Rental Respite

As some of you may know, I started renting out one room to a Malaysian worker some time back and had reflected on that experience previously. It seems like I’m not the only one, as shown from a Straits Times article published today.

I have also derived some economies of scale by maxing out the number of tenants I have to 3, which brings me to the limit of 6 as imposed by HDB. I consider this whole episode to be an intersection of luck and opportunity, as I was never actively looking out for tenants. Even more grateful is the fact that the tenants have all been really easy thus far, merely using the room as a place for a good night’s sleep and little much else.

All in, I will be getting $1,000 in rental income for the foreseeable months to come. Put one way, it will still take me at least half a year to make up for the “loss in income” since there are barely any bonuses to talk about this year. I guess one should just be fortunate that my wife and I are still holding on to jobs, though actually we have been much busier than pre-COVID times!

Admittedly, I don’t have a good sense of the market rate, which this strip just provided. So for $1,000/month, compared to the market rate (which seems to be way above $1,000), I’m providing some charity since my rate is considerably lower. But I guess that’s fine because I’m not looking to make a killing from this whole endeavour. It might mean that I should consider raising the rate after the contract is up, but then who knows if it is still possible to find tenants then. Having what I have now might well be better than some hypothetical potential that may not materialise.

Put another way, since my refinancing to pay a fixed 1.5% monthly mortgage of $1,627, that means that my net outflow is just $627. Of course, this cannot compare to those who have own more than one property and rent out the whole property, because the calculus involves making sure you don’t have to fork out additional cash, i.e. rent > mortgage + all other costs. But because I’m still staying in the same place, in some sense, this translate to a daily rate of $20 for our own place. Quite a steal if you ask me!

Of course, like everybody else, we hope that this COVID-19 situation will come and go. But I guess we have found ourselves in a nice position where we are ok either ways. Good if the borders are open and we can find ourselves going back to life as normal, whatever ‘normal’ is supposed to mean. Our tenants will then likely leave and we have to start ‘paying’ for our privacy once again. But if this are to stay like this in even in the medium-to-long term, we are in a good (not great, of course) place of taking advantage of this opportunity to earn a little bit of extra, with almost no additional cost.

Just a couple of months’ back, when my wife was contemplating a job opportunity overseas and bringing our daughter along while I continued to remain in Singapore, we were talking about renting our place out since there would be additional space. And this was all before the talk about renting out our room to Malaysian workers. That deal didn’t fall through, but funny how it all seemed to work out in the end.

Topping Up Our CPF SAs

Early this week, we made the decision to set aside a monthly sum of $585 to top up our own CPF SAs. Why such an awkward number? And why have we started topping up so early on when the money could be channeled towards investments instead? This post will explain our thinking and rationale, and we look forward your views!

Why such an awkward number?

This is the easier question to answer.

Under the Retirement Sum Topping-Up Scheme (RSTU) by CPF, IRAS allows a maximum of $7,000 of tax relief for top ups to our own CPF SAs. We wanted to automate the process via GIRO and spread the top ups over the year, rather than have to do it once a year, so that it becomes as painless a process as possible. So $7,000 / 12 months = $583.33/month, but then we just conveniently rounded it up a slightly nicer looking number of $585.

Having chargeable incomes in the 7% and 11.5% brackets, the tax relief will amount to actual tax savings of about $490 and $805 respectively. A small incentive for starting ourselves on the right track of more forced savings early.

Why have we started topping up so early on when the money could be channeled towards investments instead?

The answer is slightly more subjective and really comes down to our own financial philosophy as well as our upcoming plans. To cut a long story short, we have about 3 years more before our HDB MOP is up. We are looking to execute our 2 private property strategy at some point, and based on our initial round of calculations, we probably have to tap on more of our CPF OAs for the downpayment. To ensure that we are not eating too much into our CPF monies and potentially hurting our retirement funds, this was something I thought we should start doing early. So even as we plan to withdraw money from our CPF OAs eventually, this monthly top ups should provide some buffer to allow me to that without much concern, plus I get slightly more interest because CPF SA is 4%.

