Friday, 30 December 2016

2016 annual expenses of S$120,000

The week and the year 2016 is coming to an end with one more day of work before I get to enjoy another long weekend. Looking forward to a nice Japanese dinner with good friends tmr on NYE before counting down to the new year 2017 at their place!

I might have another post about 2016 in review but it's been a tough year on many fronts for my wife and I. We had great times with each other, our families and friends but I can honestly say we are happy to have survived 2016. Let's hope 2017 is better for us.
I would like to think that going through such a challenging year has contributed to the high level of expenses incurred. Wow, I must admit it surprised me when I did a quick calculation and came to the following figures for the year 2016:
  • Annual expenses of S$120,000
  • Average monthly expenses of S$10,000
Granted, the annual expenses took into account all of our discretionary & non-discretionary spending and contributions to our parents. Examples of such spending are: mortgage, maintenance fee, home insurance, cable TV & broadband, home appliances & furniture, groceries, dining, overseas travel, public & private transport, car, whole life insurance, personal & property tax, gifts etc.

What struck me was the figures were significantly higher than 2014 and 2015 while our salaries increased at a much slower rate. That's the thing about lifestyle inflation. It creeps up on you and it's easy to fall into a habit of spending more to make ourselves feel better from the higher stress of earning more money. Almost like a coping mechanism for dealing with tough times.

I'm putting this skyrocketing annual expenses down to an especially difficult year but bad habits can be hard to break once they are formed. It's probably time to go back to basics for the new year 2017. One small step at a time as we try to get better at the overall management of our lifestyles, jobs and interpersonal relationships. We have to believe that slight improvements every day, week and month will eventually translate into progress! 

Wednesday, 28 December 2016

Investments for Dec 2016

I originally had this post titled "Purchases for Dec 2016". But it sounded like the post is about consumer items that I purchased for the month of Dec 2016. Of which there were many considering the Christmas celebrations, dinners and gift exchanges. Happy times!

Anyway, I changed the title to "Investments for Dec 2016", just to make it sound more official and related to the financial assets purchased for the month of Dec 2016. As a follow up to my previous post on dividend income received in Dec 2016, I have also decided to reveal both my automatic and manual investments each month.
Automatic

POSB Invest-Saver

ABF Singapore Bond Index Fund (A35): 86 shares at S$1.145 per share

Nikko AM STI ETF (G3B): 32 shares at S$3.05 per share

Maybank Kim Eng Monthly Investment Plan

SPDR STI ETF (ES3): 97 shares at S$3 per share

OCBC Blue Chip Investment Plan

Nikko AM STI ETF (G3B): 498 shares at S$3 per share

Manual

Nil

Going forward from Jan 2017, S$1,800 will be auto-invested across three investment plans each month with a total fee of S$8. The aim is to keep the transaction cost to 1% or less of the investment amount each month.

Friday, 23 December 2016

Dividend income for Dec 2016

It's the Christmas weekend and I'm about to get off work soon. Thought I will squeeze in a blog post before the long weekend!

We have been doing our Christmas shopping for the past 2 weeks to prepare gifts for our families and friends. Will be having Christmas dinners over the weekend with good food and wine. Looking forward to that after such a busy and tough few weeks at work!

I was debating with myself a while back about whether to disclose more details of our dividend income but decided against it. Been thinking about it again and this time round, I have decided to start posting specific details on the amount of dividend and coupons received in relation to the relevant shares/ETFs/bonds from the month of Dec 2016 onwards.

Exciting stuff! Mainly because you can have a better sense of the constituents of the share/ETF/bond type in our asset portfolio. I will try to do the post after receiving all the dividend income for that month.
Dividend income for Dec 2016

SGX

1. Silverlake Axis Ltd (5CP) - S$13

2. Boustead Singapore Ltd (F9D) - S$21

3. King Wan Corporation Ltd (554) - S$39

4. UMS Holdings Ltd (558) - S$16

5. Singapore Press Holdings Ltd (T39) - S$110

Friday, 16 December 2016

Why I read Transitioning.org

The US Federal Reserve has raised interest rates for the first time this year and there's talk of 3 more increases to come next year. Stock markets and oil prices reacted. TPG Telecom wins right to be Singapore's next telco in an already saturated market to compete against Singtel, Starhub and M1 and their stock prices tanked. This is right after a number of days of bullish run for global stock markets.

Look at how volatile the equity markets can be. This is why I know I can't trade and have to remind myself to ignore short-term price movements. There's so many factors that impact each industry and they can develop & evolve differently over time. Hence, my preference for ETFs to risk diversify the impact of various factors on a range of industries across multiple countries.

Positive affirmation of my ETF investing strategy aside. I read about redundancies in Singapore hitting a 7 year high in the first 9 months of this year, which is the highest since the global financial crisis in 2009. That was actually more concerning for me.

It confirms my fear that the negative economic conditions is flowing through to the job market a lot more. Plus PMETs with tertiary qualifications formed the majority of Singapore resident layoffs. Feels like we got a target on our backs now.
Do you follow the website Transitioning.org? It's a support site for the unemployed and underemployed. When I was jobless as a graduate in 2010, I was actually reading this website for advice and encouragement even though it's more relevant to Singaporeans and I was in Melbourne at that time.

It made me feel less alone at a time when I was desperately looking for work overseas to give myself a reason to stay on in Australia. Even after I found a job and was employed for years after that, I continued to read posts on Transitioning.org. It was a reminder of how tough life can be for the jobless & the problems they face. And a reminder to have empathy.

Even though my wife and I have not had to go through that for some time now, it doesn't mean we should forget that retrenchment and hard times continue to strike people's lives. We could be one or two job losses away ourselves from being part of the statistics.

What makes it worse is when I read about how Singapore residents are forced out of their jobs under unreasonable employment conditions with no recourse. I only realised how little we can do about it when writing my post about making a claim against an employer. It sucks.

As economic conditions deteriorate, firms will always cut costs in the easiest manner - by reducing headcount. Sometimes unfairly so. Must we wait for things to worsen before we start addressing this issue properly?

Sunday, 11 December 2016

Why I left my previous job

I don't think I have ever wrote about why I left my previous job. I mean, I had a post about changing jobs and why I was moving to a job in a bank. But I never went into the triggers at my previous workplace (an accounting firm) that made me decide to search for a new role in the first place.

There were personal as well as professional reasons but they interacted with each other to ultimately result in me resigning. Only my wife is acutely aware of how significant the personal reasons were and I never spoke to anyone about this in detail.

After moving back to Singapore from Australia in 2014, I joined a small tax advisory team in an accounting firm. The team grew in size over time but all of us worked well together. It was a difficult time for me nevertheless because I had to adjust to longer work hours, more demanding bosses and a different work culture.

In early 2016, my tax manager went on maternity leave and I stepped up to cover her responsibilities for several months. Almost burnt myself out in the process but was rewarded with a decent bonus at the annual performance review. However, I wasn't promoted but I was fine with that since my manager had just returned and I had assumed she will resume her responsibilities.

It's tough being a working mum in Singapore and I was fully prepared to support her transition back to the workplace. What I was not prepared for was how the relationship between my tax partner and my tax manager will deteriorate to the point where they could no longer work with each other directly.

There were many reasons - mismatched expectations, lack of communication, poor conflict resolution etc. All resulting in a vicious cycle where my tax manager became demotivated, disinterested & resentful and my tax partner became distrustful, small-minded & absent to avoid conflict. Want to guess what happened to me?
It's easy. I got stuck in the middle and I was frustrated & angry that a previously good working relationship was destroyed simply because we couldn't resolve what I thought was not a hard problem. It's like watching a train wreck about to happen and you can't seem to stop it no matter how hard you try.

And that's what happened. I watched two people that I respected and looked up to become the worst versions of themselves. As a result, we couldn't win any new client work and our existing client work suffered. So I left. I refused to be a part of a non-functional team where I could no longer learn and felt trapped.

