Mentally and financially prepared for retrenchment.

This is part of an email a reader wrote to me after reading an updated blog post. (They invested in multiple properties and are now retrenched.)



Reader:
"Their experience is getting more common. I am in my late 50s and I see many friends and relatives in my age group being asked to go. I am sure it will be my turn soon as the company has not been doing well. 

"I have been reading your blog since 2010. I have invested in the REITs you suggested, including Saizen. I am not rich like you but I think I can cope if I lose my job today. I found out that many won't be able to cope. CPF and some savings cannot be enough.

"In a way, your blog saved me and I told my sons that they should learn from you too. Their future can be so much brighter than mine because they can start early."





Sometimes, when readers in their 50s or 60s ask me what should they do to be like me, I find it hard to give them an encouraging answer. This is because what I have achieved today took me almost 20 years. So, you can imagine how happy I felt reading the above email.

As long as we still enjoy a meaningful and regular earned income, we probably could and should make an effort to invest to have another stream of income, passive income. Age shouldn't matter.

When we are in our 50s and 60s, if still employed, we are in our final years of employment. If we want to have a chance at getting rich quick, put aside, maybe, $50 each month and buy BIG SWEEP or TOTO. 

Think again before signing up for some courses or schemes with get rich quick promises. If it sounds too good to be true, it might just be.

Also,

Think again before buying some life insurance or complicated financial product. Don't buy just because they are giving you some freebies.




What should we be doing?

Click on the suggestions below for some ideas:

1. Make good use of our CPF account.

2. Take part in CPF Life for lifelong income.

3. Invest in bona fide income producing assets and think of monetising our home.

Notice I put investment last in the list. This is because the CPF is a risk free and volatility free option.

Investments are rarely risk free and definitely not volatility free.

If you are in your 50s or 60s and if this is the first time you are reading my blog, remember, no one cares more about your money than you do. 




In your golden years, you should enjoy life a bit more if you can afford it but don't do anything stupid with money.

At your age, you cannot afford to make big mistakes with money.

What would be considered stupid and big mistakes?

Anything that might force you back into the workforce if it should go wrong even if you must become a cleaner making $1,300 a month.







Always ask yourself what is, realistically, the worst case scenario and if it should manifest itself, would you be able carry on with your life as usual.

Then, you would know what to do.

There are many examples of seniors who are foolish although they say wisdom should come with age.

Our golden years should be financially secure. Don't be foolish and you can make it so even in the face of retrenchment.





Related posts:
1. How many 20 years and $29K do we have?
2. Withdrawn CPF money in excess of MS.
3. Financial strategy for the elderly with spare $.

They chose financial independence over home ownership.

This is somewhat extreme but watch how this Canadian couple chose financial independence over home ownership. 

They are in their 30s and, well, they are retired.








If we qualified for a BTO HDB 5 room flat which costs, maybe, $500,000 today, why do we need to buy a condominium which costs $1.5 million, for example?

If we didn't need so much living space, would a BTO HDB 3 room flat in Choa Chu Kang which costs less than $180,000 be good enough for us?


Now, would you rather have $1 million in income producing assets (e.g. income stocks) or a $1 million home (which doesn't generate income but instead would incur expenses)?






Very often, people over consume when it comes to housing and, not surprisingly, they might also be the people who find financial independence out of reach despite enjoying higher than average earned incomes.

Reader says:
"Today I had a conversation with a colleague. She has a relative who is very unhappy at work due to unfair treatment and feels like quitting. 

"However, this relative's family intends to buy a condo while retaining their HDB. 

"The wife of this relative told him that if they go ahead and buy the condo, he MUST not quit. 

"If he buys a condo, he is stuck between a rock and a hard place, and that is not good for mental well-being."





AK says:
"Often, it is peer pressure.

"Keeping up appearances is more than just financially destructive.

"Do you believe me when I say that when I tell people I downsized from a 2 bedroom apartment to a 1 bedroom apartment, most of the time I would get a negative response?