For those that have been following me, you must wonder if it’s a reversal of our own philosophy as we chose to fund our mortgage payments entirely pay by cash. I will rationalise it by saying that we had used our CPF OA monies for our HDB downpayment as well. And we do plan to still continue funding our monthly mortgages for the 2 private properties by cash as much as possible, though that might be dependent on how likely (or unlikely) our incomes and side-incomes are to grow in the coming 5 years or so.

I’m mindful that it could weigh in on our monthly cashflow at some point, and more so if finances get tighter in the future. At some point, it would also be ideal to automate top ups to SRS and use that as an additional source for investment, but I think I’m not quite ready to put aside too much more for future use that I cannot touch in the medium-term. In that same vein, I’m re-looking at the outflows to our emergency funds (because it is filling up to the right level soon) and an investment-linked plan that I signed up a couple of years back. By re-channelling these outflows, I will be able to calibrate the right amount of outflow and also start thinking of where to park additional funds to actualise the 2 private properties plan to fruition in the coming years.

Repricing or Refinancing

When I found out that the US Fed were cutting their rates close to zero, I knew that it would be a matter of time before the mortgage loan rates eventually follow suit. I thus should start looking around because when I took up my loan with DBS, there was no lock-in period. And I thought a good post might be to document the process for me to revisit again in future.

United States Fed Funds Rate

To give some background, my rate before repricing was FHR8 + 1.250%. At the point of writing, FHR8 is 0.63% to give me a rate of 1.88% and a monthly mortgage of $1677. By virtue of taking a floating rate package, I was paying between $1650 and $1729 over the past 1.5 years. Even though DBS had revised the FHR downwards in line with the market rates, it would not moving as fast because the movement in deposits board rates tended to lag market movements.

Taken from DBS

I went to do some mortgage loan shopping by listening to a mortgage broker. He shared about his mortgage loan packages as well as other finance tips and how to think about upgrading properties. I have recently seen many of these ads sprouting up on my social media as well as multiple blogs talking about this and I’m quite well-versed with these tactics, but I thought he managed to share more than what I already knew. More than that, he was also answering additional questions that I had and even had a follow-up conversation with me to learn about my needs – and all this without a fee. I eventually didn’t take up his offers though because of two reasons:

Damn leceh. To refinance to another bank, there were a number of applications that I had to download and fill up as well as documents that I had to provide. I had no printer at home and I was not going back to office anytime soon just to get these things done. It was also annoying that I couldn’t just do all this digitally.

Doesn’t make financial sense. There is a refinancing fee to be paid, and this is usually upwards of $1000. Some banks will incentivise you to do it by providing some subsidy but usually this isn’t enough to cover the full fees. After my calculations to compare between paying the refinancing fee and the cheaper monthly mortgage (see a quick back-of-envelope calculation below), most of the options indicated that I would only break even after about a year into the loan.

In any case, the barriers to move away from status quo were way too high and I ended up not following through. Then as I thought harder about it, if I was going to pay about the same amount in fees, I might as well made my life easier by not having to fill in additional forms. And I did this by repricing instead – which is basically refinancing but with the same bank.

DBS offers only a few packages and it simplifies decision-making because at the time when I was looking at the website, regardless of whether it is floating or fixed rate packages, it is basically 1.50% for the first few years. Before I move to the analysis of taking on a 1.50% 3-year fixed loan package, let me just highlight the overall experience, which was so much smoother because it was a repricing. Everything was done over a phone call and the broker was able to answer all the queries that I had, even highlighting to me certain parts of the packages like not being penalised if I sold my property during the 3 year lock-in period and being given a free conversion after 18 months. After the call, she dropped me an email with all the details that they already had and the new package that I wanted. All I had to do then was to sign the relevant documents virtually and everything was done and dusted. It was so much smoother and no hassle involved at all and the process took all of a 20-minute phone call and 15 minutes to go through the documents and sign in. Somehow I think this should be the process moving forward, even if I was thinking about refinancing.

So now, let me quickly break down what seems like a great improvement of 0.38%. My current mortgage is now $1627 based on 18+ years term, which saves me $50/month. So with a $300 repricing fee, I only get real savings after 6 months of staying on this plan. By that time, maybe home loan rates might drop even further, which may mean that my monthly saving would be a tad less. Conversely, if home loan rates rose, then my monthly saving would be more. My own sense is that we just entered a low interest-rate environment (~<0.5%) and judging by the last time that happened, it will be here to stay for a while. And if so, why did I choose a fixed rate package instead of a floating rate that would be more attuned to my own expectations?

