chase, I think this is an awesome account. As long as you credit your salary with them, and transact in 1 other category, you get to earn bonus interest. The interest is even higher if you transact in 2 other categories. Take a look at their interest rates table:<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-XuLeU-VjmJc/Wfu3OEgPgCI/AAAAAAAAAOA/TYFc8mlp2JwkvAGS-3lnC9ZxgcLWZQBxACLcBGAs/s1600/multiplier%2Binterest%2Brates%2Btable.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="616" data-original-width="806" height="488" src="https://2.bp.blogspot.com/-XuLeU-VjmJc/Wfu3OEgPgCI/AAAAAAAAAOA/TYFc8mlp2JwkvAGS-3lnC9ZxgcLWZQBxACLcBGAs/s640/multiplier%2Binterest%2Brates%2Btable.jpg" width="640" /></a></div>
What's more, there is no minimum credit card spend required, and POSB invest-saver qualifies as transaction in the "Invest" category.<br />
<br />
More details <a href="https://www.dbs.com.sg/personal/landing/dbs-multiplier/" target="_blank">here</a>.<br />
<br />
<h3>
Possible Combo with DBS' Be Your Own Boss Account</h3>
<br />
I blogged about the merits of DBS' BYOB account <a href="https://fighting4financialfreedom.blogspot.sg/2017/09/dbs-be-your-own-boss-very-attractive.html" target="_blank">here</a>. <br />
<br />
Well, I've signed up for it, and since I am already crediting my monthly salary to POSB (previously I was crediting my salary to BOC SmartSaver account), I might as well look at how else I can benefit from this arrangement right?<br />
<br />
So the revision to the Multiplier account came just at the right time. Take a look at this table:<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-9W97cCYVK3A/Wfu6Uhr9SpI/AAAAAAAAAOc/SQobQ71t9sEk416f661reckO6oYr9fGAACLcBGAs/s1600/combo.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="192" data-original-width="772" height="158" src="https://1.bp.blogspot.com/-9W97cCYVK3A/Wfu6Uhr9SpI/AAAAAAAAAOc/SQobQ71t9sEk416f661reckO6oYr9fGAACLcBGAs/s640/combo.jpg" width="640" /></a></div>
<br />
When I signed up for BYOB account, I'm already prepared to credit my salary with DBS, and make 5 transactions on any DBS/POSB credit/debit card. Without any additional effort on my part, I can already qualify for bonus interest with the DBS Multiplier account. That's what we call SYNERGY!<br />
<br />
The only additional effort that I might possibly make is to sign up for POSB invest-saver, to qualify for the higher tier interest. I think I might just do that.<br />
<br />
<h3>
<a href="https://www.posb.com.sg/personal/landing/cashback-bonus/index.html" target="_blank">POSB Cashback Bonus</a> as an Alternative</h3>
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://3.bp.blogspot.com/-ksRDtnp9DGQ/Wfu80Bn2CKI/AAAAAAAAAO0/oIeeFGXTIBkSCjjatd_VR8lbcmQ85KdWwCLcBGAs/s1600/posb%2Bcashback%2Bbonus.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="783" data-original-width="1571" height="318" src="https://3.bp.blogspot.com/-ksRDtnp9DGQ/Wfu80Bn2CKI/AAAAAAAAAO0/oIeeFGXTIBkSCjjatd_VR8lbcmQ85KdWwCLcBGAs/s640/posb%2Bcashback%2Bbonus.jpg" width="640" /></a></div>
<br />
DBS Multiplier account is good for those who have savings (the bonus interest is applicable for the first S$50,000). For young adults who are just starting to build up their stash, a good alternative to the Multiplier account is the <a href="https://www.posb.com.sg/personal/landing/cashback-bonus/index.html" target="_blank">POSB Cashback Bonus</a>. <br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-2I_qyD7lnvo/Wfu-RtUrcvI/AAAAAAAAAPA/xhESpxNDFdEThHKfvMU1I4KazLrmb5FFACLcBGAs/s1600/posb%2Bcashback%2Bbonus%2Bcriteria.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="627" data-original-width="1187" height="338" src="https://2.bp.blogspot.com/-2I_qyD7lnvo/Wfu-RtUrcvI/AAAAAAAAAPA/xhESpxNDFdEThHKfvMU1I4KazLrmb5FFACLcBGAs/s640/posb%2Bcashback%2Bbonus%2Bcriteria.jpg" width="640" /></a></div>
<br />
Well, again, this can be layered with BYOB account, the only difference being that signing up for Invest-Saver is no longer an option if you want to be eligible for earning the cashbacks.<br />
<br />
Still, I think this is a great combo with BYOB account for those who don't have much savings.<br />
<br />
<i>P.S. I previously blogged about how <a href="https://www.dbs.com.sg/personal/cards/debit-cards/dbs-visa-debit" target="_blank">DBS Visa Debit card</a> is a good combo with BYOB account </i><a href="https://fighting4financialfreedom.blogspot.sg/2017/09/dbs-be-your-own-boss-very-attractive.html" target="_blank"><i>here</i></a><i>. Do note that spending on the <span style="color: red;">debit</span> card will not fulfill the "<span style="color: red;">credit</span> card spend" requirement for both the Multiplier account and the Cashback Bonus; You have to use a <span style="color: red;">credit</span> card. Well, my plan is to use my DBS Esso card once a month, and use the DBS Visa Debit card for an additional 4 times to hit the requirement for BYOB account.</i><br />
<br />
<br />
<br />F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com1tag:blogger.com,1999:blog-5118527857335750434.post-62290621455931310122017-10-31T18:22:00.000-07:002017-10-31T18:24:23.994-07:00DBS Visa Debit Card - Possible Combo with BYOB Account!<div class="separator" style="clear: both; text-align: center;">
<a href="https://4.bp.blogspot.com/-ekNIdByXWpU/WfkbuJrlJeI/AAAAAAAAANc/z7FgLz_wN8o8ssZSiQajTAEl4bPZWjhxgCLcBGAs/s1600/dbs%2Bvisa%2Bdebit.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="354" data-original-width="1071" height="210" src="https://4.bp.blogspot.com/-ekNIdByXWpU/WfkbuJrlJeI/AAAAAAAAANc/z7FgLz_wN8o8ssZSiQajTAEl4bPZWjhxgCLcBGAs/s640/dbs%2Bvisa%2Bdebit.jpg" width="640" /></a></div>
<br />
And so I signed up for the <a href="https://www.dbs.com.sg/personal/byob.page" target="_blank">DBS Be Your Own Boss (BYOB)</a> offer which I blogged about <a href="http://fighting4financialfreedom.blogspot.sg/2017/09/dbs-be-your-own-boss-very-attractive.html" target="_blank">here</a>.<br />
<br />
Starting from this month, I will be making a monthly regular savings of $3000 into the account to maximise the offer, which is only valid for 2 years.<br />
<br />
To earn the bonus 2% interest, I have to make 5 retail transactions using DBS/POSB credit/debit cards. <br />
<br />
But I don't have any decent card from DBS/POSB.<br />
<br />
Well, I have the DBS Esso card, but the discount is not that great compared to using UOB ONE Card at SPC. <br />
<br />
I also have the POSB Go! debit card. Nothing much to say about this card really. It's just a plain vanilla debit/atm card.<br />
<br />
So the hunt for a useful DBS/POSB card is on!<br />
<br />
Because I already have to make minimum spending to earn higher interests in my other savings accounts, I don't want another card that has hurdles to jump through.<br />
<br />
I was all ready to simply use my Go! card to make the 5 transactions, until I came across the DBS Visa Debit card!<br />
<br />
5% cashback with no minimum spending and no annual fees!<br />
<br />
Awesome stuff. <br />
<br />
But nothing comes free. To qualify for this 5% cashback, you have to make less than 3 cash withdrawals across all your DBS/POSB accounts in a month. The total value of your withdrawals also must be $400 or less. Full T&C can be found <a href="https://www.dbs.com.sg/personal/cards/debit-cards/dbs-visa-debit" target="_blank">here</a>.<br />
<br />
Sounds easy enough, as I am already going cashless whenever possible.<br />
<br />
If you are in a similar situation, this card might work for you as well.F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com1tag:blogger.com,1999:blog-5118527857335750434.post-62094487540619205382017-09-26T01:06:00.002-07:002017-09-26T01:08:02.084-07:00DBS Be Your Own Boss - A Very Attractive Offer!<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/--kuvUqfhdqo/Wcn_SObVOkI/AAAAAAAAAM8/k0qsDOPkL-EvMgYDkjRjQRvwD0MhzePUACEwYBhgL/s1600/byob%2Bheadline.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="411" data-original-width="654" height="402" src="https://1.bp.blogspot.com/--kuvUqfhdqo/Wcn_SObVOkI/AAAAAAAAAM8/k0qsDOPkL-EvMgYDkjRjQRvwD0MhzePUACEwYBhgL/s640/byob%2Bheadline.jpg" width="640" /></a></div>
<br />
<br />
I am one of those who have been waiting for the next big crash to come, opting to construct my portfolio with more than 50% cash. Well, sitting on a pile (small one for me) of cash is not the gloomiest situation, but watching them eroding away by inflation day after day is not exactly enjoyable either. For anyone who wish to grow their wealth, keeping cash that generates close to nothing is hardly a palatable proposition.<br />
<br />
Thankfully, the banks are competing hard to get our cash parked with them. I've been parking my warchest in UOB ONE and BOC SmartSaver accounts, with the former yielding an average of 2.43% p.a. and the latter, between 1.55% to 3.55%. I was actually quite happy to continue with this arrangement until I chanced upon <a href="http://sgbudgetbabe.blogspot.sg/search?updated-max=2017-09-08T08:42:00-07:00&max-results=1&start=3&by-date=false" target="_blank">SGBudgetBabe's post on Be Your On Boss (BYOB) offer by DBS</a>. More details on the product website <a href="https://www.dbs.com.sg/personal/byob.page" target="_blank">here</a>.<br />
<br />
On first look, BYOB offers interest rates of up to 4% for the next two years if you do the following:<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-QJSkXXgaSKs/WcnqaC90-PI/AAAAAAAAALs/EIqW6F2p3KoF-7K1XuHhKNeZGBGI7LlRQCLcBGAs/s1600/byob.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="725" data-original-width="620" height="640" src="https://1.bp.blogspot.com/-QJSkXXgaSKs/WcnqaC90-PI/AAAAAAAAALs/EIqW6F2p3KoF-7K1XuHhKNeZGBGI7LlRQCLcBGAs/s640/byob.jpg" width="545" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
That's simple enough, but do scroll to the bottom of the <a href="https://www.dbs.com.sg/personal/byob.page" target="_blank">product page</a> and read through the terms and conditions. Of note, to qualify for this offer, you must be between 18 to 30 years old, and with no salary credit arrangement with POSB/DBS between 1 Sep 2016 and 28 Feb 2017.<br />
<br />
<h4>
Interest Calculation</h4>
Being slightly more mathematically-inclined, I was wondering how the interests are calculated. Below is an <a href="https://www.dbs.com.sg/iwov-resources/images/others/byob/table2.jpg" target="_blank">illustration</a> provided by POSB/DBS on interests calculation:<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://4.bp.blogspot.com/-rQUSolsfRws/Wcns5YFxK_I/AAAAAAAAAL4/MqZPAycmxfgZiY3pLh134cLJztbQJC0BgCLcBGAs/s1600/interest%2Bcalculation.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="921" height="640" src="https://4.bp.blogspot.com/-rQUSolsfRws/Wcns5YFxK_I/AAAAAAAAAL4/MqZPAycmxfgZiY3pLh134cLJztbQJC0BgCLcBGAs/s640/interest%2Bcalculation.jpg" width="489" /></a></div>
<br />
On first look, it does seem like the interest are <b>not</b> credited and compounded monthly. Upon further investigation, I found out that the "Additional 2% interest" only applies to the original amount credited + interest earned in the preceding month. The "Bonus 2% interest" only applies to the original amount credited into SAYE. This all sounds very confusing, so I tried to reverse engineer the whole calculation process:<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-2ZpL6s_mOe8/WcnwaWV1J6I/AAAAAAAAAMQ/wBi5wCu12AkbcUEzIs9xm3b9GC6Q7qyGACLcBGAs/s1600/for%2B100.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="569" data-original-width="769" height="472" src="https://2.bp.blogspot.com/-2ZpL6s_mOe8/WcnwaWV1J6I/AAAAAAAAAMQ/wBi5wCu12AkbcUEzIs9xm3b9GC6Q7qyGACLcBGAs/s640/for%2B100.jpg" width="640" /></a></div>
<br />
I tried various methods of calculating, but I simply couldn't get the exact figures provided by the bank. The above table shows the closest attempt I managed.<br />
<br />
If I changed the monthly saving amount to $3000, this is what I get:<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-0de8IZq1Q-A/Wcnw6KpIwyI/AAAAAAAAAMY/YYA7jbtBzX4RJyLCYBrVth5UDGYXmSENgCLcBGAs/s1600/for%2B3000.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="570" data-original-width="771" height="472" src="https://2.bp.blogspot.com/-0de8IZq1Q-A/Wcnw6KpIwyI/AAAAAAAAAMY/YYA7jbtBzX4RJyLCYBrVth5UDGYXmSENgCLcBGAs/s640/for%2B3000.jpg" width="640" /></a></div>
<br />
A total interest of just over $3000 over 2 years. Neat.<br />
<br />
Just to satisfy my curiousity, I wanted to find out what's the equivalent rates if interests are credited and compounded monthly, instead of the convoluted way of calculation that POSB/DBS has decided to use. I've learnt not to trust headline numbers so readily. This is what I found:<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-jrNdw3fHVb4/Wcnz8olJULI/AAAAAAAAAMk/aM-juextMBM6KmdS8H2__m2bTgCfQJVbACLcBGAs/s1600/Equivalent.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="548" data-original-width="900" height="387" src="https://1.bp.blogspot.com/-jrNdw3fHVb4/Wcnz8olJULI/AAAAAAAAAMk/aM-juextMBM6KmdS8H2__m2bTgCfQJVbACLcBGAs/s640/Equivalent.jpg" width="640" /></a></div>
<br />
An equivalent interest rate of approximately 3.9%. Not too different from the headline numbers, fortunately.<br />
<br />
<h4>
To Sign Up or Not to Sign Up?</h4>
<br />
Numbers don't lie, and I think this is one of the best places to park your excess cash at the moment. You might lose some liquidity though, since to qualify for 4% (or 3.9%) promotional rate, you are not allowed to make any withdrawals.<br />
<br />
On the flipside, at least you know for certain the amount of interest you will get at the end of the 24 months. Neither UOB ONE nor BOC SmartSaver can give you this certainty, since the terms for those accounts can be changed overnight.<br />
<br />
Oh oh oh....and if you sign up before 31st Oct, you get an additional $88 as a welcome gift =)<br />
<br />
<i>P.S. This is </i><b><i>not</i></b><i> a sponsored post. My blog is not popular enough for that, so you can be assured that all opinions contained herein are those of mine and mine alone.</i><br />
<div>
<i><br /></i></div>
F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com1tag:blogger.com,1999:blog-5118527857335750434.post-322710304710815002017-09-21T20:03:00.000-07:002017-09-21T22:53:46.438-07:00On Child-Raising<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-8e45s3MANDI/WcR9SxD8qgI/AAAAAAAAALc/JXIGA7Pt8IwIzmce_wbUca5L8QEMDmGTQCLcBGAs/s1600/multigenerational%2Bfamily.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="823" data-original-width="1300" height="403" src="https://1.bp.blogspot.com/-8e45s3MANDI/WcR9SxD8qgI/AAAAAAAAALc/JXIGA7Pt8IwIzmce_wbUca5L8QEMDmGTQCLcBGAs/s640/multigenerational%2Bfamily.jpg" width="640" /></a></div>
<br />
<br />
I just had a minor exchange with my spouse. Though unrelated to personal finance, I felt that the episode and the resulting realizations are worth sharing.<br />
<br />
<h4>
Background</h4>
With the arrival of my second child, we moved in to my parents' place as we felt that the maid alone cannot handle both children. We were staying with my in-laws previously, but my mum-in-law didn't want to be at home to help out with the children - she has her own retirement activities. Hence, other than having my wife becoming a stay-home-mum, our only other option is to move in to my parents' place for my mum to help out with the children.<br />
<br />
<h4>
Not-So-Good Relationship Between the Two Dowagers</h4>
As with almost all other cases I've heard, my spouse's relationship with my mum leaves much to be desired. The cohabitation started off rather badly, but over time, they learnt to stay out of each other's way and the situation improved - but not quite enough.<br />
<br />
The unpleasant exchanges between the two ladies stoked my wife's desire to move back to our own place. We are fortunate to have a trustworthy and capable helper, hence my wife felt that we could leave the kiddos with her at our own home. I don't agree.<br />
<br />
<h4>
Potential Risks of Leaving Our Children with Only the Helper</h4>
While I don't proclaim to fully empathize with the unhappiness my wife has to put up with, I feel that the potential downside for moving out is far too great to be worth risking.<br />
<br />
