Takingstock @ - Seedly
 
Takingstock @

I work in accounting and do balance sheets, budgets and cashflow @ work. In my free time, I apply what I learn in school and work to my personal finance and have learned quite a bit over the past 12 years. I feel I have reached a point where it would be really good to share some of the lessons I paid my tuition fees (ie lost $$), so that others could learn and benefit without paying those fees. =) I really think this would be a good way for me to contribute to society and hopefully help a few folks to get through in life.

Takingstock @

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I work in accounting and do balance sheets, budgets and cashflow @ work. In my free time, I apply what I learn in school and work to my personal finance and have learned quite a bit over the past 12 years. I feel I have reached a point where it would be really good to share some of the lessons I paid my tuition fees (ie lost $$), so that others could learn and benefit without paying those fees. =) I really think this would be a good way for me to contribute to society and hopefully help a few folks to get through in life.

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Takingstock @

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Retirement

Savings

Stocks Discussion

CPF

Insurance

Takingstock @
Takingstock @
Level 5. Genius
Updated 6d ago
Hi Adam, your question is kinda broad, but my guess you might be in the phase I went thru a couple of years ago. So broadly, even though some may recommend that you talk to a financial planner/advisor as well... 1) insurance - I only want to say check the insurance coverage of yourself and dependents (eg spouse, kids, parents). Most important is hospital / medical insurance coverage, then the rest is really up to the individual. A lot of financial advisors would be tempted to get your monies to buy more insurance. I would say get the coverage for covering risks to your comfort level and the amount you could afford. Focus on the risks to address - because nowadays some people dish out advice as though everyone needs like a couple of million in life coverage (which I feel is more for their commission than your actual needs). 2) in terms of emergency or safety reserve, then the general rule is probably 3-6 months salary. My own rule is one year for the mortgage payments, and 1/2 my annual budget for everything else. This is up to your comfort level, and level of planning. Your bank balances and SGS should serve to cover this. 3) Next is saving for goals. I think you have it broadly as your RSP - but I see this more of as a saving process than you actually knowing your goals. You will need to figure that out yourself. To help out here, some people think about their retirement, children education, financial freedom, saving for a wedding, preparing to raise kids. There are so many, and it can be daunting to come up with a perfect plan like now. To ease into the process, I would suggest you think of at least one mid-term goal (within 5 years), and a long term goal (more than 10 years). Repeat this at least once a year, so you are gradually taking steps to adjust and accommodate those goals. 4) In terms of retirement, a lot of financial advisors will be eager to start selling you various products from which they can earn hefty premiums. Some may recommend products that are good for yourself, and some good for their pockets and bad for you. I don't know if it's possible to come up with a good enough answer, but personally I take things in the "low hanging fruit order" - do RSTu to fill it up first, then srs, then if I still have funds/budget left, alternative products. A lot of advisors will rush to tell you that the annuity plan, or mutual funds, or endowment beats CPF in this or that manner... But from what I read, insurers say it is very difficult for them to beat CPF life. It definitely raises my eyebrows when an advisor tells me the product sure beat CPF such that you should take like everything you have to buy that product. Take note of what you are paying in costs for these products, and the minimum guaranteed. Because RSTU is costless + gives your tax relief, and guaranteed 4%, while the other products show you the airy-fairy numbers if they achieve so and so level of non-guaranteed returns. The premiums (usually 1.5 years of premiums are costs you will never ever recover) are however guaranteed even if they fail to achieve those illustrations they try to blow you over with. It's up to you whose word you believe because you will probably find out about the consequences, earliest a couple of mths into the plan, latest when the plan matures which it would be too late to find out it was the worse option that seriously under-delivered. The other is SRS, and quite a lot of folks asked about it. You may want to consider that as well. Don't take retirement planning as a hardcore it must be this, or that approach - explore a mix, but given RSTU and SRS gives you tax reliefs, they have quite a good start in terms of ensuring a good XIRR. 5) On RSP, there's a lot of opinions in other answers. It's hard to say who is right, who is wrong... But general principles - time in the market is more important than timing the market, keep costs low (I recommend below 1% whenever possible), and rebalancing. Personally, I just started planning my investments as though a company planning their capex - I go with 1/3 to 1/2 of my savings in RSP (cash and srs), then the balance saved in a savings goal for opportunities (ok you can call that timing the market, though I have a rule, for when to go in). 6) Investments using CPF - its an alternative and it depends on what your needs are. Hard to answer, but I will describe what I do... I try to make sure I have at least one year of mortgage payments available in CPF OA so that if I lose my job, I don't have to worry for one year. Besides, it earns the extra 1% for SA. Next, I do invest in REITs and stocks using CPF OA. My returns haven't been bad and excluding unrealized gains, the dividends are about twice of what those funds would have earned in 2.5% interest. My rule is if I can match or beat 5% return, then I can continue my CPF investments. I can't give you much in answers, but hopefully sharing what I do gives you some room to think about what you could do. Disclaimer for the RSP part - this is what I do, and I don't claim it's the best.... for my RSPs, I do OCBC BCIP, only one stock at a time for either portfolio. I regularly do my analysis, and I just update the monthly contribution amount, and/or choice of stock once every few months. To ensure lowest cost, I do BCIP with monthly contributions hopefully at least 500 / mth to achieve close to 1% cost. I do double DCA, if the dividend yield is too attractive, I would adjust the monthly contribution up from 500, but if the dividend yield falls below 2x 3 mth SIBOR, I would adjust my monthly contribution down. If my strategy tells me to lower RSP to below 400 / mth, I would rather cancel the RSP and wait out until prices are more favourable. Note to other readers My financial advisor recommended I do 750 per month for an ILP for my retirement needs. The recommended fund achieved less than 2% (before fees) in one-year returns, and the three-year return is going south of 10% every passing month. My DIY investing achieved more than 18% (inclusive of fees), and the three-year return is probably close to 12+% (fees and costs inclusive). My point is actually the funds that the advisors may push may not be that actually good for you, but it is usually good for their own pockets.