I caught up with an ex-colleague recently over dinner and drinks. Apparently, the situation has worsened and the most likely outcome is that my tax manager will leave at the start of the new year 2017. I was mostly sad at how things turned out but I was a little relieved that I dodged a bullet.

The most important lesson I learned from the whole situation is how essential conflict resolution and communication is to a workplace. It doesn't matter how technically brilliant, hardworking or even of a teamplayer the people are if they don't resolve conflicts and communicate effectively.

On a side note, I did consider writing a post about how I could leave my previous job. But I suspected it would end up being about having an emergency fund, cash savings, investments and keeping expenses low. Honestly, it wouldn't have been true in this case. I already got my current job before resigning from my previous job. It was just a matter of aligning my last day and first day so I got a few weeks of holiday in between.

I didn't even need to tap into my emergency fund, cash savings and investments. Or even bothered to lower my expenses. One day, I might get retrenched or forced to resign unexpectedly without a job waiting for me. Maybe then will I write a more personal post about the importance of all those things during such an event.

For now, as long as I'm capable and willing to work, my main focus continues to be keeping myself relevant in my industry by being proactive. This allows me to walk away from toxic work environments and that is my best defense against having to tolerate similar unreasonable & negative situations in the future.

Wednesday, 7 December 2016

Moving past our mistakes

I must admit that I felt a pang of regret/fear when I read Kyith's (Investment Moats) post - Negative Cash on Cash Return Bites Single 45 Year Old with 6 Investment Properties. Although I am not in the same situation as the lady mentioned in The New Paper, Kyith's analysis could just have easily been applied to my wife and I.

It's a great read and important reminder for people not to get complacent and overstretch themselves on property investment even if you are a high income earner. In fact, I have applied Kyith's analysis to our situation below.

We capitalised on our above average and more stable earnings power to purchase a 2-bedroom condominium in the East in 2011. Since it is for home ownership/investment, the apartment is definitely cash on cash negative for now since we receive no rental income. It would still be the case even if it is leased out in the current rental market in Singapore.

If we offload the apartment now, there might only be a small profit after taking into account the closing costs and interest paid on housing loan so far. Given we only own one property and built up some holding power from being employed with some level of job stability in the past few years, the real test will come during the next recession.

We relied on the low interest rates to keep our mortgage payments affordable. It also helped that the lack of business building and appropriate financial assets for investment meant there was an underlying price support for the property market.

If you consider Kyith's factors in our situation above, you would be right to think we were one mistake away from being royally screwed. Was it just good luck and fortune that spared us that fate so far? Yes and No.
We were used to paying 30% of our salaries as rent when working overseas and we just made sure that we earned enough to ensure only 30% of our salaries was used for the mortgage. We already knew we were making a mistake of not purchasing a more affordable apartment because we could not qualify for those other options. We just didn't realise how bad it was going to be.

The key thing is not to get stuck in your mistakes. We took advantage of job openings in Singapore and moved ourselves back in roles that have above average pay, are more stable and sustainable long-term. This required us to actively study the employment market in Singapore and see where the opportunities are. As well as taking calculated risks in changing roles.

Essentially, we pushed hard to increase our salaries to the point where the mortgage payment started to drop below 30% and hurts less. That's how we move past our mistakes and we have had a lot of practice with this from living and working overseas.

Too often, couples are afraid to make mistakes whether financially or in life. Depending on the environment you live and work in, people can be cruel and judgmental when it comes to mistakes. Hence, couples take the safest approach, keep watching & learning from what other people are doing so as to make as little mistakes as possible.

This has never been the approach for my wife and I. We have a tendency to leap first after giving it some thought but not too much, work out the problems and pick up life lessons along the way. It can be a more painful approach when things are not going well and we find ourselves in difficult situations with few people to depend on.

All I can say is have a more positive attitude to the mistakes you have made. Always make sure you are learning from yourself and other people about tackling these mistakes. More importantly, don't let anyone get you down & out and count on yourself to bounce back.

Sunday, 4 December 2016

Average monthly passive income goal of S$1,500

Back in Aug 2016, I wrote about our average monthly passive income hitting S$1,000 for the first time. However, I didn't think I could keep it up until the end of the year. But I realised the average monthly passive income figure for the past 3 months has been staying above S$1,000.

In fact, based on the projected & received dividend & interest income for Dec 2016, the figure should be above S$1,000 by the end of the month too. I don't show the progress of the growth in average monthly passive income on the blog but it's been a grind to increase it (even so slowly) over the year.

Dividend cuts and reductions continue to cause problems with this strategy. Given my shift in focus away from dividend stocks and to ETFs, the dividend yield of the investment portfolio will actually decline. For the dollar amount of dividend income received to increase, I have to inject large amounts of cash into the ETF portfolio every year.

In turn, my interest income suffers since I no longer have as much cash balances in the bank accounts. Which is making me realise that growing the average monthly passive income is perhaps my toughest investment goal. Comparatively, all I need to do to ensure our portfolio balances are increasing (even by a bit) is to ensure we keep our jobs every month. not get retrenched and don't spend everything.

There's no point in setting an aggressive average monthly passive income goal. It will result in me over-investing in the short-term instead of spreading the cash funds out over market cycles. Screws up the asset allocations as well. The key is consistency in ensuring that it is actually increasing every year and the sustainability of the dividends.
Hence, my next target is for the average monthly passive income to hit S$1,500. I would be interested to see how long it takes for me to achieve this S$500 jump. Doesn't look like much but it took me a number of years to reach S$1,000 in the first place. I'm hoping the rate of increase rises as I get more experienced with managing our portfolio and we maintain or increase our salary income.

There is something else I would like to say though. I have been getting criticisms on a number of points below:
  • Too conservative in my deployment of cash
  • Ineffective selection of dividend stocks and ETFs
  • Over reliance on the salary income
  • Expenses are too high relative to our salary income
  • Lack of experience with bull and bear market cycles
I agree with all of the above, hence my efforts to constantly tweak and improve my strategies. I have no idea what will and will not work in the long-term because does anyone know what's going to happen in the next 50 years? Things sure have changed much in the most unexpected ways in the past 50 years.

This is why it's called a journey to financial freedom/independence. We all have different starting points, skills, strengths and weaknesses. More importantly, we all have different financial and emotional support from our families and friends. Self-doubt is always present as we make our own mistakes and meet our own problems along the way.

But financial freedom/independence is not my only life goal. It's an important one though because it makes my other life goals more achievable. However, they are much more intangible and require a lot more work. Things like happiness, satisfaction, fulfillment etc that have no easy way to track, difficult to meet and always evolving. Aren't they worth striving for?

Saturday, 3 December 2016

Changes to UOB One credit card in 2017

It's the weekend and I'm currently waiting for the Christmas tree that my wife ordered to arrive. Should be decorating it this weekend as well. Just something nice for us to get into the Christmas spirit!

This is going to be a short update on a SMS I received from UOB Cards notifying me of the below in relation to my UOB One credit card:

With effect from 1 Feb 2017,

1) Monthly instalments under 0% Instalment Payment Plan, SmartPay will not qualify as card transactions and such spend will not go towards the minimum spend and will not be awarded cash rebate.

2) A minimum of 5 transactions per month must be made to earn case rebate and will take effect on my new qualifying quarter.
I have written a few posts on the UOB One bank account and its relation to the UOB One credit card. You can find them here and there. I didn't mention it then but one of the key components of my spending on the UOB One credit card is my wife's personal care package costs split into 12 months via the 0% Instalment Payment Plan.

It essentially splits a once-off large expense into 12 smaller monthly expenses at 0% interest rate. This facilitates my cashflow management and conveniently contributes significantly to meeting the minimum spending thresholds of the UOB One credit card.