First, young children's capacity to learn is beyond the realm of our imagination. By putting them in an environment where there is only one adult (the helper) for most parts of the day, we might be, albeit unintentionally, artificially limiting their learning and growth. There is so much that a growing toddler needs and is able to learn, and nature has helped facilitated this by making them extremely curious and observant. Toddlers are further endowed with the ability to take in information from multiple sources - so many that they themselves might not even be conscious of. Even in the absence of planned, deliberate "teaching", young children are constantly learning, picking up new knowledge and making sense of the world around them. When my wife said she doesn't feel like my mum is teaching the children anything, hence justifying why there is no added value in staying with my parents, I knew she has massively and mistakenly underestimated the amount of learning done by the children through casual interactions with, and observations of the people and happenings around them. The immersive experience of listening in to conversations between adults, observing how adults behave and interact with each other, and sensing emotions under different situations is hard to replicate in a household consisting of only the helper and the two children. a tiny household is more "sterile" and provides less stimulus and learning opportunities for toddlers.<br />
<br />
Second, our children will start going to pre-school very soon, and that is when they will start getting exposure to many other things - both good and bad. As toddlers, they will no doubt be excited to talk about their experiences and learning in schools. Staying with my parents means that they will be able to talk to them while my spouse and I are at work. This interaction provides my parents with "teaching moments" to impart correct life values, demystify/clarify misconceptions/misinformation, nudge them in the correct direction if they are going off-course, and finally, discipline them when required. The helper cannot be expected to do the same, and we risk our children becoming self-entitled if their needs and wants are always pandered to by the helper.<br />
<br />
<h4>
Permanent, Irreparable Consequences VS Fleeting, Temporary Unhappiness</h4>
The two potential consequences of leaving the children with only the helper are <b>irreversible </b>and <b>permanent</b>. Contrast this with the <b>fleeting </b>and <b>temporary </b>unhappiness that my wife has to put up with for perhaps 2 more years, and the sensible choice to make becomes obvious. Now, I am not saying that our moving out will definitely turn our children into delinquent, self-entitled teenagers - child-raising is never this straightforward - but as parents, we should strive to provide the best environment (not materially) that gives the best chance of nurturing our children into independent, confident, and healthy adults.F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com1tag:blogger.com,1999:blog-5118527857335750434.post-44801186203356083312017-09-13T19:50:00.000-07:002017-09-13T19:50:22.474-07:00Passive Income UpdateIt has been a while <a href="https://fighting4financialfreedom.blogspot.sg/2016/12/passive-income-update.html" target="_blank">since I last consolidated my passive income</a>. Instead of waiting for the new year, I shall attempt to do a mid- (or more like three-quarter) year review.<div>
<br /></div>
<div>
The journey towards financial freedom is a long and arduous one, which makes it really easy for me to lose steam and lose sight. I hope that this stock-take of my achievement thus far will put me back on track and provide me with the motivation to push on.</div>
<div>
<br /></div>
<div>
Let's cut to the chase:</div>
<div>
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-D8hTci-dfFI/Wbns8iQyaHI/AAAAAAAAALM/FLslF_neQ4cKdGH0kwUslIOv3wROfffwQCLcBGAs/s1600/Passive%2BIncome%2B9M%2B2017.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="573" data-original-width="1393" height="260" src="https://2.bp.blogspot.com/-D8hTci-dfFI/Wbns8iQyaHI/AAAAAAAAALM/FLslF_neQ4cKdGH0kwUslIOv3wROfffwQCLcBGAs/s640/Passive%2BIncome%2B9M%2B2017.jpg" width="640" /></a></div>
<div>
<br /></div>
<div>
<br /></div>
<div>
9M interest income = $3135.17</div>
<div>
9M dividend income = $2839.24</div>
<div>
<br /></div>
<div>
Total passive income for first 9 months of 2017 = <b>$5974.41</b></div>
<div>
This works out to be <b><u>$663.82</u></b> per month.</div>
<div>
<br /></div>
<div>
I need to caveat that the interest income is expense-driven, i.e. by fulfilling credit card spend requirement to qualify for higher interest rates on saving accounts like UOB ONE and BOC SmartSaver. This source of income is not foolhardy. In the event that I lose my job, I will have problem hitting these minimum credit card spend requirements, thus drying up this income stream. </div>
<div>
<br /></div>
<div>
For dividend income, I must say I haven't been exactly building up my portfolio with high-quality, high-yielding counters. Often, I am tempted to trade, taking profits and trying to buy back lower. Not being able to do this well means that my overall portfolio yield hasn't been fantastic, as oftentimes I will miss the chance to buy-back lower as the counter continues to scale higher prices. Though I am trading much, much lesser now, my self-discipline still has rooms for improvements.</div>
<div>
<br /></div>
<div>
More than 50% of my holdings are in cash now. I will lose sleep and make more emotionally-driven buy/sell decisions if I allocate more to stocks. Holding more cash while markets continue to break new highs gives me peace of mind. </div>
<div>
<br /></div>
<div>
<br /></div>
F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com1tag:blogger.com,1999:blog-5118527857335750434.post-56973137079472565072017-05-27T00:53:00.000-07:002017-05-27T00:54:19.134-07:00Networth Update<div class="separator" style="clear: both; text-align: center;">
</div>
<b></b><br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-3fw15EYHatI/WF_AqnnBi4I/AAAAAAAAAIk/EtnWZ3cqCZcrmh0m0bOZ5mmDdzrVitfgwCEw/s1600/networth.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="273" src="https://2.bp.blogspot.com/-3fw15EYHatI/WF_AqnnBi4I/AAAAAAAAAIk/EtnWZ3cqCZcrmh0m0bOZ5mmDdzrVitfgwCEw/s400/networth.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Taking stock of what you own and owe.</td></tr>
</tbody></table>
<div class="separator" style="clear: both; text-align: center;">
</div>
<h3>
WHAT IS THIS POST ABOUT</h3>
This post is a continuation to my previous <a href="http://fighting4financialfreedom.blogspot.sg/2016/12/networth-update.html" target="_blank">one</a>, in which I proclaimed that I will do a review of my financial status every half yearly. I might be 1 month too early to do a review now, but with two young children to take care of, it makes sense to start working on this whenever I get some pockets of free time to do so. <br />
<br />
I am going to use the same structure and format as the earlier post for consistency.<br />
<div>
<h3>
</h3>
<h3>
WHAT I HAVE</h3>
</div>
<div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-q65Dky7i8-c/WF_AsbDQlBI/AAAAAAAAAIs/_-rd2LYfR2U82L7bPElxIVfGT4sM6XqfgCEw/s1600/asset.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="225" src="https://1.bp.blogspot.com/-q65Dky7i8-c/WF_AsbDQlBI/AAAAAAAAAIs/_-rd2LYfR2U82L7bPElxIVfGT4sM6XqfgCEw/s400/asset.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Growing your networth bit by bit.</td></tr>
</tbody></table>
<br />
Let me first start off by detailing what I have. As before, I'm going to exclude the DBSS that my wife and I bought because we still have a big mortgage to service, which makes our flat more of a liability than an asset. <br />
<br />
<u>Cash and Equivalents:</u></div>
<div>
<ol>
<li>Personal Savings - <b>$110,000 </b>[no change]</li>
<li>Joint Savings with Spouse - <b>$50,000 </b>[no change]</li>
<li>Daughter's Savings - <b>$20,000</b> [an increase of $1,000]</li>
<li>Son's Savings - <b>$16,000</b></li>
</ol>
</div>
<div>
<u>FD and Equivalents:</u></div>
<div>
<ol>
<li>Dad's CPF - <b>$20,000</b> (<i>Can be withdrawn with short advance notice as my Dad is past 55 years old. Basically, instead of him withdrawing from his CPF at age 55, I gave him $20k cash. I treat it as a 10 year FD yielding 2.5% p.a.</i>) [Since Oct 16]</li>
<li>Mum's CPF - <b>$14,000</b> (<i>My mum has minimal CPF balances, hence I've decided to contribute to her SA and <a href="http://fighting4financialfreedom.blogspot.sg/2016/06/753-instant-capital-gain-538-yield-on.html" target="_blank">getting some tax relief in the process</a>. She will receive monthly payout from CPF LIFE when she reaches around age 65 to help offset her living expenses.</i>) [Sep 16; Jan 17]</li>
</ol>
</div>
<div>
<u>Personal CPF:</u></div>
<div>
<ol>
<li>Ordinary Account - <b>$42,000 </b>[an increase of $11,000]</li>
<li>Special Account - <b>$36,000 </b>[an increase of $5,000]</li>
<li>Medisave Account - <b>$46,000 </b>[an increase of $1,000]</li>
</ol>
</div>
<div>
<u>Investments:</u></div>
<div>
<ol>
<li>Common Stocks - <b>$87,000</b> (<i>market value on 23 Dec 16</i>) [an increase of $45,000, mainly due to capital injection]</li>
<li>87 Oz of Silver - <b>$2,087.13</b> (87<i> x $23.99</i>)</li>
<li>Bonds - <b>$1,015 </b>(<i>market value on 26 May 17</i>)</li>
</ol>
<b><u>TOTAL OWNED: $444,100</u></b> [previously: $367,000]<br />
<ol>
</ol>
</div>
<div>
<h3>
WHAT I OWE</h3>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-HaES1bdqRDU/WF_Aq0MkP7I/AAAAAAAAAIo/PeiAwMvq4VEa2X3oH3sYs8FfuUbCTrOzQCEw/s1600/debt.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="395" src="https://3.bp.blogspot.com/-HaES1bdqRDU/WF_Aq0MkP7I/AAAAAAAAAIo/PeiAwMvq4VEa2X3oH3sYs8FfuUbCTrOzQCEw/s400/debt.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">The burden of debt.</td></tr>
</tbody></table>
<br />
The only liability that I have is the $650,000 housing loan that my spouse and I took from HDB. Monthly mortgage is about $2,668. Very substantial in relations to our income. <br />
<ol>
<li>Outstanding Housing Loan - <b>$601,000 </b>[a decrease of $9,000]</li>
</ol>
<u><b>TOTAL OWED: $601,000</b></u><br />
<br />
<b></b><br />
<h3>
<b>MY GOALS FOR 2017</b></h3>
The goal I set for 2017 is to sock away $30k, including the $7k I am putting into my mum's CPF SA. I've already exceeded that target in the first 5 months of 2017, as seen in the (more than $70k) increase in my total networth. Even if I take out the increase in CPF balances, I am still way above my initial target. <br />
<br />
To be fair, the baby bonus (received $3k thus far) and CDA contributions/matching by the government ($6k in total) helped to bump up the figure a fair bit too. All my children's money are in their respective CDA accounts, earning 2% p.a. Not too shabby to be honest. =)</div>
F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com1tag:blogger.com,1999:blog-5118527857335750434.post-5172020703813724222017-04-24T23:25:00.002-07:002017-04-24T23:28:07.973-07:00Addition of New Family Member!<div class="separator" style="clear: both; text-align: center;">
<a href="https://1.bp.blogspot.com/-VxWL8clFHKQ/WP7sbyZDu8I/AAAAAAAAAKw/mNyCcWbvbuIYY47mtJW8pcpelFEEtnDiACLcB/s1600/children.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="https://1.bp.blogspot.com/-VxWL8clFHKQ/WP7sbyZDu8I/AAAAAAAAAKw/mNyCcWbvbuIYY47mtJW8pcpelFEEtnDiACLcB/s400/children.jpg" width="300" /></a></div>
<br />
<br />
And so I just received my second bundle of joy about 2 months ago. After experiencing having two young children at home (my elder one is 18 months older), my wife and I sort of agreed to "stop at two".<br />
<div>
<br /></div>
<div>
"Maintenance" cost of children is really high, not only in monetary terms, but emotionally as well. While they are a joy to have, their insatiable thirst for attention sometimes make my wife and I wonder if it's a fair trade afterall. Only when they are taking naps (at the same time) will we get some breathing space.</div>
<div>
<br /></div>
<div>
Anyway, since this is a financial blog, I will briefly share the cost of my wife's pregnancy.</div>
<div>
<br /></div>
<div>
From the first consultation up till delivery via cesarean at Thomson Medical Centre, the total amount that we've spent is about <u>$11,000</u>. Below are some brief details on the pregnancy for reference:</div>
<div>
<ol>
<li>Total number of consultation with private gynae: 8 (each session costing around $160)</li>
<li>No complications - smooth pregnancy</li>
<li>Took the basic test for Down Syndrome [I think it's OSCAR test. The cheaper one]</li>
<li>3-nights stay in single ward in TMC</li>
<li>Cesarean delivery</li>
</ol>
<div>
While I have the exact breakdown of the expenses, I don't think it's useful to share it here as everyone's situation will likely be minimally, slightly different. A ballpark figure should be useful enough for aspiring parents.</div>
</div>
<div>
<br /></div>
<div>
The cost of raising a kid is not to be underestimated. As much as we try to cut down on our expenses, there are many expenditures that simply can't be avoided. For instance, while we try to source around for free baby clothes and shoes and what-nots, and buy from carousell as much as we can, we can't use second-hand diapers and milk powder. Also, even if we don't believe in sending our children to "branded" pre-schools, we would be hard-pressed not to even send them to PCF or MyFirstSkool when they are about 3 years old. If anything at all, they will need to pick up important social skills. School fees itself will set a family back by about $500/month/child. </div>
<div>
<br /></div>
<div>
And these just form the tip of an iceberg. Compound that over 20 years, the amount is phenomenal for a middle-class household.</div>
<div>
<br /></div>
<div>
Well...suffice to say that I just took 10 steps backwards in my journey towards Financial Freedom. Haha. </div>
F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com3tag:blogger.com,1999:blog-5118527857335750434.post-19197136543519885922017-02-15T05:41:00.001-08:002017-02-15T05:42:01.220-08:00Update on Progress / Key Financial Moves Taken<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-CnU2FrCHHb4/WKRafqbDPiI/AAAAAAAAAKU/XGtmQwzlCqAKvZDh0lepE742Ko7k12L0wCLcB/s1600/Financial-Updates-Page-Header-cropped.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://2.bp.blogspot.com/-CnU2FrCHHb4/WKRafqbDPiI/AAAAAAAAAKU/XGtmQwzlCqAKvZDh0lepE742Ko7k12L0wCLcB/s1600/Financial-Updates-Page-Header-cropped.jpg" /></a></div>
<br />
The last time I took stock of my financial position was about 2 months ago, towards the end of 2016 <a href="http://fighting4financialfreedom.blogspot.sg/2016/12/networth-update.html" target="_blank">here</a>. I was actually planning to take stock every 6-monthly, but because I did quite a couple of things in the first 2 months of 2017, I thought it might be useful for me to keep track of them in my blog.<br />
<br />
<h4>
<u>1. Top up my mum's CPF</u></h4>
<br />
As a promise <a href="http://fighting4financialfreedom.blogspot.sg/2016/10/voluntary-contribution-to-cpf-special.html" target="_blank">I made to myself</a>, I contributed yet another $7000 to my mum's CPF Special Account sometime in Jan this year. As CPF interests are computed monthly, I made a deliberate decision to put in the entire sum right at the beginning of the year to maximise the amount of interest I (or rather, my mum) can receive. It wasn't as hard this time round since I've very much prepared myself emotionally for it.<br />
<br />
<h4>
<u>2. Made multiple investments in stocks.</u></h4>
<br />
I built up my stocks portfolio quite substantially in the last few months, taking advantage of price weakness whenever they surface. I am just starting out on this journey of investing for the long term, and the hardest part is controlling my own emotions. I used to trade a lot with very bad results. Lost a sizeable amount of my savings. Hopefully I will learn to be become a more skillful master of my own emotions.<br />
<br />
Specifically, I bought the following:<br />
<br />
a. Asian Pay Tv @ $0.38<br />
b. FIRST REIT @ $1.255<br />
c. AA REIT @ $1.275<br />
d. DBS @ $15 [But I sold it off too early at 16.35. Another hard reminder to myself not to meddle with my positions unnecessarily.]<br />
e. M1 @ $2.39 and $2.16<br />
<br />
I made a deliberate decision to divert some of my funds for foreign stocks to reduce geographical risk. I didn't like US because of the high taxes, choosing Hong Kong instead. I bought the following:<br />
<br />
f. TVB @ $25.70 and $26.90<br />
g. SJM @ $6.02<br />
<br />
<h4>
<u>3. Made a partial capital repayment of $2665 for my HDB mortgage loan (by mistake).</u></h4>
<br />
