How do you ride an inflationary tiger?

You are are facing an unprecedented sea of price increases ever since the onslaught of the 2% GST increase in 2007. This innocuous increase at a time when the Singapore economy was booming was followed by high oil prices, inflationary pressures from the property market as well as increases in Government fees and charges. Shortages in global commodities coupled with hikes in the bus fares as well as the impending extension of the Electronic Road Pricing (ERP) system and a consequent increase in ERP charges means that the savings in our banks are being eroded away by the 4-5% inflation rate.

To make matters worse, most banks have steadily reduced the interest they pay on time deposits or fixed deposits to an average of around 1 to 1.5% per annum. Equity markets have also been battered by subprime problems in the US coupled with the fear of recession hitting the US.

What can you do as a consumer, an investor, a person trying to make ends meet and survive in modern Singapore?

Life simply
Inflation hits you most when you have to spend on goods and services whose prices have increased relative to your income. You need to buy and consume daily necessities. Utilities, transport, food and shelter you cannot do without. But what you can do is to control how much you consume, especially for those goods and services that are discretionary in nature and where you can reduce or made do with other alternatives.

One of the key themes in this blog is an effort to focus on keeping things simple. Human beings like to make things more complicated than necessary. I do that ALL the time! :-) But I found out that the most useful thing you can do to fight this inflationary tiger is to remember one of the key tenets in our journey towards financial freedom, i.e. to live within your means.

Living within your means
We are limited by our means whether you like it or not. If you can increase your means you can then afford to increase your consumption. But if your means does not increase but the prices of goods and services that you consume increases leading to inflation, then you need to consider how you can maintain or even reduce your consumption to a level within your means.

Does this mean literally eating bread every day and scrimping and saving every cent? Does this mean starving ourselves and neglecting that visit to the dentist?

What it means is for you to examine your lifestyle and to ascertain if you can cut away some frills. Perhaps it is about delaying that purchase of a nice handbag until your next bonus. Or it is to go to a nearer place for your vacation instead of going to a long-haul destination in the US or Europe.

Some you us have already cut down on many frills and are literally living hand to mouth, how can we further simplify? I have no ready answers for that. Each of you have to do what you think is within your power to live within your means. For me, it has meant having the same handphone for 2+ years. It has meant going to Sentosa for a 2 night stay instead of travelling overseas for my annual vacation. It has also meant taking rolled oats for breakfasts on Mondays to Fridays which is both nutritious and value-for-money.

Find your own way
Living within your means and simplifying your life can be achieved. You have to find your own way of doing this. Zen Habits and Life hack are two websites that I regularly visit to get my dose of simplifying my life. While these two sites do not explicitly touch on saving money but if you practice many of the recommendations you will find that the tips also help you save money and live within your means.

Simple living is attainable and achievable. It doesn't mean you have to sacrifice the quality of your life, but it may mean giving up on some quantity of things that do not matter in the bigger scheme of life.

Be well and prosper.

Musings on financial freedom

It is coming to a year since I started this blog and looking back at my posts, my thoughts and views on financial freedom are slowly mellowing.

The journey is as important as the destination
I used to see financial freedom as the ultimate destination, where I would be HAPPY only if I reached this financial target of $xxx,xxx amount by age xx. The further I walk along this journey towards financial freedom, I realised that while setting goals and having targets are IMPORTANT for us to have something specific and measurable to focus on, it is the journey that we are experiencing at each moment of everyday.

How do you feel each step of the way towards financial freedom? Do you take each day as a sacrifice, scrimping and saving for that tomorrow that seems so far away? Or do you take each day as a promise, a promise of a better tomorrow ahead?

With each passing step I take towards financial freedom, I am happy to see my net worth creeping up slowly each month as my daily labours earn me my monthly wage. However, I realise that all this means nothing if financial freedom is the be all and the end all. Life is about the relationships and experiences that you encounter each day. You spend time working, with family and with friends. When you achieve financial freedom, the main difference that happens in your life is that you don't need to work for a living. That frees you up to do whatever you want for that 8 to 10 hours of your life a day to pursue interests other than work or business to sustain your lifestyle.

However, if you WANT and ENJOY working, you already have the freedom to balance your life among your various pursuits with your work or business taking up roughly 1/3 or more of you daily routine.

Happiness is...
I realise that happiness for me comes from achieving the appropriate balance of work-family-friends-self. This balance can be attained WITH or WITHOUT achieving financial freedom. Financial freedom makes your life journey smoother because you tend to be financially more secure which gives you the foundation to build the right balance for yourself in your life.

No matter what stage of the journey towards financial freedom you are at, I encourage you to enjoy each stage as you discover what it means to be financially free.

Live life to the fullest (within your means!) and be well and prosper.

Cook your way towards financial freedom: health and wealth in one complete package!

One of the most under-rated life-skills you can know is the ability to cook.

You don't have to be as good a cook as Jamie Oliver, Nigella Lawson or Yan but you can learn enough cooking skills to whip up simple, economic, healthy and quick dishes and meals to save money on eating out and more importantly, improve the health of your family and loved ones.

I just made a simple salad good enough for 6-8 persons using the following ingredients:

PG Simple Salad

1. 1 x bunch of Celery ($1.15 - items from NTUC Fairprice unless otherwise stated, prices based on my recall, could be +/- $0.20-0.30)
2. 1 x head of lettuce ($1.40)
3. 1 x cherry tomatoes ($1.00 Fairprice housebrand)
4. 1 x bag baby carrots ($1.60)
5. 1 x red pepper ($0.59)
6. 3 x lemons ($1.45)
7. 2 x corn ($1.00)
   
8. Aluminium container ($2.50)
   

Total cost: $10.69, per 6 pax $1.37 per pax. If you order a small portion of green salad from Mos Burger it costs $3.40 per pax! This costs excludes your own time and effort of course and water and city gas is relatively inexpensive, say additional $0.50 thrown in.