"Recently, when I told my new banker that I bought a small car, he said the same thing as my dad that he would not buy a small car unless he could not afford a bigger one.

"It is peer pressure but it is also how we deal with it."





----------------------------------------------------

Reader says:
"maybe i have the wrong perception. 

"i thought AK got the funds from property investment.

"thats why you have the funds to invest in stock market."

AK says:
"You might have missed this:
How did AK create a 6 digits annual passive income?"







It doesn't hurt to have some advantages in life but unless severely disadvantaged, all of us can be financially independent.

Related posts:
1. Housing and the CPF.
2. To rent or to buy?
3. The biggest and most expensive.
Purchasing a 3-Room BTO flat:

Don't do silly things and we can retire smart too.

---------------------------------------




A "special feature" (what I would call an advertorial or sponsored blog post if it were to appear in my blog which it won't) by a fund manager in The EDGE:

"Your CPF may prove inadequate upon retirement because of several factors."

The fund manager suggests "that both young and middle aged workers can invest in multi asset funds for diversification benefits." 

Do this and retire smart.

AK didn't do this.

How like that? 

AK in trouble?




Is AK going to run to the fund manager and put some money in multi asset funds? 

AK will kaypoh a bit and respond to the 4 points raised first. 

Point for point:

1. Be prudent in using our CPF-OA money. Remember, our CPF money is primarily for retirement funding. 

Just because it can be used for other purposes does not mean that it should be.

2. If we have excess money in the CPF-OA (i.e. no other use for the money), think about doing OA to SA transfer to earn higher interest of 4% to 5% per annum. 

Think about possibly doing cash top ups to the CPF-SA and enjoy income tax relief (for the first $7K of top up per year).

3. Don't use our CPF money for investments (unless Mr. Market makes us offers we cannot refuse). 

Think of the CPF as the investment grade bond component of our portfolio.

4. Have a good annuity that will pay us for life and the answer is, yes, CPF Life.




Aiyoh, simi answers? 

AK just talking rubbish again, right? I blur.

No one cares more about our money than we do.

Don't do silly things like asking barbers if we need a haircut and we can retire smart too.




Related post:
Building a cornerstone in retirement funding with CPF.
If you haven't watched this before, please do.

Thinking of topping up CPF-SA with $130K.

http://singaporeanstocksinvestor.blogspot.sg/2014/08/how-to-upsize-100k-to-225k-in-20-years_4.html?showComment=1481415040678#c7130698713317820054



Hi Marcus,

Firstly, you are still young! You still have 20 years before you hit 55. Time is still on your side and your own calculation proves it. ;)

What you are thinking of doing (i.e. $130K lump sum contribution to you CPF-SA) is called a Minimum Sum Top Up (MSTU). This is meant to help us meet our retirement adequacy. My understanding is that it (together with interest earned) cannot be withdrawn for any other purpose. At age 55, the money will go to our CPF-RA and we will get a monthly payment for life from age 65.

I would suggest doing a gradual top up to the SA over a number of years. This is because the first $7K of top up each year will allow you to enjoy income tax relief. Unless you do not pay income tax or pay very little income tax, this makes good sense. 

Enjoy many years of income tax relief in this way? Sounds good to me.

So, now, you have ($130K - $7K) $123K left. You might want to put the money in some fixed deposits with promotional interest rates for 12 months. There are many offers available. Go take a look. Next year, take $7K out for MSTU and lock the rest up again in fixed deposits. 

Why fixed deposits? 

You have already decided that this is money you want to use to help fund your retirement. So, I feel that it is best not to take too much risk with it.

Actually, if you believe in having an annuity that will pay you for life from age 65, you could also opt for ERS which is 50% more than FRS. You decide when you are 55. 

Then, let's say the FRS by then is $261K as per your estimate, ERS should be $391K. This will grow to a much larger figure, compounding for 10 years, at age 65. Your monthly annuity payout will be a larger number then.

If your CPF-MA has yet to hit the ceiling, you could consider making a voluntary contribution to it. You could max it out and you, the recipient, will receive income tax relief too. 