I am receiving about $2500 monthly from renting out my HDB. For the first 8 months, the cash just goes straight into my savings account. However, the amount of cash I am holding has reached a point where I find it hard to generate decent returns. I've used up all my options already: UOB ONE, OCBC 360, and BOC SmartSaver. Any additional cash that I continue to accumulate will have to go straight to CIMB Fastsaver, which <strike>only </strike>earns 1% p.a. To be fair, it's a good rate given that there are no hurdles to jump through. However, as compared to the 2.6% which I am paying for my mortgage, earning 1% on my cash will mean that the cost of holding that amount of cash is actually 1.6%, which to me, is rather high.<br />
<br />
So I am left with 2 choices. First, I can use those accumulated rental income to make a one-off partial capital repayment of my loan, hence saving me on interest. However, this will mean that my income tax will increase as my rental income less interest paid will increase. Or, second, I can use the monthly income to pay the mortgage installments, so the money in my CPF will be left untouched and can start to build up and earn the 2.5% interest. When I eventually stop renting, I can then have the option of using the entire sum in my OA to pay down my loan. The cost of holding "cash" in OA as compared to paying off the loan straight off is only a mere 0.1% (ignoring the additional 1% to be earned on the first $20k in OA for simplicity).<br />
<br />
Mathematically, the second option is better, as money in OA is a form of buffer to continue servicing the mortgage loan should I lose my job. I will also be better off as the amount of additional tax I would have needed to pay is more than the 0.1% holding cost. Hence, given all these reasons, I tried to find ways to pay my outstanding monthly mortgage in cash before deductions are made from my CPF accounts. To cut the long story short, I made the cash payment, but the CPF deduction still happened. I emailed HDB to ask them how can I change the default payment method from CPF to bank GIRO. Waiting eagerly to hear from them.<br />
<br />
<h3>
Conclusion</h3>
<br />
So that's it! These are the few things I've done in the last few months. My personal cash savings is still at $110k, and joint savings with my wife is still $50k. Nothing else has changed much besides the above. <br />
<br />
<br />
<br />
<br />
<br />
<br />F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com4tag:blogger.com,1999:blog-5118527857335750434.post-44594172486643385572017-01-11T00:48:00.000-08:002017-01-11T00:48:16.127-08:00Using the Law of Diminishing Marginal Return to Guide Our Spending"<i>Pay yourself first</i>", "<i>Have a budget</i>" - these are financial advice all of us hear too often. I started off heeding these advice as well, setting aside money to be saved and money to be spent every month. While I am not about to write in detail the pros and cons of each of these systems, I would like to suggest an alternative method to guide our spending. <div>
<br /></div>
<h4>
<b>Let me illustrate the method with a story.</b></h4>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-_tRRmdrNCuw/WHXv_G4dbMI/AAAAAAAAAKA/tedKCpzoc9UjHv5bLy87Ir7R1j2Pi6VyQCLcB/s1600/eat.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="320" src="https://2.bp.blogspot.com/-_tRRmdrNCuw/WHXv_G4dbMI/AAAAAAAAAKA/tedKCpzoc9UjHv5bLy87Ir7R1j2Pi6VyQCLcB/s640/eat.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">An eatery serving local traditional fare like bak chor mee and laksa.</td></tr>
</tbody></table>
<div>
<br /></div>
<div>
There is this eatery called <a href="http://eat.com.sg/" target="_blank">EAT </a>near my workplace. Every time I stand in queue waiting for my turn to place my order, I will be running through this thinking process to decide what I will eat:</div>
<div>
<ol>
<li>One bowl of fishball noodles cost $4.20. One bowl of minced meat noodles cost $5.00. I am paying $0.80 more to change my fishballs for minced meat, some tiny pieces of mushroom, and one fried wanton skin. Is it worth it? Though I would very much prefer the latter option, I almost always choose to order fishball noodles instead.</li>
<li>The price quoted above is inclusive of a hot drink, either hot tea or hot coffee. On my first visit, not knowing better, I opted for a glass of iced water chestnut instead of the standard hot tea/coffee. I was expecting to top-up $0.50 for the change. But no. I was made to top-up $1.50. And then I asked: "How much does it cost to buy the cold drink on its own?". "$1.50" was the reply I got. WHAT?!?!?! My mind was blown. Since then, I will always take the default hot drink, no matter how warm the weather is.</li>
</ol>
</div>
<div>
<br /></div>
<h4>
<b>So what went through my head?</b></h4>
<div>
First, I have to decide what's the <u>marginal</u> utility I gain from eating minced meat <b><i>instead</i></b> of fishball. For the benefit of those who does not know what that means, just answer these 2 questions:</div>
<div>
<br /></div>
<div>
On a scale of 1 to 10, what level of enjoyment do you derive from eating minced meat?</div>
<div>
On the same scale, rate your enjoyment level from eating fishballs.</div>
<div>
<br /></div>
<div>
The difference between the two scores is the marginal utility you gain from eating minced meat <i>instead </i>of fishball.</div>
<div>
<br /></div>
<div>
Now, would you pay $0.80 more for that marginal utility?</div>
<div>
<br /></div>
<div>
I won't. I like minced meat more than fishball, but I don't like it <b>that much more</b>.</div>
<div>
<br /></div>
<div>
Next, apply the same principle to your choice of drink.</div>
<div>
<br /></div>
<div>
If I have a cup of hot tea/coffee, I am definitely not going to trade my cup of tea/coffee <b>PLUS </b>$1.50 for your glass of cold water chestnut. It's not a fair trade. You are taking advantage of me.</div>
<div>
<br /></div>
<h4>
<b>What blows my mind is that almost all my colleagues will go for the minced meat noodles and the cold drink!</b></h4>
<div>
And they tell me "don't need to save until like that lah!"</div>
<div>
<br /></div>
<div>
I suppose they have a budget for every meal, so as long as they do not exceed that budget, they are good with it.</div>
<div>
<br /></div>
<div>
But that's hardly the point.</div>
<div>
<br /></div>
<h4>
<b>Don't buy something just cause you can; Buy it because the utility gained exceeds the pain associated with parting with the money used (or the utility preserved by <u>not parting</u> with that money).</b></h4>
<div>
That, I guess to me, is the point.</div>
F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com2tag:blogger.com,1999:blog-5118527857335750434.post-42251663430790154612016-12-31T15:23:00.000-08:002016-12-31T15:23:55.854-08:00Passive Income Update<h3>
HAPPY NEW YEAR </h3>
<br />
Happy New Year everyone! 2016 seemed to have flown by don't you think? It's true that as one grow older, time seems to speed up. It's rather scary because a year can just pass us by while we are playing Candy Crush or Pokemon Go. It is timely, on the first day of 2017, to remind myself that time is a precious limited resource, and I should be more deliberate and intentional in the way I use it.<br />
<br />
As a continuation to <a href="http://fighting4financialfreedom.blogspot.sg/2016/12/networth-update.html" target="_blank">the update on my networth</a>, and before I start living out my 2017, I shall take stock of the passive income I received in 2016.<br />
<br />
In 2016, I received passive income from the following sources:<br />
<ol>
<li>Rental Income from my DBSS flat.</li>
<li>Interest Income on my Cash Holding.</li>
<li>Dividends from my Investment Portfolio.</li>
</ol>
Let's go through each of them in turn.<br />
<br />
<h3>
RENTAL INCOME FROM DBSS FLAT</h3>
For the uninitiated, after the arrival of our daughter, we had to seek waiver from HDB to allow us to rent out our newly-acquired DBSS flat (read more about it <a href="http://fighting4financialfreedom.blogspot.sg/2016/12/turning-mistake-into-opportunity-and.html" target="_blank">here</a>). It is unlikely to be a long term arrangement as we still have to move back to serve our <a href="http://www.hdb.gov.sg/cs/infoweb/business/estate-agents--salespersons/selling-a-flat/mop-undone-page" target="_blank">MOP</a>. Nonetheless, the passive income from rental really helped boost our monthly cashflow. We have been saving up the entire amount to pay down our huge mortgage.<br />
<br />
<b>Rental Income: $25,000</b> after deducting all the associated fees (I assumed expenses are 2 months worth of rental).<br />
<br />
This works out to be <b>$2083.33 </b>per month.<br />
<br />
<h3>
INTEREST INCOME ON CASH HOLDING</h3>
<br />
Throughout the year, I earned interest from a combination of (1) OCBC 360 account, (2) UOB ONE account, (3) BOC SmartSaver account, (4) Standard Chartered eSaver account, and (5) CIMB Fastsaver account, depending on the promotion available and what suited me more.<br />
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-ocDy5nyyfv0/WGg3jefHkRI/AAAAAAAAAJo/-r5Cl0Thv7AUxph_ivaUyjMwOb7Wff46wCLcB/s1600/BOC3.png" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="200" src="https://4.bp.blogspot.com/-ocDy5nyyfv0/WGg3jefHkRI/AAAAAAAAAJo/-r5Cl0Thv7AUxph_ivaUyjMwOb7Wff46wCLcB/s200/BOC3.png" width="164" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">BOC SmartSaver Account.</td></tr>
</tbody></table>
Out of the list of accounts above, I think BOC SmartSaver is the least raved about one. I don't know why, but it offers one of the best rates when it first started out. Take a look at their interest rates:<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-WnYGsIfHqn0/WGg3jj-AifI/AAAAAAAAAJw/VIVS9CiAZuA3wE2KmHbGfUuXuNjoSEeDACEw/s1600/BOC%2B2.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="166" src="https://1.bp.blogspot.com/-WnYGsIfHqn0/WGg3jj-AifI/AAAAAAAAAJw/VIVS9CiAZuA3wE2KmHbGfUuXuNjoSEeDACEw/s320/BOC%2B2.png" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Bonus interest rates for BOC SmartSaver account.</td></tr>
</tbody></table>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-CapTc2T08xU/WGg3jjQCxNI/AAAAAAAAAJs/atmjEwcXXroKLYq2VntD6xEXDmh_ljVcACEw/s1600/BOC.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="156" src="https://1.bp.blogspot.com/-CapTc2T08xU/WGg3jjQCxNI/AAAAAAAAAJs/atmjEwcXXroKLYq2VntD6xEXDmh_ljVcACEw/s320/BOC.png" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Prevailing savings interest rates for BOC SmartSaver account.</td></tr>
</tbody></table>
I rushed to open an account after reading a <a href="http://scg8866tstockinvesting.blogspot.sg/2016/03/boc-355-smart-saver-update-and-tips.html#comment-form" target="_blank">blogpost by scg8866t</a>. Basically, to earn 3.55% interest, you have to fulfill the same 3 conditions as what's required of OCBC 360 account. But there was a hack. the $500 card spend can be fulfilled using their debit card. So.....this means that I could use AXS mobile and pay for my UOB ONE credit card bill using my BOC debit card. That's killing 2 birds with 1 stone! The Spend Bonus is a whopping 1.55%, and combine that with 3 Bill Payments of $5 each, and the base savings interest rates for balances of $50,000 and above, I could get an effective interest rates of <b>2.55%</b> p.a. even without qualifying for the Salary Credit Bonus. This was awesome, until recently they closed the loophole and made a whole host of other changes. It's still worth checking it out though (<a href="http://www.bankofchina.com/sg/pbservice/pb1/201611/t20161130_8271280.html" target="_blank">here</a>), because they made some attractive improvements to their <a href="http://www.bankofchina.com/sg/bcservice/bc1/201605/t20160503_6891836.html" target="_blank">Family Card</a>.<br />
<br />
Oops, sorry for digressing.<br />
<br />
Here is my <b>Interest Income for 2016: $3433</b>.<br />
<br />
This works out to be <b>$286.08</b> per month.<br />
<br />
<h3>
DIVIDEND INCOME FROM INVESTMENT PORTFOLIO</h3>
I am looking for an elegant way to share my portfolio on this blog, but that's still work in progress. It's a small portfolio with a few legacy holdings from the times when I simply anyhow buy. But I've since learnt my lesson and am now trying to build up a quality, income generating portfolio.<br />
<br />
<b>Dividend Income: $745.73.</b><br />
<br />
This works out to be <b>$62.14</b> per month.<br />
<br />
<h3>
SUMMARY</h3>
<b>Total Passive Income for 2016: $29,178.73</b><br />
<br />
But if I were to remove rental income, total passive income will become: <b>$4,178.33</b><br />
<br />
This works out to be <b>$348.22</b> per month.<br />
<br />F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com1tag:blogger.com,1999:blog-5118527857335750434.post-69284020249795837962016-12-31T06:15:00.000-08:002016-12-31T06:16:21.684-08:008 Money Saving Tips in Raising a Child<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-z8v_QZ2TNvU/WGe8GwTW7XI/AAAAAAAAAJQ/BjFaVvgFJ5gHlUdd5dP278VRFt0rkwJOwCLcB/s1600/baby.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="300" src="https://3.bp.blogspot.com/-z8v_QZ2TNvU/WGe8GwTW7XI/AAAAAAAAAJQ/BjFaVvgFJ5gHlUdd5dP278VRFt0rkwJOwCLcB/s400/baby.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Is your budget baby-proof?</td></tr>
</tbody></table>
<br />
My parents, rather unabashedly, once told me this: <br />
<blockquote class="tr_bq">
If you don't plan to have children, then don't even get married. Get married for what? Just stay together can already.</blockquote>
My gut feel tells me many others think this way as well. I mean, why else would one wants to get married right? Especially for the men. Matrimonial contracts have "anti-men" written all over it. Nothing in the contract benefits us. I mean, that's the plain truth if I am absolutely objective and clinical about it.<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-iyZOzCp1ym0/WGe8oQqU_1I/AAAAAAAAAJU/6hUVvb-TRx4eqeqXSZmZr953XYPKhCmkQCLcB/s1600/marriage.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="https://3.bp.blogspot.com/-iyZOzCp1ym0/WGe8oQqU_1I/AAAAAAAAAJU/6hUVvb-TRx4eqeqXSZmZr953XYPKhCmkQCLcB/s1600/marriage.png" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">The moment you sign on the contract, what's yours is hers, what's hers remains hers.</td></tr>
</tbody></table>
But anyhow, despite all the terms that are set up against me, I got married at 24. Going by the logic of my parents', I have to start a family eventually. Both my wife and I weren't sure about it, but we weren't against it either, so we simply <i>not choose</i> and let nature takes its course. About a year later, tadah! My wife got pregnant. To be honest, I didn't know what to feel when I first heard the news. I wasn't over the moon; I wasn't scared; I wasn't feeling anything. It was just that: I am becoming a father soon, and that didn't mean anything to me at that point. <br />
<br />
Shortly after though, the financial commitment associated with raising a child began to dawn on me. It was anxiety-inducing to say the least, as I wasn't quite prepared to give up (or at least delay) my dream of achieving financial freedom. But it was no longer an option.<br />
<br />
To set the record straight, I wasn't regretting. I was just feeling uncertain and anxious.<br />
<br />
16 months on, I am glad my wife and I had chosen <i>not to choose</i>. I mean, sure, we now have to be a little more careful with our money, but it has not yet turn into something that keeps me awake at night. Just like what my parents told me (again), raising a child can be relatively affordable, or extremely expensive, it all depends on your expectations as parents. So to everyone out there who needs this last bit of encouragement to start a family, go ahead and take that leap of faith! It's not half as scary as you imagine.<br />
<br />
After being a parent for slightly over a year, I'm proud to say that I've mostly been able to keep to my prudent lifestyle. Sure, expenses will increase, but as with every other situation, there are always ways to limit the scale of it. It all depends on our expectations, right?<br />
<br />
So here are some money saving habits that I have to share:<br />
<br />
<ol>
<li><b><u>Ask for Used Baby Clothing from Friends/Relatives/Colleagues</u></b>. Before my daughter was born, my wife's colleagues handed over many bags of baby clothing and a few old but functional toys. Another colleague of mine passed me his baby car seat which he got from another colleague of ours. These items are not new, but with a little cleaning, they are good enough. I told my wife that it's better to use old stuff because they are likely to be rid of all the nasty chemicals used in production. She agreed, and so we not only saved tons of money, but also helped conserve the environment a little. The Earth needs all the help it can get.</li>
