Five Cents Ten Cents

Five Cents Ten Cents has moved to a dot com domain

2008-04-04T07:10:00.000-07:00

Flickr! photo by *Micky.

Dear friends,

Five Cents Ten Cents continues to bring to you the principles of financial freedom in our new website at http://fivecentstencents.com

Living within your means
Saving and investing
Growing your means

It explores the journey towards financial freedom and how we can take specific actions to live our lives in accordance to what we want to achieve.

Each of us has to determine the path that we lead. The road that we travel. The steps that we will take.

Continue this journey with me in http://fivecentstencents.com.

Be well and prosper.

Financial freedom: allowing you to spend your money and time on others

2008-03-20T20:55:00.001-07:00

Five Cents Ten Cents has moved to http://fivecentstencents.com

Please update your bookmarks and new feeds are available at my new website!

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This article above has interesting implications from a financial freedom point of view. As you are on this journey towards financial freedom, do you consider the reason behind why you are driven towards this goal?

All human endeavour that seeks to achieve a certain degree of success requires effort, focus and perseverance. This comes only when you have a strong desire and a clear purpose as to WHY you are pursuing your goal.

Financial freedom is a worth-while pursuit when...

Financial freedom for the sake of financial freedom doesn't satisfy. I have alluded to this concept that you are drawn to achieve financial freedom because you want to escape the time-money trade-off or in simple terms the "rat race". The rat race sees us in this value-chain of getting up, going to work and fulfilling our role in the work-earn-spend-work cycle. Never ending when we are in thrall to our housing loans or other consumer debt.

To break free of this rat race is to be able to wake up and decide what you want to do with your time, energy and life without worrying too much about how you can feed yourself and your family. That, to me, is the practical dream that drives me towards financial freedom. It is the ability to make choices ordinarily not available to those who do not chose to aim to break free of the rat race.

Some of you may like to live a life of hedonism and enjoyment within the passive income that exceeds your lifestyle. So be it. Some of you may want rather, to give more of yourself to causes that wouldn't pay well in the real world, for example, volunteer in certain capacities. I realise that with my daughter in my life, I now want to work towards financial freedom because it gives me more time to spend with developing her to the fullest of her potential and to let her grow into the matured, productive and life-changing person that she can be. I also want to be liberated from the rat race to pursue my interests in writing, sharing my own skills and knowledge in areas where I can share and to basically touch lives in ways that I am restricted.

Individuals have told me I can do it WITHIN the rat race by choosing the career that satisfy and to do volunteer work in my spare time. I have tried that out and while I still continue with my career because the earned income helps me accumulate investible savings, I realise the same 24 hours leaves me little time to spend on family and volunteer work while keeping a 9am to 6pm job.

Financial freedom - freedom to do for others as you have done for yourself

Back to our article above. I do believe that it is more blessed to give than to receive. But you still need to take care of yourself and your loved ones first before giving. I have done my share of volunteer work in teaching children reading skills as well as helping out in a supervised homework group program for 5 years or so. I have helped out in a non-profit professional association as a board member that has benefited my peers in the industry in terms of training and experience sharing. I have done for others and it has made me more fulfilled as a person. Now, I realise my focus is on financial freedom so that I can take better care of my loved ones because the time-money trade-off becomes less a burden on me with ever cent that goes into growing my passive income sources.

Would financial freedom make you happy? Why? You may want to take this long weekend to mull about the reasons behind achieving financial freedom. The deeper this desire comes from within, the more the desire is fueled by something more than self-gratification, the more you realise your actions will be aligned to the financial freedom principles:

Live within your means
Save and invest
Grow your means

In the meantime, rest, recreate and refresh yourself over these three days and remember to take care of your health too!

Be well and prosper.

Financial freedom: Growing your means by taking ACTION!

2008-03-20T00:37:00.000-07:00

Five Cents Ten Cents has moved to http://fivecentstencents.com

Please bookmark the new website as this blog will not be updated after 21 March 2008.

Thank you.

Panzer

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One of the pillars of financial freedom is to grow your means. You can do that in many ways. The most obvious way that occurs to you would be to hunker down, work hard and work smart to get ahead in your career or business.

Growing your means, a paradigm shift…
Get that promotion. Gain that increment. Grab that career move that pumps up your income and earnings. That is one way to grow your means.

The other way that is increasingly evident in our globalised economy that is Singapore Inc. is to seek alternate sources of income. Investment income is one such way. In generally, Singapore’s tax laws are laid out such that interest is not taxed. Dividends from stocks and shares for certain exempt sectors are also free from tax. Even for dividends from companies taxed at 18%, you get a tax credit to offset the taxes on your dividends that result in you only paying tax on dividends at your effective personal tax rates.

Internet income is starting to become a reality. I can’t quit my day job but AdSense revenue is paying for my web hosting for this blog. Hence, my blogging efforts are able to generate enough money to make my blog more professional with its own domain name as well as paid web hosting. The new paradigm in our ever changing value-chain is to diversify your income sources. Relying on your job for 100% of your financial security gets riskier with age and with winds of change blowing through the business landscape.

Growing your means, taking action!
My own foray into growing my means has been really using AdSense and blogging to explore how you can make some additional sources of income from non-traditional activities of trading time for money. Don’t get me wrong, AdSense requires still some trade-off but it gives you some flexibility in working on your blogs when you have time and at your own schedule.

Based on what I’ve read, unless the main stream media picks up on my blog and gives me free publicity to a few hundred thousand people, my humble blog would be challenged to generate anything close to even my investment income. I realise I need to either sell my own product or services through my websites where I’ve build up a small audience. That is the way to go. This revamp of Five Cents Ten Cents seeks to make my blog more adaptable to change as the look and feel can move very quickly using Wordpress templates. In addition, I can also add functionality that exceeds what Blogspot can do for me.

To grow our means is to be open to opportunities and to try. Almost one year ago, I started out Five Cents Ten Cents as an experiment. What this experiment has proven is that it can generate real dollars and cents and it has also allowed me to get re-aquainted with Web 2.0 technologies and to marry my skills in writing, personal finance, information technology as well as some dabbling with designs and photography. Increasingly you will note that Five Cents Ten Cents uses photos from my own Flickr! albums that were taken on my trips overseas as well as my activities in toastmastering, kidsREAD and others.

How are you growing your means? What concrete steps, however small, have you taken to grow your means. In our current low returns from fixed deposits and treasury bills, even if you can generate $10 a mth from whatever alternate source, it represents $12,000 that you would have needed to set aside at 1% (Fairprice Plus savings rate) to get the same returns. So don’t underestimate the power of this alternate income source.

Be well and prosper!

Financial freedom: The elegance of simplicity

2008-03-19T06:50:00.001-07:00

As I explore more of the ways to live my life to attain financial freedom, I start to see the convergence between financial freedom and simplicity.

The models and approaches that I explore become simpler as I journey towards financial freedom. It is this very elegance of simplicity that draws me closer and closer to the heart of what it means to work towards financial freedom.

Financial freedom in a nutshell

Fundamentally, the concept is straightforward. In order to be financially free, you should build up enough investments that generate passive income that meets your living expenses.

To achieve this level of investments, you generally need to live within your means, save and invest and grow your means.
Your achievement of financial freedom depends on how you manage to work these three areas of your life.

Living within your means

On a superficial level, this just means to spend less than your income. You want to do this so that you can grow your savings that can then be channelled into productive investments to grow your passive income.

On a deeper level, living within your means is strongly correlated with the themes of frugality, simplicity and having an uncluttered life. Many of the problems of financial recklessness and abandon are associated with the mindless pursuit of accumulating material posssessions. Your needs are few but your wants are many. It is the translation of these wants in to ever-increasing perceived “needs” that move us towards the unfulfilling vortex of materialism and the collection of stuff in our lives.

If you look around your room, your home or your workplace, most of the stuff can be done away with. We can do more with less and perhaps even more effectively without the stuff hindering our lives.

Saving and investing

The more you focus on reducing materialism to make you happy, you will find that your real needs are few and differentiating between wants and needs becomes easier over time. Savings becomes easier over time as you delay or defer gratification by spending less and investing more from your savings.

Investing requires effort but the approach for a long-term investor does not have to be overly complex. The main principle is to understand what you invest in and invest in what you understand. To have more investment opportunities is to understand more about different asset classes and the risk-reward trade-offs inherent in each type.

There is no magic bullet. Investing in the long-term can be boring and tests your patience. But slow and steady in investments you understand yielding adequate returns for your appetitite for risk is the way to go.

Growing your means

Does living a simple life mean living hand-to-mouth and suffering privations without enjoying life. The answer is an absolute “NO”. You can grow your means by gaining that promotion, increment or bonus if you are working at a job. If you are running a business, you can expand your business, build it up more with more sales or billable services generated. Growing your means allows you to have a higher standard of living through your purchasing power whilst still allowing you to live within your expanded means.

panzer’s experience

My experience has been that my life whilst simple by most standards can be made even simpler by reducing the amount of STUFF I have in my life. I think I can eliminate at least 50% of the stuff I have now in my home without seriously affecting my quality of life. This has allowed me to focus on savings and to channel these into investments for the longer term.

The more I think about financial freedom and work at it, the more I believe that the principles should be kept simple, and to allow our execution to vary according to different stages of our lives whilst keeping the overall goal in sight, i.e. to be financially free by age xx with a investment capital of $xxx,xxx amount.

Be well and prosper.

Five Cents Ten Cents is under-going a transformation... Watch for it!

2008-03-18T07:11:00.001-07:00

Dear faithful readers,

It's been a almost a year since I started out of my blog on financial freedom Five Cents Ten Cents and I have learnt so much from writing out my ideas relating to financial freedom!

The journey towards financial freedom is just starting to get interesting as now I have one more mouth to feed. :-)

Besides starting to pick up the ropes on parentcraft, I have also been exploring ways to bring this blog to the next level. I have been brainstorming and coming up with ideas on how I can TRANSFORM Five Cents Ten Cents into something even better!

I will continue with the tradition of sharing with you my insights and experiences about my own journey towards financial freedom while you accompany me through this blog.

In so doing, I hope that you find value through the ideas and thoughts generated about personal finance and YOU TOO can achieve financial freedom LONG BEFORE YOUR STATUTORY RETIREMENT AGE!

Watch this space over this coming weekend.

Be well and prosper.

Panzer's Quest for financial freedom

2008-03-17T00:08:00.000-07:00

The picture above shows the token of appreciation given by the Singapore Armed Forces to me last year when I completed my 10 years of reservist duty to the State as a Conscript in the Lion City. It comprises a Hamilton Khaki watch, a collar pin and a medal as a form of recognition of my services to the nation.

The watch's face is broken after being worn for 1+ year while I have consigned the box to the depths of my cupboard to gather dust as a remembrance of something I would rather forget.

My quest for financial freedom
The relentlessness of my pursuit of financial freedom is to some extent driven by my experiences as a conscript in the Lion City. As a able and fit male citizen of Singapore, I went through two and a half years of full-time military service when I was 18 and this was followed up by 10 years of annual in-camp training that ranged from short two day BCTC courses revising basic infantry techniques to 3 week long operational duty at key installations in Singapore.

Whilst I was on reservist, I saw how my responsibilities were taken away from me and given to a lady staff who did not have reservist. That meant my performance for that year was impacted since a key work area was taken out of my hands and given to someone else. Over the internet, I read of anecdotes where Singaporean staff were discriminated by some employers as PRs or foreign talent were preferred for their lack of NS liabilities. There were even reservists who were afraid of changing jobs because they were on remedial training for failing their individual physical proficiency test (IPPT).

Recently, I read of a case where a NSF lost 85% of his sight due to oversight by his superiors and allowing his eye condition to worsen.

The reality is that as an NSmen, you are disadvantaged economically against your competitors in the career arena. Ceteris paribus, an employee who does not have NS liabilities i.e. Permanent Residents or foreigners on employment passes / work permits are more attractive to hire and retain than Singaporean men. That is the BRUTAL TRUTH that is Singapore Inc.

Yes, the gahmen gives you NSmen tax reliefs and top ups. Reliefs and top-ups help little when you don't have a job or when your job is at risk due to your NS liability. Safra clubs does little for you if you cannot afford to pay its subscriptions without a career.

Forget duty, honour and country, and let's talk about growth, GDP and money!
The relentlessness in which this administration pursues economic growth tells us one thing. Making money in Singapore Inc is the reason we exist. I believe in economic growth. What I don't believe in is a system that penalises its own male citizens with conscription which provides inadequate compensation mechanisms for the risks we take. Hence, now that I have served my duty to the country, it's time for my duty to my family to maximise our family's economic growth through making more money.