Taken from moneysmart.sg


For that, I will have to revisit my original intent of choosing a bank loan over HDB loan and that was to beat the 2.6% interest rate (or to be more accurate, 0.1% above CPF OA rate). It honestly didn’t matter it would be 1.8% or 1.5%, so long as I beat that rate. Of course, I will not deny that the lower the rate, the better. I was never keen on holding on to a floating rate package even at the start, because servicing my mortgage by cash meant that I would see variability in my expenses each month. I learnt this about myself when I was faced with the option of taking on a floating rate package of SIBOR 1M + 1.05% = 1.3%, which meant that I could see fluctuations almost every single month! While it was a cheaper rate, I found myself uncomfortable with such uncertainty. But of course, judging by the past year or so, $80 is also not that big a spread that I can’t possibly cope with. And to this, I can only say, to each his own.

How would you make decisions on refinancing or repricing?

Crisis and Opportunity – Being a Stay-in Landlord

One of the reasons I’ve been pretty busy the past couple of weeks and unable to blog is because we’ve decided to use our ‘spare’ room to rent out to Malaysians who were looking for cheap accommodation while avoiding dormitories. And there was a lot of preparation that went into making it happen.

These Malaysians would have just gone through two weeks of SHN in Johor and another two weeks here, before being allowed to return to the community and go back to work. They would have otherwise commuted daily across the causeway, but that was not possible since 18 March because of Malaysia’s lockdown.

Chinese word for crisis.svg
The Chinese word for “crisis” also signifies “opportunity”, although that etymology has been disputed, I’ll still ride on the misconception anyway.

As we learnt from friends and relatives that there was this “opportunity”, we considered deeply whether it was something even worth doing from a financial standpoint in the first place. Even if we wanted to offer our help by not overcharging, we had to balance that against the trade-offs too – there was going to be a lot of hassle moving furniture in, not to mention the loss of privacy in our very own home. Moreover, we would not be able to guess what kind of tenants we would be getting. In the end, after working out some figures, we took the plunge.

I knew right from the start that I wanted to do things the correct way, as doing otherwise would open myself up to unnecessary risks. What if enforcement officers dropped by? What if the tenants were unhappy and complained, or did even worse things? In the end, such an arrangement would mostly end up with me having the most to lose.

At the same time, there were many obstacles that we faced upfront as we grappled with all the paperwork and bureaucracy – checking their work permits, registering with HDB, drafting a tenancy agreement. Internet is an amazing place, and I found the Council for Estate Agencies that provided templates and checklists, both for tenants and landlords. It was only then that I found out about stamp duty must also be paid to IRAS too.

But for somebody doing all this for the first time, I could understand why the much easier way is to not bother. Moreover, doing it the right way means you’re also subjecting yourself to all the rules imposed by HDB, like a non-citizen quota for non-Malaysians, minimum rental period (6 months – so all Airbnb style rentals of HDB flats are illegal!) and maximum number of tenants and occupants in a flat (maximum of 6 depending on size of flat; doesn’t affect families that don’t rent out rooms).

Nevertheless, if we never had the intention to rent out to begin with, this was always going to be some additional stream of income anyway. Friends that I have shared this story with claimed that I have unlocked value in my home, even though I haven’t hit the 5 year minimum occupation period (MOP) yet. To me, between having the COVID-19 crisis so that I have the opportunity to rent out a room and having business-as-usual, I would still prefer normalcy! Just to put things in perspective, it will be many more months of rental (at the rates that I’m charging) before I can even make up for my lost bonuses because of the crisis. So honestly, not worth it at all. It is probably just a temporary solution until the border re-opens, and there are suggestions recently that this could be happening earlier rather than later, possibly even in January 2021. Of course, it all depends on how this crisis pans out by then.

Most people generally do not think that being live-in landlord is viable. Personally, if the family is small and there is a spare room, then privacy is honestly quite overrated. And I don’t say this as if there hasn’t been inconvenience to my family. We are both pretty much still working from home, so we just have to be conscious that there are other people staying in our place too. When we do leave the house, we also lock up the rest of the rooms, just to avoid potential misunderstandings. On the other hand, we have been fortunate to have tenants who have been pretty invisible to us, in the sense that they spend most of the time in their rooms or outside. So we don’t feel like we have to adjust too much either.