<li><b><u>Carousell for the Win</u></b>! Well, not everything comes free, and there are times when you simply need to spend that hard earned dollar. But why not stretch that dollar? There are many good deals on carousell. I managed to buy a used baby high chair for less than half the retail price, a new booster seat at a great discount, and many others! The seller of the booster seat received the item as a gift, but has no use for it. His loss, my gain =)</li>
<li><b><u>Explore Free Places</u></b>. My daughter is 16 months old now. She is able to walk and do random baby things, but I doubt she will be able to appreciate places like Universal Studio. I've always insisted that we bring her to free-to-enter places like <a href="http://www.sdc.com.sg/" target="_blank">Singapore Discovery Centre</a>. There are enough spaces for her to explore, and even if the exhibits are not world-class, they are good enough to keep the baby's senses occupied. We've mainly kept to this practice, but my wife had this nagging urge to bring our baby to the zoo to look at real animals. When I finally relented to her repeated requests though, she was disappointed as my daughter could not yet appreciate what she saw. </li>
<li><b><u>Borrow Books from the Library</u></b>. My wife was initially concerned that books from public library, especially children's books, will be rather filthy. That didn't stop me from dragging her to take an actual look before we make any conclusions. She is now appreciative of the variety of books she can borrow for our daughter, and since 1-year-old has an attention span of like 3 minutes, the benefits of being able to constantly refresh the titles we have available at home came up more starkly.</li>
<li><b><u>Make Your Own Toys</u></b>. I am repeatedly surprised by the stuffs my daughter finds interesting. I brought home an empty paper cup from Burger King, washed it clean and shouted into it like how one would use a loud hailer, and that got her so excited. When she finally got bored of it, I cut two holes at the side, tied a string across, and "transformed" it into a hat. She was more intrigued by that cup than most of the toys she has.</li>
<li><b><u>Look into Your Old Stash</u></b>. I have to thank my mother-in-law for this. She actually kept my wife's doll house for 20 over years! We whipped that out and my daughter had so much fun playing with it. Some figurines have their necks broken, but nothing too catastrophic that super glue can't resolve. </li>
<li><b><u>Polyclinics for the Win</u></b>! Like many first-time parents, we only want the best for the kids, but sometimes we really should pause and consider if the cheaper alternative is indeed inferior. The first few vaccines that my baby had to take was at a GP/Gynae. The charges weren't sky-high, but they weren't cheap either. We decided to take our daughter to the polyclinic for her vaccines on the advice of other parents, and I instantly regretted not going there right from the start. Most of the compulsory vaccines were FOC, and the nurses were all very well-trained and professional. There was once when we had to bring home some paracetamol just in case she develops fever after the injection, and so I made my way to the dispensary. I couldn't believe my ears when I was told to pay like 30c (I really couldn't remember the price because it was ridiculously low) for the bottle of medicine. Being Singaporeans, there are really many things to be grateful for.</li>
<li><b><u>Have a Few More</u></b>! Last but not least, have a few more babies, and keep their age close! The cost of raising the second child is likely to be lower than the first, as many things can be handed down. That's economies of scale right there for you to exploit.</li>
</ol>
That's it! These are 8 practices I keep to to prevent my wallet from emptying out too quickly. And yes, I do practice what I preach: my second child is arriving in Mar =) F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com0tag:blogger.com,1999:blog-5118527857335750434.post-38466060477274668652016-12-25T04:53:00.001-08:002016-12-25T04:55:02.658-08:00Networth Update<div class="separator" style="clear: both; text-align: center;">
</div>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-3fw15EYHatI/WF_AqnnBi4I/AAAAAAAAAIk/EtnWZ3cqCZcrmh0m0bOZ5mmDdzrVitfgwCEw/s1600/networth.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="273" src="https://2.bp.blogspot.com/-3fw15EYHatI/WF_AqnnBi4I/AAAAAAAAAIk/EtnWZ3cqCZcrmh0m0bOZ5mmDdzrVitfgwCEw/s400/networth.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Taking stock of what you own and owe.</td></tr>
</tbody></table>
<div class="separator" style="clear: both; text-align: center;">
</div>
<h3>
WHAT IS THIS POST ABOUT</h3>
2016 is coming to an end, and I thought it might be useful to take stock of where I am now financially. I've stayed prudent and thrifty for the last 4.5 years since I started working, but I've never taken stock of my financial position. Instead of setting aside fixed budget every month, I view every spending opportunity independently, and rely on my principles (more on this in a separate post) to guide my spending decisions. While I can be sure that every cent I spend is well worth it, and that there are no more "fats to be cut" without inflicting much discomfort on myself or on people around me, I won't be able to say with certainty how much I've been adding to my net-worth annually. By putting down in details my financial status year after year, I hope to better quantify my progression. This is the first stock-take I will be doing, so wherever I am now today will set the baseline. I aim to do a review bi-annually.<br />
<div>
<br />
<h3>
WHAT I HAVE</h3>
</div>
<div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-q65Dky7i8-c/WF_AsbDQlBI/AAAAAAAAAIs/_-rd2LYfR2U82L7bPElxIVfGT4sM6XqfgCEw/s1600/asset.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="225" src="https://1.bp.blogspot.com/-q65Dky7i8-c/WF_AsbDQlBI/AAAAAAAAAIs/_-rd2LYfR2U82L7bPElxIVfGT4sM6XqfgCEw/s400/asset.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Growing your networth bit by bit.</td></tr>
</tbody></table>
<br />
Let me first detail what I have. I'm going to exclude the DBSS that my wife and I bought because we still have a big mortgage to service, which makes our flat more of a liability than an asset. <br />
<br />
<u>Cash and Equivalents:</u></div>
<div>
<ol>
<li>Personal Savings - <b>$110,000</b></li>
<li>Joint Savings with Spouse - <b>$50,000</b></li>
<li>Daughter's Savings - <b>$19,000</b> (<i>$13,000 in her CDA; $6,000 in cash</i>)</li>
<li>(Unborn) Son's Savings - <b>$10,000</b> (<i>Part of this will be used to pay for the delivery expenses in Mar 17</i>)</li>
</ol>
</div>
<div>
<u>FD and Equivalents:</u></div>
<div>
<ol>
<li>Dad's CPF - <b>$20,000</b> (<i>Can be withdrawn with short advance notice as my Dad is past 55 years old. Basically, instead of him withdrawing from his CPF at age 55, I gave him $20k cash. I treat it as a 10 year FD yielding 2.5% p.a.</i>)</li>
<li>Mum's CPF - <b>$7,000</b> (<i>My mum has minimal CPF balances, hence I've decided to contribute to her SA and <a href="http://fighting4financialfreedom.blogspot.sg/2016/06/753-instant-capital-gain-538-yield-on.html" target="_blank">getting some tax relief in the process</a>. She will receive monthly payout from CPF LIFE when she reaches around age 65 to help offset her living expenses.</i>)</li>
</ol>
</div>
<div>
<u>Personal CPF:</u></div>
<div>
<ol>
<li>Ordinary Account - <b>$31,000</b></li>
<li>Special Account - <b>$31,000</b></li>
<li>Medisave Account - <b>$45,000</b></li>
</ol>
</div>
<div>
<u>Investments:</u></div>
<div>
<ol>
<li>Common Stocks - <b>$42,000</b> (<i>market value on 23 Dec 16</i>)</li>
<li>1 Oz Canadian Silver Maple - <b>$1,177.50</b> (<i>50 coins x $23.55</i>)</li>
<li>Bonds - <b>$1,000 </b>(<i>market value on 23 Dec 16</i>)</li>
</ol>
<u><b>TOTAL OWNED: $367,000</b></u><br />
<ol>
</ol>
</div>
<div>
<h3>
WHAT I OWE</h3>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-HaES1bdqRDU/WF_Aq0MkP7I/AAAAAAAAAIo/PeiAwMvq4VEa2X3oH3sYs8FfuUbCTrOzQCEw/s1600/debt.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="395" src="https://3.bp.blogspot.com/-HaES1bdqRDU/WF_Aq0MkP7I/AAAAAAAAAIo/PeiAwMvq4VEa2X3oH3sYs8FfuUbCTrOzQCEw/s400/debt.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">The burden of debt.</td></tr>
</tbody></table>
<br />
The only liability that I have is the $650,000 housing loan that my spouse and I took from HDB. Monthly mortgage is about $2,680. Very substantial in relations to our income. <br />
<ol>
<li>Outstanding Housing Loan - <b>$610,000</b></li>
</ol>
<u><b>TOTAL OWED: $610,000</b></u><br />
<br />
<b></b><br />
<h3>
<b>MY GOALS FOR 2017</b></h3>
So where am I going next? For 2017, I am targeting to sock away $30,000 (inclusive of the $7,000 I will be contributing to my mum's SA) from my salary, and joint savings of $25,000 from our <a href="http://fighting4financialfreedom.blogspot.sg/2016/12/turning-mistake-into-opportunity-and.html" target="_blank">rental income</a>. We are expecting our son in Mar 17, and I hope that the additional expenses will not set me back too far from my target.</div>
F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com0tag:blogger.com,1999:blog-5118527857335750434.post-46848007983640109622016-12-15T05:22:00.002-08:002016-12-31T15:33:30.542-08:00How Interest Rate of our CPF OA Account is Calculated and its Repercussions<div class="separator" style="clear: both; text-align: center;">
<a href="https://2.bp.blogspot.com/-Q9u8tx951aE/WFOBGGwWzwI/AAAAAAAAAIU/41uQBxAUCxY66-cjLqCHvfNw_N4W8Y0ugCLcB/s1600/computation.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://2.bp.blogspot.com/-Q9u8tx951aE/WFOBGGwWzwI/AAAAAAAAAIU/41uQBxAUCxY66-cjLqCHvfNw_N4W8Y0ugCLcB/s1600/computation.jpg" /></a></div>
<br />
<br />
Yes! I finally found the exact formula used to calculate the interest rate that the balances in our CPF OA accounts earn. This should be public information, but somehow it took me much effort to find this.<br />
<br />
<h3>
<b><span style="font-size: large;">THE FORMULA</span></b></h3>
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<a href="https://2.bp.blogspot.com/-oDlqjQh1e1A/WFNCtShh4zI/AAAAAAAAAHo/c4eqTSX4OBYple6MtOOo13lsaQuRQGtjQCLcB/s1600/Screenshot%2B%252840%2529.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="612" src="https://2.bp.blogspot.com/-oDlqjQh1e1A/WFNCtShh4zI/AAAAAAAAAHo/c4eqTSX4OBYple6MtOOo13lsaQuRQGtjQCLcB/s640/Screenshot%2B%252840%2529.png" width="640" /></a></div>
The legislated floor rate for OA balances is 2.5% per annum. Since the 3-month average of major local banks' interest rates is lower than this, our OA balances will continue to attract interest at a rate of 2.5% p.a. from 1 Jan 17 to 31 Mar 17.<br />
<br />
It's enlightening to know that the OA interest rates is calculated based on 80FD:20SD. I've always thought that only fixed deposit rates are considered.<br />
<br />
One thing that is not specified here is the tenor of the fixed deposit. Is it a 12-month fixed deposit, or a 24 month one? I went on to the banks' websites to check it out for myself.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://3.bp.blogspot.com/-yjW0etkhvfw/WFNF_fgJC7I/AAAAAAAAAH0/ewLTlQ4pBeUj-Cbpn1lCDmuipJHQYollwCLcB/s1600/cpf%2Boa.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="426" src="https://3.bp.blogspot.com/-yjW0etkhvfw/WFNF_fgJC7I/AAAAAAAAAH0/ewLTlQ4pBeUj-Cbpn1lCDmuipJHQYollwCLcB/s640/cpf%2Boa.png" width="640" /></a></div>
<br />
As shown in the above image, 12-month fixed deposit rates for DBS is used for the computation. Cross referencing UOB and OCBC websites yielded the same outcome.<br />
<br />
So now we know exactly how CPF OA rates are computed, what does it mean for us then?<br />
<br />
<h3>
<b><span style="font-size: large;">WHAT IF INTEREST RATES RISES?</span></b></h3>
If the computed rates should go above the legislated floor rate of 2.5%, the interest rates on our CPF OA will always be slightly lower than that of a 12-month fixed deposit due to the 80FD:20SD formula. This has a few repercussions:<br />
<br />
1. <u>Paying your home loan earlier than necessary using cash no longer makes financial sense</u>. As the HDB home loan rate is pegged at 0.1% above CPF OA rates, which in turn will always be slightly lower than the 12-month FD rate due to the 80FD:20SD formula, the interest rates on your HDB home loan will be very similar to that of a 12-month FD. Paying down your home loan using cash quicker than necessary no longer makes sense in this situation. If your excess cash is put into a 12-month fixed deposit, the amount of interest earned from this will be very similar (or even higher if you choose a 36-month FD instead) to the interest you could otherwise have saved if the money is used to pay down the home loan. Interest savings is the main reason why we might want to pay down our mortgage early. If this is negated when CPF OA rates rises above the legislated floor rate, it might be wiser to simply leave our excess cash in a FD account to maintain liquidity.<br />
<br />
2. <u>CPF Concessionary Housing Loan will really be <i>concessionary</i></u>. For the longest time, we wonder how is the home loan offered by HDB <i>concessionary</i>. Home loan interest rates offered by private banks have been lower than the 2.6% that HDB is charging, and it seems like people who took up HDB loan have been taken for a ride. Further, banks have came up with innovative products that peg mortgage rates to fixed deposit rates, not dissimilar to how OA rates is calculated. While this might provide more stability than products pegged to SIBOR or SOR, they aren't actually better than HDB housing loan in a high interest rate environment. Let's take a look at the FHR mortgage provided by POSB.<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="http://1.bp.blogspot.com/--l6OwJeS5qk/WFNMA1IkP4I/AAAAAAAAAII/tMYFfV3Ui0YL4uzMu-UBCBZZMwTMic7uQCK4B/s1600/Screenshot%2B%252843%2529.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="426" src="https://1.bp.blogspot.com/--l6OwJeS5qk/WFNMA1IkP4I/AAAAAAAAAII/tMYFfV3Ui0YL4uzMu-UBCBZZMwTMic7uQCK4B/s640/Screenshot%2B%252843%2529.png" width="640" /></a></div>
<br />
The FHR-18 home loan rate is calculated by taking the prevailing 18 months SGD fixed deposit rate offered by DBS bank for amounts within $1,000 to $9,999, and adding 1.30% to it. This is inferior to the HDB loan in a few ways:<br />
<ul>
<li>The rates for 18-month fixed deposit is likely to be always higher than the 12-month fixed deposit rates used to compute CPF OA interest. For comparison, the current 18-month fixed deposit rate is 0.60%, as opposed to the 12-month rate of 0.35% (for DBS).</li>
<li>While the home loan provided by POSB adds 1.30% to the FHR18, HDB only adds 0.10% to the CPF OA rate.</li>
<li>CPF OA rate takes into account savings deposit rate using the formula: 80FD:20SD. Since SD rates are always lower than FD's, the resulting rates will be lower.</li>
</ul>
<div>
What this means is that once the 18-month fixed deposit rate exceeds 1.30%, interest rate of this particular product will be higher than that of HDB <i>concessionary </i>loan. Now we see how HDB Concessionary Loan gets its name.</div>
<div>
3. <u>Cash will give you higher risk-free returns than balances in CPF OA accounts</u>. Due to the 80FD:20SD formula used to compute CPF OA rates, balances in OA will yield slightly lower returns compared to a pure 12-month FD. The gap will be even wider if you compare to a 36-month FD. Further, cash in FD affords you greater liquidity than balances in CPF OA. There will really be no reason why you would prefer CPF OA over cash parked in FD.<br />
<br />
<h3>
<b><span style="font-size: large;">SO WHAT DOES THIS MEAN TO US?</span></b></h3>
If you expect interest rates to stay long for another decade, then what we have been used to thinking doesn't change. That is, we should continue to: <br />
<ul>
<li>choose to take up home loan from banks instead of from HDB.</li>
<li>pay down our housing loan using cash as fast as we can to save on interest expense</li>