Of course, savings in the CPF-MA will also enjoy 4% per annum in interest. In the following year, interest earned would flow into the CPF-SA if your CPF-SA has yet to hit the prevailing FRS. Otherwise, it goes into the CPF-OA.

Your plan is definitely viable and, so, remember, it doesn't matter what others (including AK) might say. Not all of us are comfortable with taking on more risk and I would go along with those who are risk averse to a point. 

To a point? 

As long as your plan is able to meet your financial needs now and in the future, it is should be good enough.

Best wishes,
AK
To read about the BRS, FRS and ERS, go to:
Changes to the CPF.
Related posts:
1. Did CPF Top Ups and denied lump sum payment.
2. Mom stunned by what happened to her CPF-RA money.
3. Worried you won't live to enjoy all your CPF savings?
Our national annuity scheme:

My girlfriend is more than US$100K in debt!

Human beings are rarely solitary. 

Although in modern societies with very high cost of living like ours, fewer people are thinking of getting married unless they want children (but, in Singapore, people who don't want to have children will still get married just to get a BTO HDB flat).

Fewer who are married are staying married but many still need companionship in life.

Realistically, once we have a partner in life, for better or for worse, naturally, things will change. 





Our life is no longer ours alone. 

It is shared. 

This is only fair. 

We gain something. 

We lose something.

When it comes to money, however, I personally feel that couples, unless they are married, should keep their finances separate. 

To pool financial resources together is a BIG step, whether forward or backward will depend on the circumstances each person brings to the relationship.





Money, I think we all agree, is a very sensitive issue. 

It is probably more sensitive than religion. 

Don't agree? 

Would it be easier to ask your date whether she goes to church or what is her personal net worth? 

See?





If we care about financial security and if we are not rich which I assume most of us are not, no matter how strong our attraction, it is probably a good idea to stay away from someone who has growing financial debt. 

The question is how do we find out?

Some of you might remember my female friend, Posh. 

If you don't, see related post at the end of this blog.

I never did find out how much her net worth was and I didn't know if she was heavily in debt and, if so, whether it was growing in size. 

I only knew that if I wanted to be rich, I would have a better chance if I had a frugal partner. 

Posh and frugal didn't exist in the same space.





Now, say, I gave Posh the benefit of the doubt and thought that she had plenty of money and that, despite her lavish spending, she was only spending a small percentage of her income (hey, love is blind or so they say) but found out much later that she was actually in debt and that it was snowballing! 

Then, what?

By then, it could be too late. 

"I didn't notice the crows nesting in the attic of the house before. Love the house, love the crows." 

Of course, I derived this from the Chinese saying "爱屋及乌" but I always get the feeling that the saying is to console ourselves when we discover something bad comes attached to someone or something we love.





I might be putting my head on the chopping block here (and this won't be the first time) but if we are not rich and if we want to be rich, we are probably better off with a frugal partner in life.

If you are willing to get married to someone who has snowballing debt and to help pay off the debt, you are a better person than me. 

Good on you!






Related post:
A story about a lady in my life.

"With as little as 30 (or 20) minutes a day!"

High frequency trading. Try beating this! I blur...

Feeling so warm! This is although I have taken a shower just now. 

Alamak! Why like that? Flu? Cold? Fever?

Aiyoh, none of the above lah.

I climbed some stairs again.

Usually, I would have to shower twice after my stair climbing exercise. Once after a twenty minutes cooling down time and again half an hour before I go to bed.

Sweaty!

I have been eating a bit too much comfort food lately and this being my birthday month doesn't help. 

Friends and family are showing their love in the usual way, if you know what I mean. Burp.

With more buffets on the way for the rest of the month, I must really step it up. Pardon the pun.

Anyway, it isn't the first time I have blogged about the benefits and convenience of stair climbing as an exercise in Singapore.

With 80% of us living in HDB flats, we have easy access to stairs. We are also very lucky that HDB flats have stairs which are well ventilated and not closed in like some I have seen in private housing here.

Go climb some stairs!