Given the upcoming change (1) above in 2017, I will have to redirect certain expenses from my other credit cards to the UOB One credit card to make up for it. It's annoying that they have removed a major benefit of participating in the 0% Instalment Payment Plan in the first place if the spending no longer qualifies as UOB One credit card transactions.

Change (2) doesn't hurt as much since I usually have more than 5 transactions per month on the UOB One credit card. It already exceeds the current requirement of a minimum of 3 transactions per month but I just have to do additional monitoring.

Which is why you should always do bank-shopping. Have a look around constantly on the savings & investment accounts and credit cards offered by the various banks here in Singapore. The terms & conditions change frequently but if you don't like it, take your business to a different bank!

In this day and age of internet banking, new accounts can be opened and credit cards can be applied for online easily. Electronic funds transfer between the banks can be done instantly with high transaction limits. We no longer have to waste time and effort going to the bank branches to initiate transactions. Don't let yourself be held hostage by any bank!

Friday, 2 December 2016

Meeting portfolio targets for the year

In Jul 2016, I did a End of Jun 2016 Financial Update post and set out goals for our net worth and asset portfolio. I'm happy to say that they have all been met at this time before 31 Dec 2016!

The monthly tracking of the figures on the relevant pages of the blog charts the progress well. I know it's showing a lot of positive figures and percentages but that's what happens when you have dual income and no kids. Most of the growth is coming from cash injections into the various portfolios as the markets have been quite flat for the second half of the year.

It's a reminder to earn more income, spend less and push the spending multiple & savings rate upwards. More importantly, it's motivation for us to keep working hard while we are relatively young. If I'm being honest, my wife and I have been feeling weary of work lately. It's a crunch time for both of us and we are getting hammered every day.

We are still surviving but can't imagine doing this when we are older and have kids. Hopefully we will be in a better position then to control our workload by relying less on our jobs for income. Anyway, here's our performance against our targets as at end Nov 2016.
1. Net Worth

Target - S$100,000
Actual - S$176,105

Cleared this goal by a mile, which means I'm setting too low a target. This is after taking into account the fact that I have been steadily lowering the market value of our property due to the weakening property market.

I continue to underestimate the ability of our net worth to grow. The rate really does accelerate once you put your mind to it and apply the law of large numbers. The logic to us is simple. We have a limited work shelf life and our tolerance for long hours and high stress decreases throughout the entire time.

We navigated ourselves to jobs that have decent pay and manageable hours. It's not about what we are passionate about since we have the rest of our lives to develop that. The focus was to maintain an acceptable rate of exchange between time and money at our jobs.

The work itself isn't particularly exciting but we change roles and scope every few years to keep things interesting. Long-term career strategy is to learn and earn as much as we can until we get retrenched. Which might always happen sooner than we think.

2. ETF Portfolio

Target - S$40,000
Actual - S$54,577

I increased the monthly amounts of automated investments into the Singapore ETFs and made some purchases of the new REIT ETF. That's what allowed us to exceed the target by about S$15,000. My concern is that I have not made any new investments into international ETFs.

We have a significant overexposure to the local equity markets and will need to increase our investments in overseas equity markets. I'm hoping Smartly can help with this after it launches by us making regular contributions to an aggressive portfolio of international ETFs held with the robo-advisor.

Which brings me to a number of questions that I have for Smartly at the moment:

  • Can I specify the proportion/mix of the international ETFs? E.g. 40% developed equity, 30% emerging equity, 20% REIT and 10% bond. Or do I have to choose from a fixed number of portfolio types from conservative to aggressive risk allocations?
  • How frequently can I contribute to my portfolio? E.g. weekly, fortnightly or monthly.
  • What happens when I make my contribution? Some form of rebalancing of the portfolio?
  • Are the dividends/distributions reinvested automatically or can they be paid out?
  • How often can I change my portfolio proportion/mix or type?
3. Share Portfolio

Target - S$120,000
Actual - S$132,111

I averaged down on the telecommunication stocks due to price weakness and did little else but that was enough for us to exceed the target by about S$12,000. The share portfolio is expected to grow much slower than the ETF portfolio anyway.

4. Other Portfolio

Target - S$150,000
Actual - S$160,100

The surrender value of our wholesale life policies have been growing slowly and consistently but contributed little to us exceeding the target by about S$10,000. It was mainly due to our monthly savings that we allocated as investment cash.

5. Total Portfolio

Target - S$500,000
Actual - S$511,587

Meeting all of the above goals resulted in us exceeding our total portfolio target by about S$12,000. Our CPF balances have been growing quickly due to the employer and employee contributions from our jobs and as we used more cash to pay off our housing loan. It's essential that we have retirement funds earmarked for spending when we actually stop work completely.

Regardless of whether we achieve financial freedom/independence, we would like to stay engaged and productive with some form of paid work. These retirement funds are for when we actually get old and no longer wish to engage in paid work. Purely for spending purposes.

As the monthly investment, spending and saving processes get more habitual and automated, my intention going forward is to make the entire thing self-sustaining. This means I need enough passive income to be generated and re-invested to grow the asset portfolio regardless of market movements.

And I only need to have enough salary to manage my expenses with no need for savings injection into the asset portfolio for it to grow. Maybe then will I engage in lower pay full-time or part-time jobs with less stress!

Sunday, 27 November 2016

Getting ready for year end

If it's not obvious by now, the number of posts each month is dropping significantly. This is due to the workload at my job getting heavier as I start to integrate into the team. I have much less time and energy to devote to the pursuits of my non-core personal interests such as blogging.

As for core personal interests such as spending time with my wife, family & friends and exercising, I continue to make the effort to do so on weekday nights and especially during the weekend. Which results in me being less engaged with this blog as I try to achieve some level of balance between all these various aspects of my life.

But this is me trying and I hope to get a better handle on things going forward. Anyway, the year end is coming and it's a good time to start getting ready for it. Or at least reflect on how the year has gone so far although I might write a more proper post for it in the new year.
1. Should we make any CPF cash top-ups?

Since we will have worked the full year, we are considering making cash top-ups to our Special Accounts for the tax relief and building up of our retirement funds. We did this for the years 2014 and 2015 but are likely to make an exception for the year 2016.

It was essential then because we haven't worked full-time in Singapore before 2014 and wanted to build up our CPF balances (especially the Special Accounts) quickly for the decent interest earnings to kick in.

With the monthly CPF contributions, our balances have grown to an acceptable amount and in line with our asset allocations. There's no longer a need to make cash top-ups to our Special Accounts to build up our retirement funds but maybe just small amounts for the tax relief.

2. Should we make any changes to the investing strategy?

The focus has always been to increase our passive income received and I continue to invest in ETFs and dividend stocks to achieve that. Changes are already in progress as I try to automate the dollar-cost averaging of the Singapore ETFs at the cost of incurring higher expenses via the monthly investment plans of banks.

Once Smartly is launched, I intend to automate the dollar-cost averaging of the International ETFs again at the cost of incurring higher expenses via the robo-advisor. I still make periodic investments into dividend stocks such as my recent averaging down of local telecom stocks but they are less frequent.

3. Should we continue tracking our net worth, income and expenses?

Yes! It can be a time-consuming exercise pulling together all the relevant information to make the updates but the data obtained has been useful. I intend to further develop my data collection and analysis tools to start making financial projections based on identifiable variables. Or tap into FinTech to plug the gap for me.

4.  What are the major risks to us now?

It's become increasingly apparent that our investing strategy is turning into a numbers game. The more funds we allocate to ETFs, the less important our ability to apply any investing strategy or even the need to be concerned by financial news.

Both the economic conditions and job markets are definitely deteriorating. Our retrenchment risks will continue to climb if the situation doesn't improve. We might still be okay for 2017 but are likely to have problems in 2018. We will have to watch our cash allocations carefully next year to buffer for this. No point over-investing our cash early on and are forced to liquidate our investments later on.

