Tuesday, May 31, 2016

May 2016 - Expenses Result

Hi Everyone!

As promised, I will lay down my expenses for this month to see how much I fare for this month. So the result is as below. Other than Entertainment (exceed by 50 cents), the rest of the category are still working quite well. Of course, for this chart, the month of May might be a bit off because I officially started off a bit late. So as part of a trial for this financial saving web that I created, I will provide a more realistic result from next month onwards.

However, I am still happy with the result because other than bills (which I left out around $80 due to early entry), the rest seems to be quite stable. For this month, I am quite happy with the result.

Based on the graph above, my expenses break down are as below:

1) Travel: $120 (Planned) VS $120 (Actual) - I bought adult concession so the amount is fixed
2) Food (Weekday): $160 (Planned) VS $80 (Actual)
3) Bills: $120 (Planned) VS $29.90 (Actual) But if we add the $80 bill in should be around $109.90
4) Entertainment: $120 (Planned) VS $120.50 (Actual)
5) Others: $580 (Planned) VS $465.96 (Actual)

Overall: $1,100 (Planned) VS $896.36 (Actual)

That is awesome for me to achieve this result and certainly I can look forward to save even more however, there is wedding expenses that I need to take into consideration. But overall, I am happy with the result as I have achieve what I have set for myself.

So this is the report card that I have produced for this month, hope June will be a better month for me. 

Monday, May 30, 2016

Saving and Investment Plan - My personal view

Hi Everyone!

My first post after coming back from my wordpress (due to some restriction that I face and the time taken to understand how it really works), so I decided to come back with my brand new post (with a brand new looks).

The reason for today's topic is because I have encounter quite a number of agents promoting such investment/saving plans be it on phone, roadshow and etc. I did went through some sessions with the agents to understand how the endowment plan works and also read online for more details regarding such plans. The reason why I am keen to know more about it is because I want to diversify my portfolio to prevent myself putting all eggs into one basket.

Not a great plan...

So, my initial thought is that since after hearing from agents that endowment is like normal saving plans, personally I think is quite good but of course there are some restrictions in terms of purchasing such plan. for instance, you have to pay a monthly of few hundred dollars in order to sustain this plan, initially I though maybe like $200 per month might be quite a good deal since after all I am saving for my retirement and with this plan, it can force me to save quite a sum of money when my plan mature.

This is the first restriction that after I think through again. Because you need to save $200 per month and depending on the plan, you are unable to withdraw the plan or any amount (unless you surrender your plan - with forfeit/penalty) in case of emergencies or other investment opportunities. 

Secondly, will you be able to sustain the monthly payment for such plan? This is an uncertainty to many because you may think that you are still young but the economics holds many uncertainty on whether will there be a recession in your own organization. If one day, you get retrench by your company, how will you be able to sustain your lifestyle especially if you have your own family, housing loan, bills, car loan and etc. 

Thirdly, as an individual, I think it is important to weight out the importance and really have to think hard rather than going to roadshow and persuade by the agents to purchase the plan after going through with you the benefits of the plan. A good agent will really try to understand your saving capabilities and will list down all the possibilities on what are the scenarios that would happen. good agent will also provide you with advice on how to go about it rather than showing you the "potential" yield that you will achieve.

The reason why I highlight the "potential" yield is because my observation from around 6 to 7 agents that I talked to in the past, they always highlight the non-guaranteed yield (which is much higher than the guaranteed yield) and some of the policies does not have guaranteed portion (in the past, not sure about now, also according to the feedback in forums). So you must read through carefully to understand what you are really getting before you purchase the plan  

I am not saying that those saving plans are not good but it really depends on your own capability to understand the risk of having one. There are some of the things that need to really consider because the plan period is from 5 years to 20 years (if I remember correctly), so basically anything can happen. 

However, there is one thing that I really hate when going through the consultation with agents is that they will persuade you by saying "you can't afford a $200 per month payment?" or "You dine at cheaper place in order to save more to pay". I was furious when not just one by I have encounter quite a number of agents saying such things right in front of my face. I told them that it is ridiculous for them to say such a thing, of course for now, it can be affordable but few years down the road many thing might happen, which crippled the ability of the individuals to pay for the premium. Also, because of the plan you want to cut down on the current lifestyle without knowing the customer's background? The customer's might already been saving by cooking their own meal and cutting down cost whatever they could, by saying such word without putting in any tiny effort in understanding the customer background, it is ridiculous.

These type of agents, only want to go for the sales and after the sales they will ignore you once they get their commission. As I mention, a good agent will list down the possibilities on what could happen, and also inform you the risk that you are taking rather than saying such sarcastic words. Of course there are other good agents around as well who can tell you what are the things that really benefits you and telling you the pros and cons of having such plans and etc. 

So you really have to do your homework instead of just listening to the financial consultant where some of them doesn't even know much but their own products. Listen to their products is good to understand the products they are offering but you will have to do your own risk assessment as well.

What are the alternatives that I can go for?

There are many low risk instruments that you can go for with minimal lock down period, so that in case of emergency, you can still withdraw your money. For instance, OCBC 360/ UOB One and Bank of China, they are able to give you attractive interest if you are able to fulfill the requirement (around 2.5% onwards).