Volunteerism? Donations?... Been there and done that.

Now it's time for living within my means, saving and investing and growing my means.

Singapore Inc has abolished estate duty, so you can leave it ALL to your family so let's make economic hay while the sun shines.

My pursuit of financial freedom is to truly contribute to the country through taxes and to receive through income streams from career and investments. It is a win-win arrangement that no true economic maximiser will refuse.

After all, "welfare" IS a DIRTY word in Singapore.

Be well and prosper.

Financial freedom: Investing for the future, focussing on the present

2008-03-14T20:50:00.001-07:00

I have discussed how the dream or reason that drives you towards financial freedom is important in focussing your hearts, minds and souls towards your financial goals.

Investing for the future, focussing on the present

You are not a robot following a program mindlessly and executing tasks repetitively. You are a human being filled with emotions, feelings and moods. In order for you to invest for the future, you need to focus on the present, to do the things daily that leads you surely and steadily towards your goals in financial freedom. You need to have a strong sense of purpose behind why you are pursuing the tasks and activities that move you towards financial freedom.

Let's recap what does financial freedom means to you:

To be able to have the targetted investible savings that generates passive income that exceeds our living expenses.

It's that simple. To be financially free you need to live within your means, save and invest and grow your means. This will help you generate sufficient investible savings over time which earns sufficient passive income to cover your living expenses. When you achieve that, you are no longer trapped in the time-money trade-off since you are free to spend your time to do whatever you want as your investible savings works for you to earn that income while you are sipping coffee watching the world go by during weekday mornings. ;-)

Focussing on the present means translating the financial freedom principle of living within your means, saving and investing and growing your means into daily achievable actions. Plans without action gets us nowhere. Action with plans gets us somewhere but not where we want to go.

Focussing on the present: getting you moving towards financial freedom

I like blogging because I have enjoyed writing and public speaking ever since I became a toastmaster. Blogging is also cathartic for me, i.e. it allows me to articulate my thoughts and at times vent off some frustrations in life. It also helps me to clarify my thoughts. I have made blogging my hobby because unlike other hobbies, blogging with AdSense helps me grow my means. I earn literally five cents ten cents everyday that adds up for my daughter's college tuition fund. This is one way where I am growing my means even as am a salaryman.

Living within my means comes from realising that materialism will only satisfy you briefing before the you hanker for the next "thing" to make you feel happy! Thus, a life spent chasing after materialism will never satisfy in my own experience. I realise that as the number of candles on my birthday cake grows, the more I realise happiness comes from the basics of health, happiness and family. Small luxuries now and then make life more enjoyable truly but they are to be sampled sparingly so as to preserve the delicate sweet flavour. Indulging in luxuries all the time spoils out palate and makes for one to live beyond your means.

Saving and investing comes from every small step. Yes, interest rates are pathetically low now. Singapore fixed deposits are yielding close to 1% plus. But that is no excuse to be saving even as inflation wipes out our savings, to mitigate the effects of inflation is just one way to take concrete action not to let our monies wither away at 0.25% in bank savings.

Investing in the future is to act in the present

You can achieve financial freedom. It is within our grasp by taking hold of our present and making small changes to our lives to align our mission, vision and values towards those conducive towards financial freedom. I took initial steps years ago and made a conscious decision to pay off my loan aggressively. Now I can concentrate on fatherhood and work-life balance and invest in the bringing up of my daughter as the roof over our heads belongs to us and not the bank! I am working for my daughter and family now and know that every bit of passive income I generate will go into building up financial freedom for my family and myself.

Be well and prosper.

Financial Freedom: Drinking Coffee While the World Goes By

2008-03-13T06:41:00.001-07:00

My good friend once remarked that once he had achieved financial freedom, he would want to spend his time drinking a leisurely cup of coffee on weekday mornings and watch the morning crowd pass him by as they go about working for a living.

Such is his dream and to some extent it is mine as well! :-)

What is your dream that drives you towards financial freedom

I encounter many posts in internet investment and personal finance forums from people who ask for the best investment that yields the highest returns in the shortest possible time. Others ask how they can save and invest without sacrificing their lifestyle that involves shopping, eating at restaurants and supporting a car.

They have a dream to drive a fancy car, to dine in nice restaurants and to be RICH with a capital "R".

Your dream can drive you towards the pinnacle of success or it can drive you crazy with the frustration of impotence in achieving your goals of being RICH.

But just dreaming of being RICH does nothing for us unless it spurs us on to take concrete action. The dream does nothing for us if it is the mere accumulation of material possessions for us to show off that we have MADE IT and are RICH.

My dream is to be financially free. Being financially free doesn't involve wearing bling-bling and brandishing the latest Rolex watch. It is not about the car I drive or the home I stay in. It is about escaping from the time-money trade-off. It is about being able to spend quality time with my daughter when I choose to. It is about being in control of HOW I can maximise the life in my years.

your dreams are your goals in the ideal state

Your dreams are actually your goals in an idealised state. Every endeavour begins in the mind. It comes from the conscious and the sub-conscious mind. In order for you to achieve your dreams, you have to sacrifice and make changes for you to hit the ideal state. Along the way, we either lower our dreams or uplift our lives to meet the lofty targets that we set for ourselves.

My dream is simple but yet challenging. It is to escape the time-money trap that engulfs all of us who work for a living. The escape route is laid out in front of me through my goals set in being financially free. I know how much investible savings I need to be able to sustain my current standard of living. I know what it takes to get there. And I know it takes me time, effort and perseverance to reach my dream.

I will get there because I am focussed, determined and patient. I will get there because that is what I dream about. I will get there because I am willing to do what it takes to live within my means, save and invest and to grow my means to get there.

You can do so too, if you truly believe in your dream.

Be well and prosper.

Financial Freedom: Plan-Do-Check-Act

2008-03-12T18:00:00.000-07:00

In order for you to achieve financial freedom, you have to have a system in place to guide your decisions to live within your means, to save and invest and to grow your means. One way to develop a framework to apply the principles of living within your means, saving and investing and growing your means is the PLAN-DO-CHECK-ACT approach.

PDCA Approach (Deming Cycle in Quality Movement)
The Plan-do-check-act or PDCA approach is described by Wikipedia as, "... an iterative four-step problem-solving process typically used in quality control. "

It covers the following areas:

"PLAN

Establish the objectives and processes necessary to deliver results in accordance with the specifications.
DO: Implement the processes.

CHECK: Monitor and evaluate the processes and results against objectives and Specifications and report the outcome.

ACT: Apply actions to the outcome for necessary improvement. This means reviewing all steps (Plan, Do, Check, Act) and modifying the process to improve it before its next implementation."

How do we apply PDCA to our objective of achieving financial freedom?

1) Plan
You need to have an objective. Be specific and it should be something along the lines of, "I want to have $500,000 investible savings by age 50" for example. You need to develop the way or steps that will help you achieve your objective. These are the processes referred to in the PDCA approach.

2) Do
Action is paramount in any endeavour. But blind action without any pre-conceived notion of where you want to go and what you want to achieve will lead you nowhere. Action to implement the plan in the required steps (plus some variations along the way) take you bit by bit from where you are now, towards where you want to be in terms of achieiving financial freedom.

Let's say your target is to have $500,000 in investible savings by age 50. If you are now 30 years old, you have 20 more years to achieve this. $500k over 20 years = $25,000 a year. How do you save $25,000 a year? By first saving $1,000, $2,000, $5,000 a year etc and leveraging on the power of compound interest to help you. Will it be easy? Of course not! It will be challenging and tough if you do not believe in the principles of living within your means, savings and investing and growing your means. TOTO and 4D may bring you there maybe with a one in a billion chance but growing your investible savings at rates of 4% to 10% is possible but tough. It requires dedication, hard work and perseverance.

3) Check
As each year goes by and the number of candles on your birthday cake grows, how do you check if you are on track towards what you planned? Is your networth growing bigger, smaller or the same? Why is it? Analyse, think and critique yourself. If you have someone who you can trust and who is financially savvy, talk to them, or better still, read my blogs! :-)

Taking time to review how you have fared in your journey towards financial freedom is also important as periodic self-assessments give you some indication if indeed there is progress. More importantly, if you are not on track, you still have time to do something about it.

4) Act
Take corrective action if you are not doing so well according to your targets. Continue to do the same things if they are giving you the returns and growing your networth towards where you want it to be.

In the end, you continue with this cycle and continue to press on in your quest towards financial freedom. While doing so, don't forget to smell the roses and appreciate the small luxuries that life has to offer!

Be well and prosper.

Financial freedom and Parenthood

2008-03-10T17:38:00.000-07:00

Having a baby in Singapore can be a costly affair as the plethora of baby essentials and accessories available for the baby are unlimited and your budget will be limited when you become a father or a mother to your first-born child!

Parenthood and financial freedom
Many Singaporeans are delaying marriage and parenthood due to a variety of factors. Some of these include establishing our careers, others include saving money for the wedding, home and other family expenses. Many of us wait to be more financially stable before we take the plunge and plan for the first child. Singapore Inc. is a very competitive place and as parents we want to give the BEST for our children to grow up and have fulfilled and successful lives.

I also took the similar route in that I got married after working for about 7 years and our child only came some years after that. One of the reasons for starting a family is that my financial situation has improved over the years. I have worked more than a decade plus without owning a car and used the savings generated from living a relatively simple lifestyle into paying off my loan for my home. Thus, it is with the stability of having no debt for the house that perhaps subconsciously facilitated the conception of my daughter, Baby A!

The more steps I take towards financial freedom, the more it opens up possibilities for me in life as I am less stressed over my job even as I have another mouth to feed. With my liabilities managed through living within my means, saving and investing and trying to grow my means, I am better able to focus on bringing up Baby A and to be a supportive husband for my wife who has endured much to bring our daughter into this world.

Time for work, time for family
We come back to the work-earn-spend-work cycle where it is a trade-off between time and money. We trade time (and our talents and skills!) for money and use the money during whatever leisure time we have. I realise that each of us needs to find that balance. I am starting to find that little bit of equilibrium because of the choices I made when I was much younger.

The simple living, low expenses and not keeping up with the Lims, Alis and Muthus allowed me to concentrate on building up my reserves to fund the most important asset that one needs, my home. When you are closer to financial freedom with the building up of your net worth, there is something you can leave to your child as she steps forth into this new world. Each day that you apply the principles of financial freedom, i.e. to live within your means, to save and invest and to grow your means is another day that brings you closer to breaking free of the work-earn-spend-work cycle that can be such a significant force that chains you to the value-chain of Singapore Inc. When you are less dependent on that cycle, the more you can spend more time with what is important to you in life.

What is important now to me is my baby and my family. The steps towards financial freedom are steps towards giving me more TIME to spend with them.

Be well and prosper.

What is your reason for financial freedom?

2008-03-08T14:44:00.001-08:00

If you have been following my blog, you would have read about how "what drives you" in your endeavour towards financial freedom is important in whether you will take concrete steps towards achieving financial freedom.

My daughter was born a few days ago and she would like to share a message with all of you.

She is my reason for financial freedom. ;-)

What is your motivation behind achieving financial freedom?

Why do you want it so much?

What will you do to MAKE IT HAPPEN?

Be well and prosper.

Withdraw your Economic Restructuring Shares now!

2008-03-03T21:45:00.000-08:00

The Ministry of Finance has announced the final dividends for your Economic Restructuring Shares (ERS) of 10.74%. You may check your holdings and more importantly, withdraw your ERS because the final dividend has been paid out on 1 March 2008 and CPFB will only automatically credit back the monies into your bank account on 7 April 2008:

“5. Singaporeans who have previously received their GST Credits or encashed part of their ERS through their bank accounts will receive their ERS payments automatically through the same bank accounts by 7 April 2008″

The other reason to take out your money earlier is that your ERS balances EARN NO INTEREST while the CPFB “prepares” it for crediting on 7 April 2008.

So what are you waiting for? Go get back your ERS monies NOW.

Financial Freedom: Exploring and Trying New Frontiers

2008-03-02T19:31:00.000-08:00

One of the key challenges of becoming financially free is to push beyond the confines of our existing boundaries. To be financially free is to adopt a mind-set that is somewhat different from the crowd. I remember some of the lessons shared by authors of "The Millionnaire Next Door" where they interviewed many millionnaires, i.e. those who had amassed $1million or more in assets other than their residential homes.

