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STE: "I lost money enough to buy a 5 room flat in 2015!"

Wednesday, January 6, 2016

I always enjoy reading STE's very thoughtful guest blogs. Regular readers would know who I am talking about.

If you are new to my blog, you might want to read STE's other guest blogs as primers. You will find his name in the left side bar of my blog under the heading "Guest Bloggers".

Here is STE's latest contribution:


Honey, I lost a 5 room HDB## value in our stock investment in 2015!

Yes, that’s how our portfolio value fared as compared to Dec 2014 …but honey, don’t worry, market is such volatile in nature and this decrease is quite mild as compared to real crisis time e.g 1998 / 2000/ 2008 etc, which any portfolio value could be wiped out by 40 – 60%.

“But how about next year’s performance ?”

Well, we don’t have “ crystal ball “ to make any forecast, it might be better or worse . If anyone said they could give you a forecast or figure on stock’s performance next year, just listen with wide smile and walk away quietly .

Market is “random “ in short term and we should not be “Fool by such randomness “ ( read the book by Nassim N Taleb and Burton G Malkiel ). As I said, market could be worse or better next year, it could have another double digit drop in STI by end 2016!  It is anybody’s guess (read the book by Nate Silver ,, The Signal and the Noise ).

“In such volatile market, do we need to sell our share to avoid further loss in capital?”

Well , it depend on the stocks in your portfolio, any selling should be done based on changes of fundamental or underlying business of the stock and not the price. Panic selling based on price will not be good or help in your long term investment journey. We might be tempted to sell in panic ( read the book by Jason Zweig : Your Money and Your Brain and Richard H Thaler : MisBehaving ) but beware of the consequences of “market timing  as it may affect long term return of your investment .

“Well , you said investing in STI Index fund should be more stable and less risky, giving us around 8-9 %  average return p.a in the long run but why STI is down by more than 13% this year? Is Index investing safe?”

Ummm…. 8-9 % Index return (market return)  is being drawn on very long horizon (say 20-30 years). As mentioned, market is very volatile in short term, it can fluctuate from – 20 to 30% to  + 20 to 30% at any time.

Even in index investing, we should not lose faith in such investing strategy due to short term market volatility. Well, this is the “ Flaw of average “ ( Read the book by Sam L Savage : The Flaw of Average ). We tend to take the average figure by granted, eg we “anchor “ the figure of 8-9% return as benchmark of our return, but that average figure derive from long period of time .




“ What should we do if our portfolio value down by another 20%-30% next year? We may lose the value of a condominium then? “

Well , remember the concept of “ Mean reverting “ in my earlier post here in ASSI? The market moves in cycle and tend to revert to mean.

As mentioned earlier, “volatility “ should not be purely associated as risk … opportunities for profit are inseparable from RISK.





Honey, we deployed some of our cash to buy some stocks in 4th Qtr 2015, well , price may drop further , really nobody knows but we see some value based on historically and statistically speaking . 

We often asking what will be the return of our investment in coming months or years.  But the more appropriate question to ask should be: “what will be the chances / probability of having returns in coming years.”

Allow me to quote: "Investors want certainty, and we cannot give them certainty. We can give them high probability; we cannot give them certainty" by Charles William Hamilton.

Statistically speaking, if market down by another 20-30%, chances of rebound in following year will be high if we could hold it for much longer period ( not using much leverage in stock investing ). We should deploy more cash if that really happen as what we did in 2009/2010.

Long term Market return of SP500 from 1924 till 2012:





“Do you think now is right timing for us to put our money into the market?”

Well honey, again, investing is about 3M = Market , Mind and Money Management.
 
Market :

As mentioned , market is volatile and unpredictable in short term , but we can see the trend in long term.

Market is not really cheap or deviate very far from long term mean / regression line but at the same time market is also not in very high valuation from long term mean. That’s why I said not too cheap and also not too expensive. Statistically speaking, it could down much from current level if real crisis hit . That’s why we are not deploying all our cash into the market at this point of time.

Always have “margin of safety “ and remember,  
market could be irrational much longer than your think. 
Buying at market PB of close to -1 SD will definitely give us
some margin of safety.
 
