Recession could hit Singapore. Do what Buffett and AK say?

Warren Buffett famously said to investors the following.

"Don't worry about economic predictions."

In his opinion, 

"... it really doesn't make any difference in what I do today in terms of buying stocks or buying businesses what those numbers tell me. 

"They're interesting, but they're not guides to me. 

"If we buy a business, we're going to hold it forever. 

"So we're going to have good years, bad years, in between years, maybe a disastrous year some year."

Now, this perspective is very interesting and also instructive.

It should be interesting to all investors.

However, it is only instructive to certain investors.

Who are these certain investors?

Investors whose circumstances are similar to Warren Buffett's, of course.

Not everyone has money gushing in regularly and, definitely, not everyone has more money than they would ever need.

We do not have the resources that Warren Buffett and Charlie Munger have.

When we read such opinions, therefore, we have to think of our own circumstances.

For most of us, paying attention to the early signs of where the economy might be headed is not a bad idea.

In a YouTube video I recently produced, I said that the Monetary Authority of Singapore is worried about the economy and if they are worried, we should be worried too.

Singapore's economy is slowing down fast and it is likely to get worse as many major economies seem to be heading for a recession.

So, the Monetary Authority of Singapore has decided to put fighting inflation on the back burner and not to tighten in a move that is expected to help support the economy.

Most people still need their earned income and they should worry about possible retrenchment.

Indeed, massive layoffs started in the tech sector and if a recession hits, other sectors would most likely also be impacted.

Only iron rice bowls will be safe.

What to do?

If we do not have an emergency fund, we should really start one.

If we have an emergency fund already, do a review and see if it is still adequate.

Even if we have passive income, we should have an emergency fund because passive income could dry up.

Whenever I recall how my interest income and dividends reduced during the COVID 19 pandemic, I get PTSD.

If we are fully invested in equities, we might want to start building a war chest.

If we already have a war chest but it is somewhat empty like mine, try to fill it up.

There are so many things that could go wrong in the next few months.

Geopolitics in many places could worsen.

The banking crisis really isn't over yet and, in a recent interview, Warren Buffett said so too.

Depositors will not lose money but investors will lose money because they made bad investments.

I am very "kiasu" but, given the uncertainties, I am more "kiasi."

I tell myself that I want to do a better job of preserving capital and having more cash really isn't a bad thing.

This is especially when the front end of the yield curve stays elevated.

A risk free return of 3.65% to 3.85% p.a. with zero volatility is very decent.

It isn't a bad idea to be more defensive, especially if it gives me peace of mind.

I said this to a reader in the comments section recently:

"Being substantially invested in equities already, I am more likely to regret not having resources in a bear market than not having invested more to benefit from a bull market, if it should happen."

At this point, it is important to remind anyone who is eavesdropping on me that all of us have different circumstances.

So, just like how we shouldn't accept what Warren Buffett says as being instructive for everybody, we should not accept what AK says unquestioningly as well.

We are also wired differently and will have our own beliefs.

Do the right things and the right things will happen for us.

If AK can do it, so can you!

Recently published:
T-bill ladder completing.
References:
1. Fixed income strategy.
2. Survivability and opportunity.

Lean F.I.R.E. 2014 till now! Still going strong! AK is wrong!

A regular reader, Henry, commented: 

"A good piece from you about Lean Fire. 

Like you, I have a crisis mentality and always worried about money not enough after FIRE in my 40s. 

To the extent that I would review my savings versus expenses every month. 

Then I figured out I should use a withdrawal rate of maximum 2% and factor in a 2.5% annual inflation into my calculation. 

This relieved the situation a lot and I only look at the number once a year. 

Then C19 induced high inflation struck. 

Haha, had to rework those numbers again every few months. 

Glad that I'm still alive and just returned from a Europe holiday. 

Your blog is so good. I learnt a lot since 2014, the year that I FIRE. Thanks again."


Then, in reply to my comment, Henry dropped a surprise on me. 

Henry said: 

"Alamak AK. Cannot compare my Lean FIRE with your Abundant FIRE lah. 🔥 

Even go holiday also must go when there's promo and low period to save costs. 

Now back to the reality of "poverty" living. Lol. 