It was found that the majority of these were self-made millionnaires who owned their own businesses and were the typical frugal and thrifty hardworking folks who has some common characteristics.

One of the major characteristic (besides them being millionnaires!) was that most of them believed in saving and investing.

What does the crowd believe in?
Spending is sexy. Why are banks able to make money from pushing unsecured credit to you? Balance transfers, minimum payments, roll-overs all make it easy for you as the consumer to spend, spend and spend!

Look at the many advertisements in print, in television and on the internet. What do they encourage you to??? S-P-E-N-D...

Stretch your loan to the maximum. Conventional wisdom is for those with HDB concessionary rental rates of 2.6% to spread it out over 30 years. This is because you can "invest" to get a better return than 2.6%. I've discussed this topic whether to pay off your housing loan in an earlier post and it depends on computing your outstanding interest expense vs realised returns from investments at any point in time. Generally, if your interest expenses exceed your interest returns, you should generally try to pare down your debt within your means.

Get a set of wheels at the same time as you get your first job! Driving is cool, taking public transport sucks. I endured the sucky MRT, Bus and taxi services for a decade or more before I decided to buy a car because I was only responsible for transporting myself for the first phase of my life. But now I need to ferry 3 other persons besides myself from point A to point B and a car, while being more expensive than public transport, serves the transportation need better.

Going against the crowd

To go against the crowd is to save every month as far as possible. Delay your wants for today for tomorrow's needs. Saving is the new sexy attitude to have if you want to achieve financial freedom.

Paying down your loan or minimising debt. You need debt to finance our homes as you need a roof over your head. However, be aware of how fast the interest on this debt generates even more interest because of the power of compounding. I know of people who still owe the bank or HDB money even when they have retired from their jobs but they own cars. It is not unusual that even in 25-30 years if we do not make a conscious effort, we still end up being in debt because of the choices we make.

The attitudes and conventional wisdom presents itself as the boundary we have to break free of in order to get ourselves in the position to aspire towards financial freedom. If we continue to be trapped in the work-earn-spend-no savings-cycle then we doom ourselves to a lifetime of slavery to our jobs, our bosses and our financially captive lives.

Breaking free requires new mindsets.

Breaking free requires being an independent thinker.

Breaking free requires STRONG DESIRE.

Be well and prosper.

Financial Freedom: Reading and understanding more about savings and investments

2008-03-01T17:36:00.000-08:00

Have you ever bought a bottle of wine from the supermarket, wine shop or duty-free at Changi Airport?

Do you read the labels on the wine to understand what have you bought?

For many years, I didn't really read the labels because I didn't understand what they described until I attended a couple of wine appreciation courses where the speaker shared with us how to read the labels. For example, the label above reads "Cabernet Sauvignon" which is a widely recognised and grown red wine grape variety. Wine labels go by grape variety or region or name of the winery and different types of wine have different types of labelling conventions based on country, custom and marketing.

Reading about savings and investments: Know what you are investing in!

This post is not about wine appreciation! It is about knowing what you are buying or investing. Many of us will rely on the recommendations of the sales lady at the Duty Free Shop in the airport or just pick the one that suits our budget and either red, white or rose wine based on the shape and look of the bottle. Few of us would actually take the time to learn more about it.

The same tends to apply to our investments. We tend to listen to the financial advisor or salesmen and women who have a vested interest to push the investment product or service to you for a commission.

Picking wine is one thing. Picking investments is another in that your investments typically involve large sums of your hard earned money which can grow or shrink depending whether you understand what you have bought. The risk of us NOT TAKING THE TIME TO READ AND UNDERSTAND what we invest is to take up more risks than necessary to earn the potential returns.

Structured Products:RIsk-return in favour of the banks/issuers

Banks know that the average investor does not like to read. In the US, it is estimated that almost 1 in 2 adults never read a book afer they leave high school. I am not sure of the Singapore statistics but I dare say many adults don't read fiction and non-fiction after the graduate. In this age of internet content, television programmes, movies, shopping, reading a good book at home doesn't rank too high on many people's list of leisure activities.

If you don't read books generally and plough through details, chances are you won't read the thick prospectus that banks and financial institutions are required by law to issue for investment products. Hence, banks and financial institutions go around splashing catchy advertisements on their "capital-guaranteed" structured deposits products only to have all the fine-print (at font 10 or less) saying the "capital guarantee" also comes with a catch, i.e. under certain conditions, say sub-prime or in the case of China Aviation Oil price collapse, the "guarantee" is not longer guaranteed.

Unfortunately, many unsuspecting investors didn't read the fine print and their returns were far from what was suggested by the banks or financial institutions issuing the product.

I am not saying that structured deposits and products are all bad and all lose money. However, if you read the fine print and ask those who understand financial derivatives, many of these structured products are structured to weigh the risk-return trade-off IN FAVOUR of the issuing bank or financial institution. In simple terms, YOU TAKE MUCH MORE OF THE RISK, THE BANK / FINANCIAL INSTITUTION TAKES MORE OF THE RETURNS. How the bank is able to do that is that they essentially make bets using a small portion of your monies invested with them for those few years on movements in currencies, share prices, interest rates and the remainder they put in relatively low risk assets. If the bets work out, the banks WIN BIG and give you a small portions of the gains as higher returns. In event that the bets turn out wrong, the bank can still give you back the "capital guaranteed" (less certain fees/charges) as the bulk of the investments were in relatively low risk assets.

Start reading today

There is no substitute for reading and understanding about investments. In this age of Google, internet and public libraries, the knowledge is out there. If you are someone who absolutely abhors reading but still wants to come out a winner in the journey of financial freedom, you need to then network with people. Ask questions, and find out more about the savings and investments where you intend to put your money.

Remember, in the land of the blind, the one-eyed man is king.

Be well and prosper.

Financial freedom: A Picture Paints a Thousand Words

2008-02-29T03:54:00.001-08:00

The more I write about financial freedom, the more I believe that the framework behind it is simple in theory but difficult in practice.

It is encompassed in the diagram above and has been mentioned many times in Five Cents Ten Cents.

The challenge facing many of us in terms of achieving financial freedom is in trying to work on all these three areas in our lives successfully. It is tough to tackle each of them but to be able to juggle all of them and to have successes in all requires patience, hardwork and a little bit of luck.

Live within your means

If you earn $1,000 a month, try to live within this amount. If you earn $3,000 a month, try to live within this amount. If you earn $5,000 a month, try to live within this amount. If you earn $100,000 a month (why would a Minister need to read my blog?!), try to live within this amount.

As a general rule, the more you earn, the more you should be able to save assuming your lifestyle habits do not change drastically. But the reality can be different as we suffer from lifestyle inflation where our expenditures quickly increase in the same if not higher proportion that our salary or business income increases.

Living within your means requires you to make conscious choice of NOT increasing your lifestyle expenditures drastically when your income increases. This is difficult for most people as many earn to spend and are trapped in this work-earn-spend-work-earn-spend cycle unconsciously.

Save and invest

In a period of low interest rates for fixed deposits and treasury bills, it is indeed hard to find risk-free or virtually risk-free investments that give you high returns. Nowadays 1% to 1.5% is the name of the game until MM Lee's "golden age" promise is fulfilled.

The save and invest part of financial freedom requires you to both live within your means to generate the investible savings. To some that is the easy part. The hard part is the investing. Too many of us have experienced realised losses in stocks and shares and other riskier assets. Investing successfully is HARD. Bad investment decisions can set you back YEARS in achieving financial freedom. But it can be done if you invest in learning as much about investments as you would into your favourite hobby.

Grow your means

Study hard. Get a good qualification and earn more money. That is still true to some extent in paper conscious Singapore. However, growing your means also requires you to develop your own inate talents, skills and abilities to the apex of your development potential. Learn more about your career prospects, the industry you are in. If you are in business, the external environment, the Michael Porter SWOT (strength, weakness, opportunity and threat) analysis to see how your business can survive and thrive given the operating parameters in front of you.

For those who are in employment, globalisation brings with it risks and rewards. Lifelong employment is gone. Look for lifelong employability or better yet, multiple streams of income.

What does it mean for you

Like an organisational excellence journey towards Singapore Quality Class or Award, we need to benchmark ourselves to the best standards for achieving our dreams of financial freedom. This benchmarking and more importantly, continuous learning needs to see us growing in all three areas:

Live within your means
Save and invest
Grow your means

There is no shortcut. There is no magic bullet. There is no quick-fix.

We need to continue to live, breathe and dream financial freedom through the framework given.

It is continuous. It is a journey. It is within your realm of possibility.

Be well and prosper.

Financial freedom: Revisiting the Lessons Learnt

2008-02-28T05:17:00.001-08:00

The more I travel along this journey towards financial freedom, the more the pieces are starting to click together.

What has happened in the last 4 years

My Excel worksheet skills are improving bit by bit as I use colour, conditional formatting, formulas and functions to jazz it up with both functionality and form to suit my approach towards tracking my networth and recording what are my investment returns (or losses!) for the last few years.

Hits and misses with stocks and shares

The journey is not always smooth. Some of my equity investments were more punts than long-term investments based on fundamentals and I had to take in some realised losses to trim my portfolio back to a more comfortable 28% cash and cash equivalents and 72% in equities as well as to remove under-performing shares bought at over-valued prices vis-a-vis the market and their fundamentals.

Developing small sources of alternate income

On the positive side, my forays into developing multiple sources of income is bearing modest fruit as AdSense helps defray the costs of broadband access. A bit of luck could be attributed to my foreign currency fixed deposit that yields a very high return relative to Singapore fixed deposit rates as I went in at a good exchange rate rather fortuitiously.

Understanding simple rules of thumb in finance

I also learnt more about the Rule of 72 which is a quick rule-of-thumb to determine how long your investment (or debt) doubles at a given interest rate. If you could get a return of 10% per annum compounded, it would take you approximately 7.2 years (72 divided by 10) to double your investment. If you could get a return of 2% per annum, it would take you closer to 36 years (72 divided by 2) to double your money. An 8% difference translates into 28 plus years to double your money.

Balancing between present wants and future needs

I also realise the importance of balancing my present wants against future needs and to live a little today and not be an absolute Scrooge when it comes to living within my means.

As I continue towards this journey towards financial freedom, it is with excitement and anticipation because my modest achievements have helped me gain a small degree of confidence about my ability to survive and thrive in Singapore Inc.

Paying off my housing loan

This is one of the most satisfying intermediate milestones in my journey towards financial freedom. I am thankful for my parents for their help in an interest-free loan which I have paid off in full. I don't claim to have been able to do it so quickly without their help. Their support advanced my plan to clear my loan by 2-3 years even though I have repaid them.

Understanding the fundamental principle behind financial freedom

There is no quick fix to achieve financial freedom. It is to live within your means. To save and invest prudently. To grow your means and ultimately to reach a stage where your passive income from your investment assets more than covers your living expenses. That is where you have "made it".

As with any endeavour worth pursuing, the reason why I have been able to achieve some of my intermediate milestones is focus. My home mortgage was cleared well before my retirement age because I was very clear that it was a high priority. Besides paying the daily living expenses, I channelled my savings, year-end bonuses and any form of windfall gains towards making periodic capital repayments. The cumulative effect of this was that with each capital repayment, the outstanding principle became lesser and lesser and the resultant interest expense also became lesser and lesser. Compound interest did the rest.

I had a clear time frame in mind and tracked my net-worth position from a consistent net liability all the way to the net asset position that I was in over those years I was repaying my loan. I did not own a car for more than a decade into working life and I continued to keep my living expenses low relative to my income level.

All this while I kept the concept of financial freedom in my mind. I filled my conscious with books on personal finance, on being frugal and sometimes bordering on stingy! ;-) I also focussed especially in the last year or so on health and to keep myself fit and healthy to enjoy a better quality of life and to keep medical costs low by seeing the doctor less.

Financial freedom is within my grasp. I am fairly confident that I can reach it with the support of my spouse, family and close friends who share my philosophy towards life. My time horizon is realistic. It is not a overnight journey. It is a journey measured by years. Measured by the growing up of my daughter (coming soon!). Measured by a corresponding improvement in the quality of life as financial burdens become less heavy over time.

I truly wish you can also join me in this journey, to find your own pathway towards your goal in financial freedom.

Be well and prosper.

Financial Freedom: Thriving in Singapore Inc.