CPF

Loans

Education

Lifestyle

Takingstock @
Takingstock @
Level 5. Genius
Answered 6d ago
In my days, we could request to pay more on the loan monthly repayments. I believe it is still the same, you can go to the CPF portal and there's probably still a request somewhere you can update your intended monthly repayment (I did a brief check on the CPF FAQ, and it said so). I don't think you have to take the problem bluntly as either 100 monthly or 4000 in a lump sum. How about considering about 350 monthly (should be within one year), or 250 monthly (should be less than 1.5 yrs), maybe a partial lump sum and then 100+ monthly? There could be so many options. Unlike banks, CPF is glad to take your payments anytime... The key consideration is whether you are comfortable with what you have left in your bank balance and / or monthly cashflows. Choose something you are comfortable with.

Salary

Investments

Savings

Loans

Takingstock @
Takingstock @
Level 5. Genius
Answered 1w ago
1) loan: Agree with Cedric. A 0% study loan means your lender lost his / her interest income. In this kind of situation, I would encourage you to align an interest rate with your borrower - I would recommend that this rate be better than what the bank would pay him/her, but yet lower than what a bank would charge you. Somewhere between 0.5% pa and around the current SSB rate of 1.75% pa to 3-month SIBOR of 2% pa would be fair in my opinion. At this stage of your life, take this opportunity to understand how interest compounds, and what is your preference towards debt. This will help you navigate future situations in the face of consumer debt (credit cards/lines), mortgages, etc. 2) from a budgeting perspective, I wonder if your savings is 100 per month (the RSP). If so, it seems quite low (about 3+%). I think you are saving more than this. I would encourage you to always plan out / budget to save between 15% to 35% of your take-home pay. The savings here would go to either a long term goal to save for emergency/downpayment for house/retirement. This habit is best cultivated early in life. You could have this set aside in the bank, or parked in SSBs / fixed deposit, or other instruments (not encouraging endowments and the like for goals that are less than 10 years away). The choice of instrument should match your goal in both risk and withdrawal timeframe. 3) Learn to budget. One habit I developed over the years is setting savings goals to set aside money for a different purpose. An example is setting aside 5% of take-home pay in a category I call Rewards - I take money out from here to pay for my travels, a new hp or tablet etc. This is "save now, consume later". You might want to give this a try. 4) in terms of investing, how well do you rate yourself? Don't rush into it. 100 per month is a good start while you are trying to pick up the ropes. On the other hand, learn to see transaction cost/fees as a % of your investment. I personally feel this % should be kept to below 1.5% whenever possible, best if below 1%. A rough guideline is every 0.1% of fees eats away 2% of returns over 10 years. For example, an investment that charges you 2% annual fees would eat away 40% returns over 10 years. Apart from learning about fees, take your time to figure out your risk preference, attitude, and preferred style.