<li>use cash to make our monthly mortgage payment if you can afford to, and let your OA balances compound (assuming you are only interested in risk-free instruments, so stocks/REITS or other more risky investments are out of your radar)</li>
</ul>
However, if you think interest rates will rise soon, then we should start questioning the "conventional wisdoms". We've been in a low interest rates environment for far too long, and we are starting to take it for granted. If rates are to rise, we should do the following:<br />
<ul>
<li>choose HDB Concessionary Loan over banks' home loans. </li>
<li> your mortgage loan should stretch out for as long a period of time as
HDB is willing to grant you. Interest
expense incurred can be easily covered by the interest earned from FD.</li>
<li>use your OA balances for mortgage repayment as much as you can. Keep your cash for FDs, which are likely to earn you more interests, albeit marginally. </li>
</ul>
<br />
<h3>
<b><span style="font-size: large;">ADOPTING A BALANCED APPROACH</span></b></h3>
The above are some actions that we can take under the two extreme scenarios. However, none of us can predict with certainty what the future might look like. Our best bet is to take a balanced approach and hedge our positions. If you have $100k of excess cash to pay down your mortgage, why not just do $50k first, and keep the remainder as cash just in case? There is no right answer to this really, it depends on what you are comfortable with, and where your conviction lies.<br />
<br />
What I hope this article will achieve is to remind all of us that, while we are very used to, in fact, <b>too</b> used to a low interest environment, there is this other side of the coin that looks vastly different. When we take up a mortgage loan, choose to pay down our loan, and make voluntary contributions to our CPF accounts, we are committing to decision that cannot be easily unwound. It is thus prudent to consider the merits of our choices under different but entirely plausible circumstances, and thereafter calibrate our decisions accordingly. </div>
F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com0tag:blogger.com,1999:blog-5118527857335750434.post-77462723556881941282016-12-14T21:20:00.002-08:002016-12-31T15:31:35.640-08:00Turning a Mistake into Opportunity, and Strengthening My Conviction in the Process!<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-hfNAjUy54yk/WFIos6dBizI/AAAAAAAAAHY/7mUrbFl_pmMvsKjnQ9Sovy-N2EJkDKVfQCLcB/s1600/top-10-passive-income-ideas-2016.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="425" src="https://3.bp.blogspot.com/-hfNAjUy54yk/WFIos6dBizI/AAAAAAAAAHY/7mUrbFl_pmMvsKjnQ9Sovy-N2EJkDKVfQCLcB/s640/top-10-passive-income-ideas-2016.jpg" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Building streams of passive income - a hard but worthwhile goal.</td></tr>
</tbody></table>
<br />
<h3>
THE MISTAKE </h3>
One of the biggest financial mistakes I've made is buying a 5-room DBSS flat in Tampines. I paid $722,000 for it, and even after $30,000 first-timer grant from the government, the flat still cost a princely $692,000. It is a lot of money for someone just fresh out of college. I must have been out of my mind when I bought the house, and AK's post (<a href="http://singaporeanstocksinvestor.blogspot.sg/2016/12/they-chose-financial-independence-over.html" target="_blank">link</a>) doesn't help me feel better.<br />
<br />
Well, it's not that we don't have our reasons for buying the flat. As compared to balloting for a BTO, which will have us waiting for 4 years or so, the DBSS was a sale-of-balance exercise and will be ready in a year's time. My wife and I really wanted to start a family while we are young, and so we went ahead with the purchase. I know I know. We could have bought a resale flat in a non-mature estate and that would have cost us a fraction of what we paid for the DBSS, and possibly be able to move in even earlier as well. I concede that there can be no justification strong enough for the purchase, and that's why I started off by admitting that this is a financial mistake.<br />
<br />
Have I regretted buying the flat then? I am not sure. I still like the house and the location very much, and I think good things have happened after we moved in. I got a small promotion at work and my wife gave birth to a beautiful daughter. I am a little Pan-Tang this way, and I think the house must have brought us some good luck.<br />
<br />
<h3>
THE OPPORTUNITY</h3>
After my wife's maternity leave, she has to return to the workforce because my single income cannot keep up with the mortgage payment and the household expenses. As we wanted to minimize the potential for conflict between ourselves and our parents-in-law, we got a helper to take care of the little girl as well. At first, we tried shuttling between our own house in Tampines and my in-laws' place in Serangoon, but that proved too cumbersome. We reckon that it's not beneficial for the baby in the long term as well, since we always got to wake her up early in the morning, disrupting her sleep. I thus suggested that we moved in with either my parents or my wife's. Of course, my wife chose the latter as expected.<br />
<br />
Our house was newly renovated at this point. We only stayed there for about 15 months or so. When I suggested to my wife that we should rent out the house since we won't be staying there for at least a few years, my wife objected to it vehemently. She didn't want the tenant to spoil our furniture etc. I cant blame her for that, since it also took me a bit of self-psycho-ing to convince myself that this is the most sensible thing to do. After all, I really wished to reduce the "damage' that this "mistake" has caused us.<br />
<br />
<h3>
STRENGTHENING MY CONVICTION</h3>
It took a few more sessions of coo-ing and molly-coddling before my wife finally relented. Looking back now, it turned out to be a decision that both of us are thankful for making. We are now receiving $2,500 per month in rental income, and I insisted that we save up all of these monies to make early repayments for our mortgage loan. In 2 years' time, assuming that the cost of renting the house is about $5k a year (agent's fees, income tax, delta in property tax, and maintenance), we will be looking at an additional saving of about $50,000. This is amazing, as it takes little to no effort on our part to save this amount. Imagine if we can continue to rent out the house for a total of 5 years, we will be able to bring down our mortgage loan by $125k, and the cost of our house down from $692k to $567k. This figure is closer to what a 5-year-old, 5-room HDB in a mature estate will cost. Sounds less like a mistake now? Definitely!<br />
<br />
Besides the financial benefits, this experience gave me a taste of what receiving passive income feels like and strengthen my commitment and desire of building a substantial steam of passive income!<br />
<br />
<br />
<br />
<br />
<br />
<br />F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com0tag:blogger.com,1999:blog-5118527857335750434.post-4075861254324116912016-10-06T16:56:00.001-07:002016-10-06T17:02:34.564-07:00Voluntary Contribution to CPF Special or Retirement Account - Not As Easy Emotionally As I Believed<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-Hk6VAWeThng/V_blfS0kJqI/AAAAAAAAAHA/NT__R7M26nAcUi7JrKr6sOiEkW8ESDcuwCLcB/s1600/tax-deduction-80d-80u.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Save for your retirement and save on taxes - only available in Singapore.inc." border="0" height="380" src="https://2.bp.blogspot.com/-Hk6VAWeThng/V_blfS0kJqI/AAAAAAAAAHA/NT__R7M26nAcUi7JrKr6sOiEkW8ESDcuwCLcB/s640/tax-deduction-80d-80u.jpg" title="Tax Savings" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Save for your retirement and save on taxes - only available in Singapore.inc.</td></tr>
</tbody></table>
<br />
Sometime in June this year, I blogged about how anyone in similar situation as mine can instantly get 7.53% capital gain and a 5.38% yield on capital per annum [<a href="http://fighting4financialfreedom.blogspot.sg/2016/06/753-instant-capital-gain-538-yield-on.html" target="_blank">link</a>]. It was easy going through the fancy numbers and writing about it, but to actually put the plan to action? Tough. No matter how impressive the plan looks on paper, the idea of locking up my money for the next 15 years and never getting them back in full doesn't really sit well on me emotionally. It feels like I'm "giving away" my money, and who does that?<br />
<br />
But as much as I hated that feeling of parting with my hard-saved money, I knew I had to stick to my plan if I am serious about securing my financial future. So I bit my tongue and took the plunge, contributing $200 to my mum's SA a few days later. Yes, a <b>grand total of $200</b>. This is the first time I am using the <a href="https://www.cpf.gov.sg/eSvc/Web/Miscellaneous/Cashier/ECashierHomepage" target="_blank">e-cashier</a> platform on the CPF website; it's only prudent to test it out first. Expectantly, the money appeared in my mum's CPF account a few days later.<br />
<br />
Then, here comes the hard bit. I intended to contribute a total of $7000 to my mum's CPF to maximize my tax benefits, which left me with $6800 more to go! Okay well, to some of the higher-income earners out there, maybe this does not sound much to you, but it's sizable and significant to me. You know how sometimes people can conveniently leave a $2 note in a corner of their house and forget about it? $6800 is <b>not </b>that to me. $6800 is an amount I will safe-keep in a strongbox made of 10 cm thick fire-resistant alloy that's hidden in the most concealed corner of my house and drilled to the wall with a pair of 10 cm long screws. Yes, it's exactly that, and now you can see how difficult it is for me to use that money to buy a golden egg that will only hatch 15 years year. In fact, it's so difficult that I actually put the plan on hold for the next 1 month.<br />
<br />
In that 1 month, I kept looking for reasons <b>not to</b> follow through with the plan. I could not find one compelling enough.<br />
<br />
So again, I bit my tongue for the second time and made a contribution of $2800. The money appeared where it should a few days later.<br />
<br />
With $4000 left to go, I sat on the plan yet again. I sat on it so much that I nearly developed piles. Eventually, I got so sick of sitting and the risk of actually developing piles got so high that I went back to biting my now-swollen tongue instead and made my final contribution of $4000.<br />
<br />
And now I can rest and prepare myself for the next round of tongue-biting and piles-developing exercise. I hope it gets easier.F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com3tag:blogger.com,1999:blog-5118527857335750434.post-68956848112456036452016-08-29T20:16:00.002-07:002016-08-29T20:21:57.007-07:00Education Savings Plan for My Daughter?<a href="http://4.bp.blogspot.com/-ACBQ_6oyqbg/V8T7yaHQnUI/AAAAAAAAAGw/5YXvSLpDYP0944PpsBrsnaaR6K3Vj0y9gCK4B/s1600/featured.jpg" imageanchor="1"><img border="0" height="266" src="https://4.bp.blogspot.com/-ACBQ_6oyqbg/V8T7yaHQnUI/AAAAAAAAAGw/5YXvSLpDYP0944PpsBrsnaaR6K3Vj0y9gCK4B/s400/featured.jpg" width="400" /></a><br />
<br />
A trustworthy and a very close friend of my wife highly recommended this education savings plan to me. I am inclined to take a closer look at the plan because I know that commissions she earns from selling insurance does not form the bulk of her income. She has other things going on for her. The conflict of interest, though not entirely eliminated, is at least kept to a minimum. If the recommendation was from anyone else, I must admit that I wouldn't give it a second look.<br />
<br />
So was I disappointed by the recommendation? Not totally, but I think the financially savvy can do better with a bit more effort and discipline.<br />
<br />
The plan is called Manulife Educate. Here are some screenshots of the brochure I received.<br />
<br />
<a href="http://4.bp.blogspot.com/-tyHVNA2AOqk/V8Td3nQDTjI/AAAAAAAAAFc/HmzJ5upkdTU6udL1gzNxcqEv_-GPQf60gCK4B/s1600/1.jpg" imageanchor="1"><img border="0" height="400" src="https://4.bp.blogspot.com/-tyHVNA2AOqk/V8Td3nQDTjI/AAAAAAAAAFc/HmzJ5upkdTU6udL1gzNxcqEv_-GPQf60gCK4B/s400/1.jpg" width="321" /></a><br />
<br />
<a href="http://4.bp.blogspot.com/-v9DPdrC7cUM/V8Td58JWLII/AAAAAAAAAFk/NCO-f7JIlYsp6lw5IeJ_VZyrs6vK0MXTwCK4B/s1600/2.jpg" imageanchor="1"><img border="0" height="400" src="https://4.bp.blogspot.com/-v9DPdrC7cUM/V8Td58JWLII/AAAAAAAAAFk/NCO-f7JIlYsp6lw5IeJ_VZyrs6vK0MXTwCK4B/s400/2.jpg" width="303" /></a><br />
<br />
<a href="http://2.bp.blogspot.com/-9r_ePOXqpOQ/V8Td79PkroI/AAAAAAAAAFs/VLmoiz2lYmEGS1UAvWrPqVwkPTEEOnEfQCK4B/s1600/3.jpg" imageanchor="1"><img border="0" height="177" src="https://2.bp.blogspot.com/-9r_ePOXqpOQ/V8Td79PkroI/AAAAAAAAAFs/VLmoiz2lYmEGS1UAvWrPqVwkPTEEOnEfQCK4B/s400/3.jpg" width="400" /></a><br />
<br />
<a href="http://1.bp.blogspot.com/-vvkJSoX2ZLY/V8Td9_FnErI/AAAAAAAAAF0/bGtQfikTFKsO5DUZ2dEz7oPrrwKXF-VzQCK4B/s1600/4.jpg" imageanchor="1"><img border="0" height="200" src="https://1.bp.blogspot.com/-vvkJSoX2ZLY/V8Td9_FnErI/AAAAAAAAAF0/bGtQfikTFKsO5DUZ2dEz7oPrrwKXF-VzQCK4B/s400/4.jpg" width="400" /></a><br />
<br />
Let's take a closer look at the example provided to determine if we are really getting good value.<br />
<br />
Nancy's father bought the Manulife Educate policy for her at birth, paying a premium of $3723.20 a year for the first 10 years. The total guaranteed cash benefits received when Nancy turns 21 is $44,000. The estimated bonus at maturity, <u>assuming</u> a return of 4.75% per annum, is $17,668.<br />
<br />
<u>In summary</u>:<br />
Total premiums paid: <b>$37,232</b><br />
Total returns (guaranteed benefits + non-guaranteed bonus): $44,000 + $17,668 = <b>$61,668</b><br />
<br />
Looks good at first, but let's analyse the numbers in two segments: (1) Non-guaranteed Bonus and (2) Guaranteed Benefits.<br />
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<b><u>Non-Guaranteed Bonus</u></b><br />
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Non-guaranteed bonus is, well, not guaranteed. If we can set-up an imaginary portfolio that tracks the performance of the funds that the policy buys into, how much do we have to put into the portfolio in order to have $17,668 (assuming 4.75% annual returns) after 21 years? I did some calculations using a spreadsheet, and the result is: <u>$814.30</u>.<br />
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<a href="http://2.bp.blogspot.com/-82ArwPajA68/V8TtJ-hAEnI/AAAAAAAAAGA/_z8vKrZgaiguB8VGKdLzJKLb9EIdtNapQCK4B/s1600/non-guaranteed.jpg" imageanchor="1"><img border="0" height="297" src="https://2.bp.blogspot.com/-82ArwPajA68/V8TtJ-hAEnI/AAAAAAAAAGA/_z8vKrZgaiguB8VGKdLzJKLb9EIdtNapQCK4B/s400/non-guaranteed.jpg" width="400" /></a><br />
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In other words, if we can save $814.30 every year, and generate 4.75% per annum on that savings, we will have $17,667.58 in 21 years. Note that we are not discussing whether 4.75% is an achievable target, nor are we analysing which investment product gives you the best chance of achieving this return. We are merely determining the amount that we need to put aside every year, channel the money into somewhere that yields the same return, so as to have the equivalent of the non-guaranteed bonus offered by the policy.<br />
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<b><u>Guaranteed Benefits</u></b><br />
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If we set aside $814.30 every year to try and get the non-guaranteed bonus, we will have ($3723.20 - $814.30) $2908.90 left. With this amount every year, what would be the required rate of return for us to receive the same amount of guaranteed cash benefits offered by the policy?<br />
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<a href="http://2.bp.blogspot.com/-9-0XB9eXfmQ/V8TtdBiHbaI/AAAAAAAAAGI/YhL80Shj3TE6mVK4arcE9SIRoDJluCZugCK4B/s1600/equivalent%2Briskfree%2Breturns.jpg" imageanchor="1"><img border="0" height="260" src="https://2.bp.blogspot.com/-9-0XB9eXfmQ/V8TtdBiHbaI/AAAAAAAAAGI/YhL80Shj3TE6mVK4arcE9SIRoDJluCZugCK4B/s400/equivalent%2Briskfree%2Breturns.jpg" width="400" /></a><br />
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The answer is, <u>2.89%</u>.<br />
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Meaning to say, the policy offers you 2.89% return per annum for the guaranteed benefit. Is this a good enough return for tying up your money for 15-20 years? Would you put your money into a 15-20 year fixed deposit for 2.89% p.a.?<br />