The other important point about such a simple salad is that it is fresh and healthy and is better than ordering a salad from a Swensons style restaurant which would cost your more on a per pax basis!

Cooking as an alternative to eating out
Our hectic lifestyles make it challenging for the typical family to cook and have dinner together on weekdays. But how about weekends? That is the time where a bit of family bonding over a home-cooked lunch or dinner together can help the family save money on cooked food in hawker centres and food courts and help to build up the health of the family as well!

Enjoy the pleasures of dining at home and as ever, be well and prosper!

Investing is a game

Investing is a game.

Rules of PanzerGrenadier's Thumb
It is a game that has its own rules. Some of these rules are written and you can read them in investment books or books on personal finance. Some of these rules are unwritten and you only learn them through personal experience of seeing your portfolio go up and down depending on the market situation affecting the type of investment assets that you are holding.

To win in the game of investment in growing your savings into a size that generates sufficient income for you to live on without having to work means you have to master the written and unwritten rules of investment.

What are these rules?

Rule 1: Invest only what you can afford to lose
This rule rings true especially when you see your portfolio melting down faster than Hagen Daz on a hot sunny day! If you have borrowed money to invest, you will be subject to margin calls, to top up your accounts and so on. This restricts the amount of flexibility you have in holding on and not selling your investment at the worst timing! The ability to hold on to an investment for the long term is arguably one of the most powerful tools you can employ to protect yourself from being burnt during sharp market downturns like the recent bear market that has hit global stock markets due to US sub-prime fears affecting the US economy.

When you are not leveraged and have the ability to hold, you also become less susceptible to fear and you can ride out periods of market volatility.

Rule 2: Never put your eggs in the same basket ('Diversify')
If you had 100% of your investible savings in stocks in the Singapore Exchange since 1 Jan 2008 until today, you would not have been spared from potential paper losses of your shares because stocks plunged so much that if you had bought any counter including blue chip shares, you would still have faced possible unrealised capital losses.

Markets can go up and down and markets for different asset classes do not go up and down in tandem. Therefore, to avoid losing massively in this game of investment, you should consider an asset allocation ratio between different asset classes. I personally have a certain percentage of my investible savings in cash and cash equivalents (fixed deposits, treasury bills) in addition to my equity (share) portfolio. This helps my portfolio mitigate some of the risks of the recent market turbulence but even I am not spared in this regard.

Rule 3: Sometimes to get ahead, you can do nothing
Doing nothing goes against the grain of traders. The market goes up and it goes down and there's money to be made both ways. In the case of the equity market, it is difficult for retail investors to make money in bear markets as the number of strategies that you can take are less. This is partly due to short-selling restrictions imposed by the Singapore Exchange as well as limits on the amount you can sell. In addition, use of put warrants also require a certain degree of sophistication and the word is that market-makers for some warrants price their products to their advantage as compared to the retail investor.

Hence, during periods of short-term volatility in the equity markets, my own strategy was to cut loss on those that I could afford to beef up my cash portion of my portfolio and then wait out the rest which are below my purchase cost. As most of my equity holdings are in blue-chip companies, I can adopt a hold and collect dividend strategy with a view of even bequeathing such equity stakes to my future generation! :-)

I literally turned off my share trading platform and stopped monitoring individual stocks as they were "underwater". As I have sufficient cash reserves and basically do not depend on my investment for day-to-day living, I could take a break from the market and take a longer term view on my investments.

Rule 4: Investing is not life and death so take it easy!
While we can be serious about our approach to our investments, it is useful to put all this into perspective. If you have your health, your family and your career or business, then see investing as a game. It is a serious game as it affects when you can be financially free and choose NOT TO WORK or RUN YOUR BUSINESS. But it is NEVER ABOUT LIFE AND DEATH.

So guard your health, happiness and family first and wealth will come after that.

As ever, be well and prosper!

Singapore Fixed Deposits Blog is born!

I have decided to enlist the help of a forummer I met on one of the forums who has a keen interest and is well versed about fixed deposits interest rates. With his help, I am launching a new blog known as Singapore Fixed Deposits blog.

The blog just started so give us some time to update it with the latest fixed deposits rates to help you MAKE YOUR MONEY WORK HARDER FOR YOU!

The blog Singapore Fixed Deposits blog will be supplemented with articles written by me on cash management, fixed deposits and treasury bills to help make it useful, informative and practical to readers or my blog as well as the community at large.

Thank you for your support, and BE WELL AND PROSPER. :-)

Saying "No" to nay-sayers in your journey towards financial freedom

The road towards financial freedom is fraught with "No"-bodies
Your journey towards financial freedom is fraught with challenges, obstacles and hindrances.

Nay-sayers, negative and non-value-adding people will tease you, tempt you and taunt you to stray from your path towards financial freedom.

When you are first starting out on this journey and your savings do not even hit the $5,000 needed to open a Maybank iSavvy account that generates 1.68% interest, nay-sayers may tell you to "forget it lah", or "why save" when you only have so little. Others will ask you to "invest" in 4D, TOTO or Big Sweep for better "returns".

When you have bought your first HDB home using the concessionary loan rate of 2.6%, nay-sayers will tell you to just borrow to the max and use the surplus CPF/Cash to "invest" not telling you the true picture that your interest expenses typically exceed whatever returns from risk-free investments you can make and omit telling you that you can lose 100% of your capital for risky punts in the stock, foreign currency or commodities markets.