Your blog had helped many over the years. 

Sifu and role model. Keep it up." 

I was replying to Henry's comment and something just kept me shifting my weight on the chair. 

I decided the problem was not my chair nor my buttocks. 

I was very curious. 

Very, very curious. 

So, I decided to publish my reply as a blog to see if there is a chance of satisfying my curiosity.

My response. 

"Hi Henry, 

Oh, you went for Lean F.I.R.E. 

Was that concept already around so many years ago? 

I wasn't aware of the different forms of F.I.R.E. when I decided to retire early at 45 so many years ago. 

I just did it my way. LOL. 

The fact that you did it and have been successful for so many years shows that I might be too conservative. 

My blogs on Lean F.I.R.E. might then give people the idea that I am talking down on the concept. 

It is not my intention to talk down, to be honest. 

I am just sharing a cautionary message. 

Now, having read your comment, I am interested to hear from people who are on Lean F.I.R.E. or who are thinking about Lean F.I.R.E. as something viable. 

How do they feel about the concept now? 

Are they still comfortable with possibly retiring early with little or no room for error? 

Or is my idea that there is little or no room for error an error? -.-" 

Oh, yes, I know what you mean by "poverty" living. 

Rich people laugh at me for saving small sums of money! 

They say I have a poverty mindset. (TmT)


Thanks for encouraging me to continue blogging.

If I were to retire fully from blogging, everyone who regularly eavesdrops on me has lots of alternatives available now. 

In recent years, while I was hiding in my gaming cave, to borrow a phrase from Keng, so many new personal finance/investment bloggers and also YouTubers in Singapore popped up. 

Really, the only constant in life is change and this is a good change.

In recent years, I have been cutting back on social engagements and even the number of ways people could get in touch with me became very limited.

I am one step away from being a hermit.

I enjoy spending quality time with myself a bit too much, maybe.

Well, although I have been a semi retired blogger in recent years, a full retirement isn't happening yet. 

Yet. ;p

I still enjoy blogging and, now, I even enjoy experimenting with YouTube video production. 

Old dog learning new trick. ;p 

So, I will stick around. 

I have decided to publish my response to your comment as a blog because I believe it should have a wider audience. 

I want to share an important point and a not so important point here. 

1. AK doesn't know everything and could be wrong about Lean F.I.R.E. 

2. AK is a semi-retired blogger and a new YouTuber who is just having fun. 

Agree or not?" 

Recently published: 

Avoid Lean F.I.R.E. and struggling with higher costs.

Avoid lean F.I.R.E. and struggling with higher costs.

A few months ago, I blogged about F.I.R.E.

More specifically, I blogged about lean F.I.R.E.

I said that some people would retire early once their passive income is able to cover their basic necessities in life, leaving very little or no room for error.

I cautioned against lean F.I.R.E. as I thought it was pretty shaky.

Of course, regular long time readers know that I like having buffers partly because I am mental but mostly because I think having a crisis mentality is not a bad thing.

I used an example of how I got pretty worried during the COVID-19 pandemic when both interest income and dividend income took a hit.

If I did not have sufficient buffers, I would probably have had to look for a job.

It would have been very difficult in a very challenging environment.

It would probably also have been very difficult because I was much older and have been out of the workforce for many years.

Why am I blogging about this now?

The catalyst for this blog was something I read this morning.

A F.I.R.E. movement pioneer who retired early 10 years ago at age 34 now says he must return to work.

Why?

He cannot afford his children's college education now.

I always say that kids are very expensive to bring up in Singapore. 

An estimate which I did almost 20 years ago showed me that it would cost some $250,000 per child from birth to graduation day at a local university. 

I am sure that the figure is much higher today.

It is so important to think ahead when we plan for F.I.R.E. or anything in life, really.

Think what could go wrong and what happens if we should have an accident or a few along the way.

Maybe, we planned to have two children but got lucky and were blessed with triplets or quadruplets.

It sounds a bit amusing when I say this and we might laugh at it, but it could throw a spanner in the works, especially if we are on lean F.I.R.E.

After being retired for 10 years, it would probably be a challenge to return to the workforce.

Our skills or knowledge might have become obsolete or our old position might no longer exist.