2008-02-27T05:25:00.001-08:00

It's budget time in Singapore as the Finance Minister has announced that Singapore has achieved a budget surplus of $6.4 billion in FY 2007/2008 resulting in the Government being able to give back some of the monies back to the rakyat (people) in the forms of various top ups and growth dividends.

In the land of plenty, more of the plenty goes to the TOP

The one thing I cannot wrap my head around is why in a country where we can invest billions in Shin Corp, Merrill Lynch, Citigroup and UBS, public assistance was only grudgingly increased from $290 to $330 (13.8%) while ministerial salaries went up 21% and mind you, it is 21% of 2-3 MILLION DOLLARS.

I can only draw one conclusion in my simple mind, that is, MAKE HAY WHILE THE SUN SHINES.

Singapore Inc is a place for you and your family to be financially free

Singapore Inc is a place to HUAT HUAT and HUAT. We are the epitome of social darwinism with those who are on the growing side of the income divide doing better while those on the losing side of the income divide suffer the full impact of the 6.6% inflation cushioned by the Governments "generous" handouts of GST rebates, growth dividends and top-ups.

Forget charity. Forget sharing the pie. Forget lending a helping hand.

Our country's values are greed, avarice and materialism. Money (and connections) talks. Everything else comes secondary. In a place where welfare is a "dirty" word, the only welfare I see is to take care of my own personal welfare.

In this quest to be on the winning side of the growing gini coefficient, I have decided to really focus and channel my energies into my own family and to achieve financial freedom LONG BEFORE THE STATUTORY RETIREMENT AGE.

CPF Life should be irrelevant to me as I intend to have passive income exceedingly my lifestyle needs before the mandatory retirement age.

Why such selfishness and focus on yourself?

For too long I have also led to believe in a kinder, gentler Singapore. A Singapore where the national pledge means something. The reality I see with my very own eyes told me a different face of Singapura.

2.5 years of full-time National Service in a combat unit gone. 10 years of annual uninterrupted reservist cycle of 7 high-key in-camp training (ICT)and operational duties defending the country and 3 low key ICT spent crawling through mud and drains in an assault course. For what? To grow the GDP so that our leaders can enrich themselves whilst letting Singapore sink in the population increase that sees us to hit 6.5 million eventually from countries such as China, India, South-east Asia?

Even MM Lee Kuan Yew himself admitted that many PRC take Singapore PR status as a stepping stone towards emigration to the US, Australia and other more developed countries.

The soul of singapore is Financial freedom

The message has never been starker now. In the land of plenty, equality takes back stage because we are a winner takes all society. The rich WILL get richer and the poor can go eat unbranded bread and unbranded rice as PM Lee admonished us that "Bread is bread and rice is rice". That's "rich" coming from someone earning $3 million a year.

Why do you want to achieve financial freedom?

I want to achieve financial freedom because I see this country as what it truly is. A place to make money and a place to gear up your children to take on a brave new globalised world where making money through value-creation in the new economy is the order of the day. Forget nationalism, patriotism and all the other idealogical 'isms out there.

The State expects you to take care of yourself. So you should listen to the State and take care of yourself but getting yourself out of your housing debt. Get out of your car loans asap and especially your unsecured credit.

Improve your means, live within in and save and invest. Grow your investible assets to the point that the passive income generated from your investible assets is more than enough for you to live on. When you reach that stage, you are financially free. You can do anything you want then because this country will WORSHIP you for your contributions to GDP through GST, ERP and other fees and charges.

There is no capital gains tax and since the abolishment of estate duty, you cannot take all your wealth with you but you can give it ALL tax-free to your next generation.

Isn't Singapore a great nation for financial freedom?

Be well and prosper.

Financial Freedom During Inflationary Times

2008-02-26T05:36:00.001-08:00

Singapore's inflation hits 25-year high of 6.6%

The headlines from Channelnewsasia says it all. Our inflation rate has hit a high of 6.6%!

The combined effect of the 2% hike in GST, global commodities price increases as well as increase in annual value in properties and oil makes the inflation rate much higher than any decent risk-free returns you can obtain from safe investments.

Your purchasing power is shrinking right now

Some people advocate more spending given this low interest rate regime coupled with inflation destroying any interest gains you get from the miserable fixed deposits or treasury bills yielding 1.35% to 1.5%. Those who believe in a live for now approach to life feel that what's the point of saving what you are getting a negative return of 5.1% (assuming 6.6% inflation and 1.5% return on fixed deposits). So might as well spend.

I choose to see it the other way. Because your purchasing power is now squeezed by inflation, you have to be more concerned about how to stretch that dollar you earn.

Living a frugal but full life by choosing to buy housebrands; consuming my rolled oats every morning from Mondays-Fridays; not spending much of clothes, shoes and other accessories continue to be my lifestyle. The sad fact of life in Singapore is that inflation hits the poor harder as income statistics have shown that the higher income earners are getting higher wage increases compared to the poor.

The system is against you

The Government has contributed to part of the problem as the 2% GST hike was imposed as a matter of fiscal policy. Even though GST rebates and some of the growth dividends and tax rebates will return some monies back to taxpayers, the taxpayer loses out. He loses out because he gets hit with the inflationary pressures all the way from the time prices increase but will only receive the rebates LATER, after his monies was taken away from him UP FRONT. If you understand the time-value of money, then you will know that money now is worth more later due to interest. Thus, the Government imposed the 2% GST hike that affects us up front but we get the rebates much later, losing out through the time value of money.

What can you do to fight the inflationary pressure?

Under this unrelenting pressures of inflation, in a time when ministerial salaries are increasing at a higher rate than public assistance, the brutal truth of living in Singapore Inc is that you need to look out for yourself and your family.

Singapore Inc in its glory is ALL ECONOMY and NO SOUL. GDP growth at all costs is the name of the game when you see through the policies being promulgated at all levels. In the end, only your own financial freedom matters because it is the way that allows you to decide how to live your life without worrying about inflation and cost of living.

To be above the inflationary pressures is to move yourself from a wage earner in the rat race to a capital owner with income producing assets. Attaining financial freedom puts you beyond the worries of a 6.6% inflation because you investments are already putting you on a virtuous cycle of passive income growing your investible savings upwards.

Live within your means.

Save and invest.

Investment prudently.

Grow your means.

Be well and prosper.

Financial Freedom: Growing your multiple sources of income

2008-02-23T22:44:00.001-08:00

Many of us have only employment income

I read Robert G Allen's book "Multiple Streams of Income" where he talks about how you can go about building financial security by diversifying the sources of your income. Most of us only have one main source of income and it usually is our employment. Others may invest their savings into investments such as stocks and shares, fixed deposits and treasury bills.

More savvy investors may venture into property for rental, into commodities and other types of asset classes.

How to go about developing multiple sources of income

The quick-win in going about developing your multiple sources of income is to start with what you know, i.e. to live within your means so as to generate investible savings that you can put in a fixed deposit, treasury bill or even a cash fund. While these truly bring your passive income, the current low interest rates of 1% to below 1.5% means that you have to build up a large pool of capital in order for 1% to mean anything significant to you.

In order for you to seriously start developing multiple sources of income, you must break free from the mindset that you job is a given. Today's age of globalisation means that our jobs and our organisations are subject to the ruthlessness of market competition and consumer trends that can result in our organisations not being in existence in 10 years' time.

Stay in your job whilst it provides you with a steady paycheck. But whilst you are gainfully employed and using your monthly savings to build up your investment assets, consider too how you can make use of your skills, talents and abilities outside of your working hours.

Monetising hobbies

I have taken up AdSense as it helps me monetise my hobby of writing blogs and publishing them on the web. The root of my ability to write and to use internet technologies started not recently with my blog in early 2007 but rather back as early as 1996 when Cyberway Internet (now Starhub) was in existence and I signed up for my first dial-up at 33.6kps internet access package. Now I am on Starhub Maxonline at a blazing speed of above 4Mbps!

It was because I had embarked into the new world of the World-Wide-Web as well as did my very first homepage then that I became familiar with web publishing. I took a break and came back in force in 2007 using some of the very fundamental skills of using Lviewpro (graphics editing software) plus the templates provided by blogger to publish my content online.

With the Googalisation of the internet, AdSense has helped me pay for my broadband bills although it is still a long way before it can allow me to not work for a living.

Building YOUR second career while you are still on your first

Most of you wouldn't mind working until you reach the statutory retirement age of 62. However, you may not be given that choice because organisations can outsource, downsize, be sold off in mergers and acquisitions or you could find your skillsets redundant in today's world.

What can you do about it?

This is where building your second career while you are at your first will help give you more options should your first career ever plateau or worst, be consumed by the forces of globalisation.

I have been building up my possible second career by joining toastmasters. Besides wanted to improve my networking and public speaking skills, I saw toastmasters as a way to build up realy knowledge and expertise in becoming an independent trainer or consultant. This is because I have additional specialist domain skillsets beyond public speaking. While I can teach or share my experiences as a public speaker and impart public communication skills for a second career, I can also be a trainer based on my experience in my chosen profession. Such second careers have a longer lifespan and work in favour for those who are experienced (or older in age!) because the conventional wisdom is that gurus or trainers tend to be old. So this form of a second career is relatively more age-resistant as compared to other careers.

Learn more and take action to build your first multiple source of income

If you are serious about building up multiple sources of income, I urge you to read Robert G Allen's book. You can find it in public libraries and use it to expand your mindset towards another way to help you achieve financial freedom.

Be well and prosper.

Guest Post by Sgmusicwhiz: His thoughts on financial freedom

2008-02-22T18:25:00.001-08:00

As part of making my blog more interactive and to invite views from other bloggers passionate about financial freedom, I have asked musicwhiz, an online blogger who follows my blog (as I do his), to do a guest post by featuring his comments into a post in today's entry.

He shares my passion in financial freedom and is also striving like many of you to reach your dream of achieving financial freedom way before the statutory retirement age.

Here are his insightful comments!

Enjoy.

Be well and prosper.

=====================================

musicwhiz said...

Hi Panzer,

Another good post and it is good to have a constant reminder of our goals. It is good that our goals are aligned on this aspect, except that I do not have any child arriving whereas you do ! Haha.

By the way, let me take the opportunity to congratulate you on your soon-to-be-parent status ! It cannot be easy to be faced with the prospect of a radical change in lifestyle but I can see that your goals are firm, so you will be able to achieve financial freedom someday soon.

Come to think of it, not many of my friends use this term "financial freedom". Most of them tend to talk about tomorrow, next week or next month and what they plan to do with their time. But none of them really seriously discuss several years down the road and how they would like to expand their wealth. Some talk of migrating, others about having kids while still others wish to enjoy life by spending on depreciating assets.

Yet I would implicitly assume that each of these decisions should be supported by adequate financing, otherwise they may (literally) fall flat on their face !

One thing I have noted is that my friends have a lackadaisical attitude towards investing and treat it as a "if it works, good ! If not, then heck it" matter.

Yes, some are very thrifty and save a substantial chunk of their income; but the true way to attain financial freedom is more than saving. It's about using money to grow more money and investing is one of the best methods for this. It may sound preachy but I have realized this the hard way after struggling for 7 years to build a decent savings balance.

Just by investing for the last 3+ years, I have managed to almost triple my total assets, though my mortgage loan still remains my single largest sole liability. Without investing and saving, I think I would not have managed this; thus I would like to provide a living example of how saving, living within your means and investing can help to grow money more quickly.

In a time of falling rates (SIBOR is around 1.44% as I type this), we cannot rely on FD or savings accounts to beat inflation. Thus, I choose to place my money in equities and high-yield instruments to maximise returns. Time will tell if I had made the right decision, but it sure beats being "safe" and leaving my money to rot in a bank account.

To end this long comment, I would like to reiterate that if only more people would be serious about investing and make capital preservation the central tenet in their investing philosophy, then they would discover that they can make money by NOT losing money.

Sorry for the long "essay", but hope that I managed to share something useful for you and your readers.

Cheers,

Musicwhiz

Financial freedom: what others think and feel

2008-02-21T22:12:00.000-08:00

If you have been reading my blog for some time, you will realise that the reasons surrounding why I am so focussed on financial freedom come from a few incidents in my life. These incidents helped me reach an epiphany when it dawned upon me that my financial security under the old paradigm of work-earn-spend-work cycle was an illusion. Hence, financial freedom really is within my hands to control by managing how I spend or save each dollar I earn.