When you are financially more secure, nay-sayers will tell you why be so thrifty with yourself because you can never tell if something bad will happen to you tomorrow so let's make merry and live for TODAY!

You determine if you want to listen to nay-sayers or to your own convictions
Nay-sayers will tell you 101 reasons why you can never achieve financial freedom. You have to decide if you want to give in to them or listen to your own convictions. I have encouraged you to find what is YOUR motivation that keeps you to the path towards financial freedom. Your reasons are yours alone to determine and the strength of your personal convictions and beliefs about the WHYs for doing something is a powerful motivator.

For me, the driving force behind my journey towards financial freedom is the ability to run my own little business in my own way and not have to worry about my paycheck that is determined in a large part by being an obedient employee executing decisions sometimes by clueless bosses who think they are better than you. This dream of being financially free so that I do not have to depend on the paycheck serves as my personal motivator.

In addition, I want to bequeath to my daughter a legacy from her father of being financially free from an early age. She will have to work for her future but I want her to grow up in an environment where she is made aware of the possibilities that financial freedom can bring to her in her life's choices.

In your individual journeys towards financial freedom, who are the people that hinder you from living within your means, saving and investing and living a life that allows you to move closer to financial freedom? Why do they have such a hold on your thoughts, beliefs and views?

Are you able to break free and not think too much about "face" and "image" of how others see you?

Your financial freedom, your rules!

Be well and prosper.

Money Savers for the Lunar New Year!

It's the time of the year again! The Lunar New Year is just around the corner and for many Chinese Singaporeans, it's the time to stock up on Lunar New Year goodies plus spring cleaning and buying of mushrooms, abalone and other delicacies for this festive period.

Our spending tends to increase during this festive period as we shop for the customary set (or sets!) of new clothes, indulge in favourite snacks and goodies, buy new furniture and furnishings and generally have a ball of a time SPENDING.

There's nothing wrong in spending during Lunar New Year, but as time passes, I realised that we can save if we don't overdo the splurges that typifies our festive fetes!

Shop for new clothes during sales
Instead of buying clothes only during the period just before Lunar New Year, you can consider making use of the Great Singapore Sale last July to stock up on those new sets of Lunar New Year wear you need.

Consider the need for gifts
The mandatory abalone, mushrooms etc. for parents, in-laws are well and good. But if your parents are somewhat more liberal, you may dispense with such gifts and perhaps give them an ang pow that is more practical in nature?

Give smaller ang-pows (red packets)
This could be a potential money saver but the downside is that you will lose "cred" with the relatives/friends because this is often seen as a social status symbol. The bigger red packet or ang pow you give, the better off you are doing. However, if you are really tight for cash, there is no real reason why a $2 or $8 ang pow cannot do instead of a $10-$20 one. It's really up to you to manage how much your "face" is worth to you. Keeping up with the Lims, Muthus and Alis is a quick way to put yourself under financial pressure.

Stay at home more
There will be four days of holidays (Thursday, Friday, Saturday and Sunday) for 2008. Instead of spending each and every day visiting every single distant relative and friends, perhaps you may want to cut down and just go out for the first two days of the Lunar New Year. Spend more time with your own family by visiting a public park and having a picnic with delicious lunar new year goodies from your home besides a home cooked beehoon, fried rice and some dishes.

There are many public parks available in Singapore that could provide a quality venue for valuable time spent with your immediate family!

Moderate your diet
Feasting on delicacies and lunar new year goodies can hit us both in the wallet and the stomach. Try not to over indulge as over-eating can lead to stomach problems and indigestion. Skip dinner and take fruits instead to help wash out the excesses from Lunar New Year reunion dinners. I will continue to enjoy my rolled oats breakfasts but maybe supplement it with some delicious bak-kwa (barbequed pork). :-) I recall how overeating made me feel very "gelat" over the overfeasting that occurred some years back!

I wish all my readers a good time in preparing for their own Lunar New Year celebrations and may the Year of the Rat bring you joy, peace and prosperity!

Be well and prosper.

Cash management 101: It's about knowing where your cash is at!

In our journey towards financial freedom, you need to know where you cash is at all at times. This ability to track your net assets daily means that you need to have a system to know how much your net worth is like distributed among your assets (cash, cash equivalents, equities, bonds, unit trusts, gold, property etc) as well as your liabilities (outstanding credit card/personal credit balances, home mortgage etc.)

Why is cash management important?
Your ability to track your financial assets will facilitate you in managing your cash and knowing when to convert your assets from one class such as equities or fixed deposits into actual cash you can pay for big ticket items.

My system has been to keep a daily worksheet that I update so that I know how much of my net worth is in cash, cash equivalents such as fixed deposits and treasury bills as well as my equity portfolio. It also tells me what is the portion of my investible savings keep between cash/cash equivalents which are very liquid and equities that are much less liquid in this current dismal Singapore stock market.

By doing this, I know whether I have sufficient cash buffer or emergency reserve to last me at least 3-6 months of expenses and to manage my cash flows when paying for big ticket items. One big ticket item to hit me is my Suzuki SX4. My dealer just called me up and told me that my car was coming earlier than scheduled. This also meant that she needed to collect the balance payment plus first month instalment and first year insurance from me soon. Fortunately, I had already planned for this outlay and had liquidated some equities to provide for cash and it could be transferred into the bank account in less than 2 working days.

Knowing where your cash goes helps you defer unnecessary expenditure
I tend to earmark funds that have been set aside for upcoming payments by subtracting them from my available cash. This makes the amount of cash available become less than it actually is and tends to have a psychological effect of making me more aware of the need to conserve cash (i.e. continue to live within my means) to save and invest.