It has also opened my eyes to the plights of others because there was no natural platform for me to interact with people of such background previously. As I chat with them, I learn about their families back in Malaysia as well as their gruelling shifts in search of a better life for their own families. This crisis really does affect everybody in very different ways, so I guess this is my way of adapting to the new norm.

How are you doing things differently?


Two Basic Math Lessons

It’s been a while since I’ve written here because I’ve been super busy with work, a couple of other things on the side, as well as studying for CFA. And so many things have happened since which I think are worthy to blog about, but let’s park that for another day

To ease myself back into the routine of blogging once more, I thought to share two realisations that I have come across that are short and sweet. One is a lesson on percentages, another is a lesson on probability.

A Lesson on Percentages

If a portfolio experiences a 10% loss followed by a 10% gain, how much did the portfolio change by?

The intuitive answer seems to be ‘no change’, but that’s not true at all. Let’s do some quick Lower Sec algebra:

Assume the portfolio is x. After the gain, it becomes 1.1x and after the gain, it is actually 1.1x \times 0.9 = 0.99x, meaning that we would experience a percentage change of \frac{(0.99x - x)}{x} = -0.01

What this simply means is this: a 10% gain followed by a 10% loss results in an overall loss of -1%! Most people don’t expect this, because it doesn’t seem to make sense. What we need to bear in mind is that the proportions do not apply to the same base. One way of thinking about it is that the 10% loss is actually applied on the new base after the 10% gain, so its effect is slightly different.

Homework question (easy): How about if we flip it around? i.e. our portfolio experiences a 10% loss first, followed by a 10% gain. (Don’t read below if you want to try it out yourself first.)

Answer: Still a -1% loss. No difference. Why? For those interested, we call this the commutative property of multiplication, which is a complicated way of saying a \times b = b \times a.

Homework question (challenging): Does this extend in general? i.e. what is the overall return for a portfolio that experienced i\% loss and i\% gain (regardless of order)?

Answer: With a portfolio of x, a gain of i\% gives (1+\frac{i}{100})x. After the i\% loss, the overall return is thus (1+\frac{i}{100})(1-\frac{i}{100})x = (1-\frac{i^2}{100})x, using the age-old expansion (a+b)(a-b) = a^2 - b^2. The percentage change is \frac{((1-\frac{i^2}{100})x - x)}{x} = -\frac{i^2}{100}. Since i^2 > 0 for all i, then it means that it is always an overall loss!

A LESSON ON PROBABILITY

Ok. I promise the next one won’t be so long.

What is the difference between a “buy-and-hold” approach and a “buy-and-sell” approach? We need to live with some assumptions since we cannot get our buying and selling right all the time. Let’s assume that a right trading (buying/selling) decisions 70% of the time, i.e. manage to buy low or sell high for 7 out of every 10 trades. Pretty generous I would say, but not impossible for a seasoned investor.

So here’s the thing. For every counter, with a “buy-and-hold” approach, you only need to make one decision, so the probability of getting it right is 70%. With a “buy-and-sell” approach, you need to get two decisions right and the probability of doing that is actually 70\% \times 70\% = 49\%, which is actually less than half the time!

How good does an investor with a “buy-and-sell” approach have to be if we wants to get it right 70% of the time then? We are looking for x\%, where (x\%)^2 = 70\%: So x = \sqrt{70\%} = 83.67\%, which means the said-investors needs to get it right about 8.4 times out of every 10 trades instead – a much higher bar!

Hope these two mathematical tidbits have been useful as you think about your expected returns and investing strategy. 🙂

The Risk Is Not In The Stocks But In Ourselves

I have been spending the past couple of weeks reading Ben Graham’s book on The Intelligent Investor.

It has a very different feel from Robert Kiyosaki’s books – more substance, very specific analysis, and overall provides actual actions that investors should take to be better at investing in the stock market. There were many gems that I picked out from reading his book, but this section from the commentary by Jason Zweig really struck a chord with me.