90% of market movement in the short term is by psychology and only in long term , it shown an upward trend due to increasing economic value by demographic / technology innovation / productivities etc.
 

Mind :
 
Andre Kostolany, Germany's Stock Market Guru, said "Psychological create 90% market".
 
Investment is driven by "Psychology and full of Fear and Greed". Be a stoic investor and minimize our “Emo and Ego” throughout the journey of investing.




Understand the pitfalls and shortcomings of our Mind will help ( read book by James Montier : Behavioural Investing ) to know better about bias  ( Confirmation biases / Over-Confident / Anchoring / Loss Aversion / Endowment effect / Mental Accounting / Money Illusion etc ).

This might avoid common mistake of “selling in panic / buying hot stock / keeping loss stock (even knowing Fundamental has change and hoping for rebound ) / trading too much / looking at 52 weeks high / low as selling or entry price etc.
 

Money Management :

As I mentioned in earlier post, understanding our Cash Flow / expenses/ debts level  is very important even before we talk about Investment.

"Well, honey, don’t worry, we still have positive cash flow even our stock value dropped by that much. We could still save more than 60% of our “portfolio income “ after all expenses in 2015."

We live like it is before my “sabbatical leave “ in Nov 2014 , we manage our expenses by not spending on things beyond our mean. Our standard of living has remained the same.

Life is about making choices and what kind of life style we want is a choice. Everyone has expectations on the life they want to live with. We cannot really say my life style is good but it suits my expectations.

We are happy that we could go on 3 holidays and have more quality time with our kids in 2015 since my early retirement.

Honey, some people said “dividend income “ is just from “right pocket to left pocket “ due to price change after XD, what do you think about this ?

Ummm… is quite subjective. Let’s see if I could explain better based on my own understanding.

 
Well, at least some institution or government agency do not recognize “dividend“ as income. I have seen this recently in one of the blogs post that he is facing problem is explaining “dividend“ as income in getting his domestic helper since there is no CPF contribution from employment or IRA’s statement to show that.

"Honey, we may face the same problem since these agency / financial institution do not recognize “dividend “ as income"
(hahaha.  that’s just side joke …but is true and facts.)

Well, you may notice that I use “portfolio income“ and not “dividend income“ in above mentioned. Dividend from stocks is just part of the income generating from one of the asset class. Income can come from Fix Deposit with bank / rental from housing / interest from Bond etc .

Each asset class is having their own Risk/Reward characteristic. Even cash or FD is subject to risk of value depreciation due to inflation and bond also could subject to default by issuer .

With stocks, we could see prices fluctuate second by second. We don't see this fluctuation when collecting rental from real estate which we rent out, for example. We don’t get quotation on the value of our house minute by minute (since we do not intent to sell it).

Stock prices are not static. Sometimes, stocks can be overvalue or undervalue. In an extreme example, if price stay at $1 and the company announce 10cts of dividend each year, price adjust after ex-d, will the price become –ve in Year 11? No, as people will see the value from the asset which generated the consistent cash flow and reflect in stock price eventually. It is not a zero sum game. Well, accounting is useful but sometime is not meaningful.

It would be more practical to look at the capability of the underlying business in generating the “cash flow“ to pay out the dividend or is the dividend declared from cash flow derive from “debts“ or other source of “creative accounting “.

As AK mentioned, a “Healthy cat“ is more important than “regardless white cat or black cat , if it could catch the mice“.

Lastly , look at our cash flow and spending money wisely is more important than defining the “cash flow“.

Appendix :
STE's Portfolio Income generated from share (exclude Bond / FD /CPF) in 2015 : $ 180,454



** We should  treat CPF interest as part of our total income as this will be our money eventually .

We continue to do voluntary contribution in 2015 although we don’t have contribution from employment .

Combining average interest of around 3.1 % (OA/SA/MA) is rather high since we treat it as AAA low risk bond rate .

Well, this another “margin of safety“ in our portfolio, with combine interest of more than $20+ K p.a from CPF, this would gave us another $ Mil upon reaching our withdrawal age of 55 .

