The email address in "Contact AK: Ads and more" above will vanish from November 2018.

PRIVACY POLICY

FAKE ASSI AK71 IN HWZ.

Featured blog.

1M50 CPF millionaire in 2021!

Ever since the CPFB introduced a colorful pie chart of our CPF savings a few years ago, I would look forward to mine every year like a teena...

Past blog posts now load week by week. The old style created a problem for some as the system would load 50 blog posts each time. Hope the new style is better. Search archives in box below.

Archives

"E-book" by AK

Second "e-book".

Another free "e-book".

4th free "e-book".

Pageviews since Dec'09

Financially free and Facebook free!

Recent Comments

ASSI's Guest bloggers

Returning trays in food courts and having financial security.

Thursday, August 7, 2014

I spent quite a bit of time penning a long email to a few friends recently and I would like to share a few paragraphs here because it is something I feel strongly about:

"As for the belief that many people think that they might not live long enough to see the first payment from the CPF Life, it is a pertinent concern. Personally, I also do not think that I will live very long because I am not very healthy. 

"Then, why do I bother planning for retirement? Why do I bother doing the kind of things that I do? It is all about taking responsibility for our own financial futures. It is about being socially responsible and not be a burden to society. I blogged about this before too.

"Unfortunately, it is not so easy to get everyone to think like this. 


"Just look at the campaign to get people to clear their own trays in the food courts and fast food outlets. How many people actually bother to do that? I was in McDonald's recently and I saw 12 JC kids who left their tables in a mess after eating there. These kids are our future. Socially responsible, anyone? I like to think that the next generation will be better at this and I still hope it will be so. 

"Again, education is important.

"I don't know if the government has tried this angle before but planning for a financially secure retirement is a socially responsible thing to do. Don't expect society to pay for our retirement unless we are severely disadvantaged. Is this worth mentioning? I think so."


I don't know about other people but in my extended family, there are people who are not financially prudent and think that it is only right that others in the family should help them if they run into financial difficulties. Why? Blood is thicker than water.

Yah, wait till the blood clots and we get a stroke or deep vein thrombosis.


Be educated financially.

Be socially responsible by planning well for retirement.

As a nation, I believe, we have some distance to go in these areas and those who know more should help those who know less so that they can help themselves. The government must do more in this respect and I believe that they can and will do more.

Related posts:

1. The very first step to becoming richer.

"The last thing we want to be is to be a burden to people we love or, indeed, to society as a whole. Well, I could be generalising too much but common decency would require that we think this way. Taking affirmative action to plan for self-sufficiency, avoiding dependency, is not only financially prudent, it is the responsible thing to do."

2. We are not perfect but we can improve our lives.
(A letter from a reader.)

"On the part of feeling very pessimistic, I can understand that... when they start thinking about retirement or old age it can look very bleak for our current generation. The government may look rich but they have other issues to think about as well. The countries around the world may not be as friendly as they seem to be.
 
"But through proper planning and use of excess funds, however little, or to restructure the way their resources are being used or allocated, I believe people can improve their lives. The problem is, I feel, nobody told them how to do it. So, since no ideas were planted, nothing can grow."

How to upsize $100K to $225K in 20 years? Oppa AK style! (UPDATED)

Monday, August 4, 2014

People are naturally attracted by large numbers. 

I mean if we got a 5% discount off a purchase price, we might not be very impressed but if we got a 20% discount instead, then, it could have a WOW factor.

It is the same thing with wealth. We would be more impressed with wealth in the billions than wealth in the millions. 

It is only natural. 

Of course, remember to ask what is the currency it is measured in.





Even if it should be news about some loss of wealth, we would be more likely to share the news of how a widow lost S$1 million in a year than the news of how someone lost his EZ-Link card because he was too distracted while on board a crowded bus.

So, I am not surprised that when I tell young people that the CPF-SA pays 4% to 5%, risk free, they are unimpressed. 

These are the ones who would complain about how they feel that they will not be able to meet the CPF minimum sum by the time they are 55.


When I tell them that they should consider Minimum Sum Top Ups (up to a maximum of $7,000 a year) to their CPF-SA or that they should transfer their CPF-OA money to their CPF-SA, they think I am crazy, naturally. 

(AK must be a pro-government dog. Hey, I am a pig, OK?)





Hey sexy S A! Oppa AK style!

It is only when I tell them how much I have in my CPF-SA that they start to ask questions. Something along the line of:

"Wah! How do you manage to have so much in your CPF-SA? You are only in your early 40s!"


Ah, finally, I got them interested. 

That would be when I show them the numbers "10" and "50".




Unimpressed with 4%? 

Surely, 50% is more impressive. 

The funds we have in our CPF-SA will grow 50% every 10 years even if we stop contributions today. 

That is the power of compounding at 4% per annum.





Compounding grows more powerful with the passage of time.

$100,000 today grows $50,000 and becomes $150,000 ten years later. 

That $150,000 will grow not $50,000 but $75,000 in another ten years from then. 

It would become $225,000! 

So, it continues. 




Why can't we meet the minimum sum again if we do the right things?