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<b><u>Alternatives</u></b><br />
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To beat 2.89% p.a. is not hard if you invest in a low-cost STI ETF for the long term. However, that is hardly a close alternative because of the risk involved.<br />
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A closer alternative to the policy is our Child Development Account (CDA) and Post-Secondary Education Account (PSEA). The interest rate for monies in CDA is currently at 2% p.a. (for balances up to a maximum of $36k for OCBC), while that for the PSEA is pegged to the CPF OA rates (currently at 2.5% p.a.). The money in the CDA account can be used to pay for approved expenses, so it's not totally illiquid. When your child turns 12, unused money in CDA will be transferred to PSEA, which can then be used to pay for post-secondary education expenses.<br />
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So how does this alternative compares to the Manulife Educate policy? Again, I ran some numbers and found out that we will end up with about $4000 lesser. That's about $200 lesser yearly.<br />
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<a href="http://3.bp.blogspot.com/-3wtNpC94Sq8/V8TxkycJ27I/AAAAAAAAAGU/VBgH1cO0KDs95pGWtKfOGZ8PvdoH0mZUwCK4B/s1600/riskfree%2Breturns.jpg" imageanchor="1"><img border="0" height="209" src="https://3.bp.blogspot.com/-3wtNpC94Sq8/V8TxkycJ27I/AAAAAAAAAGU/VBgH1cO0KDs95pGWtKfOGZ8PvdoH0mZUwCK4B/s320/riskfree%2Breturns.jpg" width="320" /></a><br />
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As with most things, there are always the good and the bad. Below is a summary:<br />
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<a href="http://1.bp.blogspot.com/-ivYP1SQF0Fc/V8T0XE-yO6I/AAAAAAAAAGg/uJ7rWR_xnJQmK8v8cIxjyo_QRtgo-HADwCK4B/s1600/pros%2Band%2Bcons.jpg" imageanchor="1"><img border="0" height="192" src="https://1.bp.blogspot.com/-ivYP1SQF0Fc/V8T0XE-yO6I/AAAAAAAAAGg/uJ7rWR_xnJQmK8v8cIxjyo_QRtgo-HADwCK4B/s400/pros%2Band%2Bcons.jpg" width="400" /></a><br />
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If I just starting out in my career, I would probably appreciate some liquidity in the first few years of my child's life. CDA-PSEA will suit my needs better.<br />
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If I aspire to send my child for overseas education, I will prefer to receive all benefits in cash. Manulife Educate will then be my choice.<br />
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If I think that interest rates will rise, even if I know I will be worse off by $4000, I might still decide to take my chances and buy into something with returns that better track the risk-free interest rates. In this case, CDA-PSEA is better.<br />
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If I would rather not manage that $814.30 every year to try and get the non-guaranteed bonus offered by the policy, then Manulife Educate will work for me. I will just leave it to the "experts" to manage my money. [Like <a href="http://singaporeanstocksinvestor.blogspot.sg/" target="_blank">AK71</a>, I don't believe in mutual funds and unit trusts due to the high expense ratio. But I believe for some, these might still be their best option.]<br />
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There is no easy option. What I've done is to break down the policy and analyse it in greater detail. Hopefully this helps us in our decision-making.<br />
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<i>*The plan provides the Life Insured with coverage for death and terminal illness. I don't currently have the details to this coverage, hence I've left it out in this analysis, Depending on the coverage, the policy might become more or less attractive.</i><br />
<br />F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com0tag:blogger.com,1999:blog-5118527857335750434.post-54730535283224445872016-07-06T05:38:00.005-07:002016-07-06T05:43:00.868-07:00Gold to Monetary Base Ratio and other Interesting Charts<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-6QQyDPtLVSU/V3z8kbyXefI/AAAAAAAAAEk/-WRWHyJXv_oDWeV2w8UluV2XgXzVQDAYACLcB/s1600/2016-07-06%2B%25283%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="492" src="https://3.bp.blogspot.com/-6QQyDPtLVSU/V3z8kbyXefI/AAAAAAAAAEk/-WRWHyJXv_oDWeV2w8UluV2XgXzVQDAYACLcB/s640/2016-07-06%2B%25283%2529.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Chart showing the 100 year history of gold prices. From the chart alone, gold price looks overvalued, but is it really?</td></tr>
</tbody></table>
<div class="separator" style="clear: both; text-align: center;">
</div>
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Just before Brexit, I almost bought gold at SGD 1746 on <a href="https://www.silverbullion.com.sg/" target="_blank">SilverBullion</a>. I created a new account, added one ounce of Canadian Gold Maple Leaf into my shopping cart, filled in my address and all the other details required to place an order, but backed-off at the last stage.<br />
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Well, we all know what happened after Brexit. Gold price had a good run-up amidst the uncertainties, and I missed my chance of getting my bullion at a good price. At the time of this post, one ounce of Canadian Gold Maple Leaf is more than SGD 1900 already.<br />
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I actually wanted to buy gold in December last year, but I chose to buy silver Maple Leaf instead. Silver prices at that time reached 2008 level. That simply doesn't make sense to me. We all know how much money printing there was since the GFC, so how can silver prices not go up given the huge increase in monetary base? Same for gold as well, but I was more compelled to buy silver. I bought a total of 50 ounces of silver Canadian Maple Leaf from <a href="https://www.bullionstar.com/buy/product/silver_maple_1oz_2015" target="_blank">Bullionstar</a> at about SGD 23 each.<br />
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So anyway, back to the main reason for this post. Post-Brexit, Dow Jones Index (DJI) immediately plunged 610 points, or 3.1% to close at 17,400. The market continued to be jittered by the unexpected turn of events and shed another 1.5% on the second session. After which, stocks made a u-turn. Somehow, somewhat, the uncertainties subsided, and suddenly everyone started to think that Brexit is actually good for the economy. I don't know what caused the u-turn, or if there was an invisible hand orchestrating all these, but here is my observation:<br />
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When the market plunged in the two trading sessions following Brexit, gold price shot up by about SGD 100 per ounce. This did not came as a surprise because during uncertain times, gold is the safe haven. Investors were selling British Pounds to buy USD and Gold. But, when DJI recovered subsequently to hit 18,000 points, gold prices remained stable. This is not usual. DJI and gold prices are usually inversely related.<br />
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Well, in the short term, perhaps this is nothing out of the ordinary. Perhaps there were still many people cashing out their British Pounds and buying gold, which explains the sustained demand, and hence price of gold. I don't want to guess why all these happened because admittedly, I have no clue, but my hunch tells me that something is brewing. Perhaps this is the last rally before the storm. Or so I wish.<br />
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That observation prompted me to look for some charts to verify my perception of the inverse relationship of DJI and gold prices. I chanced upon <a href="http://marotrends.net/">marotrends.net</a>, which boasts of many interesting charts. Here's a snapshot of the homepage.<br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-M1-ou1Mzqdw/V3xGshW5YlI/AAAAAAAAAEA/ji1eow_l7NMwT9iDPWMR5_aQK51jxR-RgCLcB/s1600/2016-07-06.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="331" src="https://2.bp.blogspot.com/-M1-ou1Mzqdw/V3xGshW5YlI/AAAAAAAAAEA/ji1eow_l7NMwT9iDPWMR5_aQK51jxR-RgCLcB/s640/2016-07-06.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">A snapshot of the different types of charts offered by macrotrends.net.</td></tr>
</tbody></table>
What caught my eyes are these two charts:<br />
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1. Fed Balance Sheet VS Gold Price<br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-5JMVaEOk_ps/V3xHRInmr0I/AAAAAAAAAEI/X3kiYQb-P80n6xmRVxmosT7JpNpRtPiqACLcB/s1600/2016-07-06%2B%25281%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="350" src="https://3.bp.blogspot.com/-5JMVaEOk_ps/V3xHRInmr0I/AAAAAAAAAEI/X3kiYQb-P80n6xmRVxmosT7JpNpRtPiqACLcB/s640/2016-07-06%2B%25281%2529.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">A chart showing the relationship between the Fed Balance Sheet and Gold Prices, taken from macrotrends.net. Looks like there is an unlikely divergent uh?</td></tr>
</tbody></table>
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2. Gold to Monetary Base Ratio<br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-ldZ8fxU_Hms/V3xHgC8eT1I/AAAAAAAAAEM/xOYLngRqLrY7w0PJZ_ngjfVovv6T4Av6gCLcB/s1600/2016-07-06%2B%25282%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="350" src="https://4.bp.blogspot.com/-ldZ8fxU_Hms/V3xHgC8eT1I/AAAAAAAAAEM/xOYLngRqLrY7w0PJZ_ngjfVovv6T4Av6gCLcB/s640/2016-07-06%2B%25282%2529.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">A chart showing the Gold to Monetary Base Ratio, taken from macrotrends.net. We are at a century-low.</td></tr>
</tbody></table>
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In the first chart, we can see that percentage gold price increase (referencing gold price at 2004) tends to track the monthly percentage growth of the Federal Reserves balance sheet from 2004 up till around 2013. After which, there is a divergence. Fed Reserves balance sheet continues to climb, but gold price actually dropped. If history is a good teacher, sooner or later, the gap between the orange line and the blue line has to narrow. This can happen in three ways: (1) Fed Reserve balance sheet got to come down, (2) gold price has to go up, or (3) both. How can the Fed's balance sheet come down though? Let's take a closer look.<br />
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Just like any other balance sheet, Fed's balance sheet comprises of assets and liabilities. When the Fed buys something, that automatically becomes its assets. Traditionally, the assets that Fed holds in its balance sheets are high quality government securities and the likes. However, to save the economy during the last GFC, the Fed embark on a series of Quantitative Easings (QEs), which is just a fancy term for printing money. Well, most of these money doesn't actually end up in the pockets of the citizens as physical notes. The Fed merely bought over massive amount of toxic assets that threatened to bankrupt the largest of financial institutions. These actions means that a good proportion of the assets held by the Fed are low quality assets that actually no one wants. To reduce the Fed's balance sheet, Fed has to sell their assets. But, how much of their assets can actually be sold?<br />
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If the Fed's balance sheet can't be reduced easily, how else can the gap between the orange line and blue line converge then?<br />
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Then we have the second chart showing the Gold to Monetary Base ratio. We are at a 100 year low, meaning that gold is very lowly-priced now relatively to the amount of currencies slushing around the the market. Even with gold prices having been already risen quite substantially compared to 2008 levels, the rise is nothing compared to the increase in monetary base. Will we continue to hit new lows? My guess is as good as yours.<br />
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Till date, I am still not vested in gold bullion though. Always missing the lows and refusing to chase the run-up. It's just hard psychologically to buy something that cost 150 dollar cheaper just a few days ago. Maybe if viewing gold as a form of insurance is the right perspective to adopt, I should not be too overly concerned with short term fluctuations.<br />
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<br />F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com0tag:blogger.com,1999:blog-5118527857335750434.post-26285848933176988342016-06-20T20:39:00.001-07:002016-06-20T20:39:29.182-07:00CPF Life - Basic or Standard Plan? (Part 1)<div dir="ltr" style="text-align: left;" trbidi="on">
Do you know that there are two different CPF LIFE Plans that you can choose from - LIFE Standard Plan and LIFE Basic Plan? The former gives you a higher monthly payout but a lower bequest for your beneficiaries, while the latter gives you a lower monthly payout but leaves more behind for your loved ones. Below is an illustration taken from <a href="https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/cpf-life" target="_blank">CPF website</a>:<div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-I3L9PJyOOFA/V2icsRrECRI/AAAAAAAAADA/ls5yIcKbdUIVVa1R50rcIQlcPxKW_WS_ACLcB/s1600/Screenshot%2B%252835%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="466" src="https://2.bp.blogspot.com/-I3L9PJyOOFA/V2icsRrECRI/AAAAAAAAADA/ls5yIcKbdUIVVa1R50rcIQlcPxKW_WS_ACLcB/s640/Screenshot%2B%252835%2529.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Figure 1: LIFE Standard Plan gives you higher monthly payouts, but leaves behind lower amount of bequests for your beneficiaries. The opposite is true for LIFE Basic Plan.</td></tr>
</tbody></table>
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While the illustration is factually correct, it leaves out tremendous amount of information essential for decision-making. There are many more considerations than just the monthly payout and the size of the bequest. Even if these are the only two factors, we still need to get a better sensing of the relevant figures to make more informed decisions.</div>
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This Straits Times article published on the 23 Aug 15 provided some <b>useless </b>(yes, this is not a typo) figures for comparison of the two plans [<a href="http://www.straitstimes.com/business/invest/choosing-the-right-cpf-life-plan" target="_blank">link</a>]. It's useless because of one important change - members only need to choose their LIFE Plan when they wish to start their monthly payout. This change applies to CPF members who turned 55 on or after 1 Jul 15. </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-O9wEmhkVZTY/V2ipghIUXsI/AAAAAAAAADQ/Z1ONDa4GZA8yl74D-jhWUvJvAJFmF3xywCLcB/s1600/Screenshot%2B%252836%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="426" src="https://2.bp.blogspot.com/-O9wEmhkVZTY/V2ipghIUXsI/AAAAAAAAADQ/Z1ONDa4GZA8yl74D-jhWUvJvAJFmF3xywCLcB/s640/Screenshot%2B%252836%2529.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Figure 2: Screenshot of the Straits Times article on the comparison of the two CPF LIFE Plans available. </td></tr>
</tbody></table>
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The article was published <i>after </i>the change. The author also acknowledged this change in the beginning of the article, so he/she must be aware of it already. However, this is where the major discrepancy is: the author did not factor this change into his/her subsequent analyses.</div>
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<div>