 
“We will be fine, honey! You know, we are very “kia shi“ type of people that having more than 30 stocks in our Portfolio as we diversify across sector and industry.” This is to ensure that we will not have any problem in case any counter went “kapuk“ in our portfolio since it will not take more than 8% of our total value.

Well, same time we will not see our portfolio value growth much since it is very diversify and a ten bagger in our portfolio will not increase the value much. Again, it suits our investment strategy.

Lastly, wishing all A very Happy and Prosperous New Year in 2016 and hope all will have a very successful investing journey ahead! Cheers!

A big thank you to STE for this guest blog which is loaded with wisdom.

Related posts:
1. Invest for income and ignore the two Ms.
2. What to do as stock markets crash?
3. AK is showing off his CPF-OA and MA.

AK is showing off his CPF-OA and MA numbers.

Monday, January 4, 2016

A reader said he shared my update on my CPF-SA with his elder brother and his brother was not only incredulous but called me a show off. 


I consoled the reader by saying there are many different people in this world and they will not all react in the same way.

Having said this, I must say that it took a lot to get me out of my comfort zone to share the numbers. They should be confidential. 

However, because AK's identity remains largely a secret, he has some protection. With all the numbers out in the open, AK will need his anonymity even more.


When I share personal numbers and they could be my passive income, my CPF-SA, OA, MA or even my body weight, I am sharing important messages. 

What people wish to focus on and how they want to interpret the blog posts, I have no control over.

Now, at risk of being labelled a show off once more, I am sharing numbers for my CPF-OA and MA. Again, there are important messages here:





What are the important messages? I won't repeat myself. If you are interested:

See my message on the CPF-OA: here.

See my message on the CPF-MA: here.

Of course, for the recent blog post on my CPF-SA savings (here), the most important message was that the magic of compounding takes time to work and giving it a boost by injecting more funds in the early years, it gets even more magical.

Alamak, I just repeated myself.

I am glad that talking to myself has helped many people. I used to feel somewhat sad but I guess I have to accept that there will always be many more who ASSI cannot help because they refuse to help themselves.

So, go ahead, share the messages but don't feel down if the reactions are negative. At least, you have tried.

Related post:

An update on AK's CPF-SA which outperformed in 2015.

Sunday, January 3, 2016

Exactly one year ago, I shared my CPF-SA numbers, as a friend put it, to shock and awe the most cynical of readers into action. 

I think it worked as that blog post has received almost 400 FB Likes so far and also generated quite a bit of discussion.

Last month, I receive a request from a reader:




At that time, I was not sure that it would be helpful to share my CPF-SA numbers one year on but, on second thoughts, it could be a good idea. 

After all, the shock and awe generated by that blog post a year ago could have worn off by now.






So, here are the numbers:




"VC" stands for voluntary contribution. 

AK is not allowed to do Minimum Sum (MS) Top Up to his CPF-SA anymore as he has exceeded the MS.

There was a "VC refund" for excess contribution made the year before. 






I blogged about it here: 
The CPF is a national PONZI scheme.

So, I received a full year interest of $8,210.28 for my CPF-SA savings. 

The interest I receive yearly, I believe, would more than cover the planned 3% annual increase in the MS, now the FRS, from year 2018.





To find out more about the BRS, FRS and ERS, read this: 
Proposed changes to the CPF system.


All of us should try to benefit fully from the CPF system and make our CPF savings a cornerstone of our retirement funding strategy. 

To me, it is really a no brainer.





The CPF outperformed the S&P 500 and the STI in 2015. S&P 500 was flat. 

The STI declined 15% and Barclays junk bonds ETF dropped 12%.
Source:
http://www.cnbc.com/2015/12/30/singapores-cpf-saving-plan-beat-markets-in-2015-with-steady-returns.html


We should always make room for a risk free and volatility free component in our investment portfolio. 

What might that be? 

I am sure you know the answer.





(If you are new to my blog, you might want to read related post number 1 below.)

Related posts:
1. A lot of money in my CPF SA is... 
2. 2016 changes to the CPF and SRS. 