Friday, 11 November 2016

1% commission charges and updates

Biggest news of this week is that Trump will be the next president of US. I didn't take any positions before or after the polling day. The markets are especially volatile and my portfolio & investing strategy are designed to try and navigate times like these more calmly. Sometimes by staying out and doing nothing.

I have just been fine-tuning the auto-purchases of the ETFs in the Monthly Investment Plans (MIPs). As it turns out, the auto-purchase of 1 share of the SPDR Gold Shares (O87) under the Maybank KE MIP did not happen again for the month of Nov 2016.

Decided to stop this component of the Maybank KE MIP but only continue with the one for the auto-purchase of the SPDR Straits Times Index ETF (ES3). Made other changes such that these are the current auto-purchase constituents of the MIPs:
  • S$300 - ES3
  • S$600 - Nikko AM Singapore STI ETF (G3B)
  • S$100 - ABF Singapore Bond Index Fund (A35) 

Which means that S$1,000 is auto-invested every month via the MIPs into local ETFs. Some in the first half of the month and the rest in the second half of the month. Purchase commission charges are at 1% of the invested amount i.e. I pay S$10 as fees every month for the MIPs.
I have to admit that this is high but acceptable to me when it comes to my dollar cost averaging strategy. Reason is simple - I expect to pay more when someone is doing the work for me. For the value cost averaging and dividend investing components of my strategy, I invest larger amounts and the commission charges drop to less than 0.50%.

I know I have to lower my transaction costs but I'm already doing that for the most part. The S$10 is not significant to me. I have already reduced our general spending slightly every month to make up for this S$10 so the net effect is zero.

What's important to me is the fact that I'm automatically diverting S$1,000 of my cash savings into Singapore ETF investments every month. In fact, when Smartly launches, I plan to divert another S$1,000 of my cash savings for the robo-advisor to allocate into an aggressive risk profile portfolio of overseas ETF investments every month.

Again at 1% annual fees initially before decreasing to 0.7% when the asset balance exceeds S$10,000. It could go down further to 0.5% if I decide to keep at it for several years. You see how the robo-advisor fee structure mirrors the transaction costs in my own portfolio?

It only starts to drop the more funds I can commit and the more experienced I become over time. This works for me as my preference is to spread out my investment cash through market cycles. It's a slow and steady investing approach but the portfolio & strategy should weather market volatility and crashes more effectively.

Quick updates for the month of Nov 2016 so far:
  • My wife received her annual performance bonus letter and the amount is okay considering how tough the market conditions were for the past year. Not forgetting how bad the impact on the profits of her bank is due to that.
  • We will allocate the bonus when received into savings, spending and investments accordingly but I will not be reflecting the full amount on this blog.
  • Averaged down on REIT ETF, Starhub and Vicom this week.
  • Auto-purchases of G3B and A35 coming up in the next 2 weeks.

Friday, 4 November 2016

The Tracking Effect

Another week of work has gone by! I have to say the new job environment is tougher than my previous one. It might have to do with the fact that I'm not settled in yet. But I can feel the higher stress levels, more intense workpace and increased number of things to follow up on.

Benefit - Day/week passes faster. Con - More exhausted at the end of each day/week. Still not sure whether the benefit outweighs the con.

Anyway, I have continued to track the changes in our net worth, portfolios, passive income and spending on Google Sheet, SGXcafe and this blog. After doing this for one year, I'm noticing certain effects from doing so.
1. Reluctance to overspend

I used to be less aware of how much we were spending on travel, food, entertainment etc. We enjoyed engaging in these leisure activities and it hurts less when you don't know how bad the overspending is.

Now that I'm tracking most of our expenses, this increased level of awareness has unconsciously made me question the need for some of our high spending items. Sigh, gone are the days of blissful ignorance. Just need to find a balance between our spending and utility derived that works for us.

Especially with above average incomes, our dollar spending level is too high even though our savings rate of about 40% is okay. Goes to show how percentage spending tracking can sometimes cause you to miss the detail.

2. Observing the relative growth of portfolio components

I started taking note of the different growth rates of the cash, investment and retirement components of our portfolio only after recording the monthly ending balances over time. I know it sounds obvious but it's quite something to see how the different parts are moving.

Especially when there's stuff happening in the month such as greater investment activity, attempts to save more money, increased spending from higher stress etc. I can actually observe the impact of changes that I make in my daily/weekly/monthly actions when it comes to saving, spending and investing. Nothing quite like financial data crunching to show me what's working and what's not.

3. Noticing a pattern in passive income

The dividend income received varies with each month and spikes every 3 months and 6 months in a year. The interest income received is more stable but spikes every 6 months. In addition to the changes from year to year, this will allow me to determine how effective passive income is for expense management purposes.

4. Better understanding of your risk profile

Before I started tracking our entire net worth, market swings and threats of economic recessions or retrenchment will make me panic. I had no clear idea of how much cash buffer I had, minimal contingency plans and little understanding of the extent of risk I could take.

Once I had all the information, I had a clearer idea of my risk profile. Not just as an investor on how much losses I can handle in my portfolio. But as an employee with varying probability of retrenchment investing during bull markets and economic booms as well as bear markets and economic recessions. The more cycles I go through, the better the understanding of my risk profile.

Have a good weekend everyone!

Wednesday, 2 November 2016

Oct 2016 Net Worth Update

I have started work at my new job and it's been keeping me busy. Won't be writing long posts anytime soon but will try to provide financial/portfolio updates when I can.

This only serves to reinforce my belief in automated index investing. Even though my new job is essentially a parallel shift in roles, the learning curve is steep since I have never worked in the financial services industry before. I also have to adjust to interacting with new colleagues and bosses.

It takes a while and a lot of effort to settle in, perform, improve etc. This is on top of making sure I continue to spend time with my wife, our families and friends. All of which reduces my focus on monitoring and research & analysis of the equity markets. It starts becoming a lower priority item.

I imagine my life as a series of changes and phases. Each one more significant than the one before. You can see the draw of automated index investing to me, even at higher costs. Build a big enough base of index ETF investments by being consistent every month and even less than market average dividend yields & rate of returns can be sufficient.

Net Worth - $163,846 (+ $18,038 and + 12.37%)
  • Made ETF and Share investments
  • Standard monthly cash savings
  • Monthly reduction in housing loan principal
  • Normal CPF contributions

ETF Portfolio - $51,126 (+$3,185 and 6.64%)
  • Bought Philip SGX APAC Dividend Leaders REIT ETF S$ (BYJ)
  • Auto-purchase SPDR Straits Times Index ETF (ES3) [Maybank Kim Eng MIP]
  • Auto-purchase Nikko AM Singapore STI ETF (G3B) and ABF Singapore Bond Index Fund (A35) [POSB Invest-Saver]

Share Portfolio - $120,335 (+ $3,423 and + 2.93%)
  • Averaged down on M1 (B2F)

Other Portfolio - $155,800 (+ $2,000 and + 1.30%)
  • Was able to allocate monthly savings as investment cash (standard increase)

Cash On Hand - $78,000 (+ $2,000 and + 2.63%)
  • Was able to allocate the rest of monthly savings as cash on hand (standard increase)

Average monthly passive income ($1,039) still above $1,000. Most of the dividend income was received from Vanguard ETFs. Higher than normal interest income due to a corporate bond coupon.

Spending multiple increases to 4.95x but savings rate drops below 40%. Decent growth in assets and travel spending resulted in this.

Monday, 24 October 2016

ETF Updates

I'm back from my 2 week holiday to Italy in Europe! My wife and I have been there before during the second year winter break of our undergraduate study. Even with a limited budget as students, we had a great time in Italy then and figured we would enjoy it even more now with our increased budget as working adults.