If you have not been exercising for a while, stair climbing could be demanding. I have been there. I know. So, don't be too ambitious.

Take a step at a time and see how many floors you could climb before you start huffing and puffing. That's a sign to slow down and, maybe, stop. 

Do this regularly and you will be able to climb many more floors without feeling winded in time to come.

Frequency? 
3 times per week is good.

Number of floors? 
Depends on your fitness level but you should be able to climb many more floors by the end of the 3rd or 4th week.

Advanced technique?
When it becomes easier, try taking two steps at a time. This creates a bigger mechanical disadvantage and is more demanding. It will help to strengthen the legs and butts faster.

With stair climbing, the excuse that we don't have time to go to the gym is a less convincing one because for, most of us, the stairs are there outside our home. 

Seen stuff like this before?

Unlike some trading gurus who tell us how we can become richer trading just 30 minutes a day, we don't even have to climb stairs daily to become stronger. 

3 times a week, 20 minutes to 30 minutes each time. That is all it takes to climb stairs and to become stronger.

Finally, we don't have to worry about Mr. Market's health. We should take care of ours.

Related posts:
1. Climb stairs and be better investors.
2. Passive income and a topless pic.

"If you worry about corrections, you shouldn't own stocks."

We need a home but a condo?

Hi AK,

I have been reading your blog for sometime & found you to be very smart & prudent. Are you able to give me some advice based on my current situation?

 

Employment status:

Unemployed

 

Age:

40

 

Housing:

Condo with $650k outstanding loan (mkt value $1M)

 

CPF OA:

$400k

 

CPF SA:

$100k

 

Dividend stocks:

$50k

 

Cash:

$150k

 

Expenses:

$20k/yr

 

I have been trying to do trading with mix success. Had also been doing part-time job to earn about $1k/mth.

 

Should I try to find another corporate job? ( I really hate it & had been unsuccessful trying for a while)

 

Thanks in advance!

EW

Hi EW,

Aiyoh. I am just another lazy fellow. Prudent enough but not particularly smart.

At 40, I think you would be financially pretty comfortable if not for the housing loan. ;)

If you were to sell your condo and get a resale HDB 3 room flat, you would probably be debt free and free to do whatever you want without having to go back to the corporate world which you hate!

We need a home but we don't need a condo. :)

Best wishes,
AK

Related posts:
1. Sell HDB flat to buy a condo.
2. Parents asking me to buy a condo.

"The big money (Pandan) is not in the buying and selling."

As I work on probably the two most anticipated blog posts of the year in ASSI, I am reminded of an important virtue of any successful investor.


In July this year, I shared a few photos and some thoughts on my Facebook wall. I did that a lot for a while as I didn't feel like blogging. (Aiyah, lazy say lazy lah.)

If you have a mature Pandan plant at home and it has babies, you can do this too. Just make sure not to hurt the mother plant in the process as you might have to snip the baby from the mother at the roots.

In a jar of water, the baby Pandan will take a couple of weeks to grow proper roots. Once that happens, transplant into a small pot of soil.

In September, mine looked like this a month after transplanting:

The older leaves died and a new bunch of leaves emerged.

Today, I decided to move the plant to a bigger pot:

The wish I made in July came true. I got a Pandan plant for free. 

Wait a minute. 

Is it really free?

If we want wealth, for most of us, realistically, we have to work for it.

If we want our wealth to grow, for most of us, realistically, it will need time to do so.

To those who have sent me emails and messages on when I might be sharing my full year results, remember, patience is a virtue. ;)

"The big money is not in the buying and selling … but in the waiting." - Charlie Munger
Have the right conditions and patience.
A money tree for you and me? 
常将有日思无日，莫将无时想有时.  

Build our wealth but take care of our health.

I met up with a friend for dinner recently and he remarked on how I used to blog about my cooking. It has been a while since I last had such a blog, has it not?






Well, although not as often as before, I am still cooking but I am just too lazy to blog about it. What's new, right? AK is a lazy fellow.