If you are reading my blog for the very first time, welcome, and let me share with you what others think about financial freedom. I follow this blog by Danny Choo, a well-known Otaku and web services developer who happens to go around in Star Wars Storm Trooper armour throughout the streets of Tokyo. He studied in UK and majored in Japanese hence decided to work and live in Japan. He also shares about his thoughts about life and why he drives himself so hard to make money running his own business in Web Development.

I find that he is being quite honest when he says that MONEY brings financial freedom for him to pursue the kind of life he wants in terms of work, play and family. His hard work and perseverance resulted in him owning a three-storey house in Tokyo. Material accomplishments aside, he pursues a life filled with meeting many interesting people in the Japanese online web services eco-system and he is living the life that he wants to live.

Do give his post a read if you are a bit tired of Panzer's rattling on and on and on and on about financial freedom as Danny writes with a sense of humour as well if you understand his Otaku jokes weaved into the tapestry of his posts.

Be well and prosper.

Financial freedom: To decide IF you want to work

2008-02-19T17:05:00.000-08:00

If work is your hobby, you never have to work a single day in your life!
I had a conversation with a relative of mine who has his own business and enjoys doing it. He is debt free and enjoys a comfortable life. For him, financial freedom is not so critical because he likes what he does and enjoys interacting with his customers. To him, work something that provides well for him and his family and he will continue as long as he can.

I too would like to be in an organisation where my skills are valued, my work is value-creating and where the remuneration package is fair. But it is a challenge to find a job that is able to satisfy on so many aspects of Maslow's hierarchy of needs. For the record, my job isn't that bad and the remuneration is decent for the regular hours I work. I don't need to travel for overseas assignments. I do count my blessings for this current job.

Perspective on work-life changes with parenthood
I realise that as I embark on a new phase of life to that of being a father, my perspective of work-life balance changes. Being a parent means you have dependents to support. Being a parent means you come 2nd to your child and spouse. Being a parent means you no longer can be selfish and think only of yourself because you child relies on you for her every need.

Being a parent means you have to be there physically and emotionally for your child and yet deliver on your job through whatever means available, phone, remote VPN back to office mail servers and the like. As the responsibilities of being a parent dawn upon me, I start to go to work with a renewed vigour, to be early for work as I also need to go home on time to prepare for my daughter's impending arrival and to support my spouse who will be doing most of the actual work in bringing my daughter to this world.

But as I continue with my job as the means to build up my financial freedom, I begin to explore even more ways that I can be financially free but continuing with the fundamentals (which some may have heard ad-nausem!) :

Live within your means
Save and invest
Grow your nest-egg
Expand your means

My weekend blogging now has become a pleasure rather than a chore because it brings me closer to my destination. I also enjoy the process of writing, thinking and documenting my thoughts down for the time when my memory starts to fail me.

Financial freedom means different things to different people. It is for me, the ability to decide IF you want to work. That, truly is what it is all about.

Be well and prosper.

I want financial freedom because...

2008-02-18T00:07:00.000-08:00

I want financial freedom because on some days, I really really HATE my job.

How many of you have the sinking, creeping feeling when you go to bed on Sunday night, knowing that on Monday morning, you have to face difficult bosses, challenging customers and combative co-workers? There were some years in my career when I felt like I was back in the military, having to book in by 2359 hrs on Sunday evening, ready for Monday, the start of another week being in thrall to the Singapore Armed Forces as a conscript in the Lion City.

Your job doesn't need you but you need your job
The reality that afflicts us is that WE are dispensable in our jobs. The job doesn't need us but we need the job because we are not yet financially free. We need the income to support our living expenses and for us to save and grow our investible nest egg to the targetted size where the passive income generated from it exceeds your living expenses.

So how can you overcome your sucky job and reframe it into terms that will re-energise and re-engage you to be more involved?

See your job as a stepping stone to financial freedom
While your job may not satisfy your aspirations now, the income derived from it helps you move one step closer to your ideal state of financial freedom IF YOU LIVE WITHIN YOUR MEANS. If you continue to be profligate in spending, then no job and no amount of income will be able to satisfy your insatiable WANTS.

Even if you hate certain aspects of your job, there is bound to be some aspect that you do enjoy. Focus on that to sustain you and not let the unpleasant aspects derail your objective, i.e. to achieve financial freedom. Your job is meant to provide you with income commensurate with your qualifications, skills and abilities and the job scope. It is not meant to make you happy in life. To make yourself happy, you either change the world to suit you (if you can) or you change yourself to suit the world.

I see the accumulation of a nest-egg that grows and grows in exchange for accepting that sucky job for a limited time frame as a trade-off. While truly toxic jobs can rob you of your joy and health in life, most unpleasant careers only make your life "sian" without giving you high-blood pressure.

To be fair, I don't hate my job all the time and for all aspects. But there are some aspects which deal with combative colleagues that really make my blood boil. I've learnt to try to live and let live and not let such colleagues give me an aneurysm. I'd rather take one day at at time and manage it because I know, at the end of each month, I am another step closer to financial freedom.

Think about your own situation. You want financial freedom because ___________.

You are in the driving seat. The road may be bumpy but you can navigate through the roadblocks and obstacles toward your destination of financial freedom.

Be well and prosper.

Tis the season to be jolly falalala-lalala...Budget day is here

2008-02-15T06:40:00.001-08:00

Finance Minister has announced the slew of "goodies" that the Government will be giving to citizens back much of the taxes it has taken for us for FY 2007. Instead of the deficit of $0.7 billion, the excellent economic growth coupled with the Singapore property boom resulted in a SGD 6.4 billion surplus. The Government definitely "huat" for 2007. So why quibble about SGD 2-3 million for each minister? The dream team managed to conjure up SGD 6.4 billion surplus.

Of course, in good times, the Government should spend on its citizens. Some netizens commented that GIC and Temasek can pour easily SGD 10 billion into US and European financial institutions hit by sub-prime but only gives its own citizens a miserly SGD 1.8 in sharing of the surplus.

How does the 2008 budget benefit you PERSONALLY?

The discussion below is not meant to be comprehensive but to give you a "feel" of how the budget impacts you.

1) Growth dividends

All citizens aged 21 and above who have signed up for the GST credits will automatically receive this. It ranges from $100 for higher income earners and higher property type owners to maximum of $600. NSmen, ex-NSmen and NSFs get $100 more but I don't think many qualify to get $600+$100=$700 because you would have to have a home with annual value < $5,000, annual assessable income of <$24,000 and be aged 60 and older. So perhaps ex-NS regulars who have retired?

2) Medisave top-ups

Mainly for those aged 51 and older. Sorry, if you're younger you're on your own.

3) LIFE Bonus

Again, this applies more to those aged 46 and above.

4) Tax Reliefs for CPF Top-ups and Tax Rebate of 20% (subject to cap of $2,000)

The tax reliefs for top-ups are nice but the tax rebate of 20% means you final tax payable is reduced by the lower of 20% of $2,000. This is quite a big saving for those who pay income tax. The difference between a tax relief and a tax rebate is that tax reliefs reduce your chargeable income i.e. income subject to tax BUT tax rebates are a direct discount off your tax bill.

5) Tertiary Education

More bursaries if you qualify under the lower income categories. But if you don't qualify it doesn't affect you so much.

6) Post-Secondary Education Accounts (PSEAs)

$150 to $600 per child that varies with age (older 13 to 20 get double that of 7 to 12) and those who stay in homes with annual value >11,000 get less.

7) Estate Duty Abolished

This means that if you have investible savings that exceed the previous cap of $600,000, you no longer need to consider parking your funds in a residential dwelling (whether owner-occupied or not) as previously you would get hit with 5% estate duty for value of movable property in excess of $600,000. The cap for residential dwellings is $9 million. So do continue to live within your means, save and invest because you can bequeath ALL of it to your children WITHOUT estate duty. Unfortunately, this benefits the rich more than the rest but hey, Singapore is a CAPITALISTIC society and it is every man, woman and child for himself or herself.

Panzer's Wrap-Up

Considering the huge surpluses chalked up by the Government from the resurgent property market as well as GST increase coupled with economic growth, the Government has to give something back to the people to assuage their anger, dissatisfaction and dismay at how inflation has reared its ugly head on our fair shores with price increases for virtually EVERY household expenditure. You name it, its price has gone up.

Even my neighbourhood economical rice stall has raised its price from $2.50 to $2.70 (8% increase). Of course, the Minister for Finance will quote you statistics to tell you that on average, real wages have gone up but *ahem* guess WHOSE wage has gone up much more than inflation. As Michael Jackson sang in the song, "Man in the Mirror", he goes, "Take a look at yourself and make a change....ange...ange....ow...."

Oh, side note. The addtional top-up for NSmen of $100 is pathetic. It is quite a big insult because what the Government is saying is that for the 2.5 years (now 2 years) of full-time National Slavery coupled with 10 years of annual In-Camp Training is only worth a miserly $100 extra. I think I have bought more than $100 worth of army related gear from beach road during my 2.5 years + 10 years of reservist. But hey, why complain when the Government is giving SO MUCH back to citizens after taxing us left, right up and down with income, property, goods and services, ERP and other fees and charges levied at us?

Enjoy your Growth Dividends and Majullah Singapura.

Financial Freedom: The Power of the Reason WHY

2008-02-14T17:50:00.000-08:00

The reason WHY is one of the most powerful forces that can push you to achieve your goals in life. Much of the personal effectiveness and self-development literature I read typically exhort you to be clear about your goals and objectives AND to also be very sure WHY you are doing something because all worthwhile endeavours require time, effort and energy and we sometimes get bogged down by difficulties, obstacles and challenges that get in the way of us achieving our financial objectives.

The driving force behind financial freedom
My own personal reasons for wanting to achieve financial freedom get clearer to me each day as I slog as a digit in the organisation. Nasty, vindictive bosses. Unreasonable requests and rude treatment by the higher-ups. Asked to do stuff with low value-add and not recognisable by the big bosses. Being treated as a inferior by arrogant mini-bosses. To be fair, not everyday is a torture but there are occasional times when I am made to feel small and useless. This is a terrible feeling. Some of you may think, grow up Panzer, that's working life. What do you expect?

Exactly! I have grown up and recognised that so long as I am an employee, I have limited control over my own financial security if I am reliant on my job for life. That is why I am so so hungry to develop multiple sources of income, and why I have sacrificed much of present consumption in the past to be debt-free before I hit the age of 40.

While I still have a fair distance to go before I can achieve financial freedom, I realise that because the reason for me achieving it is getting stronger, I am striving even harder than before to do the things necessary to put me well in the path towards financial freedom.

The key focus for my life now besides my career is to:

Spend more quality time with family
Build up multiple sources of income during my weekends/evenings
Maintain a healthy lifestyle
Seek a balance in work-family-financial freedom activities

Activities promoting financial freedom can be made part of your life
One of the things I realise about achieving financial freedom is that it does not have to be mutually exclusive with other goals. Skills learnt at work helps one too in financial freedom initiatives and spending more time with family generates more ideas about what I can blog about and also gives me the strong motivation to strive for financial freedom.

While I need to spend more for my family due to my daughter's impending birth, I will also cut down on non-essential spending such as gadgets and lifestyle expenses that I can do without as I spend more time at home. :-)

I look forward to the day when I decide to work because I want to and not because of I have to. That would be an interesting day in the chapter of my life. It is dreams like this that propel us for the daily activities needed to get us there.

Be well and prosper.

Financial Freedom: You are Your Greatest Asset!

2008-02-13T05:55:00.001-08:00

Valentine's Day is just around the corner and PanzerGrenadier would like to wish all my readers a Happy Valentine's Day filled with joy, peace and love for significant other, family and friends.

In line with the Valentine's Day theme, today's topic is about that someone you see every morning when you wake up in the morning and before you go to sleep. No, I am not talking about your spouse or girlfriend/boyfriend or pet dog... I am talking about the man or woman in the mirror you see in the morning when you brush your teeth or before you sleep at night.

Yes... I am talking about YOU.

You are your best asset

In our journey towards financial freedom, we talk about living within your means, saving and investing and growing your net worth day by day, month by month, year by year.

Who is going to achieve it? It is yourself. You are the one who will make your vision of financial freedom come true. You are the one who will reap the benefits of being financially free and you are the one who sacrifices present wants for future needs.

It is about you!

So what about you?

Valentine's Day is associated with love and sometimes we love money, our spouse, our pets more than we love ourselves. But we must be careful not to neglect ourselves because it is within us that lies the power to do the things necessary for us to achieve our goal of financial freedom.