CPF

Family

Lifestyle

Savings

Insurance

Retirement

Takingstock @
Takingstock @
Level 5. Genius
Updated 1w ago
Elijah has good advice. Having been through this cycle a few years, I would advise similarly with some differences, as below: 1) get their medical expenses covered with medical / hospital plan insurance. Talk to an advisor to select options within the (household) budget, but it will be unwise to skimp on this. It will come in more handy than you think. 2) in terms of financing the hospital plan insurance, usually some portion is payable via Medisave. I recently learned about how CPF interest works, so... Depending on how your family feels about it... If your parents Medisave are near / exceed their BHS, any interest from Medisave will most likely flow to their CPF OA after their RA is setup. This means the 2.5% interest can be withdrawn as though it is a high yield bank account (can take out, very difficult to put in). If your family feels this is something beneficial, you can consider paying the Medisave premiums with yours / sister's Medisave instead so that they have a low-risk high yield bank account to draw on. When paying the medical insurance/Careshield/Eldershield premiums from yours / sister's Medisave, the drawback is you have less interest / Medisave to draw on for your own needs. But your parents would likely pass away first before either of you, so if there's leftover from their CPF, you get the "cashback" earlier in a sort of way. This is debatable and so up to you n family to think about or consult others on the pros n cons. 3) it would be wise to think about the family budget and discuss. Depending on their savings... How will their day to day expenses and the bills be financed - while you are still part of the household and when you have set up your family? When they no longer have employment income, will their passive returns be able to pay the bills? If they have to pay it from their savings or CPF payouts, is it sustainable? This is something to think about. As one of the sandwich generation, I can tell you I am paying for most of the monthly bills, but it's up to each family to decide how their finances run. This could be an important factor that leads to older folks not stopping employment because they don't have enough to maintain everything. 4) in terms of topping up the RA, personally I feel it's a nice to have. The way CPF life payout works now is that the payouts are calculated assuming the retiree lives until 95. So for every 7000 you put into their RA, the actual increase they may get could be somewhere like 10-15 per month (you have to use the CPF calculators or approach CPF to check this). Back to point 3 above, you have to think how the money benefits them if given in cash vs topping up the RA. Because that 10-15 monthly may not matter enough to pay the bills. 5) I think the CPF life payout is decided when they decide to turn it on. May be beneficial to ask them to check how much that payout is at the moment if they start it at 65, or at 70. CPF should be able to help you with that. Deferring the drawdown age to 70 may mean that the monthly payout increases by as much as 50% (compounding interest and not getting payout between 65-70). The life expectancy for males is about 84, and females about 87, though CPF quotes 1 in 5 live past 95. The RSS is probably not enough in addressing longevity risk, and hence CPF life. But if they don't have much of savings, electing to start drawdown at 70 may not even be an option. This may be a lot of information to absorb, but hope u find it beneficial. I think you can refer back to Elijah's advice for thereafter. But this is the order I would have told myself 5 years ago.

Retirement

Property

CPF

Loans

Takingstock @
Takingstock @
Level 5. Genius
Updated 1w ago
I have to agree with Hariz on his answer. Add on points (given I am paying down a 25 yr loan myself): 1) A 30-year loan is horrendous in terms of interest. Ask for the statement that shows you the total interest paid over 30 years assuming rates don't change. I am gonna put my guess that its gonna be about 30++% of the condo purchase price. When I started before ABSD was implemented, the interest was below 1% after it shot to 3%, I found myself having some difficulty. And it might stay that way through the 30 years. As a further add on, if you bring it down to 25 yrs or less, how do you look on your debt servicing ratio? If the property loan ongoing payment at the current rate of 2.2+% is above 35% of your combined income, the condo is probably too expensive for you. 2) If you don't have an annual budget, make one. If you do, then after forking out the cash portion of the loan, are you able to save 10% of the take-home pay? Do you also have some emergency funds left after the downpayment? 3) Have you asked what is the total stamp duty and other fees required for the property? Do you have money for that? 4) What's the annual condo maintenance fee? If you also still have the agent's contact, ask what is the annual property tax estimate. 5) How many bedrooms are there? If its 1+ to 2, the demand and appreciation potential might not be there. If it's 3 or more, that's probably decent for resale demand. 6) is it 99-year leasehold? After 30 years, you would have 69 years left. Have you heard of Bala's leasehold depreciation table? After 30 years, the resale value might be 80% compared to an equivalent freehold property. All of these are property-related questions, not including the other financial aspects. Hope you have time to go through and answer them before signing the papers.