Well, for one thing, for most people, there is too little in their CPF-SA! 

Imagine the difference between $10,000 and $100,000 compounding at 4% per annum. 

It is that simple. 




So, voluntarily pushing more money into the CPF-SA is necessary.

Start doing this as early as possible. 

The sooner we build up a strong base in our CPF-SA, the easier it is for the magic of compounding to show its power. 

Time and the government will help us grow our retirement funds in the CPF, all without any risk.




My own experience bears this out as I transferred much of my CPF-OA money into my CPF-SA in the first 4 years of my working life. 

Then, I let the magic of compounding do the rest.

This is something that anyone, especially those in their 20s, should seriously consider doing. 







It might mean putting off marriage plans by four years for some but it would be worth it.

For those in their 30s or 40s, it might mean that they have lost 10 or 20 years of compounding magic but 65 is still years away. 

So, don't envy those in their 20s (too much).





Obviously, for those in their 50s and 60s, this blog post is more of an academic exercise but I hope they will help to share the message with their children and their grandchildren, if they have any. 

The younger ones are likely to live longer and they should plan early and plan well for their retirement.

It is not impossible to meet the CPF minimum sum.

Once we know how, all that is left to do is to make the system work for us too.

Unless severely disadvantaged in some way, we can and should make the system work for us.




Related posts:
1. Build a bigger retirement fund with CPF-SA.
2. Securing risk free returns early for retirement.
3. We do better managing our savings than the CPF does.
4. Thoughts on financial security for Singaporeans.
5. Do the right things and transform our lives.
Hey, sexy S A! Oppa AK style! ;p

Buy a car and get an annuity.

Sunday, August 3, 2014

I think we have read enough articles from financial bloggers on why we should not be buying cars in Singapore. 

Although I am generally in agreement, I have also said that, for some people, a car is a need and not a want. 





Generally?

Yes, if having a car would make a person economically more productive, then, the car is actually an investment similar to a capital expenditure in a business. 

Of course, add the fact that a car would probably improve our quality of life, it becomes an even more sensible proposition. (See related post #1.)


So, whether something is a need or a want depends on a person's circumstances. 

Like with many things in life, it isn't as clear cut as some people might make it out to be. 

We must not be too dogmatic about things. There will always be exceptions.





Of course, for many people, I believe, who own cars in Singapore, it is really more a want than a need. All I have is anecdotal evidence, of course. Correct me, if you like.

If we want to have a car simply because it improves our quality of life, because we don't want to squeeze ourselves into crowded trains or buses (if we are lucky enough to actually get into one during rush hours), because we don't want to join long queues for taxis when we go shopping for grocery or bulky items, because we have children and old folks at home, for examples, and if we have the resources, then, go ahead.


What do I mean by having the resources? 

Well, it could be a bit extreme but, to me, it is not just having enough money for 50% of the price tag and taking a loan for the rest. 

To me, it is about having enough money to pay for the car in full without having to take a loan. 





A car loan is actually more expensive than it seems and I have blogged about this before. (See related post #2.)

So, when a friend told me that he is thinking of taking a 60% loan to buy a car because he has enough cash to pay 40% of the asking price, I told him he shouldn't and, of course, went on to explain why. 

Then, he said that his parents are willing to give him $60K to buy the car (the car's price tag being $100K) because it is spare money to them and not making much by way of interest income but he feels bad about taking their money. 

I told him he should consider it and that surprised him.

I told him that if he has set his mind on buying a car, then, nothing anyone says is going to stop him. 




Rather than taking a loan from a bank and paying interest, he should consider taking the money from his parents and paying them interest instead. 

That way, more money stays in the family. 

Yes, take it as a loan and not a gift.



A loan to buy a car now attracts about 2.8% in interest cost per annum. 

A $60,000 loan would attract an interest payment of $1,680 a year. 

Over a 5 year period, this amounts to $8,400.




So, if he were to pay his parents on a monthly basis over a 5 year period, it would mean paying them $1,140 a month. 

In a way, it would be like a short term annuity plan for his parents too.

Mind you, I am not saying that I support my friend's decision to buy a car when he doesn't need one. 

I am just trying to make the best of a bad situation, if you will. 





The way I look at it, my suggestion would help his family save $8,400 in interest payments to an external lender. 

This is enough to pay for 56 months of petrol, assuming an average of $150 a month.

Related post:
1. Money management: Needs and wants.
2. A car loan is different from a home loan.
3. First time car buyer? Get a Mercedes Benz!
4. Tea with AK: A new car for $75,000!
5. Tea with AK: Bought a new car.

How did AK "supercharge" his CPF-SA's returns?

Saturday, August 2, 2014

Some might find this email exchange interesting:

Hi AK,

I chanced upon your blog and started to follow - would like to say thank you for being active and selfless sharing your wealth building story.

I came across one blog entry and you mentioned that in 2008~2009, you took the opportunity and invested in an OCBC SG equity fund and you said that you would invest on it if market crash down again. what is the name of the fund? Lionglobal Singapore Trust Fund?

I am in the midst of looking for a fund to invest and would like to study further on your choice back then.

