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...
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I produced a YouTube video recently on how much money do seniors need in Singapore monthly to cover basic needs.
The video got many comments and some of them were pretty shocking when it comes to providing financial support for parents.
I am archiving some of these in my blog as a reminder to myself that not everybody thinks like me and how things might be very different now.
@deschua76 said,
30 years ago when I was still a kid, I told my parents that I won’t give them a single cent when they retired and because of that the fear drove them to become financially free now!
That should be the way! Do or die! No excuses!!!!
my parents constantly thank me for what I did. For your information and dissemination please.. #ToughLove
And someone agreed with this comment.
@user-pi6mn9wj8n said,
This is what ALL children should tell their parents. Why shld children hv to pay parents who hv no responsibility to take care their own financial health.
The young hv it far harder than their parents did - with things like student debt and much higher housing costs.
It is PARENTS that should be helping children at this juncture. DONT sacrifice your own retirement and financial health because u hv deadbeat parents who want/need handouts.
To this, AK said,
"Like that, children become forever liabilities.😱 Better don't have children."
In case you are interested in that YouTube video and the comments it generated, here is the link:
While watching some YouTube videos regarding the economy, a video titled "Are All Singaporeans Rich?" popped up in the right sidebar.
I am usually not interested in videos like this but since I blogged about Singaporeans being obsessed with salaries not too long ago, I decided to give it a go.
Fortunately, the video had timestamps which allowed me to watch the segments I was more interested in.
It is interesting to see that the people interviewed in the streets of Singapore mostly agreed that everything was expensive in Singapore.
Most of them had earned income of $5K a month or more.
Personally, I think I can be quite comfortable with a salary of $5K a month today.
Apart from cars and private housing, I don't think Singapore is expensive.
Why do many Singaporeans think that a salary of $5K a month is insufficient?
Watching the video produced so many "Alamak, AK!" moments.
Someone said he would buy lattes regularly, paying $8 a cup!
Then, there is pubbing on weekends and taking taxis!
(OK, as a ComfortDelgro shareholder, I think taking taxis is a good idea. Please continue.)
Then, some talk about fine dining and how expensive wine is in Singapore!
Hey, we have choices.
If we overpay for coffee and if we choose to take taxis instead of buses and trains, of course, it would lead to a higher cost of living.
If we choose to get our nutrition in fancy restaurants, definitely, it would be costlier.
Such a lifestyle in any country would be more expensive than more humble alternatives in the same country.
Am I right to say that?
So easy to blame others for bad results even when it was our choices that led to those results.
Don't say Singapore is expensive when we make expensive choices.
Wake up.
A lady said that she had to work harder to earn more money.
I don't think that is a bad thing per se.
If she worked harder and put some of the money to work in order to generate passive income, her financial health can only improve over time.
If we do the right things, we don't have to worry too much about our financial future.
If I were 30 years old today and drew a salary of $5K a month, if I were truly prudent, I could probably save 50% of that money each month.
If I were to invest $2K per month in good income generating businesses, with a dividend yield of say 4% to 5%, I would be able to generate a few thousand dollars per year in passive income by the end of the third year.
Yes, it would take only 3 years to see meaningful results!
Over time, if we make more money, we could put more money to work if we stay financially prudent.
I remind myself that it is not how much money we make but how much money we save that will tell us if we are growing richer.
Then, be a pragmatic and patient investor for income and we can only become richer.
Not all Singaporeans are rich but all Singaporeans can be richer.
Over the years, I have talked to myself about real estate and my philosophy.
With the Additional Buyer Stamp Duties (ABSDs) increased by quite a bit, a reader asked for my thoughts on the property market in Singapore now.
Regular eavesdroppers on AK would be able to guess the response.
My philosophy has not changed.
If we are investing in real estate, just like investing in stocks, we want to invest in an asset that, after expenses, will generate a meaningful income for us.
If we buy real estate thinking that the price of the asset will rise in the next few years and that we would be able to flip it for a profit, that is not investing.
That is speculating.
Usually, I would stop here.
However, for quite a few years now and it has gotten a lot worse, we have people buying real estate in Singapore not to generate any income nor to flip for a profit.
They simply want Singapore properties as a store of wealth because of the strong Singapore Dollar and the politically stable environment.
They are mostly foreigners.
Wow!
So many ultra rich foreigners!
From which countries?
You ask, you answer.