Investments

Retirement

Supplementary Retirement Scheme (SRS)

Takingstock @
Takingstock @
Level 5. Genius
Updated 1w ago
Adding on to Elijah's answer. There was another question on whether it was worth doing SRS, and I will build on my answer there. - don't recommend women who intend to have children to have SRS as they are not likely to get much more additional tax reliefs above the Working Mother's relief. - for others who are not entitled to reap the benefits of Working Mother's Relief, SRS is a tax deferral scheme, where you get tax relief for your contributions and get taxed on 50% of the withdrawals (over 10 years) when you can start withdrawing (62 for now, might be later in future). - if your incremental tax rate (ie the tax rate that applies to an additional dollar of taxable income) is low (would say below 7%), you may want to consider the flexibility of keeping that cash versus enjoying that relief for locking up the contributions for many years. - if you do feel your incremental tax rate is high, and the tax relief is decent, and you can afford not to withdraw the SRS contributions, it is something to consider (but you would have to invest it appropriately and not earn 0.1% interest rates, or buying SSBs). If you could invest and get an average return of say more than 5% between now and your srs withdrawal age, the SRS essentially is like providing you with a discount to saving money and investing it for your retirement. Many may recommend on the max amount of 400k (so you don't pay tax on the SRS withdrawals, assuming you withdraw 40k per yr over 10 yrs... The first 40k based on current tax rates, you pay 350 in tax). After my last answer, I have a new insight. Imagine if your time till SRS withdrawal is say 25 years. If your incremental tax rate remains consistent at 11.5%, and you put in 10k over the 25 years, your tax relief enjoyed = 11.5% x 10k x 25, and that would be about 28.75k tax savings (before accounting for interest and compounding). With compounding of 96 monthly or 1152 per year for 25 years, this is $57,407. Assuming tax rates don't change, and you manage to compound it @ 833.35 per mth or 10000.2 for 25 years at 5% per year, you will compound it to 498.4k over the 25 years. Let's say this amount doesn't grow further at 0% over the 10 year withdrawal period, you then plan to withdraw 50k per year over 10 years. For the first 25k taxed (50% of 50k), you pay 100 in tax, so over 10 years that would be 1,000 ==> you achieved real tax savings of about 56,407 (I know it's not exactly precisely the way I account for time value, but its more than enough to prove a point). Let's take a more extreme example, which you still contribute 10k per year for 25 years, and by good luck, the annual rate of return is 12%. 96 x 12 over 25 years at 12% equals 182k of effective tax savings after compounding. By the same token, 833.35 x 12 for 25 years @ 12% pa = 1.58 million. If you plan to withdraw 160k per year over ten years. The tax payable on 80k (50% of 160k) is 3350 based on current rates, and over ten years is 33,500. Still seems like a good deal.

Investments

Credit Card

Takingstock @
Takingstock @
Level 5. Genius
Updated 1w ago
Clear the credit card bill first. Most credit card annual interest rates are 24-27%. Which averages about 2% a month. If you look at it in another way, paying off your credit card debt is also like making annual returns of 24-27%, except you "stop" earning when that debt is paid off. It's guaranteed returns paying down the credit card, versus non-guaranteed returns on investment.

Stocks Discussion

Investments

Savings

Stocks

REITs

ETF

Takingstock @
Takingstock @
Level 5. Genius
Updated 1w ago
I think I did something like this before and came up to the conclusion that 7+k to minimize the transaction cost. Have tried smaller amounts, and eventually, my own comfort level was if I got fees down to 1% or less of the overall cost, this was fine. If you want to keep costs low, monthly plans like BCIP and invest saver can definitely keep the costs below 1% and helps deploy dollar cost averaging. The limitation is the options available, but there are quite a bit of good stocks listed in BCIP. in comments below, I mentioned about my May purchase of 500 DBS shares at 27+, and the lower average cost of abt 25+ for 100 shares of DBS using BCIP while prices were sliding. Also explained why BCIP is not necessarily more expensive In short, large investment trades have lower fees, but you have to put in a lot of money, you probably do less often, and the timing has a larger overall impact on the total cost. My advice is to keep the fees low, but you have to do so while balancing the timing, size of the position and your comfort level of the stock. On your 2nd question about allocation / % of the portfolio, this differs from person to person, depending on their circumstances, risk tolerance and time when they need to cash it out. No straight up answer but maybe some principles: - if your timing to cash it out is less than 5 years, you might consider less or no stocks as the market is volatile, and you may have a loss when you do need the cash. - ETFs and unit trusts are similar in that they have a portfolio of stocks, so they have a lower risk vs individual stocks, but not necessarily less risky. - REITs need to distribute 90+% of their income as dividends to get the preferential tax treatment, so they tend to be good cash-generating units. Multiple REITs also do quarterly dividends. It's like being a landlord at a fraction of the share and cost. They do not, however, get stellar in terms of price appreciation because most of the gains are already shared via dividends. I customize my portfolio to focus more on dividends and have my method of allocating the positions relative to the counter's dividend yield. It's not something that's prescribed in textbooks, so I won't go further into the thought process. I would probably write a blog post of it in due time. - an additional question in comments- I maintain a portfolio of 19-23 counters. Portfolio theory suggests diversification, and the more the better. My view - some diversification, but not too much. By the time you have more than say 50... Either you have invested a lot into those 50 while keeping your fees low, you spread out your funds and have high fees, and/or you don't have the time to follow all 50. Yes I tried other approaches other than dividends, but so far based on my three portfolios (cash/SRS/CPF IS), the dividend stocks have always fared better and more consistently over 2017-2019. They share upside, have lower downside, and you get paid dividends while waiting for the tweets or Brexit to end, so I actually don't mind waiting. Stock picking varies for person to person, as a disclaimer I speak for myself... Stock picking is like picking your future son-in-law. You want someone who is spending within his means (ie profitable with a decent margin), honest and reputable (good governance and transparency score), able to provide for family (decent yield), not taking on shitloads of debt (manageable debt/equity ratio, and good interest coverage), and always have plans to improve their income potential (eg future growth expansion) You can have many different types of son-in-law. The ones that have fancy cars/houses behind a lot of debt, and it just takes one retrenchment, wrong margin call, business failure before they can't keep up with their spending and file for bankruptcy. Your daughter would likely struggle to make ends meet, and most likely eventually divorce. Or the ones that are slow and steady, always trying to improve themselves, ever prepared for unfortunate events and eventually tide through their own crisis, and emerge stronger. Which one do you trust your daughter or money with?