Anyway, I was in the mood. So, this was lunch today:

Fried rice and seaweed. I used:

1. Cooked white rice.
2. 3 eggs.
3. 3 tbsp. coconut oil.
4. 4 gm of seaweed.

And I ate the fried rice with seaweed. You can tell I have probably been watching a bit too much K-drama. 

I still think a high fat, low carbohydrate diet is good for me but I am no longer very strict. 

I used to keep my carbohydrate intake to less than 50gm a day. For a while now, I have allowed myself between 50gm to 100gm of carbohydrate a day.

Still, I have rice (which is made up mostly of carbohydrate) only once in a while. Half a bowl of cooked white rice has about 22 grams of carbohydrates. That's plenty. 

Eggs have about 1 gm of carbohydrate each. Per serving of seaweed (2gm) has 0.2 gm of carbohydrate and I had two servings.

We want to build our wealth but we should take care of our health too.




Finally, for readers who want to lose weight, remember, losing weight is 80% diet and 20% exercise. Less carbohydrate is the way to go.

Related post:
A topless pic.

Not giving in can only make us richer.

Although we like to say we have saved money when we buy something at a sale, the truth is if we spent money at a sale, we did not save money, we just spent less money.

Happily, this reader didn't spend less money, he saved some money.

Hi AK,

Thanks to you ! I have just cancelled my 3 orders brought from Amazon's Black Friday. (around 350 USD)

Upon re-reading one of your blogs again, I decided that they are non-essential items and I can live without them. 

But I did not cancel the birthday present for my wife because I still want to have my marriage and it is already shipped (I may have to pay for the return good) hahaha. I know it's an excuse but I cannot expect my wife to understand why she does not have a birthday present because I tried to save some money.

I do a lot of thinking especially retirement early plans, your blogs constantly remind me whenever I lost directions and it feels like a trusted companion walking with me on my journey to my dreams. (its also feel like the journey to the west where there are demons and temptations) You just have to stay focus but it is never easy. 

Working in Singapore is so stressed that you will always feel like taking a deserving good "detox" rest and indulge yourself with materialistic pleasures eg buying a big condo, car, branded clothing, lavish & exotic holiday, eat out at expensive food outlets etc. 

You worked so hard why you cannot enjoy ?! many time we fell into a cycle of bad decisions......

Sometimes I ready hope we have more simple answers and I can see you are doing your best to write them in your blog. 

Please find time to continue writing and thanks a lot for being there when we need some guidance.

Have a good day.

Best Regards

SK

Hi SK,

Thanks so much for the email which I enjoyed.

Black Friday and Cyber Monday are lost on me. I am a marketer's worst nightmare. ;p

You have probably read this blog post:
http://singaporeanstocksinvestor.blogspot.sg/2015/04/wealth-is-attracted-or-repelled-by.html





On our journey towards financial freedom, it is worth remembering to keep our needs simple and our wants few. 

Keeping your wife happy is, by the way, a need. Good job! 

Gambatte,
AK


If we could, we probably should cut ourselves some slack once in a while but, remember, not giving in to our buying impulses can only make us richer. 

A shorter time to reach financial freedom? It's your call.




Related posts:
1. An unbeatable level of certainty.
2. Retirement (Needs and wants.)

Audio books on saving and investing money.

I receive many emails each week. Unlike my early days in blogging, I might not reply to all of them although I still try. Believe it or not, I also receive emails in Chinese.

My proficiency in Chinese has never been high. The best grade I received was a B3. Not bad but not good either. 




Unfortunately for me, emails in Chinese are the second most common after emails in English and they are usually a bit of a struggle for me.

Anyway, with the help of Google Translate, there is my translation of a recent email:

"My husband is a big fan of yours. I hope you will not find my request rude.

"Since he started to read your blog a few years ago, my husband has become very careful with money and he has also invested in stocks.

"I am an ignorant housewife but my husband would explain to me what he is doing. From having nothing a few years ago, my husband tells me he receives almost $10,000 in passive income each year now.

"He likes to say, "Imagine what we could have when we are AK's age!"

"He would read your blog every night and his favourite ones are about saving money. 