Tracking cash flows also allows one to set aside cash equivalents in fixed deposits or treasury bills that have certain tenures such as 3-6 months and allows me to keep the minimum balances in those savings accounts that yield only 0.25% per annum on the deposits.

Surplus cash not needed for day-to-day use and part of 3-6 months cash reserves are set aside in Poems treasury bills that can be liquidated in T+1. Others are put in the Maybank iSavvy that yields 1.68% for balances exceeding $5,000.

Cash management helps you travel faster on the journey towards financial freedom
Your ability to manage track and manage your cash is critical to achieving financial freedom. One of the keys for me to be able to pay off my home loan early was to know when I had surplus cash and to deploy it by doing capital repayment within the limits allowed under my loan agreement without incurring any penalties.

The satisfaction from seeing myself move from a net liability position to a net asset position was very motivational as I found myself very happy each time I took out a large chunk of my mortgage balance by making principal repayments when bonuses were paid out in December.

It took years for this to happen but knowing that each partial capital redemption took me closer to a net asset position thrilled me that nothing else could. The interesting thing to observe was that as my net liability reduced, so did my stress levels and worries about job security and job situation. I found myself better being able to cope with job situations as I knew I was in a financially better shaper each year as I continued to plough back savings to pay off my home loan.

Are you tracking adequately your cash and net worth as part of the discipline in walking along this path towards financial freedom? Are you keen to do what is necessary to move yourself from a net liability or net asset position to an even better one? Are you ready to challenge yourself to better deploy your investible savings to generate more passive income for you?

If you say yes to any of these questions, take action RIGHT NOW and start MONITORING YOUR NET WORTH because if you don't know where you are at in this road towards financial freedom, then it'll be difficult to get to your desired destination.

Be well and prosper!

Financial freedom at all costs??!!

The Suzuki SX4 Sedan above will be an addition to the "stuff" that I own by the end of this month. It symbolises a few things in my journey towards financial freedom. It symbolises convenience, it symbolises comfort and it symbolises that my journey towards financial freedom will detour to allow me to enjoy some of life's pleasures with what I have saved.

Financial freedom at ALL costs?
Those of you who are reading my blog for the very first time may find it blasphemy for one to spend $55k on a car. What! $55k for a vehicle when you can use the interest from this amount to defray public transport costs? It's true that from a purely cost perspective, owning a car in Singapore will require me to take a longer time to reach my goal of financial freedom. The running costs of owning a car plus the maintenance would reduce the amount I can save each month and hence it would take me longer to reach my targetted level of investible savings to achieve financial freedom.

I admit to all the above arguments. However, I realise that if you CHOOSE to take a detour from your journey towards financial freedom and accept the consequences of having to work longer or delay retirement age, then it is up to you if you wish to do so. I regularly exhort you who are reading my blog to consider your decisions to spend or save as those that impact upon your goal of financial freedom. It is not about RIGHT or WRONG because you are the one who determines what is your financial goals and objectives and you decision if you want to save or spend. Your decisions affect your own financial situation and those who depend on you so exercise your choices with an eye out for the consequences.

For me, I have come to a stage in life where I want to give my family (and myself!) a comfortable form of transportation. It cetainly costs more but is within my budget. In addition, I have prioritised by making sure the roof over my family's head is 100% owned by me and NOT by the bank and hence my home is actually now an ASSET to me and not a LIABILITY!

No! No! Never can it be! Never never can it be!
Financial freedom to some may appear to be living ascetically. Literally bread and water so that we can build up our financial freedom. That is certainly one way to achieve financial freedom but may not be a balanced approach. Financial freedom means to be able to live within your means, slowly but surely building up your investible savings to a point where passive income exceeds your living expenses. The more you buy into this equation, the more you will realise what choices you need to make in your life. It doesn't mean neglecting family, neglecting health and neglecting the occasional spending on things to enjoy in life. But it means being clear about how much you should spend and how much you should save within your means.

I am getting my SX4 sedan to enjoy life a little. :-) After saving and putting aside money to clear my home mortgage, I finally own my home with my spouse for our family. It is an asset I can monetise should I need to or choose to. It is this choice that allows me the opportunity to give my family a comfortable ride in our urban landscape.

Financial freedom is a journey just like life is a journey. As we move closer and closer to our targets and goals, we should also enjoy the journey within our means and continue to focus on what is important to us. Family, health, loved ones and whatever we put on top in terms of life's priorities.

Be well and prosper.

Help help! My portfolio is RED!

Every investor's nightmare....To see the paper value of your investments in the RED when you do a mark-to-market exercise based on closing prices of shares you own on the SGX.

These past few weeks continued sell-down of virtually most of the shares in the Singapore Exchange means that for many of you (including myself), our portfolios are under water or showing unrealised losses. What can we do during times like this.

I don't know what others can do, but I know what I have done... Become defensive.

Defensive strategies in a weak stock market
I have also suffered during this recent market meltdown and perhaps the start of a bear market. My mark-to-market paper losses have resulted in my portfolio performing at a -12%. I have also incurred realised losses when I cut some of my losses to conserve cash and preserve capital. I am now at 33% cash and cash equivalents (savings, treasury bills, fixed deposits) and 67% in equities (as compared to almost 90% in equities and 10% in cash and cash equivalents 2 months ago.)

This is my strategy, to maintain this asset allocation ratio while I build up my cash reserves again. I still believe I should be invested in the market because some of my holdings like a couple of bank stocks will still generate dividends and do well in their underlying business. However, their market valuations have taken an undue beating due to US sub-prime as well as US recession fears.