Savings

Takingstock @
Takingstock @
Level 5. Genius
Updated 2w ago
Upticked the question coz there's so many different ways to look at it. From what I have read, plus the different variations: Seedly - 50% expenses / 30% wealth retirement / 20% savings or emergency Elizabeth Warren who's running for elections: 50% needs / 30% wants / 20% savings Gail Vaz Oxlade (Canada): 35% housing / 15% transportation / 25% life / 15% debt / 10% savings. Big items actually come in several categories (eg downpayments, medical emergencies, retirement, wedding)... Personally I feel three category is too tight (you end up with very broad buckets), but if I had to recommend, I would use a six bucket framework like this: A) Allowance for self, and family (some call 家用): 15% +/- 5% B) Housing / Rent: 30% +/- 5% If you have yet to pay your own mortgage, consider splitting between saving for downpayment and household utilities. C) Recurring expenses and/ or annual ones like insurance, transportation, tax, wifi / cable, s&cc, dental... : 15% +/- 5% D) Entertainment and Wants: 10% +/- 5% Travel would be here, as well as clubbing/movies, shopping... E) Emergencies: 5% (keep in bank and/or SSBs) Theoretically, we all advocate 3 - 6 mths, which is a topic in itself. It's a nice place to be but even for myself, I want 12 mths for certain types of expenses. But if u carry consumer debts, then hoarding a lot of emergency funds in low yield safe places is not a very smart thing to do. F) Lumping up retirement / savings / non-housing debts / other future goals here. Would suggest 15-25% here, but it goes in an order - pay off debts if you have any - no debt, look at future goals (wedding/children) - split out some for retirement, helps to start early, but up to your comfort level in things like annuities, SRS and RSTU. - put the remaining in investments that you have some sort of flexibility in case you really really need to sell them to meet some needs. They would need to be balanced to 100% total. And it's not dead... For budgets, you will slowly get the hang of it and adjust as necessary based on your priorities. Personally, over my entire career, my total savings per year (for category E and F) tend to average about 3 to 4 mth salary, so about 1/3 goes to retirement, I adjust my emergency funds between cash and SSBs, and the rest in dividend-paying assets to have passive income in case shit happens.

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Investments

Takingstock @
Takingstock @
Level 5. Genius
Answered 2w ago
If I said "yes", how does that affect you? If I said to your face you will fail your exam this year, do you think you will fail it? Underemployment happens, yes it might happen to you if you got an MBA, but still end up washing dishes... But is it because you didn't try, or you didn't try HARD ENOUGH? Higher living costs... Just like the stock market indices, prices just tend to go up in general, coz people also need to make incremental profits and inflation. It's the price of progress... Be glad for inflation... Unless you want to go experience deflation n stagflation yourself. Don't think the lost decade was a good time for the Japanese. Student loans in the US are bad but don't think it's that bad here in Singapore. Their interest rates can go up to xx.xx% (think I have seen higher than credit card interest rates). Almost everyone will have some debt in their life... You should learn to deal with debt, how to calculate your interest costs and the best way to pay the loan down. Problems don't go away if you talk about it and do nothing... They go away after you start taking steps to tackle them.
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