Risk exists in another dimension: inside you. If you overestimate how well you really understand an investment, or overstate your ability to ride out a temporary plunge in prices, it doesn’t matter what you own or how the market does. Ultimately, financial risk resides not in what kinds of investments you have, but in what kind of investor you are. If you want to know what risk really is, go to the nearest bathroom and step up to the mirror. That’s risk, gazing back at you from the glass.

John Zweig

I have come to realise that investment is a very personal journey. Everybody has their own objectives, time horizons and risk appetite. One man’s stock pick may be another man’s trade blunder. What may be good for Warren Buffett may not necessarily be good for the typical retail investor, because we may not have as deep pockets to stomach additional risks, or sufficient investment knowledge to truly understand what it means to buy more complex investment products.

I used to think that the way to learn more about our own investment style is to have some skin in the game by owning stocks and keeping track of market movements and trends. To some extent, that is true – that is partly the reason I decided to buy some cryptocurrencies. I also thought that any losses that come from it will be my “tuition fees”. But that only makes sense if I actually learnt something from my investing mistakes! So, skin in the game is just the first step. In some sense, it is really no different from the gambler at the casino, who rides on the occasional highs and frequent lows, without any proper understanding of what he is actually betting on. And if you view the stock market that way, that’s fine too.

But I seek something else instead. From my experience thus far, it has given me greater impetus to gain more knowledge about various investing strategies and principles. And more financial knowledge means making less risky decisions on investments that may seem riskier to others.

In the same vein, that is why in recent weeks, I have started my days doing my CFA readings (a good principle from Robert Kiyosaki – pay yourself first!) and also eked out some time in the evenings to attend some free webinars (recommend following Chua I-Min if you interested) and read up online (some good introductory materials on investing by Seedly). But I am still hungry to learn more about using fundamental analysis, accounting principles, etc, which might well be attributed to my background in Pure Mathematics. There is a part in me that is always interested to understand concepts from first principles, derive them on my own and see how they can be adapted in a novel manner in unfamiliar settings.

I would encourage anybody who wants to be more serious about investing to focus more on improving your financial knowledge rather than be on the constant lookout for the next stock tip. That forces you to look into the mirror and constantly evaluate whether what you know in the past has been sufficient for you, and whether you need to know more. Because quite often, we don’t know what we don’t know or we think everything we know is all there is to know. These are the dangerous positions that we do not want to catch ourselves in.

Beginning the CFA Journey

I have been contemplating this for a while now. It was a couple of years after my university days and I thought that this was something that I was really interested in and should get started on, even as I was serving out my scholarship bond. But I guess so many things happened in the past few years – wedding, BTO, baby, etc. – that life got in the way and this got pushed to the side for a bit. Because of this extended WfH that my workplace is still on for the foreseeable future, I thought I could eke out some time to sign up for financial courses and pick up more financial knowledge.

So I did some research on my own, looking out for some courses to take on. Then I realised that almost every course were running into thousands of dollars for a couple days of workshop. And from what past attendees have shared with me, you usually need to attend a number of workshops before you get something tangible. After the few free SGX workshops that I signed up, I thought I had picked up some knowledge already but I was pretty sure there was still more to learn.

So I recalled my desire to take the CFA examinations previously and assessed the cost (see below) as well as the level of preparation required of me. Most people say that I need upwards of 300 hours to prepare for the examination sufficiently. There is even a website with that title dedicated to helping candidates plan and prepare for the examination. I figured that with my mathematical background that has familiarised me with some statistics, I have some decent grounding, but only in certain topics. This can at best compensate for more preparation time that I will likely need on the Economics part (which I never studied at A-Level) or the Ethics bit (which while I consider myself a reasonable ethical person, is probably quite a different standard when it comes finance). There are some decent freebies that are provided on the website – free practice papers and free study plan. So I am pretty hyped up that I am not short of resources.

So just yesterday, in the name of lifelong learning, I signed up for the February 2021 CFA Level I examinations. It cost a whopping USD 1,150 because I signed up during the Early Bird phase (which ended yesterday). If you are interested, you can find out more details at the website. I also learnt that it will be the first sitting where the examination is carried out online, which is really a sign of the times ahead. Cost wise, I think the registration fees are really just the beginning – I had a look at the online materials and decided that hardcopy textbooks are more suited to my studying style, and then there’s a financial calculator which I need to get too. And if you are so inclined, there are courses run by Kaplan to keep you on track, but I think that I should be able do without that.