I believe the market will recover. The question is WHEN??!! In order for you and I to survive this tumultous market developments, we must have holding power. My 33% cash and cash equivalents allows me to handle day-to-day living expenses plus some buffer. This has already factored in my outlay in getting a car as well as my upcoming family expenses for my baby daughter who will arrive sometime in March 2008.

Live well within your means
This market shock that has burnt many retail investors of stocks and shares teaches us the lesson about diversification, i.e. cannot put 100% of your investible savings PURELY in stocks and shares. It also teaches us to continue to live within our means because market conditions can change very fast. I remember the euphoria back after the August 2007 correction in SGX that STI will hit 4000 by December 2007. Now we are seeing STI closer to 3000 just 2 weeks into 2008!

If you can work within your paycheck and other passive income and continue to plough back some savings into prudent investments, you have the odds stacked in your favour to build your retirement nest egg, bit by bit, dollar by dollar, cent by cent.

The stock market moves in cycles. Bull and bear markets. If you have holding power, time is ON YOUR SIDE!

Be well and prosper.

Investing is hard, speculating is easy

Investing is hard
To get consistent returns above benchmarks such as the CPF special account interest rate of 4% (or 5% including the 1% extra given by the Government) or even treasury bills of 2% (now closer to 1.7%+) is not hard. It is hard to beat the benchmarks and avoid risk. Speculating or punting on timing the stock markets using a buy low sell higher or sell high buy back lower approaches is easy...easy to LOSE MONEY if these bets turn sour.

Investing is hard work. I am reading Benjamin Graham's "The Intelligent Investor" and some chapters are somewhat heavy going. I can understand why investment and finance books can put some of you to sleep and be a challenge to read end to end. However, we should persevere and continue in our constant reading about personal finance and investments because the only way to learn is to first READ and be aware of the knowledge we need to equip ourselves to approach investments.

Speculating is easy
Speculating is easy because it is essentially a bet. You may call it a calculated risk, an exercise in probabilities but if your intention is not to hold for the longer term to participate in the share of the business of the enterprise you are investing in, then it is a gamble.

For me, speculating takes less brain power and essentially plays on my "feel" for the market. Usually my "feel" is as good as US subprime CDOs. ;-P (i.e. NOT GOOD AT ALL!). I have realised that I have been very fortunate in the last 4 years speculating in the market as looking at my portfolio of 9 stocks, only Singtel has been with me since the beginning and I kept it because it was bought using CPF monies! Even the Group C SingTel shares were already sold by me several years back at a loss.

Thus, I have been speculating for the last 4 years and survived based on pure dumb luck and the fact that the STI moved from below 2000 in 2003 up to the current 3000+ levels. Hence, I was just riding on the wave of bullish sentiment all the way to 2008.

Going Forward
Now that the good times of the bull market appears to be coming to an end, it becomes tougher to obtain reasonable returns in the stock market and I have realised I now need to be very selective in the counters I buy and hold long-term, i.e. next 18 years until my daughter reaches the age of going to the University.

Given that my time horizon is now longer, i.e. 18 years and beyond (for my retirement), capital preservation for a portion of my portfolio is paramount. Thus, I will stick to at least a 25% holding in cash and cash equivalents in the safety of treasury bills and perhaps some investment grade bonds. This provides me with a buffer for unexpected day-to-day funding needs.

I still need to be invested in the market but should move away from the speculative punting activity that has allowed me the privilege of paying the bonuses of my broker and the counterparty who bought/sold the shares I sold/bought.

Achieving financial freedom requires dedication, discipline and a determination to live within one's means, to save and invest and to use the power of compound interest to one's advantage to grow one's nest egg prudently and safely. There is no absolute safety in investments but there is a need to be defensive and NOT LOSE CAPITAL. Having an asset that has a portion invested in safe instruments would help one weather the financial storms we encounter during our journey towards financial freedom.

Be well and prosper.

Protecting your investments against the storms

Our journey towards financial freedom will be fraught with storms and showers that threaten to challenge each step that we take towards our goal.

Preserving capital amidst the financial storms
Investments is about growing your money at a reasonable rate of return for the risk you take. I am still reading "The Intelligent Investor" by Benjamin Graham and am struck but his thoughts on the level of risk that one should take. By Graham's reckoning, the amount of risk we take should be commensurate to the amount of time and effort that we can put into monitoring, selecting and managing your investments.

Many of us (and I include myself) are unsophisticated investors and need to be careful about market timing. No other time does this ring true that our recent stock markets in the Singapore Exchange (SGX) and the NY Stock Exchange (NYSE). Recession fears as well as fear of contagion by the sub-prime write-downs on some of the largest US banks on Wall Street have affected the US economy and the investor is starting to get very nervy about the stock market. This has seen my portfolio move towards the red in terms of unrealised losses and I have had to take some unpopular measures of cutting losses and preserving capital.

If you have holding power, i.e. can hold on to your investments for next 10-20 years without liquidating them, you will have a high chance of riding out these recent storms unscathed. However, if you need some cash for unexpected big ticket item, then our SGX may not yield much as many of the blue chips even are languishing in anticipation of a US recession despite Singapore Inc's engine still churning strongly.

Where do we find safe havens?
The closest thing to safety for me is treasury bills and Maybank iSavvy savings. Treasury bills are now yielding pretty low returns of around 1.7%+. Time deposits are not that much higher for lock-in tenures of easily 6 mths and above and for large denominations of $25,000 and above. Maybank's iSavvy still gives a return of 1.68% on balances exceeding $5,000 and is still decent considering the liquidity it offers.