How to invest in yourself

Build up your ability to increase your means

Formal and informal education that is relevant to your career or your business is important because you are the money-spinner, the rain-maker and the provider. If you do not provide the means, how will you then achieve financial freedom. Safe-guarding your means i.e. through required insurance for medical and other needs should be considered. Developing alternate or multiple sources of income is another way to increase your means. Investments in dividend or interest yielding assets such as stocks and shares, treasury bills and fixed deposits or even rental income from investment property are ways to increase your means.

Get used to living within your means

The key to living within our means is to differentiate between needs and wants. Our wants are unlimited but our needs can be moderated with discipline, focus and willpower. If you start living within your means now, you will find it much easier to adapt whatever your income level.

Save and invest prudently

You need to continually have cash flows from your career or business to generate positive cash flows to save and invest. You are your own gold mine. The gold ore that is mined for your gold (i.e income) is limited by the number of years of your working career or business. Careers nowadays tend to have a finite lifespan and hence we need to protect our gold mine i.e. our health as well as our jobs if this gold mine is to continue to yield bountiful returns for us to build up our private gold stockpile for our retirement!

Spend on what matters to us

What you spend on is a personal choice that reflects your approach and attitude to life. I realise that as my daughter will be born soon, she is going to represent the future of Panzer. My spouse and I have someone who can continue to build upon the foundations we have laid for financial freedom for our family. Spending on ourselves is still important because while my daughter is our dependent, we need to maintain our ability to generate cash flows for the future. Thus, an occasional luxury to pamper ourselves and keep us motivated for the continued journey towards financial freedom is important. But important too is the ability for us to provide for our own retirements that we can later choose to retire earlier and to spend more time with our daughter.

As Valentine's Day approaches, fret not no matter what your relationship status as personal fulfilment in life cannot be contingent purely on your marital or relationship status. It is more important for you to invest in yourself as you are your greatest asset in your journey towards financial freedom.

Be well and prosper.

Report of the National Longevity Insurance Committe (aka Annuity Scheme) : What it means to you

2008-02-12T17:40:00.000-08:00

The National Longevity Insurance Committee (NLIC) comprising esteemed individuals in Singapore have released their report on the Lifelong Income scheme (previously known by the unpalatable "Annuity scheme" that was so famously launched by PM Lee Hsien Loong during the National Day Rally in 2007 to public consternation and concern.

The scheme in its present form was so poorly conceived that Minister for Manpower Ng Eng Hen had to throw it back to the drawing board to a committee led by Prof. Lim Pin to take into consideration public feedback. I wonder what MOM or PMO's office were doing prior to the public consultation. Perhaps "public" refers to organisations affiliated with a political party that runs Singapore Inc? But I digress... Let's examine the issue on hand, i.e. how the new Lifelong Income (LI) scheme affects us.

Dissecting the LI Scheme Conclusion by Conclusion, Recommendation by Recommendation
The NLIC's full report can be found in the Ministry of Manpower website. News reports in Channelnewsasia, Straits Times also feature write-ups on the recommendations (read: commandments) for you the CPF member. Panzer now attempts to translate the report into human-readable format and to raise a few questions for you to think about in planning your own financial freedom.

Key Conclusion #1: [Paraphrased by Panzer] You will live longer

Panzer's take on Key Conclusion #1
What the NLIC is saying is, "You WILL (on average!) live longer, I told you so! Gahmen told you so, Deloitte Trowbridge tells you so!" Of course the caveat is that it is on average and even the Department of Statistics is very careful to say for those born in 2006, the projected life expectancy is 78 for males and 82.8 for females. That is for those born in 2006. That does not mean you who were born in the 50s, 60s, 70s, 80s or 90s can tahan so long. This is mainly to address those of us who were incredulous when told more than half of us will live beyond 85.

You can't do much about this except to keep healthy so that the quality of life is there when you reach your ripe old projected age.

Key Conclusion #2: More than half of you can fund your own long life

Panzer's take on Key Conclusion #2
60% of active CPF members (as opposed to inactive members who went to heaven) are expected to have half of full minimum sum of $67,000. Based on current assumptions of interest rates at 4% for SMRA account is enough to last you $600 for lifetime if LI starts at 80. What NLIC is saying is that, don't worry, if you have at least 50% of minimum sum of $134,000, CPF can earmark $16,080 for Refundable Premium at age 55 from your CPF Retirement Account and use it to invest for you to support your income from aged 80 onwards. Indirectly saying, I told you oredi, minimum sum is GOOD FOR YOU!

Key Recommendation #1: CPF system not working so well if you live long, so we come up with this LI Scheme

Panzer's take on Key Recommendation #1
The CPF system as it is doesn't work very well because we have to come up with a new scheme using YOUR money to fund it. Of course, the current CPF system also uses YOUR money (and your employers' contributions with a teeny-weeny top-up by Gahmen before elections) to fund your income until 85. Gahmen wants citizens to be self-sufficient and not have a "crutch" mentality so save for your own retirement! Of course, Ministers with their pensions are exempted from such principles.

Key Recommendation #2: Seamless integrate - Don't worry about choosing insurers, no need to crack your brains

Panzer's take on Key Recommendation #2
No need to worry, we choose insurer for you. Do what we say and you'll be fine appears to be the key message here.

Key Recommendation #3: Told you already, we chose CPF for you lah!

Panzer's take on Key Recommendation #3
Pretty self-explanatory.

Key Recommendation #4: You want choices, okay lah, we give you choices on refunding of premium, varying age of payouts and other flavours

Panzer's take on Key Recommendation #4
Different strokes for different folks is the message here. The NLIC committee has done what the Gahmen didn't do in the first place. Consult people and ask what type of choices they would like with THEIR MONEY. I don't know about the Ministers but most of the time people actually APPRECIATE having a say IN THEIR MONIES.

Key Recommendation #5: Give people choice to opt-in, especially those who are unable to pay private annuity schemes

Panzer's take on Key Recommendation #5
Similar to recommendation 4 in that people should be given an option to opt-in.

Panzer's overall comments
The annuity scheme in its re-packaged Lifelong Income scheme basically addresses many of the concerns people had which was about being forced into a compulsory non-refundable annuity scheme. While many accept the concept that we are responsible for our own retirement, many refuse to be forced to buy a product they may not need or want and to have no option for the remaining lump-sum premium paid to be bequeathed to our next-of-kin in the event of earlier transition to the next world.

Choice of LI Payout Age
However, certain concerns are still not fully addressed. For one, the LI scheme requires you at age 55 to make a bet on how long you can live. I.e. To determine the payout age of LI. You can opt for payouts to start from 65 up to 90 at 5 year increments. Default is 80 years.

The way the NLIC has structured the scheme is that earlier payouts in fact yield more income because a larger amount of your minimum sum is earmarked for the Refundable Premium. I.e. the future value (FV) of a larger lump sum payment now will yield more money than a small lump sum payment assuming same interest rates due to compound interest working on a bigger lump sum. Sounds confusing? Maybe I will put in some math later to explain this. Intuitively, this doesn't seem to make sense because typically if you defer your CPF withdrawal age, you should be receiving more money but later. This feature may actually result in more people opting for RP65 since you get more for a longer period of time! The catch is that you lose the interest on the RP earmarked from your minimum sum. If you had opted for RP80, you get a lower payout than RP65 but you forgo interest at 4% on $50,920 (i.e. 76% of half Minimum Sum of $67,000) for your lifetime.

No Refunds
Also, you are expected to make a decision on whether to opt for a higher payout if you forgo the refund of your Refundable Premium. If you think you will have a long and healthy life, you may want to bet that you can outwit and outlast the RP and opt for no refunds but to have a higher payout. This appeals to those who want to make their RP stretch.

At the end of the day, the LI scheme is useful for those who are not rich enough to buy their own private annuity plans and would have a long life. The economies of scale by the CPF make it possible for them to offer this scheme on a relatively more cost-effective manner and CPF is not profit-driven (at least on paper) and should look out for CPF members' interest.

However, the payouts and premiums are dependent on many assumptions, one which is that the CPF continues to pay 4% of Special/Medisave/Retirement Accounts (SMRA) and the additional 1% of first $60,000 of the SMRA. This really depends on the performance of the 10YSGS whose 2007 performance of 2.9% may be unable to support the reality to be faced in the future.

My suggestion is for you to consider keeping yourself healthy and think carefully about the implications of your choice when you hit 55. Also, the scheme will kick off in 2013 and include all who are aged 55 and below. Those who are aged 55 and above with at least $40,000 in their Minimum Sum would also be included.

Be well and prosper.

Financial freedom: Your Protection Against Longevity

2008-02-12T06:08:00.001-08:00

You are going to live longer (on average) than your parents because the Straits Times says so. The Department of Statistics says so and so does our beloved gahmen. What do you think? Do you think you can hit 78 for a male or 82.8 for a female?

Coincidentally, the National Longevity Insurance Committee has also submitted its report to the gahmen for the hotly debated annuity scheme now renamed to a more palatable term "Longevity Insurance".

Why are these two articles being mentioned in this post?

Longevity can be a blessing or a curse

The fact that on average, we live longer than our parents has serious implications for us in terms of financial freedom. Looking at the positive aspects, living longer means that you have more time for the compounding effect of interest to allow your investments to grow. The flip side is that uncontrolled debt will bury you before you can clear it before your time on this earth is up.

Living longer can be viewed in a positive light if we are healthy. One of the reasons I promote healthy living as part of financial freedom is that without health, our new found status of being financially free is totally wasted as we enjoy not the fruits of our consistent living within our means, saving and investing as well as being prudent in conducting our financial affairs.

Giving the upward increase of healthcare costs, longevity without adequate health would be both a financial as well as emotional burden.

Assuming that we will reach the targeted age in reasonably good health, what should we consider in our plan for financial freedom if we are going to live longer?

Develop multiples sources of income

I believe even now more than ever that developing multiple sources of income as well as developing skills for a second career become even more critical as our life expectancies increase. This is because when you have multiple streams of income flowing, with adequate time and even if you are in your 40s, living to 78 means you have 38 more years to go. That is a lot of years given that companies can ask us to retire at 62 (now) and 67 in the future. Thus, if our dream is to reach financial freedom by 55, then we need to ensure that our passive income can sustain us for another 23 years i.e. 2 decades for us to enjoy the next 23 years doing all that we wanted to do without having to go to work.

Investing for the future

Our time horizon nowadays has to be far because on average we can expect to live until our 70s-80s. Unless you relish having to flip and serve burgers at 70, you have to give serious thought to growing your money now.

Remember the rule of 72 I talked about? In general, any investment doubles by 72/rate of return. So if you invest in treasury bills at 1.5% now, you treasury bill will double in 72/1.5 = 48 years. But if you invest in 1 lot of SPC now at $6.30 with a final dividend of $0.40 declared, that's a return of 6.3% which using the rule of 72 would double by 72/6.3 =11.4 years.

Imagine, shaving off 36+ years for a difference in return of 4.2%. That is what compound interest does for or against you.

Living within your means

If you believe the statistics and believe in what the gahmen says, then it only makes sense if you continue to live within your means NOW so that should your job stop before your heart does, then you are able to continue to fund your lifestyle through passive income from your investments or from the CPF plus CPF Life ('annuity') scheme.

Even as this post is written, news about the CPF Life aka ANNUITY scheme is being published on the Straits Times website as well as through Channelnewsasia. I will take a good look at what more schemes the gahmen dreams of making us responsible for funding our own retirement while GIC and Temasek invests our reserves in bailing out US/European banks hit by sub-prime.

Be well and prosper.

Financial freedom : the freedom to choose

2008-02-11T04:22:00.001-08:00

Financial freedom means many things to many people.

If you were to stop the average working person at the bus interchange, the MRT station or the car park and asked him/her what does financial freedom mean to him/her, you will get many different answers. That is perfectly normal as you and I are unique. There is only one of you and there is only one of me in this world. In our uniqueness, there are similarities. The similarity comes when we are posed this question:

"What would you do if you had a million dollars?"

This question is still as relevant today but perhaps due to inflation we should bump up the amount to 5 million dollars to make it interesting. :-)

What would you do if you had 5 million dollars?

I bet you that many of us would say we would quit our jobs right there and then and do whatever we fancied as making a living trading our 8-10 hours a day for a monthly wage no longer appeals.

In that response, there is a commonality that connects us. Many of us really dislike our jobs or would rather be doing something else. The world is a practical place, we need to work for a living and quite a number (myself included) work at a decent job at a decent wage but we would rather be doing something else if we won the $8million Hongbao draw that is coming on 28 February 2008.