2016 changes to the CPF and SRS for a better retirement.

Saturday, January 2, 2016

I was reading the papers on changes to the CPF and SRS which took effect on 1 Jan 2016 and thought to myself that working Singaporeans are a lucky bunch.

If you are a middle income worker, rejoice because mandatory CPF contributions by both employer and employee per month are now based on a higher salary ceiling of $6,000 a month instead of $5,000 a month. Your CPF savings will grow at a faster clip.

If you are a worker between 50 to 65 in age, your employer will now contribute an additional 0.5% to 1% based on your monthly wage into your Special Account (SA). 

If you are 55 years old or older, you will also receive an additional 1% interest on your first $30,000 in CPF savings which means you get 6% interest per annum, risk free!

It would be a good idea for younger readers to communicate this change to their parents. If at all possible, consider topping up your parents' CPF SA or MA if they do not have that first $30,000 in their accounts. 

We really should not pass on a 6% annual return from a AAA rated sovereign bond!


A comfortable retirement need not be a dream.

As for the SRS, the ceiling is raised to $15,300 for Singaporeans and PRs. It is $35,700 for foreigners. So, if you pay plenty of taxes each year, this is another tool to help pay less in income tax.

I think it is important to count our blessings and not keep complaining. Probably, there is more than a handful of people who think that the changes are not good enough. Fion Lau, 41, said that the changes do not go far to provide retirement adequacy.

Well, I would like to remind Fion that the CPF is, like I always say, a cornerstone in our retirement adequacy strategy. It is not the entire foundation.

Related posts:
1. SRS: A brief analysis.
2. Retiring before 60 is not a dream.
3. Retirement: Buy a AAA rated bond.

Filial son working hard towards financial security in 2016.

Friday, January 1, 2016

Young people often feel invincible. I am not saying that it is a bad thing but it is important to realise that we are not really invincible and that life will throw problems our way.

So, what to do?

Have measures in place so that the feeling of invincibility has some genuine substance beneath it. Then, the only thing that could destroy us would be Kryptonite...

Sorry, couldn't resist that.

Here is a recent conversation with a very sensible young person:

Hi AK, 

I'm 26 this year. been working 2 years plus all due to due to NS. 


I have been reading your blog for one whole week and i realise you share alot of impt details.


I start to feel very stress when i login to both my parents singpass to check their cpf. both of them are self employed. my dad 58yo, oa and sa is less than 1 k. his ma is have 40k. my mum 56yo, oa,sa,ma all less than 500. they always claim that they have insurance. but after checking from moh site, they doesnt have any H&S insurance at all.

As i earn only 2300 each month. for myself i already brought dps and h&s already. this week i have been meeting AIA, Prud and going to meet NTUC agent next week. i read alot of advise from your blog.

I have transfer all my oa to sa and using excel to calculate how much i gain from SA in the next 25 years. For now, i doesnt have much savings, but i plan to pay insurance for my parents using my MA and giro as well as i plan to apply UOB one card or OCBC frank card to gain more interest. (tips in your blog) however their age is expensive to buy insurance now. but i will check out the enhance income shield for them and buy the maximum age so at least the price is maintain rather than increase if they need to renew.

I just paid 20k for my part time degree. my saving only have 2k now. i did my planning on expense and saving. once i settle my parents H&S and term plan. I aim to save up 5k and start doing s-reits first, then follow by stock to get 4-6% yield each year. but i will also ensure i do my Emergency fund to least me at least 6 mth first.

I am going to finish my studies in jun 16 and i plan to change job, hope to pinch a better pay. I also learn from you, i do freelance designer to earn extra money, recontact iphone and sell yearly to gain extra cash to pay my mobile bills and expense,

I hope you can continue to share more knowledge in stocks and reits. i will spend time to read TA and FA first, and save up money first. Meanwhile waiting for MR market to give us the opportunity to enter a good price when he is depress.

Lastly, i just wish you good health and thank you so much once again. i hope to have the chance to meet the session with you next time. And also i start to share with my frens about oa transfer to sa. but like you said. most of them doesnt bother and feel lazy. so I just ignore them and let them regret in the future. Last of all. wishing you and your family stay healthy and happiness.