Warm Regards
I
------------------

Hi I,

Wow! You have done your homework well! Yes, that was the fund I used money in my SA to buy. There were not many mutual funds which were approved for investment with CPF-SA money. :)

This is a unit trust which invests in names I am familiar with and since I am not able to use my SA's money to invest directly in these names, I did it through this unit trust instead. ;)

Best wishes,
AK






Hi AK,
I research further on the return of this fund, amazing 70% in 2009, but -22.76% in 2011, and 19.34% in 2012.
Overall return looks good.
Regards, I
-------------------------------

Hi I,

With our money in the SA, all the more we should buy only when there is blood on the streets. Very few investments can consistently produce results as good as compounding 4 to 5% per annum without fail and with zero risk. :)

Best wishes,
AK


Related posts:
1. SRS, CPF-OA and CPF-SA.
2. Do you want to be richer?
3. A bigger retirement fund with CPF-SA.
4. The CPF-IS and its alternatives.
5. Balancing returns and risks.

How is credit limit for personal credit cards determined?

Friday, August 1, 2014

The purpose of a blog post could be "A" but people could end up seeing "B". It has happened in my blog before and, going by the comments generated on FB, it happened again for my last blog post.

I am not complaining, really. I am just amused by how sometimes we can have unintended consequences which can be good things too, of course.


Some comments:

"I thought the credit limit should be 2x monthly salary only. MAS guideline, I remember. Or no longer in force?"

"std chartered gives a $100000 limit to everyone...the manhattan card i am referring to specifically. anyone else care to share?"

"Strange, ocbc gives my hubby credit limit of only half of his monthly income. We do not have any loan with them. Guess they do not want us to spend more money... We never get 2x or 3x our income. Usually only get 1x of our monthly limit or lesser."

"the banks will do a check with credit bureau. its just like when u open a stock trading acct, there is a financial background check..."

"So, if a person has no debt, pays his bills on time or has more unencumbered assets, he gets a higher credit limit?"

"That's the part I don't understand. We have no car loan, no house loan, we don't have overdue credit cards, no personal loan... How come our limits are so low?"


Including myself, it seems that not many know clearly how credit limits for personal credit cards are determined. So, I did a bit of research and found this:



Interesting, isn't it?

To read more on this topic, visit Moneysense:
http://www.moneysense.gov.sg/understanding-financial-products/credit-and-loans/types-of-loans/credit-cards.aspx

Related post:
An easy way to improve cash flow in life.

An easy way to improve cash flow in life.

It is a strange fact of life.

If we are poor and need some financial assistance, generally, the banks wouldn't want to lend us any money. When we start showing signs of being able to make some money on a sustainable basis and possibly no longer need financial assistance, the banks will want to lend us money.

I don't know about you but I have received so many cheques from banks in the last few years for amounts between $5,000 to $10,000 that I have lost count. They are practically stuffing money in my face. All I had to do was to bank in the cheques and the money would be mine to use. So good of them, right?

More recently, I got an OCBC 360 account and since one of the conditions to get more interest income is that I must charge $400 to an OCBC credit card each month, I applied for the cheapest available card, the OCBC Frank VISA card. A friend who found out told me that the card is for young graduates who just joined the workforce and not for established old gits like me who are making more money. Really? Look at the credit limit they have given me!




It is ridiculous! I have never had such a high credit limit for a credit card ever! No, my earned income has not had any increase in the last few years. In fact, it could have declined. Such is my life. My last credit card application approved by Citibank only had a credit limit of some $14,000. So, I guess OCBC is trying to encourage me to spend more money and, perhaps, even to take my time to pay them. OK, they are not being ridiculous. They are being nice to me. My apologies.

Take my time to pay them? Yes, of course. It is not just OCBC as, generally, the banks are very understanding about how we might not be able to pay in a timely manner.

Tell you a secret, if I could lend anyone money and charge an interest rate of 18% to 24% per annum, I wouldn't be bothered to invest for income in the stock market! "Lending for income", in this case, sounds like a better deal. Don't you think so?

Of course, to regular readers, this is not a new topic in my blog. I have blogged about it often enough and from various angles. I was encouraged to blog about it again by a friend who shared an article with me last night:

"33-year-old is an honours degree holder and a white-collar professional. He estimates that he has paid out about S$70,000 in interest over two years on his original loan amount that was S$20,000. He has been forking out S$4,000 a month, or 88 per cent of his take-home pay, to pay interest on a loan he took from a licensed moneylender.

And it all started because:

"The banks kept on sending me invitations to sign up for credit cards, and at one point, I was using 10 different credit cards. I lost track of my spending,” he said."

Read the full story here: inSing.com

So, what is the moral of the story? We need to learn a secret and it is the secret to avoiding financial ruin.

Together with the two related posts below, publishing this blog post means that I have given proper acknowledgement to all the three local banks in their efforts to help improve my cash flow.

Now, who says that AK is not impartial? Who? Who?

Related posts:
1. Extra cash for better control of your finances.
2. Get on top of your finances.


Monthly Popular Blog Posts

All time ASSI most popular!

 
 
Bloggy Award