All in, it will be an intense 6 months. I think I may even be writing less now that I have decided to take this up. I just hope that my discipline can see me through this period and pass the examination eventually so that I can move on to Level II next.

Anybody else who will be sitting for the same paper in February? Will be useful to find a study buddy particular for revision because my wife is not as keen. Or if you have any tips and tricks or an experience to share if you have gone through the process before? Wish me luck!

Wedding Costs

Yesterday was my sister-in-law’s solemnisation ceremony. Apparently, at least another 240 couples thought that 08/08/20 was a special date for them too. Thinking about weddings. I reminisced a little and wanted to post about my broad takeaways from this episode of my life, so that those whose turn are coming up can also think about them and the trade-offs you are willing to make. For proper framing and context, I will also highlight that I am making references to a combined wedding based on the Malay-Muslim tradition, which I understand can be quite different from separately held ones or a typical Chinese wedding held at a hotel ballroom. For the latter, you can find out more about the costs of those weddings from Seedly, DollarsAndSense and ValueChampion. Void deck weddings may also be cheaper, but only so slightly. Another caveat is that family dynamics and style vary from individual-to-individual and family-to-family, so not everything may be fully relatable, which is why I do not want to go so deep into the specifics either.

Back to my sister-in-law’s wedding for a bit – We intended to do the wedding reception the day after but because of the COVID-19 situation, we were unable to invite as many guests as we wanted to. Hence it was decided that part would be postponed to early-2021 instead. Personally, I thought that it would have been an opportune moment to hold a smaller and more intimate reception, and everybody else can still attend via Zoom. More importantly, it would have been much much cheaper. But I guess as far as the older generation is concerned, that was deviating too far from tradition. So my first takeaway is that the wedding industry is unlikely to see too much disruption in the near future – which means that when this situation blows over and we can gather again in huge crowds, wedding fever and costs will continue to go up.

Now on to my own wedding and its associated costs about four years ago, when it was held over 31 December 2016 / 1 Jan 2017 (My friends joke that it was a two-year long wedding). I still can recall doing up the budgeting, busting it each time and the various squabbles that me and my then-fiancee had over what we should spend and what we could afford to forego. My next takeaway is that tradition may cost more money. You can try all sorts of means to minimise cost but do note that there some Malay wedding essentials that we cannot do without. Then there are also ‘essentials’ that go beyond the religious and are costly mainstays of the tradition which should form part of the wedding depending on how much say you give to the older generations. And as far as I’m aware, this applies to any tradition.

I will be upfront and say that I budgeted $50k for my wedding, knowing that I was able to set aside that amount of money by the time the wedding came around. I was able to afford it fully without either of us resorting to loans, which was my first benchmark. If I had things my own way, I would have budgeted and spent less. But alas, one big takeaway I had from my own wedding is that it is almost never just about the bride and groom. Everybody has something to say about the wedding and that’s how costs can easily balloon if not kept in check. So budgeting is important to show that spending more in one area equates to a trade-off that spending must be less in another.

I am sharing the template that I used to budget for my own wedding. You can start by putting down estimates and then filling in the costs and other details along the way as you confirm the various vendors you will be working with. Knowing what you have pinned down will also arrow you to narrow your scope for what you can budget for subsequent vendors. A checklist is also useful to make sure that you keep yourself on track on the stuff that really matters most – pre-marriage course preparations, booking of the kadi, etc. More significantly, the budget really forced me to review the paid and upcoming expenses for the wedding every now and then.

And then when it comes to the crunch, we had to think up of alternatives to reduce cost. What we chose to do may be slightly unconventional as we handmade quite a number of wedding props and decorations.

Up-cycling with Snapple bottles for guests to share anniversary ideas
Hanging props: straws, fishing line and a gold spray paint is enough to get the glittery look
Cardboard, black tape, red paint and quite a bit of man-hours; used for two weddings to make it worth the effort

It certainly took up quite a bit of time putting them together but I treated it as mini-art projects. Except the LOVE letters though – that was a big one that my family gamely got involved too. So basically, it was a trade-off between time and money and in this instance, I chose money. But I’ve also preserved the value of these wedding props because they now form parts of my own house decor too! They now make for interesting stories whenever I have guests coming over.