Structural unemployment is very real.

Even if we are not obsolete, we would probably have to compete with younger and probably more energetic people for the same job.

They would probably be able to settle for lower salaries too.

Costs are rising and people on lean F.I.R.E. might be able to cope if they rise slowly but if they should rise rapidly like what has happened in the last one year, it could become difficult or even impossible.

I would avoid the various forms of F.I.R.E. which are along the line of lean F.I.R.E.

I don't like to live life with little or no room for error.

This is why people who follow the Y.O.L.O movement, believing that they should live life to the fullest, can ill afford mistakes.

Things do go wrong like they sometimes do.

I always demand a greater margin of safety for peace of mind.

What about you?

Related post:
F.I.R.E. lean or shaky.

Comments section of the blog
on Mr. Lee Kuan Yew.

Recently published:
1. Mr. Lee Kuan Yew's wisdom.
2. Obsession with salaries.

Mr. Lee Kuan Yew on impressing people. Latest videos.

Mr. Lee Kuan Yew said this in 2011.

"I see no reason why I should impress people by having a big car or changing my suits every now and again to keep up with the latest styles.

"I've got many new suits that are absolutely in good condition because I seldom wear them.

"In fact, the older I get, the less willing I am to spend time putting on a suit and tie.

"I just have a blouson or a buttoned-up Chinese jacket, and it saves a lot of trouble.

"I have had them for many years and they are very comfortable."

Latest videos by AK production house:

Have a good weekend!

Recently published:
Why do we obssess with salaries? Why compare?

Related posts:
1. Mr. Lee Kuan Yew said China could become pushy.
2. Why I have been silent on Mr. Lee's passing?

Bankrupt before 30. Is this a trend? Don't let it happen!

This blog is just some stuff for my pensieve.

I know that being on the verge of bankruptcy is not fun. 

I am talking from experience. 

Becoming bankrupt must be a lot worse. 

The combination of high inflation and very high interest rates is expected to send many economies into a tailspin. 

Bankruptcies are expected to increase. 

Allianz Trade estimates that bankruptcies will increase globally by 19% in 2023. 

Bankruptcies in Australia increased to 238 Companies in February 2023 from 175 Companies in January of 2023. 

The US is expected to experience a 40% rebound with 18,900 bankruptcies. 

If we think this is only happening in places like the USA and Australia, consider this. 

In Singapore, we already saw bankruptcies rose last year in 2022. 

Although the Covid-19 pandemic hurt Singapore's economy, the number of people who were made bankrupt in 2021 sank to the lowest in five years! 

Ministry of Law data shows that 3,648 people filed for bankruptcy last year in 2022. 

That was fifteen per cent higher than the 3,160 applications filed in 2021. 

This comes amid much higher cost of living, rapidly rising interest rates and the loss of pandemic support measures. 

The number of bankruptcies is expected to increase this year in 2023. 

Property auctions and mortgagee sales are, therefore, expected to rise in 2023 on the back of increasing number of bankruptcies. 

I always say that it is not a bad thing to have a crisis mentality. 

Always think of what might go wrong. 

Even though it might not look like it could happen, things do go wrong when we least expect them to. 

Take precautionary measures. 

Limit your exposure. 

If you run a business, evaluate credit limits and terms extended to customers. 

This is especially so for customers who are at risk for bankruptcy or already struggling to pay.

Businesses could be made bankrupt because too many debtors could not pay up.

Don't let other people's problem become our problem.

What I did when I was working as a business manager back in the day was to ask for larger upfront payments and allowing a smaller amount on credit. 

As an individual, although it is important to make sure to have an adequate emergency fund, to avoid bankruptcy, it is more important to make sure we are not over-leveraged. 

An emergency fund is unlikely to save us if we are excessively leveraged when things do go wrong. 

If we are using 60% or more of our earned income to service debt and if we do not have any meaningful passive income, then, we should seriously consider deleveraging.

If we must have leverage, how much is prudent?

Well, I don't know exactly how much leverage we should limit ourselves to in order to be considered prudent.

However, if 20% or less of our earned income is used to service debt, I feel that is relatively comfortable.

It will give us the option to put aside more money, and in an environment where money has a much higher cost, it is not a bad asset to hold.