As enclosed within the purple box in Figure 2 above, the figures in the article are supposed to illustrate the monthly payout and bequest for a male <b>who turned 55 on July 1</b>. However, on closer look, the figures totally ignore the change mentioned earlier! For a male who turned 55 on July 1, 2015, he only needs to make his choice when he wishes to start his monthly pay-out, which is when he turns 65 at the very earliest. This means that between 55 and 65, the money will stay in his Retirement Account (RA) to earn interest. The major giveaway is at age 65. If the member is to pass on at 65, just before he starts receiving his monthly payout, the bequest amount should be the same for both plans because the money in his RA has not yet been (or just been) used to pay for the CPF LIFE premium. This is clearly not the case for the illustration used by Straits Times. I think the author must have used the figure for someone who turned 55 <b>before </b>1 Jul 2015. For this group of people, they have to make a choice at 55, which is also when the first deduction up to the Basic Retirement Sum of $80,500 is made. Figure 3 below explains this. The scenario provided by the Straits Times article is clearly not for those who turned 55 on 1 July 15.</div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-LNCynq_Ft_I/V2iwA0UA4uI/AAAAAAAAADg/FINyErSBZngppIJ8bFY6PQJTC4q4OgWvQCLcB/s1600/Screenshot%2B%252837%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="426" src="https://4.bp.blogspot.com/-LNCynq_Ft_I/V2iwA0UA4uI/AAAAAAAAADg/FINyErSBZngppIJ8bFY6PQJTC4q4OgWvQCLcB/s640/Screenshot%2B%252837%2529.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Figure 3: Deductions of premiums for CPF LIFE Standard Plan for members who turn 55 before 1 Jul 2015.</td></tr>
</tbody></table>
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For this group of people who turned 55 <i>before </i>1 Jul 15, the interest earned on the money used to pay for the CPF LIFE premiums will not be refunded upon the death of the member. This means that the first deduction of up to $80,500 at age 55 will not earn "refundable" interest for the next ten years. This explains the lower bequest amount at 65 for the LIFE Standard Plan.</div>
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I am appalled by this piece of misinformation by our news publisher. With such a large reader base, such mistake can cause many readers to make the wrong choice. I almost gave the wrong advice to my dad! Luckily, I didn't take the numbers presented at face value, and went on to read up more on CPF website.</div>
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I urge all of you who have vested interest in the CPF LIFE to read up more on CPF websites to further your understanding, instead of relying solely on news publications. If Straits Times can make such a mistake, CPF can too, but we will have a stronger case to fight for justice if the mistake is made by the latter. </div>
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For those turning 55 on or after 1 July 2015, Figure 4 below tells you how the premiums are being paid instead. This is taken from the CPF website. </div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-1evoeBi7gGk/V2i1iGDqEkI/AAAAAAAAADw/y31DUo06AwgTqEAiQLCtqFhK0cJOhS3JQCLcB/s1600/Screenshot%2B%252838%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="426" src="https://2.bp.blogspot.com/-1evoeBi7gGk/V2i1iGDqEkI/AAAAAAAAADw/y31DUo06AwgTqEAiQLCtqFhK0cJOhS3JQCLcB/s640/Screenshot%2B%252838%2529.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Figure 4: Screenshot from CPF website showing the difference in premium payments for the two different CPF LIFE Plans.</td></tr>
</tbody></table>
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I first started out with this post hoping to do some analyses on the figures provided by the Straits Times. Now that we know they are not relevant anymore, I will have to try and derive some figures myself. I am quite sure I don't have all the information to calculate the figures accurately, but I hope to be able to make some guesstimates. </div>
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That will have to be in the next post.</div>
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Meanwhile, I hope this post helps you to avoid making a false decision because of the misinformation provided by the Straits Times. </div>
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F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com0tag:blogger.com,1999:blog-5118527857335750434.post-29969465007691789042016-06-20T06:32:00.001-07:002016-12-31T15:25:26.984-08:00Cash Is King, Until It No Longer Is<div dir="ltr" style="text-align: left;" trbidi="on">
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<a href="https://3.bp.blogspot.com/-ySHkk1T-Y7I/V2fwJy7XNcI/AAAAAAAAACw/bggySL79RIIJnSYsekx-jAFogofL5svDwCLcB/s1600/Cash-Is-King.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="416" src="https://3.bp.blogspot.com/-ySHkk1T-Y7I/V2fwJy7XNcI/AAAAAAAAACw/bggySL79RIIJnSYsekx-jAFogofL5svDwCLcB/s640/Cash-Is-King.jpg" width="640" /></a></div>
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Allow me to share with you a (true) story.<br />
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My paternal grandparents were born in the 1920s/1930s. They owned a small piece of land in Pulau Tekong where they cultivated rubber trees, grew vegetables, reared live stocks like chickens and pigs et cetera. As you all know, the island is now exclusively used for military training. My grandparents were displaced when that happened, but not without being compensated with a 3-room HDB flat right beside Tampines Mall and some money. Exactly how much, I have no idea, but at one point, my granddad had over a $100k.</div>
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At that time, that much money could get you a freehold landed property. But nope, my granddad decided that keeping it in the bank is the way to go. The outcome needs no elaboration. </div>
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While cash is king, we must remember that we are actually losing money every year if the returns on that money is lower than inflation. My portfolio consists of mainly cash now, as I wait patiently for the opportunity to pick up great companies on the cheap. I don't know when that will come, so meanwhile, the best I can do is to find the highest yielding place to park my money without taking on too much risk nor losing too much liquidity. Not that I have got tons of money though, as a bulk of my savings were spent on wedding, down-payment for my property, renovation & furnishing, having a kid, and all the other things that an ordinary, young married adult will need to spend on. What's left, I park them in the following places while waiting for the right time and opportunity.</div>
<div>
<br /></div>
<h3 style="text-align: left;">
1. <a href="http://www.ocbc.com/personal-banking/accounts/360-account.html" target="_blank">OCBC 360</a></h3>
<div>
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-tW97bDKVD0M/V2fuWpAYw9I/AAAAAAAAACY/RM-z5YSf1FQkKA2o09Cc03RENtfiQ1fqACLcB/s1600/Screenshot%2B%252831%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="388" src="https://1.bp.blogspot.com/-tW97bDKVD0M/V2fuWpAYw9I/AAAAAAAAACY/RM-z5YSf1FQkKA2o09Cc03RENtfiQ1fqACLcB/s640/Screenshot%2B%252831%2529.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="text-align: left;">Criteria to fulfill to earn bonus interest on balances of up to $60k in OCBC 360 account. </span></td></tr>
</tbody></table>
<div>
This is my salary crediting account, and it yields me 1.25% (1.2% bonus interest + 0.05% base rate) without me doing anything else. Of course, the other low-hanging fruit is making 3 online bill payments to earn an additional 0.5%. I am also usually able to spend $500 on my OCBC cards to earn the other 0.5%, yielding me a total of 2.25%. However, I prioritise my UOB credit card spend before OCBC's because UOB gives me a higher yield on their UOB ONE account, which brings me to the next point.</div>
<div>
<br /></div>
<h3 style="text-align: left;">
2. <a href="http://www.uob.com.sg/personal/deposits/chequeing/one_account.html" target="_blank">UOB ONE</a></h3>
<div>
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-BZA1e3o-w6A/V2fuY84HvMI/AAAAAAAAACg/RZJRtb08xiYBJXQ1lyZ3vlIBCw5JABUfQCKgB/s1600/Screenshot%2B%252832%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="266" src="https://3.bp.blogspot.com/-BZA1e3o-w6A/V2fuY84HvMI/AAAAAAAAACg/RZJRtb08xiYBJXQ1lyZ3vlIBCw5JABUfQCKgB/s640/Screenshot%2B%252832%2529.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Criteria to fulfill to earn bonus interest on balances of up to $50k in UOB ONE account. Note that unlike OCBC 360, spending of $500 on UOB credit card is a must for the account to qualify for any bonus interest at all.</td></tr>
</tbody></table>
<div>
<br /></div>
<div>
I strictly maintain $50k in this account, nothing more, nothing less, due to the tiered structure of its interest rates. I've already set up three GIRO bill payments, so it only makes sense for me to prioritise spending $500 with my UOB ONE Card. If I don't, I am back to earning the base rate for that month. If I do, the GIRO deductions will bump up the effective interest rates to 2.43% on the $50k balance. Spending $500 on my UOB credit card also helps me in getting higher interest rates in my 3rd account - Bank of China's SmartSaver account.</div>
<div>
<br /></div>
<h3 style="text-align: left;">
3. <a href="http://www.bankofchina.com/sg/pbservice/pb1/201611/t20161130_8271280.html" target="_blank">BOC SmartSaver</a></h3>
<div>
<br /></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-6OTe3eoRJdU/V2fuZL0Q6cI/AAAAAAAAACs/uf6ugrQFdh0ti5yhwj8RmaY4trQq061yACKgB/s1600/Screenshot%2B%252834%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="640" src="https://4.bp.blogspot.com/-6OTe3eoRJdU/V2fuZL0Q6cI/AAAAAAAAACs/uf6ugrQFdh0ti5yhwj8RmaY4trQq061yACKgB/s640/Screenshot%2B%252834%2529.png" width="498" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Criteria to fulfill to earn bonus interest on balances of up to $60k in BOC SmartSaver account.</td></tr>
</tbody></table>
<div>
<br /></div>
<div>
I maintain a minimum of $50k in this account, so my base interest is 0.40%. Together with the 3 bill payments, the account already yields me 1%. I forego the 1% from crediting my salary into this account because well, I only have 1 income source, and OCBC gives me 1.2% for that. The last criteria, $500 credit/debit card spend to give an additional 1.55% is the real deal. I am going to let you in on a little secret of mine; this mighty combo I believe many of you will be thrilled to find out. Ready? Here it goes: </div>
<div>
<br /></div>
<div>
The Bank of China Great Wall International Debit Card that is issued together with the SmartSaver account can be used to pay for another credit card bill. This IS the real deal. I use this as the perfect combo with UOB ONE Card. This means that I only need to spend $500 a month with UOB ONE card, and then use BOC debit card to pay for that credit card bill. Voila! I kill two birds with one stone. It's hard to chalk up so much credit card spend every month, so this works like a charm, giving me an additional 1.55% interest on the balance in this account to yield a total effective interest of 2.55%.</div>
<div>
<br /></div>
<div>
So if you have $170k cash, and are thinking hard about making them work harder for you, the above solution might work for you. With just $500 credit card spend, OCBC will give you 1.75%, UOB 2.43%, and BOC 2.55%. If you can chalk up $1000 credit card spend a month, OCBC can yield an additional 0.5% to make 2.25%. Not worth forcing it just for that 0.5%, but on months when you have that extra expense coming in, why not, right?</div>
<div>
<br /></div>
<div>
Note that bill payment is never a concern because you can simply pay $5 to the same three bills that are GIRO-ed from UOB ONE account. Do this using your OCBC and BOC accounts every month, and the outstanding amount will be GIRO-ed from UOB ONE account.</div>
<div>
<br /></div>
<div>
What about you? Where do you park your warchest to maximise the return while you wait?</div>
<div>
<br /></div>
<div>
<br /></div>
</div>
F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com0tag:blogger.com,1999:blog-5118527857335750434.post-74670580888717831852016-06-19T12:52:00.001-07:002016-09-05T16:26:04.435-07:007.53% Instant Capital Gain + 5.38% Yield on Capital<div dir="ltr" style="text-align: left;" trbidi="on">
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<a href="https://1.bp.blogspot.com/-3bBe3Isc1CE/V2b8khLrJHI/AAAAAAAAACI/qmufntQdlGYCIpz00V9adfuKDyRKVIJlwCLcB/s1600/cpf%2Blife.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="579" src="https://1.bp.blogspot.com/-3bBe3Isc1CE/V2b8khLrJHI/AAAAAAAAACI/qmufntQdlGYCIpz00V9adfuKDyRKVIJlwCLcB/s640/cpf%2Blife.jpg" width="640" /></a></div>
<br />
<br />
Is there an investment that gives you an instant <span style="font-size: small;"><b>7.53% capital gain + a minimum yield on capital of at least 5.38%</b></span> for the next 15 years? Sounds too good to be true? Read on to find out more!<br />
<br />
I haven't given much thought to this excellent long term "investment" previously, but ASSI's blog post on "<a href="http://singaporeanstocksinvestor.blogspot.sg/search?updated-max=2016-06-17T13:21:00%2B08:00&max-results=1&start=2&by-date=false" target="_blank">How Younger Members can Get 6% per year from the CPF</a>" inspired me to dig deeper and think harder. Yes, like what most of you seasoned personal-finance gurus would have figured out already, this investment is our CPF.<br />
<br />
Before I came across the article, I only thought about contributing to my own CPF to get the 4% that our Special Account (SA) is yielding. But because I am 4 decades away from retirement, have a huge mortgage to service, a 10-month-old daughter to feed, and 2 aging parents who aren't quite prepared for their own retirement, I put off the idea.<br />
<br />
But what if there is a new variety of seeds that will start to bear fruits in 15 years time? What if there is a 7% early bird discount now? Will I buy those seeds to plant them today? I am very tempted to.<br />
<br />
<br />
<h3>
Let me first explain how I got the numbers.</h3>
<br />
If I make a cash top-up to my loved ones' SA, I get to enjoy tax relief of up to $7000 per calendar year. In my latest year of assessment, after all the reliefs I qualify for, my chargeable income is between $40k to $80k. This means that if I were to contribute $7000 to my mum's SA, I will pay $490 lesser in tax (source: <a href="https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Income-Tax-Rates/" target="_blank">IRAS</a>). Essentially, this is like getting $490 for free from the government if I put in $6510, or a 5.38% gain in capital immediately (490/6510 x 100%). Got freebies who don't want??? <span style="font-size: x-small;"> </span><br />
<span style="font-size: x-small;">*do note that any contribution above the Full Retirement Sum is not eligible for tax reliefs. My mum has (only) $12k (after checking, I realised she only has 2k, but nevermind, we can assume she has 12k for the subsequent illustrations in this post.) in her CPF, so I don't have to worry about that. </span><br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-fvQGHbpfl20/V2bf6aZx33I/AAAAAAAAABM/PfQM3YqbfVcr3ydWnvqqmMVtXpT0sfVmgCLcB/s1600/2016-06-20.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="360" src="https://4.bp.blogspot.com/-fvQGHbpfl20/V2bf6aZx33I/AAAAAAAAABM/PfQM3YqbfVcr3ydWnvqqmMVtXpT0sfVmgCLcB/s640/2016-06-20.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Tax relief for the giver? It's like free money from the government!</td></tr>
</tbody></table>
<br />
What about the 5.38% yield on capital that I purported above then? If you look at the footnote# under the table in the print screen above, the first combined balances of up to $60k attracts an additional 1% interest. This means that for my mum who just turned 50 this year, balances in her SA will earn 4+1 = 5%! But remember my capital outlay was only $6510? That gives me a yield on capital of 5.38% (350/6510 x 100%). Okay, I am really just playing with numbers here, but it really does sound like a good deal, doesn't it? Moreover, the interest rates will be bumped up to 6% for the first $30k when she turns 55.<br />
<br />
<h3>
So what's the game plan?</h3>
<br />
Given that I only qualify for 7% discount every year on the first $7000, with the likelihood of the discount getting bigger in the years ahead (pay rise, yay!), I am inclined to spread out my contribution.<br />
<br />
Let's run some numbers.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-Af34hn4-JgA/V2boH32vYGI/AAAAAAAAABc/YRQjVTZpPJ8kyfkgw-lm-iGRVw7QSMBhQCLcB/s1600/2016-06-20%2B%25281%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="224" src="https://1.bp.blogspot.com/-Af34hn4-JgA/V2boH32vYGI/AAAAAAAAABc/YRQjVTZpPJ8kyfkgw-lm-iGRVw7QSMBhQCLcB/s640/2016-06-20%2B%25281%2529.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">8th Wonder of the World, indeed.</td></tr>
</tbody></table>
<br />