I am not going there.
I have said before that when we buy a property, we want to ask 2 questions.
1. It is not just a question of affordability but we should also ask if it is value for money.
2. Do we have deep pockets for if things go wrong and many things could go wrong.
However, to these very rich people, these two questions are most probably irrelevant.
So what if the properties don't make money or if they should even lose money?
If the ultra rich are able to protect a big fraction of their wealth, they would still be very rich and that could be more than enough for them.
For the rest of us, we really have to stay grounded and not be swept away by barbers telling us we need to have more frequent haircuts even if we are going bald.
Now, for those who bought properties in Singapore recently thinking they could flip them a few years later at higher prices, the much higher ABSDs announced might have turned those dreams into nightmares.
The government of Singapore wants properties to be sold mostly to genuine owner occupiers because housing affordability is a big issue.
Singapore welcomes foreign direct investment but we do not want foreign direct speculation.
Hence, the recent strengthening of property cooling measures.
For those of us who are still thinking of investing in properties for passive income in Singapore in spite of the ABSDs, I would go back to those 2 questions I said we should be asking.
Cannot remember?
Scroll up and take a screenshot.
Nightmares do not discriminate between speculators and investors.
This is a fact.
Pay a price too high and we could have a high price to pay in future.
Anyone who is not ultra rich but wants to be a real estate investor in Singapore might want to read the related posts below.
The week started with the shutting down of Silicon Valley Bank and Signature Bank by U.S. regulators.
The U.S. regulators announced measures which ultimately bailed out the banks.
Then, we saw Credit Suisse reporting "material weaknesses" and the Swiss National Bank stepping in to backstop the troubled bank.
Credit Suisse took a 50 billion Swiss Francs loan from the Swiss National Bank to strengthen liquidity.
Then, a consortium of 11 largest U.S. banks rescued First Republic Bank, the 13th largest bank in the U.S.A., by jointly depositing US$30 billion in the troubled bank.
After all that happened, Mr. Market ended the week with a dramatic down day in the U.S. stock market on Friday.
The Fed increased interest rate a year ago in March 2022 for the first time since 2018.
Since then, the rapid rate at which interest rates have been increased has caused a lot of pain for homeowners as well as investors in the real estate space.
The pain is most keenly felt in the high growth but negative earnings tech space and if you are a tech investor, you know this firsthand.
The people who said that something would break under the growing pressure of such rapid rate hikes are now looking rather prescient.
What would they say now?
Not surprisingly, that things will continue breaking as long as the Fed continues to hike interest rates.
With the ECB having hiked interest rates in the EU by another half a percentage point, the Fed is probably going to hike interest rates in the U.S. next week too as they stick to their plan to fight sticky inflation.
Mr. Market, already jittery, while initially assured by the show of solidarity in the U.S. banking industry, became depressed again on Friday when First Republic Bank suspended dividends.
In an environment where depositors could lose their savings and where investors in both stocks and bonds are losing money, heightened volatility in the stock market is unsurprising.
Fear is palpable.
It drives Mr. Market into self-preservation mode.
If the confidence deficit continues, then, more money could flow to the perceived safety of U.S. government bonds, and we could see yields lower.
During the COVID-19 pandemic, I blogged about how I was worried because my passive income was reduced due to my businesses either suspending or reducing dividends.
My relatively high level of CPF savings was the only "investment" that continued to pay what I expected it to pay, uninterrupted, which highlighted to me the importance of having an allocation to high quality fixed income in any portfolio.
So, I can understand Mr. Market's negative reaction to First Republic Banks's decision.
Many people depend on dividends for a living or to at least fund part of their expenses.
The still troubled bank saw its stock price recovering from a day ago on Thursday only to see it plunging 32% on Friday.
When the bear comes out of its cave, none is spared, and we saw the stock prices of large U.S. banks beaten down too as even JP Morgan saw a 3.78% decline in its stock price.
When Mr. Market is gripped by fear, he becomes irrational, and the baby gets thrown out with the bathwater.
As U.S.A. is still the largest economy in the world, what happens there often spreads to the global markets.
So, we could see Asian markets echoing that fear in the U.S. stock market.
I have said many times before that we cannot predict what will happen but if we are prepared, we need not worry and we could instead benefit.
Don't be overly pessimistic.
Don't be overly optimistic.
Be pragmatic.
This week, I was on steroids.