We were right! Nicer accommodation, food and travel options do make a difference. Anyway, we are happy to be back in Singapore and are still recovering from jet lag. Will also need to get ready for our first day back at work this week and readjust to the daily routine.
I updated the Google Sheet and SGXCafe portfolios for the automatic Oct 2016 purchases so far:

  • SPDR Straits Times Index ETF (ES3) - Maybank Kim Eng Monthly Investment Plan (S$400)
  • Nikko AM Singapore STI ETF (G3B) - POSB Invest-Saver (S$400)

The SPDR Gold Shares (O87) automatic purchase under the Maybank Kim Eng Monthly Investment Plan did not happen because I only allocated S$100 to it. Which is not enough to purchase even 1 share as I found out from the broker. Not sure why I didn't think of this before. Increased it to S$200 and I'm hoping at least 1 share gets purchased every month from Nov 2016 onwards.

While I was away, the Philip SGX APAC Dividend Leaders REIT ETF S$ (BYJ) was listed and started trading last week. I'm not going to analyse the pros and cons of this REIT ETF as there is plenty of online material on that by the other finance bloggers and websites.

After making my own assessment, I reckon it makes for a decent addition to our ETF portfolio. I have considered including a REIT ETF before to increase the dividend yield of our ETF portfolio but couldn't find a suitable one so far.

The BYJ has some level of diversification into different types of REITs and Asia-Pacific countries but with a substantial exposure to the retail sector and Australia. It's not ideal as I would have preferred a more even spread across the various sectors and to other developed countries. But it works for now and I have added about S$1,200 of the BYJ to our ETF portfolio.

There will be an automatic Oct 2016 purchase of ABF Singapore Bond Index Fund (A35) under the POSB Invest-Saver (S$100) tomorrow and I will update the Google Sheet and SGXCafe portfolios then as well.

Wednesday, 5 October 2016

Sep 2016 Net Worth Update

I didn't post an Aug 2016 Financial Update last month. Besides, you can refer to the figures that I update regularly on the Net Worth, Asset Portfolio, Passive Income and Spending Multiple & Savings Rate blog pages as a reference. I have also included the numerical and percentage changes from month to month for easier tracking of our progress.

Nevertheless, I have decided to do a Sep 2016 Net Worth Update. Before I go into the details on our financial progress from Aug 2016, I'm going to write about other related topics first. Just to make it interesting to have some of my current thoughts and views in this post.

Would we ever pursue self-employment?

I have been debating this issue with my wife and we are coming to the conclusion that we probably won't do it unless we are forced into it. We are relatively young and still have decent job prospects and earning capabilities. We might as well make the most of our careers for now by expanding our professional & social network and gaining more work experience & skill sets. Besides, we have limited self-employment options at this stage.

Given the way things are going, technological advancements, outsourcing and structural changes to the economy & industries might put us out of work in the next decade or less. Even if we are willing to move countries to pursue jobs, it would only delay the inevitable by another decade at most. Or we will just decide to stop work early from getting burnt out, tired and disillusioned.

Which is why our approach is to keep going in our full-time jobs while we still can and keep a look out for self-employment options at the same time. And we will have to develop the required skills, experience and contacts on the side to prepare for them.

This works out financially for us since our salary income can continue to drive our savings and investments forward the longer we remain in the workforce. Our self-employment options increase the less we rely on them to fund our living expenses.

What about the value of time?

I honestly don't know what we will do even if we become financially independent, pursue early retirement and stop work now. I know it's a stupid thing to say because I'm sure there are many ways to occupy my time each day other than going to work.

Maybe we can travel more frequently, spend more time with family and friends, exercise more etc. But we can do that now even with full-time work since our jobs are not as demanding with reasonable hours. It's just a matter of motivating ourselves to be more effective and efficient at managing our time.

It's not that we like working. We just enjoy the daily interaction and engagement we get from going into work and dealing with colleagues and bosses. The positive and negative experiences help to improve us professionally and personally. That's how my wife & I have grown up and matured over the years since graduating. Self-development is one of the main reasons for our relationship to keep evolving so we will always be adapting and changing to stay together.

Our time is already well-spent by having all these influences in our lives. Unless we can find something else that offers an equivalent level of interaction and engagement, our time doesn't become better spent from not working. Essentially, time doesn't become more or less valuable from whether we have full-time jobs but from the choices we make each day. Maybe this might change when we have kids and we no longer consider the utility of time from our perspectives but from theirs as well.

Anyway, that's enough of a non-financial update and I should get back to the net worth figures. I should also mention that this is probably my last post for a while as I will be leaving for a 2 week holiday to Europe soon. And I will be busy settling in to my new job when I get back. Which translates to less time for blogging.
Net Worth - S$145,808 (+ S$14,946 and + 11.42%)

There are small increases in our ETF and Share Portfolios even though equity markets stayed relatively flat. These are due to POSB Invest-Saver contributions to Nikko AM Singapore STI ETF (G3B) and ABF Singapore Bond Index Fund (A35) as well as averaging down on some oil & gas stocks.

The Maybank Monthly Investment Plan for SPDR Straits Times Index ETF (ES3) and SPDR Gold Shares (O87) have been set up for this month onwards. This should accelerate the rate of increase in our ETF Portfolio going forward.

The increases in our Other Portfolio and Cash on hand came from cash injections and savings. Same for the increase in our Central Provident Fund (CPF) balances and decrease in our mortgage liability. These should be regular as long as we stay employed with no major expenses or investments made during the month.

There was a big drop in dividend income as the reporting season is over and should remain low until the end of the year. Interest income is increasing slightly from cash build up and corporate bond coupons. Good to know the annual spending multiple has risen too.

A few of the blog figures are proxies of actual numbers

I have been getting questions and comments that the math on my blog doesn't seem right. I'm going to address this issue now and say that you are correct. This blog is meant to be a public and personal space to chart our financial freedom journey. Take away whatever you reckon is applicable and relevant but understand that I have already revealed quite a bit of personal and financial information.

The only way I could have done that is by cloaking myself in anonymity. I have tried not to abuse it but admit that I have sometimes been too straightforward and inconsiderate in my opinions, views and comments. Besides, some of our family and good friends are already aware of the existence of this blog. As much as I trust them, I will never reveal all of our personal and financial information on this blog.

But I will try to summarise the explanations for some of the inconsistencies in the math:
  • We don't include all of our savings, investments and retirement monies in Australia in our calculations. These are our lifeline funds for starting a new life in Australia if things don't work out in Singapore. Far more important than expense and emergency funds and too critical to be disclosed publicly.
  • Our actual salary income is higher than the average figure we are showing now and that's how we have enough cash for both savings and investments every month.
  • We have only included 50% of the value of our apartment (real property) and excluded some of our CPF balances in our net worth calculation.

Although most of the figures on the blog are accurate, a few of them are proxies of the actual numbers. This helps to protect our personal and financial information by maintaining a certain level of secrecy and anonymity. I'm signing off on this note for now but will be back eventually. Looking forward to writing my next post then!

Monday, 3 October 2016

What we learned from my unemployment

I have to say that the previous post on our annual spending multiples has really put things into perspective. By the way, it also represents roughly the number of years we can last on the capital amounts of our savings and investments if both of us have to stop work involuntarily or by choice.

The current rate of increase suggests our annual spending multiple should rise by 1x every year assuming there are no changes to our income and expenses. With the 10 year target to achieve financial independence, our annual spending multiple would have increased to 15x a decade later.

Our incomes might rise during that time as we hit our peak earning capabilities but our expenses would also increase correspondingly due to family obligations. Let's say they net each other off i.e. back to the same scenario above of no changes. We would still get to the same annual spending multiple of 15x by then.

Even if we both stop work at that time, we might have enough to get us to the retirement age to access our retirement funds. That's when we get the next boost in our annual spending multiple from including these assets to last us to the end.

I'm hoping to accelerate the rate of increase of our annual spending multiple to either reach 15x before the 10 years are up or achieve 20x by the end of 10 years. I know the interest and dividend income will help but it still looks like our salary income is the main determinant.