I have pared down my asset allocation in equity to 70% plus from an earlier 90% plus. I have eaten realised losses on two speculative punts that went sour. Enough punting for 2008! It's time to relook at fundamentals by being focussed at quality stocks without trying to beat the market. 2007 was good to me as the market was generally bullish for the 1st 2.5 quarters. The latter part of the calendar year was more volatile.

What now, brown cow?
Given my propensity to punt on the counters that give me a negative return, i.e. make me lose money, I will use this opportunity to stop punting and focus on finishing "The Intelligent Investor" by Benjamin Graham. One of the lessons I learnt during this period is that the market is there for us. So long as I continue to live within my means, save and invest (safely now in treasury bills and iSavvy), my journey towards financial freedom still goes on albeit at a slightly slower pace. :-)

Part of winning the game of financial freedom is to preserve capital and to be patient. Invest safely and remember that it's not wrong to be defensive and let your money grow at 1.8% in treasury bills while reviewing your investment strategy.

Be well and prosper!

Financial freedom - The Choices You Make

Financial freedom is a journey and not a destination. So long as you spend within your means, save and invest and enjoy the ride towards reaching your goal, you are doing what is necessary to achieve higher net worth for now and for the future.

For us to stay on the path towards financial freedom, it is not the big decisions you make now and then but rather the small, controllable decisions you make each and every day that is leveraged to positively impact you on your road towards being financially free.

Spend or Save: You Decide!
It is not rocket science. The key decision every day to move yourself towards financial freedom is the decision all of us face: spend or save?

Sounds deceptively simple, doesn't it? Experience has taught us that it is the simple things done consistently over the long term that yields superlative results. The key to taking that positive step towards financial freedom is to build up your financial habit of making a decision to save more than the decision to spend.

It is not a 100% spend or 100% save strategy. It is simply recognising that if you tilt your decisions towards saving more than spending, i.e. to live within your means, you will find your nest-egg comprising investible savings and investments growing.

The story of the rickety old computer chair and the PDA phone
As I type this, I am sitting on a old computer swivel chair at home. It is easily 3 years old and I bought it for less than $100 at IKEA. Now, it is due for replacement and I intend to replace it. The trick is that I am replacing it when it goes completely kaput or breaks down completely. Even as it was showing minor signs of wear and tear but could still function safely, I continued to use it and use it and use it!

Look at the things around your house? If it can be used, just use it until it breaks down and then change or buy a new one. By doing this you end up delaying your purchases and delaying spending. The concept of time value of money means when you save more now, it translates into a higher return later. My PDA handphone is the same. I have used it for close to 2 years and it still works well. I have been tempted to change it given how fast new phone and pda models come into the marketplace but I resisted this temptation.

Some of you may scoff, aiyo Panzer, why so stingy? Isn't spending part of living? Those of you who scoff at me are also right. I don't dictate how you should live your life. Remember, it's not about who is right or wrong just how your behaviour between choosing to spend or save affects your goals towards financial freedom. If you operate on the assumption that you will work until the statutory retirement age and rely on your CPF plus home to retire. By all means do it and tilt your spending/saving ratio to the point that satisfies you.

If, however, but no small coincidence, you come to my blog because you, like myself, WANT TO RETIRE WAY BEFORE THE STATUTORY RETIREMENT AGE, then your decision to save/spend every day will have an impact on when you can do so.

The journey of a thousand miles start with a single step
Wise sages have opined that the journey of a thousand miles starts with a single step. I'll add that single step has to be followed consistently by another step, and another, and another before we come to our destination of being financially free, where before our statutory retirement age, we can rely on our passive income for living expenses and do whatever we want with our time.

But in the meantime, enjoy each step you take towards financial freedom. Do enjoy yourself a little as Chinese New Year is around the corner and I wish you, as always, be well and prosper!

How do we invest for financial freedom?

The straw poll that I did yesterday elicited 8 votes and it appears that the majority (63%) felt that "Don't know how to invest" is their toughest challenge in attaining financial freedom. While this poll is not statistically representative since the sample size doesn't even hit 30 for central limit theorem to kick in, it tells me what you would like to know more in our journey together towards financial freedom.

How Panzergrenadier sees investment
For a long time, investments to me was putting money in fixed deposits and savings accounts. My first few years of working while still single and living with my parents was about going to work, earning money, going home, going out during weekends with friends and occasionally dating. The sum total of practical investment knowledge then was put money in fixed deposits. This wasn't a bad strategy then when interest rates were much higher than the paltry 0.25% paid on savings and the 2%+ for fixed deposits that we saw for most of 2007 and likely for the rest of 2008.

Fast forward to 2008 today. Given our low interest rate climate, the only way to grow your money safely in the long term to not only beat the low interest rate but to also beat inflation projected at 5-6% for 2008 is to consider equities (stocks and shares) as well as bonds.

Developing your investment portfolio
If you are serious about developing a portfolio of assets that can beat inflation, then you have to learn about stocks and shares and bonds. I am no expert in this area but fortunately there are many experts out there whose knowledge and know-how can be tapped for free! I highly recommend the following books - "The Intelligent Investor" by Benjamin Graham and "A Random Walk Down Wall Street" by Burton G Malkiel. These are well written books about personal investing and I have read Malkiel's book and have just started on Graham's.

The key take-away from these books is that you cannot beat the stock market consistently as even majority of professional fund managers do not do so year-in-year-out. So the trick is to invest in a portfolio of stocks, bonds and some cash equivalents (treasury bills, deposits) based on your own risk tolerance and do it consistently for next 20-30 years.

I have followed this strategy to some extent in that I now invest in blue-chips for capital gains and dividends. However, I also have deviated by punting on other non-blue chip counters for speculative returns with mixed results.