Some of you would want to go travel the world if you have $5 million in your piggybank. Some of you would photocopy your winning TOTO slip and attach it with your resignation letter to your boss. Some of you may even just disappear to another country overnight. Whatever you choose, the possibilities start to become endless and I believe many are salivating at the prospect.

Now what if I told you that you could get $1 million dollars if you truly focussed on the slow and steady path towards financial freedom by saving and investing, living within your means and developing multiple sources of income?

CHOOSE TO BE FINANCIALLY FREE

I'm sure you would be excited and energised by the prospect. However, there is a catch. You would have to work hard at:

1) Developing multiple sources of income

2) Continue to live within your means and save

3) Invest prudently and wisely

4) Repeat 1 until you reach your target

That is what is happening for myself. I too dream of hitting that magical $1million in my lifetime and to do it using the tried and tested methods of what is shown above. It will take time, effort and a little bit of luck for me to achieve my target and I intend to do so eventually.

This blog is a small step for me in trying to develop multiple sources of income, in time to come, this blog will also serve as the genesis for a book that I would want to write about financial freedom from Panzergrenadier's perspective and to allow me to connect with others who have similar dreams.

As we embark on the Lunar New Year period, it's time for us to choose to dream, choose to take action to start on our journey towards financial freedom and choose to be proactive.

Be well and prosper.

Your first step towards financial freedom: taking action!

2008-02-10T01:48:00.001-08:00

You've read a couple of books on financial freedom. You've browsed through some of my blog posts as well as other personal finance and investment blogs such as thefinance.sg or forums such as Sgfunds. You are ready to embark on this journey of financial freedom. Kudos and bouquets to you! What you now need is to take the first step into ACTION.

The new paradigm of change - Taking action

It is very easy to be a passive passenger on this journey towards financial freedom. To read and just let the ideas slide off our minds like water sliding off a duck's back. Without having anything really stick into our consciousness and translated into ACTION or BEHAVIOUR that moves us towards financial freedom.

I love to read books on personal effectiveness. Some of the books I've read include: "The Seven Habits of Highly Effective People" (Stephen Covey), "Think and Grow Rich" (Napolean Hill), "Mind Mapping" (Tony Buzan). These are all good books but these books DO NOTHING for you if you do not put any of the principles in them. I too used to quick read these books and do nothing until I came across Napolean Hill's "Think and Grow Rich" . Hill urges us not to quick read and put it aside but to continually put into practice the powers of goal setting and power of the subconscious mind to channel our efforts towards what we have a strong desire.

Since then, I have gradually tried to put into use bits and pieces of personal effectiveness literature into my life. For instance, I use mind-maps to occasionally flush out the ideas and thoughts onto paper so that I can generate even more ideas and thoughts. Some of the new developments such as the launch of Singapore Fixed Deposits blog was due to a few mind mapping sessions on the theme "Financial Freedom". I also believe in affirmations and have some personal life goals set up in my net worth Excel worksheet in my office laptop to constantly focus my mind on what I am working so hard for.

How to take action towards financial freedom

There is no trick. The road towards financial freedom really consists of:

Living within your means
Saving and investing
Grow and protect your investment capital
Go back to step 1.

The hard part is to TAKE ACTION and OPERATIONALISE steps 1 to 3 and to avoid losing what you have saved in step 2. Now that the "secret" to financial freedom is known to you, what you need to do is to prioritise what is it that you are not doing so well and CHANGE it. For instance, if you are living on credit and relying on a TOTO windfall to give you financial freedom, then it is going to be very challenging for you to achieve your target of financial freedom. You need to consider how you can bring your expenses to within your income levels so that you start saving. Or you may have to develop multiples sources of income to be more than your expenditure. Either way, you have to TAKE ACTION and change behaviour that DOES NOT help you towards financial freedom.

Increase your means, grow your returns, protect your capital

If you are already living within your means, but you find that you cannot get better returns than fixed deposits and treasury bills. This means you may have to look at other types of investment which come with their associated risks and rewards. You have to decide if the risk-reward trade off is WORTH IT and TAKE ACTION accordingly.

If you are already investing and getting decent returns over and above risk-free treasury bills but find that the recent market downturn can potentially affect your investment portfolio. You have to consider ways to diversify your risk or consider proper cash management to make sure you can ride out the current storms and risks of US recession impacting major equity and potentially property markets.

Even if you decide that doing nothing, i.e. not buying/selling but just holding on to whatever investments you have now is the way, you can still take ACTION by reading more about other investment asset classes beyond what you are familiar with to give yourself more knowledge for trying out other types of investment.

In short, there is always some POSITIVE ACTION we can take towards financial freedom. We are in control of what ACTIONS we want to take.

One of the actions that I take towards financial freedom is the writing of this and other blogs. It helps me articulate my ideas and thoughts about financial freedom and at the same time helps in a small way towards developing an alternate source of income. I realise that the read-think-write process and feedback loop helps keep my mind on ways to help me move towards my goal of financial freedom.

What action have you taken recently? :-)

Be well and prosper.

Zhng your way to financial freedom!

2008-02-09T05:39:00.001-08:00

Many of you who have Starhub cable vision would have watched this programme on MTV called "Pimp my Ride". In the programme, the host Xzibit visits participants who write in to ask for MTV to pimp or in local Singapore parlance ("zhng" - fix/modify) their cars to their liking. You must be thinking what does "Pimp My Ride" have to do with our journey towards financial freedom?

pimp your ride towards Financial freedom

Singaporeans are also car fanatics and the concept of pimping or zhnging their cars with the latest accessories and gadgets just shy of LTA requirements does ring a bell with some of us. Have you ever thought of how in your quest for financial freedom, do you ever zhng your ride with the latest gadgets and accessories to make your ride towards financial freedom filled with more excitement, fun and entertainment?

Panzer's going show you some of the accessories he uses to jazz up his journey towards financial freedom.

1) microsoft Excel worksheet

This is arguably one of my most powerful zhng's that I add to my home as well as office computer. My one worksheet tracks my personal net worth (assets less liabilities), tracks my profit/loss from investments in stocks and shares, allows me to compute the rate of return for my investments by asset type (e.g. cash, equities) etc. It also lets me see my investment returns for the last 4 years plus allows some simple cash forecasting for how much cash I would need for the next month.

My worksheet also graphs my allocation of net worth between cash/cash equivalents, equities, insurance policies, CPF etc. In order for you to work towards your target of financial freedom, you have to know where you are now.

2) Calculator

I have a 14 digit calculator that I use partly for work but also for quick calculations of returns for investments etc. A calculator is useful for you to do quick and dirty caculations on the fly as you analyse risk vs returns and also do simple additions, subtractions etc. If you are deskbound, calc is also available.

3) Notebook

Instead of using a spreadsheet, you can also carry around a small notebook (paper based not the laptop computer) to write down your expenses or costs if you are starting out on determining how much you spend a month. A note book also allows you to jot down useful stuff like where you can find the best value-for-money bargains for stuff you buy regularly so that you make your dollar stretch. Financial freedom is about living within your means so a dollar saved is a dollar earned. On top of that, you can use your notebook to write down ideas that come to you for financial freedom e.g. ideas for multiple sources of income, ideas for how to save money or invest your money etc.

4) Books on personal finance, investments

Even though I have managed most of my own money for the last 4 years, I still borrow books from the public libraries on personal finance, investments and markets. I read and read and read because I enjoy reading. But even when I may not enjoy the specific topics, I still read to beef up my knowledge to know what I don't know about personal finance, investments and financial freedom. Learning never stops and having books around helps you focus your mind on topics that will help you towards financial freedom.

Reward yourself with Tokens now and then

The journey towards financial freedom is long and challenging. There are no two ways about it. We are talking about taking 10 to 20 years of consistent habits that contribute to us living within our means, saving to invest and investing for returns that bring us closer to our targetted investment capital that yields sufficient passive income for day-to-day living expenses.

As we move forward on our journey, I occasionally reward myself with the percentage of the returns I make. This allows me to plough back 80-90% of my investment returns back but gives me the small luxury of buying myself a nice meal, or a small gadget or a new laptop bag ON OCCASION (not everytime!) when there are some capital gains or dividends. This is a small form of tangible reward to myself and keeps me motivated to continue to invest for more returns so that even a small percentage of that would buy me a fun token to keep from feeling too deprived along this journey.

So do consider zhnging your ride towards financial freedom and be well and prosper.

Financial freedom should be fun!

2008-02-08T00:03:00.001-08:00

In our quest for financial freedom, do we feel even more stressed to work on our jobs or businesses, save and invest and seek new ways to save money or to generate multiples sources of income?

Stop, pause, wait!

You may find the road towards financial freedom filled with challenges and obstacles, but it doesn't mean you cannot have fun and enjoy the journey!

Here is some of PanzerGrenadier's 3 ways to make financial freedom fun for you so that you will find it sustainable to commit to the various ways to grow your net worth to a sum where the passive income from it more than covers your living expenses.

1) Treat it as a game!

When you play video games or sports, don't you tally up the scores to see who is winning or losing? It is the same thing for financial freedom! When you set goals and targets, each month or year where you see your net worth growing and the gap between your targetted investible savings amount and your current amount narrowing, it gives you a certain feeling of satisfaction that you are moving ever closer to your goal!

Seeing it as a game also allows us to inject more humour and fun into it rather than seeing it as deadly serious. Some readers may disagree with me on this approach but I found that life is too short to be all serious all the time. Yes, we need to be serious about setting goals and targets and about taking the disciplined approach to do the necessary things such as spending within our means and saving as well as building up our investments prudently. But no-one said it has to be done WITHOUT humour, a sense of fun that it really is a game that we play to allow ourselves the option to retire earlier than the statutory retirement age set by the powers-that-are.

2) Learning and earning

As I learn about investments and ways to make my investible savings grow, I also embark on hobbies that generate some additional source of income. For me, AdSense has allowed me to explore my interest in writing and articulating my thoughts into something that has a tangible economic value as it helps to bring in some small kopi-money even as it is both fun and rewarding in many senses of the word. In addition, my public speaking endeavours are aimed at gearing me up with skills that help me in my current career but also prepare me for a second career when the time comes.

My blogging efforts also exposes me to a slew of new technologies relating to Web 2.0 that I would not have experimented with if I had just chosen a more traditional hobby such as vegetating in front of the television or xbox (or is it xbox 360 now!?) ;-)

3) Laugh at yourself once in a while

If I counted the number of mistakes or wrong paths I had taken in my journey towards financial freedom, I would run out of fingers and toes to count them. No-one is perfect and has fore-knowledge of what is to come. My adventures in this journey towards financial freedom has its ups and downs. I realise that you have to sometimes just laugh at yourself when your portfolio goes underwater due to sub-prime or risk of US recession and count your lucky stars that you have some of your investible savings in defensive assets such as bank deposits, treasury bills and fixed deposits. At the end of the day, all these efforts towards financial freedom mean whether we can retire earlier or later but not life and death. So I try not to frame things in terms of life and death unless they truly are e.g. driving safely IS a life and death issue.

I do hope that you will also consider the fun part of achieving financial freedom, as it gives you more options in life to explore it in its wonder, splendour and candour.

Be well and prosper!

"Take time to smell the roses, my son..."

2008-02-06T18:12:00.001-08:00

Our journey towards financial freedom brings us to many different places. The places are not necessarily physical or geographical; rather - they are places within our minds as we broaden our experiences in the many paths and roads that bring us ever closer to what financial freedom means to us.

The voice that tells me...

As I work and make progress towards my goals in financial freedom, I become increasingly aware of the distant voice inside my head that tells me to slow down and smell the roses. No, I am not schrizophrenic nor pyschotic, I do not literally hear voices but I am increasingly guided by this sense that I should explore a little bit more about what this world has to offer to my family and myself and not to just to focus on saving and investing just to grow my investible savings to that established target.

Targets and goals are critical in any endeavour worth pursuing and you will find that I am very feverent in my goals of achieving financial freedom. I aim to achieve this target long before the statutory retirement age or 62 or even 67 depending on when the government changes the minimum withdrawal age for the Central Provident Fund (CPF).

... To take it easy

There is tremendous flexibility in how we can achieve our targets in this journey. I used to belong to the school of thought where I relentlessly pursued many means to reduce my personal expenditure and maximise my investment returns. The years of 2003 to 2007 were years of reasonable returns beating fixed deposits and CPF special account interest rates even though I was not (and am still not!) an expert in investments and personal finance. I have tried with varying degrees of successes investing in fixed deposits, treasury bills, stocks and shares (equities) and unit trusts (mutual funds).