Budgeting is just one part of the picture though. The other part is maintaining cash flow. How is that relevant for a wedding, you may ask? Well, the budget that I set out at the start must be based entirely on my own means – what I had then and what I was willing to set aside along the way as I worked for the few years leading up to the wedding (and of course, not everything should be set aside for the wedding only). It may seem obvious, but I also know of some bad practices that we should all avoid: Don’t bank on the duit hantaran /dowry or any cash gifts from your attendees as part of the wedding budget. Those come after the wedding, and for the latter, as much as you can expect, there is no guarantee you will receive. So never put yourself in that precarious position unnecessarily.

Another takeaway that I have always advised those around me who are planning for an upcoming wedding is this: If you know that you’re going to have no choice but to spend a pretty big sum for a wedding, then might as well make the best out of it. When we met vendors, my fiancee would focus on the quality of their service. I would focus on the payment schedule and the different payment modes that they accepted. I already had my Citibank Premiermiles credit card (sharing my referral link for your easy reference) by then, so I charged all the purchases to that card to collect miles along the way. There were a handful of purchases that we made in JB, and that qualified me for bonus miles because of the overseas spending. The same can also be said for your honeymoon spending, which will allow you to rack up quite a bit of bonus miles too since you will definitely be overseas and likelier to spend more just to treat the both of you for a job well done because planning for a wedding is more than just about managing finances together (managing people is generally a much larger headache). And better still, the miles on the card never expired, so I was never pressured into spending more than I needed to.

Anyway, after everything was said and done, we ended up spending slightly beyond our budget: $54k. I’m thankful for the budget and proper tracking of the wedding costs, as it really kept me in check multiple times along the way. With all the cash gifts from friends and relatives, it helped to ease the overall load as I manage to ‘make back’ more than half that amount and ended with a deficit of $20k, which was not as bad as I initially imagined it to be. I know that there are some people which relatively richer relatives who can end up ‘making’ money from their wedding, but I guess this is just one of those things where we accept the final outcome and be glad that the damage was not greater than what it was.

For those with a wedding that’s coming up soon, any thoughts you might want to share? My experience through planning my wedding may shed some light on how to cut costs…

Taking Leave from Work

It’s going to be a while before we can use our leave for overseas travel given the current situation. I had initially booked a 3-week long holiday to the US West Coast but that has since been cancelled. So with quite a lot of leave still on hand, which I have not really used so far because it makes sense for me to clear my off-in-lieu’s first as those cannot be brought over to 2021.

What this means is that this really long 6-day weekend is pretty much going to be spent at home, and some of it to help out with the preparations of my sister-in-law’s wedding. And I was actually quite excited leading up to it because there were a number of things on my to-do list that I was keen to do, but did not really have the time to think about it with a full presence of mind. Some things on my list are:

1. Complete an online course on Tableau since the beginning of this year – I had trouble doing so because it took so long to get the license key from my organisation as well as to gain access to the lessons. Now I can dedicate a good couple of hours specifically to this skill which I have been wanting to learn and is very relevant to my current and future work. Hopefully I can try out some nifty visualisations with financial data and share them here once I get really good at it.

2. Attend evening webinars – These are getting more popular these days since the advent of Zoom. It used to be the case that such 1-2 hour sessions were held somewhere in town and I had to make the trip all the way there just for that couple of hours. It also means I get to spend less time with my family. This arrangement is so much more convenient now.

3. Review various aspects of my financial portfolio – I have been contemplating whether this is the best interest rate environment to refinance or reprice my HDB mortgage loan. I recently received a letter from DBS that they are revising my floating rate downwards to 1.85% (FHR8 + 1.25%) and so I have been actively looking out for better deals since I started out with no lock-in periods. I hope to come to a final decision during this period seeing that this interest rate seems likely to stay. (Must really review this statement again in months/years to come…) Another part that I am also starting to take a keener interest in is to gain more financial knowledge (related to above point) and have signed up for free courses (and paid ones too) on SGX Academy. SGX also has free tutorials to go back to the basics of investing, which are always useful to review every once in a while.

