CPF fake news and financial prudence.

When we use our CPF-OA money to purchase a property, we must be aware of the opportunity cost that comes with the decision.

When we use our CPF-OA money to purchase a property, we are losing out on interest payments made by the government to us.

Despite what some people say, we are not paying interest to the CPF for using our CPF savings in the purchase at all if we should sell the property with a capital gain.

We are, in fact, paying ourselves interest (to our CPF account) for the CPF savings we have utilised in the purchase of the said property.





Now, what if we made a loss from selling the said property?

Would we have to top up our CPF account to make up for the capital loss?

Alamak!

Real or Not?

Don't listen to hearsay!

Beware the fake news!

Watch this video for the answer:







As property prices have risen a lot in the last 10 years, some people find it hard to believe that there is a possibility that property investments could go horribly wrong in Singapore.

Well, they have gone horribly wrong before in the past and they could go horribly wrong again in the future.

The possibility exists.

We have to remember that not everyone has the ability to handle such a possibility even if they have the willingness to do so.

Those who have been swept away by euphoria and paid prices too high should beware.

Buying and thinking that property prices can only go up is speculation.

With the enormous price tags of private real estate here in Singapore, it is not an overstatement to say that it is speculation on a relatively large scale.






People rarely make money buying real estate in a market euphoria but they usually make money buying when Mr. Market is depressed.

Also, people do lose their jobs and for those who are financially leveraged to the max, it could be hell on earth.

Unless we have deep pockets, it is best not to participate as just one mistake could sink us.

Remember not to ask barbers if we need a haircut.

For sure, no one cares more about our money than we do.






For most of us, unless we are very rich already, our CPF money is our ultimate safety net in retirement funding.

The fact that we don't have to top up our CPF savings if we make a loss in the sale of our property doesn't mean we should just anyhow use our CPF savings to anyhow buy a property or, indeed, multiple properties.

This is not "masak masak".

Don't "suka suka".

Financial prudence might not make us rich fast but it will ensure we avoid painful falls, some of which we might never ever recover from.






1. Everyone needs to learn financial management skills.

2. Everyone wants a higher standard of living.

3. Everyone needs to think of all the bad things that could happen to them.

If you find this unfamiliar to you, you are probably rather new to my blog.

If you are interested to find out more, read the story:

From rich to broke?





Related posts:
1. Buy property in Iskandar, Johor.
2. $500,000 in bad property investment.

Voluntary contributions to CPF in January 2020.

Remember the blog I published two years ago in January 2018?

Which blog?

This blog:

8 years AAA bond with 2.5% and 4% coupon!

I was referring to a AAA rated sovereign bond.

Know where to find such a bond?

Pause.

Pause.

Pause.

Regular readers will know that I was talking about the CPF, of course.

Guess what?

This "bond" is even more attractive to me now!

Why?

It is more attractive to me now because the tenor has shortened by 2 years and the coupons are still 2.5% and 4%!






Get the same coupons from the same bond but for a shorter tenor?

What an attractive deal!

You know what people say about Singaporeans loving to queue for deals?

Willing to join long queues to spend money on things like stuffed toys (think Hello Kitty) or mobile phones (think Huawei Y6 Pro)?

OMG!

These people are crazy!

Overnight queue for BTS Singapore concert merchandise?


Madness!







So, is AK saying we should queue to do voluntary contributions to our CPF instead?

Alamak, you don't know?

We don't even have to queue!

Just do everything online!

Amazing or what?

OK, I know.

I say you crazy.

You say I crazy.

Now, why not ask if you would rather be 

crazy and poor 

or would you rather be 

crazy and rich?


See:
Do online contribution to CPF?

Wait.

What?

You don't know why it is a more attractive deal for me now?

Basically, the closer we are to 55 years old, the more attractive the "coupons" become as the waiting time is shorter.

Chop, chop!

M.T.L.

Yes, I have made voluntary contributions (VC) to my CPF accounts (OA, SA and MA) this month.

The CPF Annual Limit for 2020 remains at:

$37,740.

So, a $2,800 VC to my MA.

Then, a $34,940 VC to my OA and SA.

Yes, AK bought a 

"6 years AAA rated sovereign bond with coupons of 2.5% and 4%" 

this month!






Why make maximum VC this month?

The idea is pretty simple to the economically inactive AK.

Hit the CPF annual contribution limit in January each year to get the most interest income possible.

Remind myself again to think of it as having bought AAA investment grade sovereign bonds that pay 2.5% (OA) and 4% (SA and MA) coupons!

"Spend less than you make; always be saving something.

"Put it into a tax-deferred account.

"Over time, it will begin to amount to something.

"This is such a no-brainer."

- Charlie Munger






I plan to keep doing what I have been doing with my CPF because I want it to "amount to something" by the time I am 55.

I know some readers want me to show my CPF numbers.

Patience.

Look out for an upcoming blog on what my CPF savings has amounted to so far.

This will happen probably before the end of this month.

Yes, soon, it will be time to see our pies. ;)

If you are absolutely clueless, please read the blog I hyperlinked at the intro of this blog for a more detailed reasoning as I do not want to repeat myself (too often) lah.








Related posts:
1. How to grow our CPF savings!
2. 4 ways to boost our CPF savings.
3. VC to CPF-MA in 2020.