I have published too many blogs regarding the stock market and what my plan might be.
So, if this is your first visit in as long a time, you will have a lot to read.
This blog was held in storage for many days because I was wondering if I should publish it.
I haven't published anything like this in a while.
It is bordering on being political and it is something which many people probably have very strong opinions about.
Anyway, I decided to take the plunge.
In The Straits Times on 4 March, Chua Mui Hoong wrote that Singapore was “at a juncture when the internal contradictions of its hyper-competitive system are becoming apparent, causing much angst, from the low to middle to high-income residents.”
“They worry if they can attain the essentials of modern life, a home, job, school for their children and caregiving for frail family members.
“Those who are wealthy, still worry about access to good schools and whether their children can do as well in a game they themselves excelled in.”
This, plus what Pritam Singh said in Parliament about how "two Singapores" could possibly emerge, got me blogging.
There was a big discussion regarding Singapore's income inequality and the suggestion was that Singapore's income inequality issue was worsening.
However, that is probably more a popular and erroneous perception than reality.
Singapore’s income inequality has been declining.
The Gini coefficient decreased from 0.478 in 2012 to 0.437 in 2022.
Lawrence Wong shared the results of ongoing efforts to uplift lower-wage workers.
Lower-wage workers had seen higher income growth than those earning more than the median income in the last five years.
What is my opinion?
There will always be income inequality.
Hard truth.
It is hard for me to accept that a cleaner should be paid as much as a doctor or even a high school teacher in a capitalist society, for example.
Of course, in a communist country, equal "pay" should be expected.
So, do we want to live in a communist country?
I know I don't.
Then, there is this concept of "essentials of modern life" which Chua Mui Hoong mentioned in the newspaper article.
I have blogged about needs and wants before many times.
We only need so much money in life.
The rest is for showing off.
If we keep our needs simple and our wants few, our life will "basically" be better, no matter how much money we make.
The problem starts when many things which are not essential get classified as "essentials of modern life."
Need a home?
What about a HDB flat or even an Executive Condominium?
Need a school?
What about a neighborhood school?
Need healthcare?
What about a government polyclinic or hospital?
In my last visit to the doctor in the polyclinic a 20 minutes walk from my home, I paid $20 when the actual cost was about $80.
Yes, my medical bill was about 75% subsidized and I am not even a senior citizen (yet.)
There is an over-emphasis on income when it comes to measuring financial well being.
Seriously.
Must people earn a lot more money to be rich?
I have a blog that says average income workers can be rich too.
I have a blog that shares a reader's experience on how to have more passive income than "richer" friends.
If we spend as much as we make, it doesn't matter if we are high income individuals because we will always be "poor."
It isn't how much money we make that determines if we are rich or poor.
It is how much money we keep.
There was a study done in an advanced country that showed how 40% of upper middle income families were living paycheck to paycheck in that country.
Why?
They habitually spent as much money as they made or more than what they made.
How to be financially better off like that?
Then, there is the issue of assigning blame.
Really, there should be a greater emphasis on taking ownership when it comes to our financial well being or the lack of it.
As you can tell from the video, I am proud to be Singaporean and proud of our CPF system.
If you haven't watched it yet, you might want to give it a chance as it shares the view of a foreigner.
I like the CPF system because it is a system where the government helps those who help themselves.
I don't like as much the way the government has been giving out free money in recent years.
However, I am very much aware that there are low income families which genuinely do need some financial relief.
Still, if the government keeps doing it, then, it might foster feelings of entitlement amongst Singaporeans who, I feel, can be pretty ungrateful at times.
Honestly, I do not think Singapore is such a terrible place when it comes to economic issues.
Don't talk about Pakistan or Sri Lanka.
I think we are even better off in Singapore than in the U.S.A. when it comes to economic issues.
Of course, Singapore is not perfect but waving a banner that suggests Singapore could split apart because of growing income inequality is just malicious.
The P.A.P. government probably would not say many of the things I have said in this blog because they must think about winning the next election.
It could cost them some swing voters, I suspect.
I don't expect this blog to do well and it could even get me flamed.
However, long time regular readers know that this is a topic that I feel strongly about and I just need to get it off my chest.
A short blog to say I will be diverting money set aside for voluntary contribution to my CPF account in 2023 to Singapore Savings Bond (SSB) again.