Which means the single biggest risk to us now is the loss of our jobs. How we manage that event if it happens will become the main factor that determines our ability to recover and get back on track. We don't have any experience in dealing with retrenchment but we have some experience in managing my unemployment years ago. It's not quite the same thing since the former is the cause (not the case in my situation) and the latter is the effect.
In our 6 years of working in Melbourne, Sydney and Singapore, learning how to deal with my unemployment after graduation remains our most important lesson as a working couple so far. Having to go through that at the start of our careers overseas has also shaped our work and relationship philosophies and dynamics greatly. These are some of the things we have learnt to better manage unemployment:
  • Take care of your mental and physical health. Give yourself time to recover from the inevitable blow to your self-confidence and self-esteem. As long as it doesn't cripple your mind, you live to fight another day. One of the best ways to do that is exercise even more often than you used to. Better mental and physical health will usually translate to stronger performance in interviews. 
  • Don't just apply for jobs online at home the entire day. Get out of the apartment/house to meet your professional and social network. It will help you to feel better about yourself and you can access more opportunities that way. People are actually willing to help as long as you ask for it. Besides, there's not that many relevant jobs posted online that will occupy your whole day to apply to them. Find and target roles that are not listed on job sites.
  • Understand that your partner will feel the increased stress and pressure. Nobody like to be the sole breadwinner in a household if they had a choice. It's stressful knowing that your loved ones rely heavily on your income to survive. Going from a dual-income to single-income household requires getting used to and your partner is going to be under pressure to perform better at work to keep the job. Expect him/her to lash out no matter how well both of you manage this transition.
  • Work out whether the issue is a skills gap. Assess whether your job skills are sufficient and still relevant or no longer in demand. This is the time to decide whether you should keep sticking to your current field only to have the same problem later or move to a sustainable field with a brighter future. Be specific in your retraining and reskilling so you waste less of your dwindling time and energy reserves.
  • Be prepared to cut fixed & non-discretionary expenses and accept a lower salary. You have to be ready to reduce all fixed & non-discretionary expenses. The longer you stay unemployed, the more drastic your measures will have to be. Chances are your next job will also have a lower salary because you are not in any position to negotiate for a higher pay. It's desperate times once you have to start drawing on your emergency fund no matter how large it is.
  • Communicate with your partner even more than you used to. It's easy to forget your partner can be having a bad time at work when you are thinking he/she should be grateful to even have a job. Don't shut down and go into your own world of thoughts and worries. This is the time for greater communication to avoid any misunderstandings and resentment.
  • Find other ways to contribute to the household. Earning money to pay for stuff is only one way to contribute to the household. There's so many other ways you can contribute if you don't have an income such as doing the laundry, buying groceries, cooking, cleaning the apartment/house, paying the bills etc.  This is on top of your job-hunting efforts since you still have to pull your weight at home.  

Every now and then, we go through and survive retrenchment exercises and keep in contact with friends/ex-colleagues  that are jobless. The tough times they face remind us of the hardships we went through and left behind but could be just around the corner for us again.

It's one of the reasons I started this blog. To develop a hobby or interest that can occupy my attention and thoughts when life gets difficult. I still remember being in the apartment by myself while my wife was out working and adjusting to her full-time role.

We had no family in Melbourne and most of our international friends went back to their home countries. It's hard to relate to our local friends when you are the one without the requisite visa to allow you to work and you can't stay with family to save costs. Plus 3 years at university just isn't enough time to build good friendships when there's so little common & shared experiences.

It can get lonely & isolating and it would have been helpful to have a platform that I can share my thoughts and worries on. Not to say I wasn't talking to my wife about it. She was already having a tough time at work with a difficult manager who didn't particularly like an international student (with a lack of local work experience) in a graduate role.

This was on top of us screwing up our budget and not managing our expenses properly. My wife still had savings but I was running out of money even after transferring over most of my savings from Singapore. I sunk into a mild depression while my wife was trying to keep her head above water. You want to know where our perseverance and resilience came from? It's from surviving shitty experiences like that. By the way, there are many people out there with much worse stories.

That's how my wife and I learnt the most important thing about us - that ultimately, we can only depend on ourselves and each other. It's okay to make mistakes as long as learn and move on from them. We believe strongly in helping our family and friends in times of need but we also actively encourage them to help themselves. We won't apologise for the way we have developed and the values & ideas we stand for. Neither do we care much about how other people perceive us. This is just who we are now. 

Friday, 30 September 2016

Our annual spending multiples

I will be going on a 2 week holiday to Europe with my wife before starting my new job later this year. It's always good to have a break in between jobs just to relax and refresh myself. After my probation ends mid next year, we will probably head to the West Coast USA for another 2 week holiday to reward myself if I clear it or to console myself if I fail it.

I have mentioned before on my blog that travelling for overseas holidays is one of our main expenditure items. We enjoy both short and long haul holidays and plan to travel more while we still can as a Dual Income No Kids couple in Singapore. Who knows how long this will last.

However, it's not the fact that we just spent thousands of dollars on flights, accommodations and currency exchange that triggered this post. Admittedly, I was taken aback by how much our monthly expenses increased due to the travel spending.

Have you heard of the Wall Street Playboys blog? It's informative and insightful yet divisive and depressing at the same time. The thought process, logic and math are sound but I doubt the majority of people can follow their suggested roadmap and actions. Me being one of them.

I'm not their target audience but I do read the blog posts sometimes to pick up insights on how we manage our careers and finances. Their latest post on why savings rates are worthless and what real net worth is brought my attention to our lack of focus on the annual spending multiples.
I have been calculating our savings rate and assumed an average fixed percentage savings of 40% will be sufficient. I should have realised the need to link our savings and investments to our spending to test whether this assumption will hold.

I'm going to take a conservative approach and exclude our retirement assets consisting of the Central Provident Fund (CPF) funds in Singapore and Superannuation funds in Australia. Reason being we can't access the retirement monies now to manage any cash outflows and expenses. I know we can use the CPF - OA funds for housing expenses but will choose not to include it at this stage.

This is how I calculated our annual spending multiple at the end of each month: (Total savings and investments) / (Total expenses for the previous 11 and current months).

By the way, I have a new Spending Multiple & Savings Rate page on the blog to track the monthly annual spending multiples for 2016. This replaces the old Savings Rate only page.

According to the guidelines provided by Wall Street Playboys, 20x annual spending is rich, 10x annual spending is comfortable and 1x annual spending is disastrous. We are currently at 4.77x annual spending and it has increased from 4.20x at the start of the year. However, this suggests we are only at an average level of real net worth and not as comfortable as we thought.

Just when we think we are progressing. It still looks like we have a long way to go and our goal for now should be to get to 10x annual spending. At the very least, it will lower the possibility of a few significant negative events in our jobs and financial markets from wiping us out.

Wednesday, 28 September 2016

Maybank Kim Eng Monthly Investment Plan of S$500

It's mid week and I can feel my working pace slow down. The handover process has already begun and my workload should wind down even more as I transition out of the firm. The bad thing is that time passes slower and it feels longer to get to the end of each day.

The good thing is I have more time to review our investments before I hit the ground running in my next role. After increasing my POSB Invest-Saver monthly investment amount in the Nikko AM Singapore STI ETF (G3B) from S$300 to S$400, I had another look at the regular savings plan options.

Although I'm happy to wait for the launch of the Smartly robo-advisor platform to set up an equivalent S$500 regular savings plan in global equity and bond ETFs, I considered starting another regular savings plan.

No particular reason other than to transfer more forced savings into forced investments. Our monthly forced savings is at S$4,000 of investment cash and cash on hand now. This will become monthly forced savings of S$2,500 in investment cash & cash on hand and monthly forced investments of S$1,500 in ETFs.

I have to admit that three regular savings plans is not an efficient way to do index investing. I'm better off combining the S$1,500 into one regular savings plan to save costs. The thing is I like the idea of slow accumulation of different ETFs over time based on Dollar Cost Averaging (DCA).