Why not use all our money to pay down debt?

Well, for most of us, if we do that and if we become unemployed, we are in trouble.

With global recession a greater possibility now, be very careful.

Of course, having less leverage will also give us the option of investing more money when Mr. Market goes into a depression.

We must remember that it is pretty easy to sink into bankruptcy if we are careless. 

In Singapore, bankruptcy is a legal process involving an individual or firm that is unable to repay any outstanding debt of at least $15,000.

Only $15,000.

Don't Y.O.L.O. 

Don't be like an ostrich sticking its head in the ground. 

There is no automatic way to be released from bankruptcy in Singapore. 

The good news is that bankruptcy is avoidable. 

How? 

To me, it is simply being careful and not to do anything financially irresponsible. 

I saw in the news that the young in Singapore are increasingly relying on credit card debt. 

There is also a growing "buy now, pay later" culture. 

These generate sounds of ticking time bombs to me. 

This is the story of a young person who was declared bankrupt before turning 30 years old. 

He got his first credit card soon after graduating. 

He was excited when he got the card and took it as a sign that he had arrived. 

Soon, he found how easy it was to spend money or, more accurately, future money. 

Scratch that. 

It was simply money he didn't have. 

Then, came the interest free repayment offers. 

No interest for 12 months? Really? 

He maxed out that card and applied for a line of credit. 

Rinse and repeat. 

Before long, he had a mountain of debt. 

How does one who is making $2,500 a month get out of a $50,000 debt pile? 

Warren Buffett famously said the following to people, especially those with credit card debt. 

"I think people should avoid using credit cards as a piggy bank to be raided." 

We have to be financially prudent before we can work towards financial freedom.

Recently published:
1Q 2023 passive income.

Reference:
Survivability and opportunity.

Singapore to split apart? Who to blame?

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.

Related posts:
1. Average income workers can be rich too.
2. More passive income than richer friends.
3. Don't make difficult times more difficult.
4. Survivability and opportunity.

Do you give parents enough money monthly?

In a blog published many years ago, I said that I was lucky that my parents didn't ever ask me for money.

If you are new to my blog or do not remember, here is the link to the blog:

How did AK achieve financial freedom?

However, I have also shared in my blog in recent years that I was providing my parents with financial support.

Sounds contradictory to what I said many years ago?

Well, my parents didn't ask me for financial support.

I offered.

The thing is if we are blessed with good parents, they usually try not to burden us, their children.

They might just tighten their belts or make some pocket money doing some part time work.

If we are good children, we wouldn't want to see our parents do that.

They have labored to provide for us children till we became independent and, in their golden years, it is our turn to make sure they are at least financially comfortable.

I believe that this is the least we can do as children.

Anyway, the catalyst for this blog was something I read online.

The author asked how much money did people give their parents? 

He said he gave his parents 10% of his salary monthly. 

The amount was $400 a month.

Source: theindependent.sg

The blogging bug bit me when I saw that.

If the author's parents were relatively well off and he was just giving them a monthly allowance to express his filial piety, I think his method would be OK.

Method?

Yes, setting aside a fixed percentage of his monthly pay to give to his parents.

Otherwise, it seems pretty arbitrary to me.

It's like saying, 

"Hey, don't say I don't give you any money, OK?"

Don't get me wrong as it is better than not giving any money at all.

It would be more meaningful, however, to find out what our parents' needs might be financially and if we could do more to help.

Also, simply giving parents money might not always be the best way to help them.

Helping them pay recurring bills might be a better idea, especially if we want to make sure that the money is being used properly.

Some people are just not very good with money.

Both the giver and receiver would have peace of mind this way.

Hopefully, not having to worry about recurring expenses, our parents would have sufficient resources of their own to take care of their daily expenses.

Otherwise, we might have to provide financial support to defray their daily expenses too.

Then, it might also be a good idea to set aside an emergency fund for our parents, especially if they do not have one.

Things do go wrong like they sometimes do and unexpected expenses do pop up. 

Being prepared for a rainy day or, worse, a storm is never a bad idea.

So, what about me?

Well, I don't set aside a percentage of my passive income to give to my parents.