With a 10 year average yield of 3.47%, the latest round of SSB soundly beats the average return of 3% I would get from the CPF for doing voluntary contribution to my OA and SA.
If you are interested in how I arrived at this conclusion, see:
I expect this round of SSB to be oversubscribed again with its record beating 10 year average yield.
The last round of SSB was 2.44x oversubscribed and even if no new funds joined the fray, this round of SSB would be 1.44x oversubscribed if only unsuccessful funds from the last round reapplied.
So, I won't be surprised if my application is partially filled again.
$10,000 again?
Maybe.
Well, I will only be applying for $28,000 this time since I got $10,000 the last time.
If some of my money gets refunded, it might not be a bad thing as the final round of SSB in December could offer an even higher 10 year average yield.
Hmm.
Maybe, I should hedge.
I should apply for $14,000 this time and apply for $14,000 in December.
On 18 October, I shared my thoughts in a blog on growing passive income in an environment of heightened inflation and rapidly increasing interest rates.
If you cannot remember or need a refresher, here it is:
I will be submitting non-competitive bids for 6 months T-bills for auctions in November and December too.
This is because I expect their yields to be much more attractive than 6 months or even 1 year fixed deposit interest rates offered by the banks.
Cut-off yield at 4.6% p.a. next?
After all, the U.S. Fed is expected to hike interest rates in November and again in December.
I would avoid long duration bonds in such an environment of rapidly rising interest rates.
For sure, I would avoid bond funds.
If you are new to my blog or if you have forgotten, here is a refresher from my YouTube channel:
Remember, no one cares more about our money than we do.
Do not ask barbers if we need a haircut.
If we are not overleveraged or overly leveraged, we don't have to fear rising interest rates.
We have not been swimming naked and don't have to fear what the receding tide might reveal.
Yes, I know. Bad AK! Bad AK!
If we are invested in bona fide income generating assets and if we are getting a share of the income, there is really no need to panic (as long as we have a good handle on our expenses.)
The sky is not falling.
We will still enjoy some level of cash flow even during tough times.
Unfortunately, it sometimes takes a crisis for some people to realize that reliable and meaningful cash flow is one of the most important things to prioritize in investing and personal finance.
Getting rich slow is not sexy but it works.
Readers who have been following my blog for a long time might remember that I said this:
"Gradually, as our passive income grows from a stream to a river, our earned income could become something less critical." Source: Best insurance in life.
That was about 6 years ago but I think some bits are still worth reading.
My gut feeling is that mortgage rates will rise faster than the SSB's 10 year average coupon.
Even the fixed deposit rates are rising rather quickly now as banks have started competing for deposits.
Banks are trying to lock savers in with higher rates now because they think interest rates will go even higher in future.
My mom went to renew her fixed deposit a few weeks ago and was pleasantly surprised to be offered 1.1% for 1 year.
This was because my aunt did her renewal a month before and she was offered 0.8% at the same bank.
Another bank offered my mom 1.5% per annum but it was a 2 years fixed deposit.
For a 3 years fixed deposit, they offered her 1.9%.
That's too long and we are not compensated enough when interest rates are expected to rise rapidly in the next couple of years.
I told my mom to just go with the 1 year fixed deposit because interest rate would probably continue rising rapidly.
We could soon see 2% interest rate offered for a 1 year fixed deposit.
In fact, it could even go higher if inflation stays stubbornly high and the Fed has no choice but to continue raising interest rate to a point where it is higher than the inflation rate.
After all, the most effective way of bringing down inflation if past experience is anything to go by is to have interest rate higher than what inflation is and inflation is at about 8% in the USA now.
We can say that inflation is lower in Singapore but, unfortunately, when it comes to interest rate, Singapore is a price taker because we do not control the interest rate in our country.
"Most countries, including the United States and China, adopt an interest rate policy where central banks raise or cut interest rates.
"Singapore is the only major economy in the world to use the exchange rate, guiding the Singdollar higher or lower.
"MAS says the exchange rate is the best tool for a small, open economy like Singapore"
Still, no one can be sure what the longer term picture is going to be but in the shorter term, there will be pain and most of us should be prepared to tighten our belts.
I remember when I paid off my last home loan, my mortgage rate was 5.1%.
Yes, young people might find that rather surreal but it wasn't a bad dream.
It was real.
Interest rates are going higher but no one knows for sure how much higher.
Still, if we are not overleveraged, all else being equal, we should do better than most.
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