I have sufficient cash for Value Cost Averaging (VCA) and dividend investing but they require a certain level of market timing. In my short investing experience, I have come to realise that it will take a long time to develop the required skills, discipline and temperament. This might happen eventually but most probably after making many mistakes.

I'm okay to take my time to learn but the regular savings plans will keep me vested in the markets in the meantime. Higher costs and lower returns is a price I'm willing to pay until I gain the requisite experience.
After reviewing the other regular savings plan options, I decided on the Maybank Kim Eng Monthly Investment Plan. Main reason is the extensive list of securities in multiple markets I can invest in. For now, I'm interested in these two securities with the following breakdown of the monthly investment amount of S$500:
  • SPDR Straits Times Index ETF (ES3) - S$400
  • SPDR Gold Shares (O87) - S$100

The orders submitted under the Maybank Kim Eng Monthly Investment Plan should be executed on the 8th of every month as long as it is a business day. If not, on the first business day after the 8th of that month. I just have to make sure there is sufficient cash in the KE Trade Prefunded Account before the 8th for the withdrawal to execute the orders. 

The Maybank Kim Eng Monthly Investment Plan would be held in my name while the POSB Invest-Saver is held in my wife's name. If possible, I would like the Smartly robo-advisor platform portfolio to be held in both my wife and my name as a joint account (will be our first one).

My wife and I generally do not like the idea of joint accounts and prefer to keep both of our savings and investments separate in individual accounts. She is okay for me to manage her money but any actions with those funds will require her authorisation.

I know I previously wrote about why we chose not to invest in a Gold ETF. However, I did mention at the end of the post that we might invest in the Gold ETF after the size of our ETF & Share portfolio has grown significantly.

I'm not saying that has happened. Clearly evident from the small S$100 monthly investment amount in the O87. However, I do think it's time to introduce a low correlation asset class exposure to better manage the recent and upcoming volatility.

I'm interested to see how this precious metals exposure plays out. Since it's still an ETF, I don't think I can count it as a form of alternative investments. I know there are seven common types of alternative investments:
  • Private equity
  • Direct investments in start-ups and private companies
  • Venture capital
  • Real assets
  • Hedge funds
  • Fund of funds
  • Private placement debt

These are for sophisticated investors and I doubt we will ever have enough capital and knowledge to gain access to them. It would make for a great topic to write about though and one can always dream.

Monday, 26 September 2016

Increase POSB Invest-Saver to S$400

The weekend is over. It was a great one but I now have to go through another week of work to get to the next weekend. Fascinating how time seems to slow to a crawl when you are sitting at your desk in the office on Mon morning looking at your laptop screen.

Anyway, I have been thinking about my previous posts on how we index invest every month and relevant FinTech startups for us. As much as I would like to integrate the Smartly robo-advisor platform into my ETF portfolio, it still has not been launched to date.

I understand it's a regulatory compliance issue and the Monetary Authority of Singapore (MAS) really should be moving faster on this. All that talk by the Singapore Government about encouraging the FinTech industry but regulations seem to be the main cause of delays again and again.

It's frustrating as an investor in Singapore not to have access to a robo-advisor platform when it has been proven to be such a fantastic wealth-building tool in US and Canada. Even worse when there is actually a product ready-for-launch and you are just waiting to access it. Can't imagine what it's like for the Smartly team.

However, I realised I have to be more efficient at deploying our investment cash. It's one thing to let our cash on hand build up as a buffer for emergencies & expenses but another to do that with our investment cash. Unless I am predicting a market crash in the near term (which I am not), that's just poor asset allocation on my part.
Hence, I have decided to increase the monthly investment amount of our POSB Invest-Saver in the Nikko AM Singapore STI ETF (G3B) from S$300 to S$400. In addition to the S$100 monthly investment in the ABF Singapore Bond Index Fund (A35), the total amount of S$500 is the most cost effective level before I have to start exploring other regular savings plan options.

There's a useful MoneySmart article that compares the various regular savings plan options (POSB vs OCBC vs POEMS vs Maybank Kim Eng). Have a read and you can understand why I'm reluctant to invest more than S$500 in the POSB Invest-Saver when there are cheaper regular savings plan options.

I know the increase of S$100 is not much but it will help to soak up some of the investment cash. Instead of starting another regular savings plan, I have allocated a monthly investment amount of S$500 for the Smartly robo-advisor platform.

The POSB Invest-Saver as a regular savings plan that offer exposure to the Singapore equity and bond markets will suffice. My objective is to set up the Smartly robo-advisor platform as a regular savings plan that offer equivalent exposure to the global equity and bond markets.

I hope the Smartly product is launched soon. As my wife and I get busier with work, especially after my job change, I would like to automate more of our investment processes.

FYI, we have been spending time with our friends and their kids over some weekends. It's been a good experience and precursor to what it would be like when we have kids of our own. But I have also noticed how little time the parents have to themselves in each day. It's more important to spend that time with each other to continue developing the relationship than on investment research and analysis.

Going forward, It will definitely help to have more of our investment processes automated so less actions are required on our part. Time to wait and see how this works out.

Friday, 23 September 2016

Changing jobs

I have held back from writing about this recent development in my professional life because it's quite personal and I wasn't sure how useful it would be on this blog. But I figured a change in jobs is a significant event because it can have an immediate and long-term impact on your salary income. Which makes this a personal finance topic.

Newsflash: I will be resigning from my current position in an accounting firm and taking up a new position in a bank. This means I'm finally joining my wife in the banking industry, which is something I never imagined doing.

I have always believed in employment risk diversification to reduce the possibility of both my wife and I being retrenched at the same time. Working in different fields and industries is a good way to achieve that. Protecting at least one source of salary income is a high priority for us to be able to navigate an economic downturn and recession.

So why have I gone against my risk diversification philosophy? I have considered all these factors that led to my decision and figured it would be a good reference point to check back on after working in my new job. Just to see how they played out.
1. Is the salary income higher?

I always knew salary incomes in the accounting industry are lower than those in the banking industry. And I could justify that by convincing myself that my technical skills and knowledge will increase at a faster pace. At some point in time, I will be able to catch up on the gap in the salary income and make up for it. Besides, I figured there was more room and scope for professional development in an accounting firm.

I have come to realise that this is not entirely true. I can say this because my wife and I entered into the banking and accounting industries respectively with similar academic qualifications, achieved the same professional qualifications and our career paths have diverted.

It's true that I picked up compliance and advisory technical skills and knowledge in an accounting firm. But my wife has also picked up specialist skills and knowledge in a bank. Neither is less valuable than the other. However, a lower starting salary and slower increase in salary due to a fixed promotion ladder has resulted in an ever increasing gap with my wife's salary.

I'm happy to have a wife that out earns me and I don't understand why society views it as an issue to be discussed. I could go on and on about the benefits of a higher earning wife but that's not the point of this post. What's important is that I start pulling my weight to address this salary gap. Not just for my wife but for myself as well.

I agree that money should not be the most important factor in a job. But it is one of the main employee motivation factors for me. The fact that I can be paid 15% more by making a lateral move from an accounting firm to a bank makes me wonder how much my lost earnings are from not having done so earlier.

2. What about the current job crisis in the banking industry?

This is a good question posed by my colleagues. Why move to the banking industry that is currently going through a job crisis with increasing retrenchment statistics? The problem for me is revenues are already declining in my current team and will eventually cause a restructure. I might as well deal with that problem now and move to an external role with demand for my skills and knowledge.

This actually answers the question above. It depends on which area of the bank I am moving to. If that division is in decline, I am going to run into the same issues eventually. However, if it's in a growing area such as regulatory compliance, there's potential for longer-term application of my expertise.