Thanks AK. you change my life.
AK's reply:

Hi S,

Welcome to my blog.

I can appreciate your anxiety but you are taking steps to rectify the issues you have discovered. That is a good thing. Of course, it will take time.
Rome was not built in a day.

For your parents' H&S needs, I would like to make a small suggestion that could help you save some money.


If your parents do not mind staying in Class C or B2 wards in government hospitals, there is no need for you to buy H&S policies from any of the private insurers as they only need Medishield Life. It will be less of a burden on your pocket.

I shall look forward to more updates on your journey towards greater financial security. In the meantime, gambatte!



Time is a dwindling resource for all of us. All young people have one big advantage and that is time is on their side.

With the new year upon us, I hope this blog will nudge younger readers to consider their own situations and what action they might want to take to achieve financial security.


Wishing one and all a financially more secure and happier year in 2016!



Related posts:
1. Graduating soon? Think financial security.
2. How much to have in emergency fund?
3. Beef up and achieve financial freedom.
4. Do the right things and transform our lives.
5. Medishield Life and hospitalisation.
(Read related posts too.)

2015 full year income from non-REITs.

Monday, December 28, 2015

Before I reveal the numbers, let me talk to myself about what I did in 4Q 2015, investments wise.

I re-initiated a long position in ARA as I felt that its stock price declined to a reasonably attractive level. 

ARA's rights issue which followed not long after was unexpected but I took up my entitlement and applied for excess rights as I looked at it as an opportunity to buy more on the cheap. I will probably buy more if the stock declines further in price.

Of course, those who follow my blog will also remember another rights issue and that was by Croesus Retail Trust. I too participated fully in that rights issue.

A back of the envelope calculation shows that Croesus Retail Trust is now trading at a 10% distribution yield. 

Croesus Retail Trust has rather high gearing level but if we were to take that away, Croesus Retail Trust is actually still generating more than a 5% distribution yield (i.e. non-leveraged yield) which I think is very attractive for a portfolio of mostly freehold retail properties in Japan. 


As the Trust's unit price declined, I added to my position again in the middle of December at 78c a unit.


I also increased my investment in Accordia Golf Trust as its stock price declined. The last time I did this was in mid-December at 51c a unit.


Investing in Accordia Golf Trust, we must realise that weather plays an important part in its performance. So, we have to expect its revenue to fluctuate quite a bit seasonally, much like investing in hospitality REITs.


With sentiments pretty negative, if Mr. Market were to offer me meaningfully lower prices, I would probably be buying more.




I also did a bit of trading in 4Q 2015. I reduced my long positions in Wilmar and ST Engineering as their stock prices recovered. That gave me some trading gains for the quarter.

I don't trade very much anymore as it requires a bit more work. Now, I might not even look at the stock market for several days in a row.

I added to my long position again in ST Engineering as its stock price declined by more than 10% from my recent selling price. 


ST Engineering is still one investment for income and growth. I definitely want to buy more if Mr. Market goes into a depression.



For those who do not follow my comments section, I initiated a smallish long position in DBS. Some know that I have been thinking of buying into the three local banks for a while and have been waiting for their stock prices to become cheaper.

I chose DBS first because it was trading at the smallest premium to NAV compared to OCBC and UOB. There is also consensus that DBS would be the biggest beneficiary of rising interest rates.

I also added to my investment in SingTel as its stock price declined. We invest in SingTel, Starhub and M1 because they are defensive income generators but with SingTel, there is also a nice element of growth.




Finally, I added to my long position in APTT this month after having left it alone since its inception. The rapid plunge in APTT's unit price up till middle of December seemed excessive to me even though I have mentioned before that a DPU of 8c a year is unsustainable in the longer run.


A much lower DPU of between 4c to 5c would probably be more sustainable for APTT. So, adding to my long position at 63c a unit, I am expecting a more realistic distribution yield of 6.3% to 7.9%.