"Unfortunately, because of an accident recently, he won't be able to read for a while.

"I thought of how to cheer him up and wonder if you could talk to him?"

I left out plenty of details.

Anyway, I think regular readers would know what my reply was.

However, I decided that I could still do something for them. Took me a while to do this and I hope it does the trick.

Here are my first audio books (or blogs) for your listening pleasure:

Book one.

Book two.

Book three.

Book four.

Book five.

Read the full blog posts:
1. Mr Lee Kuan Yew was very frugal.
2. If we are not rich, don't act rich.
3. Is AK a rags to riches story?
4. A piece of advice on saving.
5. Save 100% of your take home pay.

To pay down HDB housing loan faster or not?

Not only do all of us have different financial circumstances, we also have different capacities to stomach stress.

What works for one might not work for another (i.e. what might give someone peace of mind might be quite stressful for another).

So, listen to what others have to say but, ultimately, make our own decision, one that will not rob us of our precious sleep.



Chat with Reader #1

Reader:
 Hi there Ak. I have a question. I have a new bto flat that im staying in with abt 200k hdb loan spread over 25 years. It takes up abt half of my oa contribution every mth to pay it. Should i use the excess oa funds to channel it to sa or focus on paying off the house asap?

Like · Reply · 1 hr

Assi AK
I would max out my SA first. Money should go to where it is treated best. Doing so, I would maintain a buffer in my OA sufficient for 24 months of loan repayment in case something goes wrong.

Like · Reply · 2 · 33 mins

Chat with Reader #2

• 
  

  12:31pm
  

  
  

  Reader:
  

  Hi AK, do you think i should pay off 10k of hdb housing loan whenever my OA accumulates to 20k so that it stays below 20k to enjoy the additional 1% interest? i.e. 3.5% instead of 2.5%

  
  
• 
  
• 

  12:51pm
  

  
  

  Assi AK
  

  Earning more interest is always appealing to me. ;)

  
  

  
  
• 
  

  1:11pm
  

  
  

  Reader:
  

  Cos I have a friend who says it's more impt to pay off housing loan as the 0.1% on a big loan is more than 1.5% on the 10k transferred. I.e. It only makes sense if the housing loan is less than 150k, correct?

  
  

  
  
• 

  2:37pm
  

  
  

  Assi AK
  

  It depends on what you are after. :)

  
  

  
  
• 
  

  2:38pm
  

  
  

  Reader:
  

  Maximized returns lor

  
  

  
  
• 
  

  
  

  
  

  
  
• 

  2:41pm
  

  
  

  Assi AK
  

  You have to remember to compare like for like

  
  

  
  
• 
  

  2:41pm
  

  
  

  Reader
  

  Meaning?

  
  

  
  
• 

  2:41pm
  

  
  

  Assi AK
  

  Compare $10K with $10K, $150K with $150K

  
  

  It is meaningless to compare 0.1% on a $200K loan and 1.5% on a $10K savings

  
  

  
  
• 
  

  2:42pm
  

  
  

  Reader:
  

  Ah. So for 10k, where can it get maximum returns

  
  

  
  
• 

  2:43pm
  

  
  

  Assi AK
  

  By paying $10K of your loan, what are you saving? By putting $10K in your SA, what are you gaining?

  
  

  You will have your answer then

  
  

  
  
• 
  

  3:00pm
  

  
  

  Reader:
  

  Ok, I get it. Only that the SA monies cannot be used for other purposes in future.

  
  

  Thanks AK! 👍🏻

  
  

  
  
• 

  3:01pm
  

  
  

  Assi AK
  

  Yesh... ;)
  

  
  

  If you are saving for retirement, go for it. :)

  
  

  
  
• 
  

  3:02pm
  

  
  

  Reader:
  

  姜还是老的辣

Whenever we do something, it is important to be clear what our motivation is. Then, we will know if we are doing the right thing.

Related posts:
1. Pay off home loan and hit MS.
2. Related to housing loan repayment.
3. Fixed rates, SIBOR, FHR18 or HDB loan?