I also do not give them money monthly but I do give them relatively generous red packets on Father's Day, Mother's Day and their birthdays.

That's the only cash I give them.

I can hear some long time regular readers asking questions now.

Yes, in a blog which I published in August 2022, I revealed my updated budget.

In that blog, I said I would be setting aside $48,000 per year from my passive income to provide financial support to my parents.

Most of the money would go to helping them pay recurring expenses and the biggest ticket items are H&S insurance premium, property maintenance and property taxes.

Up until recently, recurring expenses also included mortgage payments.

Thankfully, the final housing loan was fully paid in 2H 2022 and I paid the legal fees to discharge the mortgage as well.

To be honest, $48,000 per year has quite a comfortable buffer as the amount I set aside for parental support was $40,000 per year before.

So, what about the amount in excess of annual red packets and paying recurring expenses for them?

Well, I could increase the size of their red packets henceforth.

However, being a worrier, most of the excess would go into the emergency fund I have set up for them.

I have blogged about the importance of having an emergency fund and how mine was big enough to cover 24 months of routine expenses not just for myself but also my family.

However, I have not blogged about how our emergency fund should also keep pace with inflation, if my memory serves me right.

If we have set up an emergency fund a few years ago and if we have not looked at it since, maybe, it is a good idea to check if it is still as robust as before.

If you are new to my blog or need a refresher, read:

Emergency fund.

So, how much money am I giving my parents in percentage terms?

Well, this number is going to be different from year to year since my passive income is going to be different each year.

My passive income for 2022 totaled S$205,999.

$48,000 is about 23% of that total.

To be sure, I am not telling anyone how much money they should give their parents.

I am definitely not saying that I am 10x better than someone who gives $400 a month or $4,800 a year to his parents.

We most probably have different circumstances and, in some cases, quite possibly, very different circumstances.

However, instead of asking how much money are you giving your parents monthly, perhaps, the author of the article which was the catalyst for this blog should be asking are you giving your parents enough money monthly?

I am going to take shelter now.

Just talking to myself, as usual.

Related posts:
1. Inflation, passive income and my budget.
2. 4Q 2022 passive income.

Emergency fund, float & convenience cash. Buffers.

I blog about emergency fund from time to time. 

I have mentioned having a float at times too but not as often as my talks to myself on emergency fund because I didn't think it was as important.

Why?

Well, know it or not, all of us have a float.

Just like an emergency fund, it just varies in size for each of us.

Not everyone has an emergency fund and I suspect most don't have one or an adequate one.

However, I suspect that, unless extremely financially constrained, all of us have a float.

Now, I am not using the word "float" very strictly like a finance professional would.

In finance terms, a "float" is money that appears in two accounts at the same time as the money is being transferred from one account to another.

What I refer to as my float has a similar flavor but with a larger temporal window.

My float is money which I have on hand which is farther away than "convenience cash" which is money I keep at home and, therefore, nearest to me. 

However, money in my float is nearer than money in fixed deposits.

Yes, it is money in my savings and current accounts.

My float is really a form of convenience cash but just not as convenient.

Although not as large a sum as my emergency fund, the float is still around $100K at any one time.

The float exists so that I have ready funds to make routine monthly and quarterly online payments or whenever they are required. 

The float also exists to honor monthly and yearly GIRO payments which I have in place.

So, the money in my float is money which has been earmarked for various payments to be made in the future.

Yes, the float is to fund consumption.

Admittedly, my float could be smaller as I am not excessive by most standards when it comes to consumption. 

However, I was serious when I said I was mental on multiple occasions.

Buffers allow me to sleep better at night.

Having a larger float gives me another buffer.

What this also means is that in case of an urgent need for a relatively large sum of money in my family, I have money which can be deployed immediately.

However, my float alone isn't sufficient as an emergency fund which must be able to cover many months (and in my case, it is 24 months) of expenses for my whole family in case our cash flow goes negative.

Anyway, to be used in an emergency is not the primary purpose of my float but it could be used to plug sudden one off financial gaps.

My float is really wearing many hats.

So, the term "float" is pretty apt as the money can go wherever it is needed especially when it has a comfortable buffer.

Why am I blogging about this if I thought it wasn't important before?