Let's assume that my mum has $12k to begin with, and I start my yearly contribution of $7k just before she turns 51. This will last for 5 years. Thereafter, I will not contribute anymore.<br />
<br />
Total capital outlay (after tax relief): $12,000 + ($6510 x 5) = $44,550<br />
Balance at beginning of 65 (after compounding for 14 times) = $89,495.29<br />
<br />
Not bad. Almost hitting the Basic Retirement Sum of $93,215 for her cohort.<br />
<br />
<h3>
How much can she expect to get every month?</h3>
<div class="separator" style="clear: both; text-align: center;">
</div>
<br />
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<a href="https://4.bp.blogspot.com/-NNCO-elITjo/V2b10Qi6BZI/AAAAAAAAAB0/GX1E7Spymr0UjTU_GQqxXJ6WDY38pPycwCLcB/s1600/2016-06-20%2B%25284%2529.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="360" src="https://4.bp.blogspot.com/-NNCO-elITjo/V2b10Qi6BZI/AAAAAAAAAB0/GX1E7Spymr0UjTU_GQqxXJ6WDY38pPycwCLcB/s640/2016-06-20%2B%25284%2529.png" width="640" /></a></div>
<br />
<br />
Referencing the Straits Times article published on 23 Aug, 2015, the amount one can expect to receive per month on the Basic Life plan is about $650. <span style="font-size: x-small;">(I will talk about why I prefer Basic Plan over Standard Plan in another post)</span> This is based on $80,500 being set aside at age 55. I have no idea how the smarties in CPF or MOF came up with this numbers, and I concede that I am not half as smart as them. So how? How can a layman like me estimate the amount that my mum can expect to receive?<br />
<br />
Let's try two methods:<br />
<br />
<b>First Method: Proportionality. </b><br />
If $80,500 set aside at 55 results in about $650 a month from 65 onwards, $53,265 will result in...<br />
<br />
(53,265/80,500) x 650 = $430<br />
<br />
<b>Second Method: Use the tools provided by CPF <a href="https://www.cpf.gov.sg/eSvc/Web/Schemes/LifePayoutEstimator/LifePayoutEstimator" target="_blank">here</a>, but tweak the inputs.</b><br />
The tool only works for those who are between their payout eligibility age and 80 years old. For my mum's case, the tool doesn't work, but I can cheat the system a little to get an estimation.<br />
<br />
Since we've already computed the amount she will have in her RA when she hit 65, I will simply assume that she has already hit 65 this year (means the year of birth is in 1951). The amount in her RA, I will input as $89,495 as computed.<br />
<br />
Next, the tool will ask you for your annual assessable income and annual property value. This is to determine if you qualify for CPF Life Bonus. My mum does not, so I chose the highest range for both so <i>no bonus</i> will be included in the calculation.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-wwzTl2VFQlg/V2b1szSAWfI/AAAAAAAAABs/8uBgHkOUizEKY1A9BpxO7NxnQvqXwV5ZQCKgB/s1600/2016-06-20%2B%25282%2529.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="360" src="https://4.bp.blogspot.com/-wwzTl2VFQlg/V2b1szSAWfI/AAAAAAAAABs/8uBgHkOUizEKY1A9BpxO7NxnQvqXwV5ZQCKgB/s640/2016-06-20%2B%25282%2529.png" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Nope, my mum doesn't qualify for CPF Life Bonus.</td></tr>
</tbody></table>
<br />
The result? She will receive about $444 a month. Not too far off from my first method, so I think it's rather safe to assume that she will receive slightly more than $400 monthly from 65 onwards.<br />
<br />
Is this a good amount? I think it's not too shabby. It's not enough for sure, but it can certainly help to ease the financial burden a little.<br />
<br />
What do you think? Are any of your parents without much money in their CPF? Maybe this might work out for you too.</div>
F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com0tag:blogger.com,1999:blog-5118527857335750434.post-28955563488499362942016-06-19T06:13:00.001-07:002016-06-19T06:29:12.273-07:00Expense Update - May 16<div dir="ltr" style="text-align: left;" trbidi="on">
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<a href="https://1.bp.blogspot.com/-8TtHSlUpDd8/V2aeHrHoVlI/AAAAAAAAAA4/0sGN169NL-ohWRP_KAcLVXPdjw1dlfWTgCLcB/s1600/expense-report-24621.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="290" src="https://1.bp.blogspot.com/-8TtHSlUpDd8/V2aeHrHoVlI/AAAAAAAAAA4/0sGN169NL-ohWRP_KAcLVXPdjw1dlfWTgCLcB/s400/expense-report-24621.jpg" width="400" /></a></div>
<br />
So I started keeping track of my expenses from 10 May. I've been wanting to do this for the longest time, but every time I felt compelled to start, I always managed to rationalise to myself that it is not worth the effort. I finally managed to take the first step on 10th May.</div>
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Because I don't receive my salary on the 1st of each month, my financial month runs from 10th to 9th of the month. It makes life a bit harder, but it works for me.</div>
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Let's start with my own personal expenses.</div>
<hr style="background: rgb(200, 215, 225); border: 0px; color: #3d596d; cursor: default; font-family: Merriweather, Georgia, "Times New Roman", Times, serif; font-size: 15px; height: 1px; line-height: 25.5px; margin: 8px 0px;" />
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Since this is my first post, I will list down my <span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">fixed</span> expenses.</div>
<ol style="color: #3d596d; font-family: Merriweather, Georgia, "Times New Roman", Times, serif; font-size: 15px; line-height: 25.5px;">
<li>Joint Account Contribution: $1300</li>
<li>Endowment Plan: $198</li>
<li>Parents' Allowance: $150</li>
<li>Savings for Daughter: $50</li>
<li>Investments for Daughter: $100</li>
<li>Auto Insurance: $138.26</li>
<li>Road Tax: $50</li>
<li>Medical Insurance: $50</li>
</ol>
<div style="color: #3d596d; font-family: Merriweather, Georgia, "Times New Roman", Times, serif; font-size: 15px; line-height: 25.5px; margin-bottom: 24px;">
The first item on the list is actually a joint account I maintain with my wife. Both of us each contribute $1300 to this account to pay for "joint" expenses. I will detail our "joint" expenses in the next section.</div>
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Now, let's examine my <span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">variable</span> expenses for May:</div>
<div style="color: #3d596d; font-family: Merriweather, Georgia, "Times New Roman", Times, serif; font-size: 15px; line-height: 25.5px; margin-bottom: 24px;">
<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><strong>Food - $100</strong></span>. Note that meals out with my wife are charged under our joint account. This segment only accounts for the meals I take when I am not with her, i.e. usually lunches on workdays.</div>
<div style="color: #3d596d; font-family: Merriweather, Georgia, "Times New Roman", Times, serif; font-size: 15px; line-height: 25.5px; margin-bottom: 24px;">
<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><strong>Car - $711.61</strong></span>. Apart from the auto insurance and road tax, which are accounted for under fixed expense, there are other running costs associated with car ownership. This month, I spent $400 on tyre change, $150 on cashcard top-up, and the remaining on petrol. $150 in my cashcard will probably last me more than a month.</div>
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<strong><span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Bills and Misc - $49</span></strong>. Mobile phone bill came up to $44, while an additional $5 was spent on haircut.</div>
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<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><strong>Discretionary Spending - $450</strong></span>. This is where I lost control this month. I spent $450 on LEGO sets. Bad bad. There are usually a few sets that I will be eyeing, but will put off buying them until I've got enough to buy to chalk up $600. I need this minimum amount to be charged to my StanChart Singpost Credit Card in order to get the 7% cash rebate for online spending. This month, the stars are aligned: weaker USD, 20% discount on a set I've been eyeing, et cetera. I spent $450 on sets that I want, and another $300 (tracked under joint expense) on a set that both my missus and I want. =/</div>
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In summary...</div>
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<span data-mce-style="color: #ff0000;" style="color: red;"><strong>Total Fixed Personal Expenses: $2036.26</strong></span></div>
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<span data-mce-style="color: #ff0000;" style="color: red;"><strong>Total Variable Personal Expenses: $1310.61</strong></span></div>
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<span data-mce-style="color: #ff0000;" style="color: red;"><strong>Total Personal Expenses: $3346.87</strong></span></div>
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<div style="color: #3d596d; font-family: Merriweather, Georgia, "Times New Roman", Times, serif; font-size: 15px; line-height: 25.5px; margin-bottom: 24px;">
Let's examine our <span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">fixed</span> joint expenses:</div>
<ol style="color: #3d596d; font-family: Merriweather, Georgia, "Times New Roman", Times, serif; font-size: 15px; line-height: 25.5px;">
<li>Household Contribution (given to parents as we stay with them): $500</li>
<li>Maid's Salary: $580</li>
<li>Maid's Levy: $60</li>
<li>Conservancy: $90</li>
<li>Property Tax: $108.14</li>
<li>Medical Insurance for Daughter: $30</li>
<li>Utilities: ~$200</li>
<li>Mortage: $2680 (CPF OA)</li>
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Our mortgage is a bomb, I know. It's one of the financial mistakes we made, but no regrets really. More on this in another post.</div>
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Our <span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">variable</span> joint expenses:</div>
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<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><strong>Food - $173.15</strong></span>. This didn't come up too badly. We are eating out a lot lesser now that we have a baby.</div>
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<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><strong>Baby's Stuff - $62.90</strong></span>. $50 for a booster seat and $12.90 for a cardigan.</div>
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<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><strong>Gifts - $272</strong></span>. $250 on wedding angpows and $22 on fruits for grandparents.</div>
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<span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><strong>Discretionary Spending - $300</strong></span>. LEGO. Nuff' said.</div>
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In summary...</div>
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<span data-mce-style="color: #ff0000;" style="color: red;"><strong>Total Fixed Joint Expenses: $1568.14 + $2680 (CPF)</strong></span></div>
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<span data-mce-style="color: #ff0000;" style="color: red;"><strong>Total Variable Joint Expenses: $808.05</strong></span></div>
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<span data-mce-style="color: #ff0000;" style="color: red;"><strong>Total Joint Expenses: $2376.19 + $2680 (CPF)</strong></span></div>
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This is the first time I am listing down our expenses like this.</div>
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Scary sight.</div>
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F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com0tag:blogger.com,1999:blog-5118527857335750434.post-72142458797863910332016-06-19T06:11:00.003-07:002016-06-19T06:28:31.853-07:00Part 3 - Financial Planning for My Daughter<div dir="ltr" style="text-align: left;" trbidi="on">
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<em>This is the third part to a three-parts series on the financial planning I’ve done / will be doing for my 9 months old daughter. Part 1 details how I am saving for her, part 2 describes my attempt at making these monies work, and lastly, part 3 documents the type of insurance coverage she has.</em></div>
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Saving and investing are important first steps to a more secured financial future. While we can do our best at preparing ourselves for whatever life has to throw at us, sometimes we just can't be prepared enough. This is why people get themselves insured. This is the only one thing that people pay money for, but do not wish to receive anything in return. (Note: I am referring to pure insurance policy that does not have any saving/investment component tagged to it.)</div>
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When life happens, and huge sum of money is required, there could only be three outcomes: Your savings are depleted, your loved ones' savings are depleted, or you drown yourselves in debt. Neither of these are pleasant outcome. If you have been thrifty, the last thing you would want to see the wealth that you have so painstakingly accumulated over the years get wiped out overnight. That is why I insist that I get myself, and everyone around me, insured against such life "happenings".</div>
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The most important policy that everyone should have is the Private Integrated Shield plan. The newly introduced Medishield Life covers all pre-exisiting conditions, which is awesome, but it still requires the insured to fork out the first $3000 (deductible) and co-pay 20% of the remaining amount (co-insurance). Further, if you are only covered under Medishield Life, your options are limited to B2 or C class wards, which is not-so-awesome. B2 and C class wards are also usually running at full capacity, which means you can expect yourself to stay along the corridor for the first part of your stay. For my daughter, I don't wish to limit her to such narrow options, which is why I got her covered up till private hospital under the Great Eastern's Supreme Health P-Plus plan.</div>
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Though Supreme Health P-Plus covers my daughter should she be warded into a private hospital, it still has a deductible and co-insurance portion. To get my daughter fully covered, such that hospital bills are fully paid for by the insurer, the plan has to be supplemented by Total Health. The table below shows the premium rates for the various plans (correct as at 31 May 2016).</div>
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<img alt="rates" class="alignnone size-full wp-image-306" data-mce-src="https://fighting4financialfreedom.files.wordpress.com/2016/05/rates.jpg" height="634" src="https://fighting4financialfreedom.files.wordpress.com/2016/05/rates.jpg" style="height: auto; max-width: 100%;" width="758" /></div>
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For my 9-month-old daughter, I have to fork out an additional $287 for her Supreme Health P-Plus Plan, and $384 for Platinum Total Health, on top of the premium she has to pay for the compulsory Medishield Life Plan. Part of these extra monies used to purchase her Additional Private Insurance Coverage can be paid for by her Medisave (which already has $4000 thanks to the Medisave Grant for Newborns), up till the Additional Withdrawal Limit (AWL) of $300 for her. More info <a data-mce-href="https://www.moh.gov.sg/content/moh_web/home/pressRoom/pressRoomItemRelease/2015/new-additional-withdrawal-limits-to-help-integrated-shield-polic.html#4" href="https://www.moh.gov.sg/content/moh_web/home/pressRoom/pressRoomItemRelease/2015/new-additional-withdrawal-limits-to-help-integrated-shield-polic.html#4" style="color: #00aadc;" target="_blank">here</a>.</div>
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One of the added advantage of getting my daughter covered early is that as long as I continue to maintain the policy, she will be covered for all medical conditions. I would urge all parents to cover their children while they are still young and healthy. I am trying to get my parents covered, but because they already had some pre-existing conditions, any new coverage I buy now will exclude these existing conditions.</div>
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F4FFhttp://www.blogger.com/profile/02553588514719430781noreply@blogger.com0