A more recent development was an expression of interest by a party to acquire Ascendas Hospitality Trust which I included in my income portfolio in 3Q 2014. I have added to my investment on a few occasions since then, as and when its unit price declined.

The last time I increased exposure to Ascendas Hospitality Trust was on 24 August 2015 at 58.5c a unit. With an estimated annual DPU of 5.5c, I was looking at a distribution yield of almost 10%.

Although I hope that the offer is going to be at a fairly attractive premium to valuation, I am aware that if the Trust should be taken private, my income from non-REITs next year would take a hit.


Very safe to show hand like this.

Including my first income distribution from Religare Health Trust (RHT), dividends from my investments in non-REITs in Q4 brings my income in 2015 from them to a grand total of S$76,804.69.

This works out to be about S$6,400.00 a month.

Including the distributions from S-REITs this year, I am pretty satisfied with the total income generated by my investment portfolio.


Related post:
1. ARA: Re-initiating long position.
2. Croesus Retail Trust: Rights.
3. Trading ST Engineering.
4. Religare Health Trust: Entered at 88c.
5. 9M 2015 income from non-REITs.

2015 full year income from S-REITs.

Saturday, December 26, 2015

I did not do anything substantial to my investments in S-REITs in 4Q 2015. I just collected dividends, mostly.

However, it seems that I would be receiving less income from S-REITs in the not too distant future as Saizen REIT looks likely to be delisted as a firm offer of $1.17 per unit was received from a potential buyer.

Saizen REIT is currently one of my top three investments in S-REITs. Off the top of my head, it contributes to around 20% of my passive income from S-REITs.

So, losing Saizen REIT will greatly impact my income level in future, for sure.


Readers who have been following my blog since its inception in 2009 will remember that I was, back then, already a strong proponent of investing in Saizen REIT for income (and for its very cheap valuation).

Needless to say, I ate quite a bit of my own pudding.

So, I have grown somewhat attached to Saizen REIT after so many years. It is like having a good son who has been giving me regular and meaningful pocket money.

Now, this good son is going to give me a lump sum payment which is not a bad thing either but on the condition that there will be no more pocket money in future.

I just have to make sure that I remain financially prudent, I guess. Of course, there is no guarantee of this. Stress...

15A Changi Business Park Central 1.

Did I do anything at all in the S-REIT space?

I did increase my exposure to Soilbuild REIT by about 15%, taking advantage of the weakness in its unit price. I was waiting to see if Mr. Market would sell to me at an even lower price than 73c a unit but it didn't happen. Not for me, anyway.


However, 73c a unit was a fairly good deal and it is still lower price than the additional investment I made in the REIT back in August when stock prices plunged badly. That was 75c, if I remember correctly.

Including Q4's income distributions from my investments in S-REITs, my 2015 full year income from S-REITs is: S$90,344.81

This works out to be about S$7,528.00 a month.

I will be blogging about my investments in non-REITs next week. If you are interested, look out for it.


Related posts:
1. Saizen REIT: A firm offer.
2. Soilbuild REIT: A nibble.
3. 9M 2015 income from S-REITs.

Christmas, ASSI turns 6, financial freedom and charity.

Thursday, December 24, 2015

Has it really been 6 years since I started blogging?


Pinched myself and, yes, I am not dreaming.


Quite recently, I shared some thoughts and feelings on the matter. 

So, I am not going to repeat myself which is something I have become prone to doing as I age.


Yes, I used to laugh at my mom. 

Now, I am like that too.


In case you have missed it or might want to read that blog post again, here it is: Don't thank AK but thank yourself in future.





So, which blog post in ASSI was the most read in 2015? 

I guess I should not be surprised by the answer.

It was: How did AK create a 6 digits annual passive income?





We will most probably have challenges in life but, in spite of all the challenges, we can achieve financial security and, over time, a measure of financial freedom if we do the right things now and in the future.


On our journey, there will be times when we feel depressed. 

When having a particularly difficult day or going through a particularly difficult period, take a moment to meditate on how fortunate we are to have what we have. 






Remind ourselves that we are moving in the right direction and that things will be better.


Lastly, as we do better in life, remember to provide assistance to those who need help most.

