We are not perfect but we can improve our lives.

Hi AK,

I am also pessimistic, actually. The thing I realised these couple of months is in life things can be unfair or by a stroke luck fate deals a bad set of cards or bad things happen because of my incompetence.

However, whatever situation one is in, the cliche of being optimistic that's sold by people may not be too practical. What's practical I find is to be able to do something even a small little thing to be better off. Because I believe little things do add up. Of course, sometimes trying to improve can backfire or backslide but it's just part of life. No one is immune to failure lest they do nothing at all.

When I go out, I do see people working in jobs they cannot extricate themselves from and bosses that exploit people. I mean if they could they would have changed jobs or found a way to have a higher salary. So, not all people are fortunate enough to move into a better situation. I think they call it social mobility.

On the part of feeling very pessimistic, I can understand that. Take, for example, the guy that works at the train station control or the driver or technician or maybe even the engineer. 

Faced with stagnating wages and rising costs and the worst part is the company they work for has long ago categorized them into the lowest ranks in the company. Their advancement may not be existent. So, there is not much hope if u look at it. 

Who is going to help them? 

So, when they start thinking about retirement or old age it can look very bleak for our current generation. The government may look rich but they have other issues to think about as well. The countries around the world may not be as friendly as they seem to be.

But through proper planning and use of excess funds, however little, or to restructure the way their resources are being used or allocated, I believe people can improve their lives. The problem is, I feel, nobody told them how to do it. So, since no ideas were planted, nothing can grow.

So, I think if the SGX changes the board lot size to 1 share come next year, it can really help people who don't have much. Finally, they can own blue chips and, hopefully, reduce their risks. 

People would just have to pay a one time charge with Standard Chartered that's only 0.2% with no minimum fee.  At the very least, they can grow with the economy. 

Even people who don't know anything about stocks, they can just create their own index rather than depend on the ETF which has additional expense or blue chip share building program which I feel is restrictive.

A peeve I have with the STI ETF is that it is hard to sell. I bought the Nikko once and took a long time to get rid of my 100 shares and the pricing wasn't good. So, I gave up on that and just went to buy the blue chip instead. U know in some blogs people sing praises of it but I am not sure if they actually tried to sell it. 

I personally feel there's a bit of untruths to the STI ETF. When they took the 8% y-o-y growth, they were measuring the years where there was a nice increasing slope. However, if one bought at other periods, the return just doesn't look that good.

The flip side of the coin is people, by nature, want quick solutions. 

If I tell people u know u get 1.5% extra or u can save 100 dollars in tax every year, nobody is really going to take notice. But they are very interested in TOTO and 4D and making a quick buck in the financial markets, university graduates included. 

It is only after a long time, through some event happening, that some of the lucky ones will start to work on their lives and the extremely lucky ones meet someone who would hold their hands.

My reply:

....

Till today, I tell people that my ideas are simple but to really see them through might not be easy. I also tell people that I have been lucky and, in life, we always need a bit of luck, investments included. Sometimes, things do go wrong, like you said, and it could well be due to my incompetence too. No one I know has had a life that is smooth sailing always.

I do share your concerns and I do want to help people, especially those of able body and mind who think that it is impossible ever to be financially free. This has been a driving force behind many of my blog posts.

For sure, every little bit adds up. We just need discipline and time for results to show. Problem, like you said, is that people cannot seem to wait.

When I tell people that 4% is a whole lot more than 2.5%, they usually tell me that it is only 1.5% more. I would tell them that they are wrong. It is actually 60% more! It is simple that way but they could not see it. Some saw it and their eyes lit up but some just chose to be fatalistic and ignore the revelation.

I like it when you say how people can improve their lives and I always say that everyone's life could be and should be better.

.....

“No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”
– Warren Buffett

Read Klein's earlier emails to me:
Tea with Klein: CPF, SRS and HDB housing loan.

Related post:
Take your time to pay down your HDB housing loan.

Take your time to pay down your HDB housing loan.

In the guest blog by Klein recently, he offered his reasons why we should not repay our HDB housing loans too quickly. One of the reasons is that we would be losing more in interest income from the CPF-OA than we would be saving by avoiding the 2.6% HDB home loan interest rate.

Now, this is unconventional thinking, at least to me, which seems to make sense. This was another reason for me to share it here in ASSI with everyone. Of course, it does not mean that I think it is the way to do things but it does offer an alternative which is worth considering.

In my reply to a reader on this matter, I have offered some numbers which could make things a bit clearer, I hope.

Let us assume that a person had an outstanding HDB home loan of $100,000 which was meant to be repaid over a 10 year period and let us assume that he chose to pay down this $100,000 in loan using money in his CPF-OA in one lump sum. How much would he be saving in interest payment?

Using an amortising calculator, $13,670. This would have been the total interest payment of the loan over the 10 year repayment period.

Now, if this person had not repaid the $100,000 loan in a lump sum but instead chose to leave the money in his CPF-OA to earn 2.5% in interest income per year, how much would he be able to accumulate over a 10 year period? Compounding 2.5% a year, $28,008.

Of course, I am assuming that this person stays in active employment over the 10 year period and that his monthly CPF-OA contribution is able to cover the monthly repayment of $947.25 to HDB.

Naturally, this person would not be receiving any interest income for this $947.25 that is paid monthly to HDB but he would still benefit from interest earned by that $100,000 in his CPF-OA that is left untouched. Isn't this a better arrangement than not having that $100,000 in his CPF-OA and having to start accumulating funds again in his CPF-OA at the rate of $947.25 a month?

This perspective offered by Klein, if I have understood it correctly, is an interesting one for me as I have never bought a HDB flat before and have never been faced with a choice like this.

When I bought a private property some years ago, I had to pay an interest rate of 5.1% on my home loan while money in my CPF-OA was earning only 2.5% and money in my savings account was earning 0.125% per annum in interest income. In my situation, it made sense to pay down the housing loan as soon as possible, of course.

So, does it make sense for you to take your time to pay down your HDB housing loan?

(Please read the comments that follow this blog to gain a better understanding of the issues involved here. In particular, please read comments by PSTan, kael1n and SnOOpy168.)

Related post:
Tea with Klein: HDB Housing Loans.