3. Would my professional development plateau?

I will admit that my professional development might stagnate. But it's very much up to me to decide whether that happens. The work environment in an accounting firm pushes you to learn but you have to push yourself to learn in a bank. It's easy to keep doing what you are doing and not pick up new skills and knowledge.

In short, there will be a greater learning inertia at a bank but I have to be active in overcoming it. Besides, failing to do will probably result in retrenchment so I might as well give it my all.

4. How does this fit into my personal finance goals?

One of my biggest weaknesses personally and professionally is that I get bored with what I'm doing quickly. This translates into me starting something and never finishing it properly. As you can imagine, doing that in your career can have disastrous consequences.

I have done my best to alleviate this by working in different aspects of the same field to keep myself interested in the job. But all these moving and jumping around in my job history will cost me in the long run for my career. Something my colleagues have made sure to point out to me.

This is what I have to say. Screw it. I only have one life and I'm going to learn as much as I can about as many things as I can until I find something that really fires me up. Actually, I might already have.

As a couple, our ability to generate salary income has contributed greatly to the growth in our asset portfolio. However, lifestyle inflation has eaten into our net worth by resulting in a large amount of liabilities.

The more I manage our personal finances on the assets, liabilities, income and expenses, the more I realise there's so much that I don't know. This is the case even when I am interested in learning about it. I can only imagine how much steeper the curve is for people who are not interested but still want to improve their personal finances.

I have to believe that what I learn and earn from my jobs will eventually result in me being able to contribute to improving the general personal finance management and education level of people in one form or another. This might result in me not having a traditional career path but I reckon it's something worth striving for.

Tuesday, 20 September 2016

Relevant FinTech startups for us

I'm a fan of the FinTech Revolution and I believe that FinTech startups will improve the quality of financial services provided to consumers. Before I go into any detail on specific ones that I find interesting and relevant, I should highlight that this is not a sponsored post.

In fact, none of my posts so far are sponsored. I have mentioned before that there are no plans thus far to monetise this blog. Besides, it's not self-hosted, has a basic design and there are no ads on it, which is not optimal for monetisation. Since I still rely on my full-time job for salary income, this is purely a hobby for now.

I'm exploring content partnerships but still find it too early to accept guest posts on my blog or even provide guest posts on other blogs. Besides, I like writing about how we approach personal finance & investments and other topics that interest me. However, the writing style is not likely to appeal to a wide range of audience.

The last post I wrote on FinTech as a topic was about my hopes for its development in Singapore. This was back in April 2016. Since then, I have been monitoring a few of the startups that I find relevant to us and discussed related topics in subsequent posts on:
  • Robo-advisors
  • P2P lending
  • Personal finance management
  • Government support on developing the FinTech industry

It's about time I provide more detail on why I follow certain FinTech startups or monitor the development of the industry at all.

1. Potential job or business opportunities

Since my wife and I work in the banking and accounting industries, we must remember that we are in the financial intermediary and professional services provider sectors. Which means our service industries rely on the growth & expansion of new & existing business industries.

It's important that we monitor business trends to assess their impacts not only for negative consequences on our jobs but also for potential opportunities. Make no mistake. The rise of the FinTech industry will probably result in the fall of certain divisions of the banking industry.

I doubt banks will ever allow themselves to become irrelevant in the new world but perhaps work with FinTech startups to tap into new growth areas. However, this also means some existing businesses of the banks will go into decline.

As for the accounting industry, reduced revenues from existing financial institutions will be offset by increased revenues from new financial institutions that will come under increased regulatory oversight and have more complex business service requirements.

That being said, the development of the FinTech industry in Singapore continues to be slow although the service demand by consumers and businesses are growing. Even though there are potential job or business opportunities in the FinTech industry, they can require transferrable skill sets that we have or completely different skills sets that we do not possess.

Perhaps we will only be consumers of services provided by FinTech startups for now. I will be interested to see whether we get more involved in the services creation aspect in the future. Definitely something to watch out for going forward.
2. Need for robo-advisor

It's become increasingly obvious that we are not allocating our cash efficiently. Our Dollar Cost Averaging (DCA) and Value Cost Averaging (VCA) strategies are effective but we are not deploying sufficient cash to make them work well.

We are probably too conservative and risk-averse despite having enough assets to be more aggressive. Fascinating how we let our emotions from feeling good about having more cash interfere with our logical objective to achieve higher returns since we have a long investment time horizon.

We will probably become more time-poor as we get older with additional family, work and social obligations. We have to implement an investing strategy on the side that is more automatic and allows us to deploy our excess cash.

We considered increasing our investment amounts for the POSB Invest-Saver but the high fees are a deterrent. Plus we would like to diversify away from Singapore equities since our jobs, property and a significant portion of our investment portfolio are already tied to the Singapore economy.

You can start to see how and where our needs are arising. A working couple that has some cash to invest but not enough to attract the attention of financial advisors and privilege or private bankers. And we refuse to believe that high fees and commissions are prerequisites for earning higher returns.

Enter the robo-advisors. Low cost, low minimum account online wealth management services that provide automated algorithm-based portfolio management advice without the use of human financial planners. The problem is what are the robo-advisors that are available to us here in Singapore.

The only relevant robo-advisor I could find for us is Smartly. You can refer to this post by Kevin (Turtle Investor) to know more about the progress on the launch of Smartly. Kevin also talks about how he can integrate a robo-advisor platform into his portfolio.

As for how I am planning to utilise Smartly, I will probably go for a high risk allocation of 80% global equity ETFs and 20% global bond ETFs. It would be even better if the selection of global equity and bond ETFs are entirely different from what I am already investing in using the Stan Chart online trading platform.

The fee structure is 1% for assets between S$0 - S$10,000, 0.7% for assets between S$10,000 - S$100,000 and 0.5% for assets above S$100,000. It's likely I will start investing with S$500 per month first i.e. S$400 for global equity ETFs and S$100 for global bond ETFs.

I'm okay to get hit with the 1% fee at the beginning since I intend to test the Smartly platform first. If it provides to be reliable, easy to use with a well-constructed portfolio to meet my requirements, I will increase the monthly investment amount over time. I'm happy to push even more funds into Smartly as long as it can prove itself as a viable option.

3. Need for personal finance management

We have a growing asset portfolio made up of real property, cash holdings, investments in shares, ETFs & bonds and retirement funds. We are finding ways to reduce our liabilities consisting of the housing loan, credit card debt, personal and property tax payable. Our income and expense types are also increasing with additional sources of income and lifestyle inflation.

Let's run through the various logins I have to do manually to check the balances and transactions:
  • Internet banking accounts of six banks to check my account balances, transaction histories, credit card statements
  • CPF to check my CPF balance and contribution history
  • Internet accounts of two bank brokerages and CDP to check my investment portfolio balances and transaction histories
After doing the above checks, I have to manually update the Google Sheet for the financial snapshot. Even though I build in tables and graphs to track the data over time for trend analysis, their capabilities are limited and quite static in nature.

It's one thing to collect data but another to analyse it. I can't really see the interaction between assets, liabilities, income and expenses, which is crucial to personal finance management. You cannot look at the results of actions to address one item in isolation as they affect each other. Understanding their relationships is key to overall improvement.

I also lack information on how well my efforts to balance the allocations of my asset portfolio between cash (investment vs on hand), real estate (property & REITs), shares (domestic vs international and industry sectors), ETFs (domestic vs international and geographical distributions) and bonds (corporate vs government) are working out. 

The only FinTech startup that I can find of relevance here is PiSight. Its flagship product PiMoney might provide a complete picture of our wealth and enable us to better manage our finances. It can apparently aggregate our savings, loans, credit cards and investments all in one place. I wonder whether PiMoney can provide insights or analysis on how we manage them as well.

For now, these are the immediate needs that we hope to address soon. After that, we might look into other FinTech startups such as MoolahSense that can provide alternative investment options like P2P loans. It's time we diversified our asset portfolio beyond real estate, equities and bonds.