Always be charitable if we can afford to be.

Always try to make the world a happier place for everyone, especially the less fortunate.







Merry Christmas from AK's planter!
Related post:
A message from AK as ASSI turns 5.

New money habits led to saving $100K in 18 months.

Tuesday, December 22, 2015

In quite a few emails I have received, I found that some married couples have been inspired by my blog to improve their financial health.

I find this very heartening because it is not always the case that both parties are on the same page when it comes to money matters.





One person might want to make changes while there could be resistance from the other person and I have heard many such stories before. It could even lead to arguments and disharmony at home.

However, here is a positive example which I find even more heartening because the couple's money habits were very different before reading my blog.




Hi AK,

This blog (
7 pertinent questions to help build our wealth) has really come in as a timely reminder to me. Especially now it's towards the end of the year when im doing a wrap up of my finances for 2015.

Although i dont leave comments on your blog often, i check your blog every day. I started reading your blog since JUL 2014 and since then i have never regretted spending my time on it.

Trust me, your posts are really informative and its also the time where me and my hubby bond our time together reading new updates, sitting down together discussing how can we improve our finances. =)




Like your most recent blog on food, we have also started doing our own salads and bringing it to work now. We started packing home cook lunch to work in 2014

When we first started this, all my colleagues were saying that this routine wont last because it is too much of a hassle. Haha, but i had proved them wrong.

Me and my hubby seldom eat out now unless its a weekend. Even if we eat out, its at hawker centre. Dining at a restaurant is almost NIL in a month except if we are going out with friends for gathering. Even then, it was always ME who choose the location so that i can control the cost indirectly. Haha

Also in 2015, both of us started contributing to our SRS account and topping up our CPF. The only regret is we started this late (I am 32 this year and my husband is 35). If we had started to transfer all our OA account to SA before the purchase of our HDB flat, i think we could have reached the MS sum quite pretty soon.




We live in a nice cozy 4 room HDB flat and are left with about $50K loan for the house. We do have some funds now to fully pay up this 50K but we were thinking if we should do so. If we do so, it will definitely dip into our emergency funds.

We have about 100K of emergency funds and we were thinking of paying the remaining loan via cash instead of CPF now because i feel that CPF earns more interest than the cash sitting in the ocbc bank.

My husband and I save about 4K per month into our emergency funds (thanks to your blog post that we started this). Prior to 2014, our savings were almost negligible. Now that we are towards the end of 2015, looking back, sometimes I find it amazing how far we have come.

Although there are still a lot of areas for improvement, I am happy that we took our first step on our journey and I wish that you will continue to inspire us through your posts. Thank you AK!

Regards,
Happy Doggy






AK's reply:

Hi HD,

Emails like yours really cheer me up. It makes me feel that talking to myself in cyberspace is the best thing I have ever done in my life. ;)

I would like to talk to myself about whether I would dip into my emergency fund to pay the remaining $50K in my HDB home loan.

First point, an emergency fund is for emergencies. Is paying the rest of my home loan an emergency? ;)





Second point, savings in OCBC 360 could pay me 2.2% per annum (if I do not invest or insure with them). This is slightly lower than the 2.6% per annum in interest which a HDB home loan charges.

Of course, OCBC 360's higher interest applies only to the first $60K. If I had $100K in emergency fund, I would split the money into two OCBC 360 accounts, one under my name and one under my spouse's name to possibly maximise the benefits.

I could also consider setting up a UOB ONE account as the second account. The UOB ONE VISA credit card has a 3.3% rebate for a minimum spending of $500 a month too. If I had $50K parked in UOB ONE account, I could get paid 2.43% per annum in interest for my emergency fund.

Holding cash could be costly but it is important to have liquidity. As long as we can lower the cost of holding cash, it is good enough for me.

You are doing a good job and I am sure your story will inspire many other married couples. :)

Best wishes,
AK






It is never easy to change our habits. It takes a lot of determination. To change habits as a couple could be even more challenging for some.

The journey towards financial security and, ultimately, financial freedom is made much easier if both parties are on the same page, definitely.