For me, I have taken a huge swing from my early days of 100% portfolio of investments in fixed deposits and savings deposits to at one stage 90% equities and 10% cash and treasury bills. Going forward, I should move towards an allocation closer to 25-75% equities+bonds and remainder in cash/treasury bills.

Fear of losing money in equities and bonds
If you were like me starting out from a 100% cash/fixed deposits strategy, it's likely that you were also afraid of losing your hard-earned and hard-saved money to the fluctuations in the market. That is perfectly understandable. In fact, many investment books tell you that the first rule of investing is NOT TO LOSE MONEY. Unfortunately, capital preservation is just one consideration, we should then apply our money in investments that grow faster than inflation because if we do not, then we are LOSING MONEY to a lower purchasing power of our savings.

To invest is to make your money work hard for you accordance to your risk tolerance. To do so successfully means you need to understand the potential risks-returns from holding stocks and bonds. You need to determine when to buy and how to select stocks and bonds. You also need to understand your own investment strategy and your targetted returns/risk. You also need to determine how much time and effort you can spare to monitor your investments.

All these feed into your decision making for investments.

It is not easy, but it can bring you closer to your goal of financial freedom.

Be well and prosper.

Why does PanzerGrenadier want Financial Freedom?

Those of you reading my blog for the first time may be wondering.... Why is this PanzerGrenadier chap so obssessed about clearing his loan early and planning for financial freedom. Why shouldn't he be focussing on his work, earn money and just consume and be happy?

Retrenchment without benefits - up close and personal
The reason why I pursue this journey towards financial freedom is that I have encountered during a stint of my working career a case where two people I knew in their late 30s and early 40s were asked to go from the organisation because of headcount reduction and not because of performance. They had families and they were asked to go because the organisation's profit margins was not generating sufficient return on investment/equity to satisfy the owners of the organisation. Hence, despite generating larger profits, margins were down and management was tasked by the owners to embark on cost-cutting measures while maintaining revenue.

One of the easiest and fastest ways to do so was to shed staff in cost-centres since these people contributed to the bottom line by being an expense and didn't help much in the topline (revenue).

When your job evaporates, so does your confidence and perhaps your world as you know it
Losing your job due to restructuring affects your self confidence significantly. Even though on paper you were not released due to poor performance, at the back of your mind you would be thinking of why was I chosen instead of Mr. B or C? Why did I have to be the one "sacrificed". etc.. Such negative thoughts are not easy to suppress when your rice bowl lays shattered in shards by the organisation.

Why me? Why now? Now what?

The fear of uncertainty is what drives many people to depression and hopelessness. While losing your job is not a life and death issue, it is a very serious issue when you are older, have dependants to support and have housing and other debt to service.

My obsession and at times paranoia about financial freedom is because I've seen people being put under such situations. While they put on a brave front, it was scary when I talked to one of them on a face-to-face basis over coffee in the office cafeteria. I saw the unspoken fear, uncertainty beyond the words and phrases uttered during the conversation.

Why I delayed buying a car since I first started working
Whenever I looked at a car, I thought of what the $50k-$70k could do at a return of 3-5% do for you if you have invested that amount. Whenever I received my bonus, I kept thinking of the bank who basically was my ultimate employer since I worked to pay off my mortgage instalment every month without fail.

These were the thoughts that kept me to my approach to paying off my home mortgage at an aggressive pace and to eschew conspicuous consumption. After working for a decade plus some years, I have managed to fire my banker! Now I am only left with a small car loan as I will be getting my car soon before Chinese New Year. This is perhaps the only big ticket item I have bought besides my home as well as the furnishings and furniture when I got my own place.


The final analysis
The security and stability of your job is for you to assess. For me, I realise that I cannot depend on employers forever and some day, I have to strike out on my own in the areas I have some skills and expertise. In addition, with the current CPF system, my retirement age is really up to me to determine because if I were to let the CPF dictate when I can retire, then it is at 67 or later. I wouldn't want to HAVE to work until 67. I would WANT to work if my health was good and I enjoyed the work that I was doing then.

Your motivation for financial freedom lies within your heart.

Be well and prosper.

What is your toughest challenge in attaining financial freedom

	What is your toughest challenge in attaining financial freedom?
	Don't know how to save
	Don't know how to invest
	Don't know how to do retirement planning
	Don't have motivation
	All of the above
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Reading your way to financial freedom

All of us started out as investment newbies. No-one was born already equipped with knowledge about personal finance, investments, savings and financial freedom out of our mothers' wombs. We were all born into this world, naked and innocent until the big bad world of finance and investments teaches us to start learning how to navigate the pitfalls in our journey towards financial freedom or pay hefty tuition fees in terms of lost opportunities, bad investments and loss of capital.

Reading your way to financial literacy
Part of the building blocks that you need in establishing a firm foundation for achieving financial freedom is to learn about financial literacy. You can also learn from talking to more experienced investors, friends and relatives who work in the industry or more importantly have achieved financial freedom and are willing to share. However, such people are not easily available on tap. What is available virtually anytime, anywhere are resources online through the internet as well as resources on paper in our well-stocked public libraries.

I have been seriously investing my own money towards my financial freedom since 2003 and I continue to read a book about personal finance, investments, equities every one to two months.

I am reading Benjamin Graham's "Intelligent Investor" one of the foremost books about investments you can find still valid today even though it was written in 1971. I have reserved a book by Martin Pring relating to technical analysis as that is one part of my investment knowledge that I need to beef up.