If not, you can go for Singapore Saving Bonds, where you can achieve 1.94% on average over 10 years. You might think, 10 years! Isn't that the same as those saving plans? The answer is no, the benefit of such bond is that you can take out the money anytime and you will still be given the pro-rated interest if you redeem before the scheduled interest date. However, you will need to pay the $4 processing fee of participating and redemption action.

Thirdly, you can go for saving account like CIMB savers account or Maybank iSavvy account which gives quite a good interest without any action, but just put in a sum of money per month. Wait wait wait, isn't that the same as those saving plans? Nope, because you can terminate or withdraw the money anytime as well.

If your risk appetite is higher, you can go for blue chips or STI etf, you control your own investment, if you know what you are doing. The above method are the alternatives that you can go and control your own yield where you can liquidate anytime in terms of emergencies. 

As for insurance, get a normal insurance plan to cover your illness and medical stuff will be sufficient. Insurance is important to cover yourself from spending huge amount of money on hospital bill and etc. If you have yet to get one, it will be best to get it while you are still healthy!

Sunday, May 29, 2016

Investing in Property.. My Choice and My Plan

Hi Everyone,

As readers might know, I have been aiming for 2 bedroom condo ever since I started this blog, or should I say way before I started this blog (in wordpress). Condo is the choice that I choose to go for due to some reasons that requires me to do so.

Understand that many people might think I might leverage too much just to purchase a condo, but sometimes people must take risk in order to achieve higher goals. My fiancee and my goal are pretty similar, is to able to generate enough passive income for our retirement. I believe this is the goal for everyone. Why condo? many might asked. The reason why I choose condo over HDB resale flat, I believe I have mention in my first few post, but I don’t mind mentioning again, the reason is because of investment opportunity.

Some people might say that getting HDB will have better resale values and able to earn much more as compared to condos. Yes it might be true but the fact is that it really applies to BTO flats in a good location (some even fetch million). In addition to that, I choose to purchase condo is also because of the investment opportunity, whereby my wife is able to purchase or retain her current condo to gain rental yield. Of course, subtracting the interest and the monthly repayment to the bank, it might not left much but still might have 100 to 200 dollars left per month. Well, 100 to 200 dollars is a pretty good return and is a start of the journey, because after the loan period is over, we will be getting around 2k for the rental which is quite a good sum of money after we hit our 60s (if we still keep that condo).

So for this property, we can already put one side and not to touch it and let it generate passive income for us (which is pretty good deal). But of course, nothing is smooth, we also consider that what if no one rents our place? or what if every month instead of getting 100 to 200 dollars, we need to pay 100 to 200 dollars even if we manage to rent? Of course, money needs to be managed, that’s why it is important to understand your risk appetite before purchase big ticket item.

How much do I need to make down payment for 2 bedroom condo?

There is no fixed amount that you need to have in order to purchase 2 bedroom condo, because it will have to depend on the price of the condo that you wish to purchase. Some might cost around 600K++ and some might cost around 800K++. So it really depends. For me, of course if can get it cheaper, i will go for cheaper but in decent location. So let’s say I aim for 650k condo, with a rough estimation of 23% down payment (including lawyer fee and etc.) It will cost around $149,500 for the down payment. Quite high isn’t it. As I am still below 30s and just started working, how am I going to achieve that amount? To tell you the truth, it is indeed hard, especially that now, I have to spend 20K+ for my wedding (of course I am happy for the wedding but it put stress in achieving that target). Really, can someone able to save 45K in just 1 year 2 months? That is pretty much insane isn’t it. Of course my 45K includes CPF (Central Provident Fund). So let’s us do a break down! Why $45K, you might think, it is because this is a target that I set for myself to hit before I purchase a condo.
I earn around 4K and I break down into details.

  • Net Salary: $3.2K per month
  • Ordinary Account: $920 per month
  • Passive Income: $130 per month
  • Expenses: 1.2k per month

So if based on the figures above, I am able to save around $3,050 per month (excluding bonus). So in the range of 14 months, the calculation will be shown as below:$3,050 * 14 months = $42,700 Still fall short for $2.3k but if we include bonus for lets say 3 months, we will have additional 12k more to the total which hit $54,700! Of course there are variables that we have yet to include. Like my increment, possible of raise in passive income, CPF interest and etc. With that, hitting my dream goal will not be an illusion but a reality.

So with a mere 1 year 2 months, I can attain more than 50k savings which is quite an extensive amount!So finance management is really important in order to achieve your goal. If you lost control of your finances, and anyhow spend, it will cost you a lot. But of course, savings is important but living your life comfortably is as important as savings. Try not to starve yourself just to save that small amount of money. It is not worth it. If you cannot achieve that goal, try to extend 2 more months or 3 more months in order to get your desire goals. For me, well, I will be reporting my monthly update to let you reader know where I have hit that target.

But of course, I need to spend money on wedding as of now, so might be a little tough to follow through for the first few month. We shall see how it progress!

Bringing Back this blog to live....

Hi Everyone!

I will be bringing this blog back to life again. The reason is because there are many restriction using wordpress which really restrict the things that I want to do. So in order to use a simple and direct blog approach in doing my blog, I intent to bring this blog back to life again!

So do continue to support my blog and I also hope to reach a new height of getting 150k viewers!

Thank You!

I will be migrating my post from wordpress to this blog.