Remind ourselves that others have done it, so can we.

It can be done.

PART TWO: HERE.

Related posts:
1. UOB ONE VS OCBC 360 accounts.
2. How big should be the emergency fund?
3. Do CPF OA to SA transfer before buying flat?

7 pertinent questions to help build our wealth.

Saturday, December 19, 2015

28 November 2016:
If you have read this article before and if you fell short, have you made any progress? If this is your first time reading this article and if you fall short, there is no better time to take action than now!






--------------------------
We might want to ask ourselves a few questions:

1. Do we pay ourselves first each month?

2. Do we dine at restaurants frequently?

3. Do we delay gratification?

4. Do we have the right insurance?

5. Do we maximise benefits from the CPF?

6. Do we have an adequate emergency fund?

7. Do we keep an eye on credit card debt?

Increasing our earned income is but one step in our quest to become wealthier. We must also be prudent when it comes to spending money.

We absolutely should have proper measures in place to guard against involuntary wealth destruction.

Finally, we have to recognise legal and ethical opportunities to build wealth and capitalise on them.





Here is an inspiring email from a reader:

Dear AK,


I was smiling when I was reading this post (I'm not mad) but was delighted to find out someone had benefited from your blog like me. (AK says see related post #2 at the end of this blog post.)


I wrote to you in Aug and four months have past..
(AK says read the blog post: here.)
I hope you don't mind me updating you. 

Salary Management - Now, growing wealth and management have been a common topic between my husband and I. So first salary management, for the two months at home as a "free-loader" cum housewife, I decided to make myself useful and forced myself to write down all the fixed monthly recurring payments and worked out some strategy with my husband. 

Strategy: For the first joint account, we credited our salaries and that will be the spending account. A second joint account is created for savings/travel. Once the $10k is reached, we will transfer that sum to the 3rd joint account as emergency funds. Every month, we will save minimum $2500, of which, $2000 will go to the second joint acct and $500 will go to the 3rd account. 

We hardly eat at restaurants. We don't see a point in celebrating any events by going to expensive restaurants. If we want to pamper ourselves, we would buy good salmon and beef from the wet market, and cook at home. 

A good part of the motivation was achieve financial independence. A small part,it may not sound that nice.   






Delayed Gratification - This probably took some mental muscles. My husband and I are active in sports. We run 10k and half marathons. Now the cycling bug has bitten us. We are the sort where we would pay for quality goods so that the goods can last longer. We set our sight on a $4000 road bike each because eventually we would want to do an Ironman in our lifetime. 
AK is also thinking of buying a bicycle. This costs $138. Hmmm.

Every time, we talked about it, we would feel guilty and sometimes your words would cross our minds. (See! You are that influential!). In the past, once we have saved that budget, then we would spend or use 0% interest free installment. Although we have set that budget, both of us agreed that we should delay the purchase until next year June and save aggressively now till it's way above the bikes' cost. Then decide again.  





Insurance - Two insurance agents I spoke to, asked if I want to be a part-time agent. My husband always laughed when I challenged the agents. We are fixed on buying term insurance. 

CPF - We have transferred part of the amount from OA to SA. The painful part was, I should have read your blog before letting HDB wiped out my OA. That's $38k which could have earned 5% in my SA. Ah... 

Investments - Like what you have recommended when I first wrote to you, we have to make sure that our safety nets are secured and now the priority is to grow our emergency funds and get adequate insurance. Yup, so we would be delaying investments until the first two are settled. 





Credit Cards - We are starting to make it a habit to check the credit card usage at least once every week and not wait until the day our salaries come in. This would prevent overspending. We tried those expenses app where you enter every purchase, that has not gone down too well. To start small, we will check our credit card balance regularly. 

Sorry for the long post and I can see why blogging can also be "talking to myself". Halfway through the email, I also felt like talking to myself. 

Thank you AK,






Impressed? I know I am. Well done!

Remember, for anyone, the best time to start on the journey towards financial freedom is now.

Related posts:
1. 2 questions that build wealth.
2. 7 things a reader did after visiting ASSI.
(Read related posts.)


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