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:

A "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.

Flats with remaining leases of less than 60 years are problematic. (Financing the purchase of a HDB flat, new or old.)

I revealed in my last blog post that I have been exploring HDB's website and there is really plenty of useful information for anyone who is thinking of buying a flat, new or resale.

One question that some might wonder is whether they can afford a flat. 

Another question some people might wonder is how much of their CPF-OA money can be used to pay for a flat.







I would like to share what I have found with anyone who might be interested:

"Some measures of housing affordability use the Home Price-Income ratio (HPI), where a figure of 6, for instance, would indicate that the property being purchased is priced at six times the buyer’s current annual income.

"In Singapore, HDB uses the Debt Servicing Ratio, or DSR as a more accurate indicator of actual housing affordability. The DSR refers to the proportion of the monthly household income set aside for housing instalments.. This measurement takes into account interest payments, which the HPI does not. It is calculated on an assumed 30 year loan, and the figure would rise if the loan tenure were shortened.





"HDB’s commitment to Singaporean households centres on the provision of new BTO flats. A typical first-time home buyer of a new flat in a non-mature estate used on average, less than a quarter of their monthly income (at the point of application) to pay for their housing loans. This means that most buyers are able to pay for their monthly instalments using CPF, with no or minimal cash outlay. 

"For example, a buyer, with a lower monthly income of $2,500 may opt for a smaller 3-room flat in a non-mature estate, to be financially prudence. This buyer will only need to come up with a very minimal cash outlay of $4 for the monthly instalments."

Click to enlarge table.
Source: HDB speaks.

Actually, it is all about being financially prudent. 

Some people had trouble with money because they overstretched their finances, over-consuming on housing, and it usually happens during the boom years because stories of how people made tons of money selling properties would be plentiful. 

Being greedy at the wrong times and getting the purchase of a property wrong is likely to tie us down and hold us back for a long time.





Of course, it really doesn't pay for us to keep up appearances. 

Living below our means might not be glamorous but, financially, it will give us a lot less to worry about.

What about the amount of CPF money we are allowed to use for the purchase of a flat? 

Generally, there is less of an issue, if any, when purchasing BTO flats with fresh 99 year leases or resale flats with remaining leases of 60 years or more.

The problem is with the purchase of flats with remaining leases of less than 60 years. 






In fact, for flats with remaining leases of less than 30 years, CPF money cannot be used in their purchase at all.



I have a found a very nice info-graphic to help explain this:

Click to enlarge.

Source: Using CPF for a property.

So, as conventional wisdom goes, if we are considering the purchase of a resale flat, try to avoid very old flats especially if we want to keep the option of reselling the flat open. 





If our flat should have a remaining lease of less than 60 years by the time we want or need to sell, it could be more difficult.

Searching for solutions to a reader's predicament has led me to learn quite a few things and I hope you have found this blog post useful too.

Related post:
Retiring comfortably with a HDB flat.