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!