4. Catch up on sleep – I usually sleep sometime near midnight and tend to get woken up early because my daughter will ask for milk at about 6am. Once we are all awake, there is that rush for breakfast and to send her to playgroup and by the time I am back home, it is time to start work. So this period will let me go back to sleep in the late morning and get some much needed rest.

I was quite used to the mentality of expending leave only for the purposes of overseas travel, otherwise it would seem like the leave had been wasted. But that was perhaps because I was teaching in a school and never really had to apply for leave until the school holidays and thus leave was not such a precious commodity until my current role. However, if I held on the mentality and limit myself to what leave should be used for, then I would be forcing myself to not ‘waste’ my leave and will instead continue to spend my time working without taking a proper break from work. And that cannot be good for my own mental heath.

The financial education that I have been receiving for the past couple of months has made me reframe my thinking about taking leave from work. Let’s be real – Nobody gets rich by working for somebody else, that only makes somebody else richer. So the middle ground for me right now is to be really focused in drawing boundaries between time spent at work for my income, as well as time spent in my other pursuits, with my family and to make myself more financial literate and one step closer to financial freedom. It does not in any way imply that I am cutting corners at work. Quite the contrary, it has driven me to be more efficient and to focus on what really truly matters, because otherwise by Parkinson’s Law, “work expands so as to fill the time available for its completion”. Taking leave is one way of drawing such boundaries and I will be looking forward to taking more of such mini-breaks in the near future!

The Inflation Illusion

What is inflation? In Economics 101 (which I must confess to not have taken formally in school), inflation is the phenomenon of price increase in the general price of goods and services over a period of time. When this happens, it might that for the same amount of money, we will be able to buy less in future. Or in economics speak, one’s purchasing power decreases as a result of currency depreciation. In Singapore, we measure inflation using the Consumer Price Index (CPI), which is compiled by the Department of Statistics monthly. For more information on inflation with the local Singaporean context in mind, check out this brilliant Economics Explorer series put together by MAS.

Singapore’s inflation experience aside (which is far too short anyway), I thought the history of inflation on a global scale also gives a good understanding of this phenomenon. You can look up these sources to get more details: Investopedia or Wikipedia. I claim no expertise on this topic, but here is my quick laymen recollection of it anyway. In the past, the Romans devalued their silver coins by making coins with less silver content after melting earlier versions so that they could make more coins with the limited supply of silver. In modern times, with fiat currency like dollar notes that have no intrinsic value, all the US central bank have to do is to print more notes. Simplistically, they do this because the US borrows from other governments, particularly China, and one way to make sure that they can repay their debts is to print more money. With such an oversupply of money (and even more as part of “quantitative easing measures”), it is no wonder that costs will rise because the value of money decreases over time.

Now imagine the three scenarios below and how you feel about it.
Scenario A: Receiving a 2% pay raise when inflation is 4%.
Scenario B: No change in pay when inflation is 2%.
Scenario C: 2% pay cut in a zero inflation environment.

Most people will feel happier in scenario A because of the pay raise but in real terms, all three scenarios result in the same outcomes in your financial position – being worse off by 2% after inflation. And that is the inflation illusion that we have been fed in recent times. So what kind of inflation environment have we been in the past few years? That will allow us to better appreciate the context within which we are receiving any pay raises and whether our financial position is truly improving over the years.

Singapore’s average inflation rate is about 3% over the years

You can check out Singapore’s inflation rates for the past 80 years and look at a narrower time period here: Singapore Inflation Rate 1961-2020. Of more interest to us is perhaps the last couple of years, where the average yearly inflation has been pretty stable at about 0.5%. It is projected to be negative in 2020 because of the COVID-19 situation. So that means anybody who has a pay raise in the past couple of years will have quite likely improved on their spending power. And anybody who was fortunate enough to not suffer a pay cut or lost their job (quite possibly nobody) will likely be in a better position than they were in the previous year.

Inflation is also a good indicator of the success of your investment returns. Leaving money in a piggy bank means its value gets eroded over time, less so if it is a fixed deposit or savings in a bank. So when it comes to investing, you want to make sure that your overall portfolio can provided returns that allow you to swim against the tide of inflation that we constantly face. It is like swimming against the current – stop and you will constantly get pushed further back.