What are you reading today?
In order to build your foundation in financial literacy so as to achieve financial freedom, you need to read, read and read. Time is precious. You only have 24 hours a day. What will you do with it while you commute to/from work in the bus/MRT. While you wait for your doctor's/dentist's appointment. While you drop off your children at the tuition class?

Go read, read and read.

Be well and prosper.

Invest in your health for 2008!

My investment strategy for 2008 is to invest in health.

Health is truly wealth!
Your health is arguably one of the most important assets that you have before you reach financial freedom. You need to work at your business, employment and even investments for your retirement funds to grow and grow through savings and investment income ploughed back into this nest egg. To work, you need to be healthy enough to do so. Even if you have achieved financial freedom without needing to work or run a business, you still need health to enjoy the time that you now have without needed to be somewhere doing something 9 to 5 or 24 by 7.

Without health, you have nothing! It's that simple.

I realise that all my investment returns become meaningless if I am not able to enjoy its fruits. You read of reports of SAF NSmen or even regulars collapsing after exercise in their 40s and some in their 20s. What is money and income if you are dead?

Investing in health promotes financial freedom
One of the benefits of investing in your health is that it contributes to you achieving your goals towards financial freedom as well. With good health, you see the doctor less and have to spend less on medical bills. Exercising is a low cost type of exercise given the many public parks and sports facilities available throughout Singapore.

Non-smokers pay less for their insurance premiums for life as well as medical insurance. When you are fit and healthy, you have more energy, more zest for life and tend to have a positive mindset and are able to focus on tasks better.

How to invest in health

1) Exercise regularly
Build exercise into your weekly routine. Go jog, swim, bike, brisk walk, play tennis, soccer, basketball etc. You get the picture. Get active and do it regularly three times a week or more for 30 mins or more. Exercise can be fun and can be a good hobby as you can enjoy exercise and its benefits while saving money and building up your health!

2) Eat moderately
Build fibre into your diet. Eat 2 servings of fruits and 2 servings of vegetables daily. Eat at least 3 meals a day and try not to skip meals. Avoid supper and meals after 9pm. Incidentally, from a budget perspective, vegetables and tofu cost less than meat and seafood. So eat a balance diet and choose more vegetables and less meat (and more vegetable protein - tofu, legumes) if you can.

3) Manage stress
Build stress management into your life. The closer I move towards my goal of financial freedom, the less stress I feel from work because my net worth grows with each month and year. When you have no debt and am on your way to building your retirement nest egg outside of the CPF, you feel more in control of your financial destiny and this sense of accomplishment also makes you feel that you have more control over your life - a key part of managing your stress from work and dependency on paycheck and bosses moods.

All our efforts in our journey towards financial freedom will come to naught if we neglect our health. You want to be able to enjoy breaking out of the rat-race and the time-money trade-off trap. Once you have reached your goal of financial freedom in good health, you can enjoy that accomplishment even more with longevity and a superb quality of life.

Be WELL and prosper!

Resolutions to help you achieve financial freedom

It's that time of the year again! The beginning of a whole New Year 2008!

The start of a new year promises fresh perspectives, renewed energy and cheerful optimism. We can wipe the slate clean for 2007, forget about what we have not achieved in terms of the steps towards financial freedom and focus on achieving the goals that lead us towards our ultimate goal of generating an amount of passive income that supports our lifestyles.

New Year Resolutions
Some of you groan at hearing this. No, not again! Some of us get all excited about setting New Year's resolutions only to see them forgotten or ignored after a few days, weeks or months.

It doesn't have to be so. You have the power to break this habit and form a new habit in moving yourself from your current situation to an even better one for the rest of 2008.

Setting goals is part of planning your journey towards financial freedom. The trick then is to set realistic goals. You know that financial freedom will not be achieved overnight but takes patience, dedication and discipline to get there.

To get things started, let me share some of my goals towards financial freedom for 2008.

Goals for 2008 towards financial freedom
1. To increase my networth position by 20% by 31 December 2008
2. To read 3 books about technical analysis and charting by 31 March 2008
3. To maintain my health through proper diet (fruits & veggies, rolled oats, no over-eating) and exercise (3x a week) throughout the year
4. To plan and start an college tuition fund for my daughter to mature in 18 years' time

Goal setting do not have to be fancy. You just have to make it SMART, i.e. describe the goals in a specific, measurable, achievable, realistic and set a time frame. The key to achieving your goals is not to overwhelm yourself with them and at the same time to make them exciting enough that you would desire to achieve them for the extrinsic and intrinsic benefits they bring you.

For me, being and staying healthy gives me a big kick because when you are healthy, your quality of life really improves compared to when you are having the sniffles, sneezing and coughing. In addition, health is truly wealth because healthcare costs are increasing and every once of effort invested in prevention through proper diet, exercise and rest reaps bountiful benefits in the long-run.

I remember reading Napolean Hill's "Think and Grow Rich" to reach for the stars because even if we fail to reach it we will hit the moon.

Looking back at 2007
Looking back at 2007, my portfolio returned a realised 7.4% return based on dividends, interest and realised capital gains which was credible but could be improved as my returns could have been higher if I had done less speculative transactions in the 3rd quarter of 2007. On paper, my portfolio now is a little bit in the red (-0.62%) based on mark-to-mark to market and this makes it more challenging for me to beat 2007's performance. If the equity market proves buoyant, then I will have a good chance of matching 2007's performance but it looks like I have a lot of living within my means, saving and investing to do for 2008!

New Year's resolutions can be beneficial if you set SMART objectives and are truly committed to achieving your goals. Each of you are motivated by different desires, wants and needs. It is for you to find out what and why you will be enthused into pursuing your own version of financial freedom!

Be well and prosper in 2008!