I was thinking about random stuff and quite suddenly felt like doing it. 

I just thought "why not?"

If anyone should ask me what I meant by having a "float" in future, I would have a blog to point them to.

I hope I am right when I assume most people have a float just like me and that I am not being more mental than usual.

Do you have a float, oppa AK style?

References:
1. Emergency fund.
2. Convenience cash.

SSB, T-bill, CPF & UOB ONE. Use them. My plan.

A few months ago, I said that it made more sense for me not to do voluntary contributions to my CPF account and to buy Singapore Savings Bonds (SSBs) instead. 

That was when Singapore Savings Bonds were offering 10 year average yields of more than 3% p.a. and it happened for 3 months in a row in 4Q 2022.

Money meant for voluntary contribution to my CPF account in January 2023 were all very nicely deployed into SSBs without any leftovers.

This year so far, SSBs have been offering lower than 3% p.a. in 10 year average yields which is less attractive than the what my CPF account offers.

Of course, what the CPF offers each of us is different based on our age group and how much we have in the Medisave Account. 

The percentage allocation to the Ordinary Account, Special Account and Medisave Account would be different from person to person and could result in a different average interest rate for each of us.

Anyway, before I veer farther off track, if the SSBs continue to offer a lower than 3% p.a. in 10 years average yield for the rest of the year, I am not worried as I would resume voluntary contribution to my CPF account then.

I could do this in the month of December instead of waiting till the new year which was what I had to do in years past.

This is because I have yet to do any voluntary contributions this year, of course.

So, one month in advance for a one month extra interest income.

For now, I will wait and see what the SSBs will offer in the months ahead all the way till December.

After all, the Fed is not done raising interest rate yet with probably a couple more hikes incoming.  

I know many are saying that inflation has been tamed but if inflation in the USA remains elevated, there could be more than just a couple of 0.25% hikes left to go. 

In such a case, we could see yields going higher especially if the US dollar strengthens against the S$.

In case you are wondering why the strength of the S$ is a relevant consideration, it is quite simple. 

A stronger S$ means our country would not have to offer higher yields to compensate bond holders because the S$ is more valuable and bond holders would gain from the exchange rate.

I am veering off track again.

Anyway, what is the plan or, more accurately, my plan?

1. Set aside $42K from my passive income generated this year for voluntary contribution to CPF in 2024.

Money meant for voluntary contributions can be deployed in December 2023 while money for top up to the Medisave Account will be deployed in January 2024.

2. Wait and see if SSBs offer more than 3% p.a. in 10 year average yield in the coming months.

If they do, deploy funds meant for the CPF in 2024 into SSBs instead.

If they don't, use the funds to get 6 months T-bills as long as the yield curve remains inverted which means the front end of the curve remains more rewarding.

Total amount to be deployed this way is $38,000.

3. The strategy of using 6 months T-bills can only extend till June or July 2023 because I will need the funds to be ready for voluntary contribution to my CPF account in December 2023 or January 2024.

If SSBs continue to offer lower than 3% p.a. in 10 year average yield from August to December or the last 5 months of the year, any money meant for CPF voluntary contribution coming in after July 2023 will have to sit in my UOB One Account.

I do not enjoy the highest tier interest rate offered by UOB One Account as I do not have any earned income to credit. 

However, it still offers a relatively attractive interest rate at least for money which cannot be locked up for a few months.

All I have to do is to spend $500 on the UOB One Card and have 3 monthly GIRO transactions.

I meet these conditions every month, anyway.

If you are new to eavesdropping on AK, I do have a significant exposure to equities while the CPF, SSBs and T-bills together form the fixed income component in my portfolio.

See:
Banks and REITs dividend machines? T-bills, SSBs and CPF?

I am mental and this blog is really more for myself as I don't want these thoughts to keep circulating in my mind.

You have been warned.

I use my blog as a "Pensieve."

What is a "Pensieve?"

You didn't watch the Harry Potter movies?

"The Pensieve was a magical device used to review memories." 

Source: Harry Potter Wiki.

My mind feels lighter now.

Recently published:
Changes to portfolio in Jan 23.

Related blogs:
1. CPF or SSBs?
2. Growing passive income?
3. $1.1m in CPF savings!