My personal status has changed from student ==> employed single ==> employed married (no children) ==> employed married (with 1 child on the way). In each of these episodes of my life, I have tried different ways of growing my net worth bit by bit, little by little.

What has changed since I have learnt from each episode until today is that MANY PATHS LEAD TO FINANCIAL FREEDOM. And one of the paths that has opened up for me is to take time out to smell the roses.

Smelling the roses

What this means to me is that I need to sometimes allow myself to enjoy a bit of my net worth WITHIN MY MEANS and while still keeping my goals of financial freedom FIRMLY IN MIND even as I sample the sweet nectar that life offers for those who are able to delay instant gratification for a deeper sense of appreciation and enjoyment of life.

Ideally, if our investible savings yields some returns, you can decide if you want to channel these returns back into investments or perhaps partake in a percentage of it for personal consumption of the little luxuries in life.

My own experience of buying my Suzuki SX4 Sedan to provide a more convenient form of transport for my family and myself comes at a price. The capital cost of my car does delay my goals of financial freedom by about $55k (and more if you compute future value of investing this amount for next 20-30 years!!!). My living expenses will go up because of petrol, maintenance, road tax, insurance, ERP, parking and a whole host of myriad costs that maintaining a car involves.

The car to me is a different path I have chosen to take in my journey towards financial freedom. It is time to smell the roses as I have worked for 13 years without owning a car. It is time to allow myself a little luxury in life in transportation as I can afford it and it makes sense (maybe not cents! :-) ) for my upcoming family addition!

What is the rose in your life?

What is the path that you may want to take in your journey towards financial freedom. Remember, you are in control of this journey you take. You decide if you wish to take a straight line from here to your targeted goal of $xxx,xxx amount to be financially free or to take a longer path.

It is about balancing today's needs and wants with tomorrow's needs and wants. There is no prescribed text book answer. You decide on the outcome, retire at 55, 62, 67 or 83. It is all up to you.

Have a great Lunar New Year with family and friends and as always, be well and prosper.

Happy Lunar New Year for 2008: Year of the Rat

2008-02-05T17:09:00.000-08:00

Wishing one and all a Happy NewYear of the Rat!

A Singaporean Dream of the 5Cs

2008-02-04T22:09:00.000-08:00

Remember the time in the 90s when people were obsessed with the 5Cs? The 5Cs represent an era when people who survived through the recession in the mid 80s thought that Singapore was going through another "Golden Age". A "Golden Age" where economic growth proceeded at break-neck speeds creating wealth and making the Singapore pledge come true..."so as to achieve happiness, prosperity and progress for the nation"? Of course, it helped that prosperity came to you and hence the 5Cs were the be-all and the end-all of the so-called Singaporean dream.

The 5Cs: A Recap
The 5Cs refer to cash, credit card, condominium, car and country club membership. They were a catchy way to describe the attributes of success in modern, materialistic and mercenary motherland of Singapura. Cash does not need much explanation, any capitalistic economy worth its salt uses money as the measure of economic prosperity and personal success (whether this is right or wrong is an issue to be addressed in another blog).

Credit cards are a proxy to measure your income level. Previously, you had to have an annual income of at least S$24,000 a year to qualify for one. Nowadays, the limit is closer to $30,000 annual income. Hence, if you qualified for a credit card, it meant that you were a somebody in Singapore Inc.

Condominiums (or private residential property) was another measure of how well you did. With virtually 85 to 90% of the population living in HDB apartments (first-time or resale), if you were the 10-15% who lived in private housing, you were considered to be somewhat above the hoi-polloi of the masses who live in HDB estates.

Country club memberships capped off one's ostentatious display of wealth as the entrance fees for some more exclusive clubs ran into 6 digits. This allowed you to swing titanium space-age golf clubs at a dimpled ball across manicured greens and ponds. The epitome of having "made it".

The 5Cs: A Reality Check
Ever since the Asian Crisis in 1997-1998 as well as the dot.com bubble burst in 2000s, globalisation rears its ugly head against Singapore Inc as we are not spared the excesses of world global financial markets. Some MNCs downsized, some SMEs died and others were born. Jobs were lost, re-created and Singapore Inc re-organised itself under the watch-ful eyes of the powers-that-be to emerge into today's new "Golden Age" (Hey.. haven't we heard this before?).

During the 80s, I was also caught up in the 5Cs and did hanker after them as well. I followed the instructions of my parents to study hard, get a degree, find a comfortable job and slowly achieve the Singapore Dream. However, having gone through the Asian Crisis and Dot.com bust, I step into 2008 with more cyncism and realism. The first thing I realised was that jobs were not safe. The era of life-long employment is gone. Life-long income (a.k.a. annuity) is now the new thing. Oh, but sorry, you have to find the funding for the annuity yourself out of your CPF or own monies! Don't look to gahmen to fund your retirement.

New realities in Singapore Inc
The new sense of reality of how Singapore Inc has changed in a globalised world sunk in when I started to see how our living spaces started to shrink due to the deliberate open immigration policies to grow the working population as well as "instant" citizens being implemented. The powers-that-are is of the view that our indigenous population is insufficient to support economic growth. Thus, absolute numbers of economically active workers from the regions of our north, south, east and west and imported to help grow our GDP. This growth in absolute numbers means that competition for jobs is increasingly tough at all levels. While foreign immigration brings in much needed helpers in the domestic worker sector (maids), construction and increasingly service sectors, it has also made IT, financial services and even many white collar jobs subject to strong competitive pressures, making it tougher for you to compete economically.

So has this stopped us from achieving the 5Cs? No it hasn't but it has made me rethink about the 5Cs. A home is a home so the choice of abode is really one's choice based on your income level and affordability. Credit cards should be seen as a way to make payment and I have stopped applying for new cards as they have lost their lustre. Country clubs are really only if you have too much money as many alumni based or Safra type ($40 a year) of clubs provide value-for-money at relatively affordable monthly subscriptions. A car was something I aspired to but it took me my daughter's impending appearance soon that prompted me to get one for the family after working for 13 years and surviving reasonably well in Singapore without a car.

Where does that leave us?
In our journey towards financial freedom, the 5Cs used to be a common benchmark for many to aspire to. Whether this is an appropriate benchmark for you or if you should focus on other aspects is largely a personal choice. My own sense of the 5Cs is that you have to balance your income and affordability against what you want to get. A car brings with it great convenience but is generally more expensive than public transport. Until public transport starts getting better (say in another 4 to 12 years' time and assuming our population doesn't hit 6 million souls), many will still trade money for convenience and comfort of our family.

You determine the benchmark and dreams you have for yourself.
You determine what success is to you in Singapore.
You hold the power to decide for yourself how you want to go about on your journey towards financial freedom.

Be well and prosper.

Surviving Low Domestic Interbank Rates in Singapore

2008-02-04T16:51:00.000-08:00

Time deposit rates have moved downwards along with Domestic Interbank rates
Interest rates for savings and fixed deposits (time deposits) have reduced sharply since Oct 2007 as can be seen in the Monetary Authority of Singapore data on domestic interbank rates since Jan 2007 to Jan 2008.

It has moved downwards from the dizzying heights of 3% sometime in Feb 2007 and creeped steadily downwards towards the present 1.50% plus. If you noticed, interest rates for many banks and financial institutions fixed deposits have also moved in tandem. This is because the bank borrows from you (the depositor) and lends to other banks at the rates. If they can lend at 1.5%, then to make any meaningful margin, their cost of borrowing has to be lower than 1.5%, which explains why time deposit rates have moved downwards as well.

What can you do about it?
There is actually very little you can do about it. Unless you have millions to deposit where the bank may give you preferential rates above what they offer to the typical retail investor, the average investor will only be a price taker, i.e. you can only get the rates that are now close or lower than 1.5% or so for bank time or fixed deposits.

However, fret not, as interest rates do move up as well as down so low interest rates will not be permanent. But how long the interest rates will stay this way is any one's guess. Previously, treasury bills were a way to counteract the low interest rates given by banks for their fixed deposits. However, recent treasury bills auctions for 3 month tbills have yielded 1.49% or so. Thus, most of us retail investors do not have many viable options.

Some "savvy" investors pooh-pooh or look down on us who put some of our monies in such low yielding instruments, proclaiming proudly that inflation (projected at5%) eats up such low interest returns. They are right. However, unless they can find equivalent low risk assets which your diversified portfolio should have in some proportion, it is still a more prudent strategy to have a certain portion of your investible savings in very safe (though low yielding) instruments such as fixed deposits or even treasury bills.

Investing for the long term and building your firm foundations for financial freedom starts with always having some safe instruments to give you confidence to take a more calculated risk with your other investible savings. Never put all your eggs in one basket may mean not being able to become financially free at age 35 or 40 but you have more likelihood of being able to retire before the statutory CPF withdrawal age if you can avoid losing all or most of your investible savings. A recent article by one financial advisor who lost $380,000 over the CLOB debacle shows us the folly of trying to get rich fast by taking inordinate amount of risks and with borrowing to invest.

Slow and steady wins the race and may you, your family and loved ones be well and prosper during this Lunar New Year and for 2008!

Uncluttering your life towards financial freedom

2008-02-03T18:31:00.000-08:00

Getting Things Done and financial freedom
There is a convergence between financial freedom and living a simple life that is uncluttered, unfettered and unrestricted.

Besides reading and writing about financial freedom, another of my interests are topics relating to GTD or "getting things done". GTD topics touch on personal effectiveness, how to do things more efficiently and productively as well as how to get more things done with less. The key theme that brings itself to my consciousness as I delve into GTD literature is that fundamentally, our lifes improve when we simplify and de-clutter it. I realise that when you de-clutter and simplify, the benefit translates into monetary terms because you realise that you need fewer pieces of material "stuff" to get things done and to make you happy. On top of that, it's really true that the best things in life are REALLY FREE!

Health, wealth and happiness does not always correlate with a high net worth and income. Being poor makes it more challenging for you to maintain health and happiness but being financially free while making it easier for you to maintain your health and to be happy does not guarantee either happiness or health.

Live Simply
On a personal level, simplfying your life by focussing less on acquiring material possessions and more on relationships and people helps you achieve financial freedom because when your lifestyle requirements are simple, it is easier to support with a lower level of passive income then if you were continuing to live as if you had active income from career or business.

How does one get started on simplfying our lives? Lifehack is a good source for me to read up on tips and tricks to de-clutter our lives and get more in tune with what's really important in our lives.

The more I think about it, the more I realise that simplicity comes from focussing on what you think is important in your life. This focus is what you need to allow your mind to concentrate the conscious and the sub-conscious and allow your actions to flow in line with your goals.

As the Lunar New Year approaches and many of you will be spending time feasting and catching up with friends and loved ones, do consider time after this period to pause and simplify your lives. You never know how this may lead you towards a different path in achieving financial freedom.

Be well and prosper.

Wishing all my readers a Happy and Prosperous Lunar New Year!

2008-02-02T16:42:00.001-08:00

It is the time of the year again where the festive mood is in the air for those of you who celebrate Lunar New Year. :-)

Changing traditions for the Lunar New Year
As my daughter will soon be born into the year of the rat, I realise new family traditions are starting to emerge that are aligned to my and my spouse's own values and beliefs. Increasingly, the attraction of a simple, fuss-free Lunar New Year becomes more appealing with each Lunar New Year we celebrate.

Panzer's Fuss-Free Chinese New Year Celebrations
I continue to visit my parents for the reunion dinner at their place as a way to catch up with my siblings and parents whom I do not meet every day. This tradition continues in our family. However, I start to cook more meals at home and take the Chinese New Year as the time where I can put my culinary skills to the test because many hawker centres and food courts are closed during this period.

Due to my wife's pregnancy, we will be cutting down on visits to relatives and friends and be very selective to reduce travelling. This helps to save petrol and more importantly, allows us to eat less Chinese New Year goodies that tend to be sweet, fattening and unhealthy! :-)

Even for one of our friend's gathering, I will be whipping up a simple salad plus mashed potato as healthy dishes for the pot-luck being organised.

Ang-pows tend to be another place where lots of money flows out from our pockets. My spouse and I do give ang-pows to relations and close friends but we are not flashy or ostentatious. We are not concerned about "losing face" and just give what is affordable within our budgets. There is no-one to impress because if people judge us based on the amount of ang-pow we give, then so be it. Trying to keep up with the Lims, Muthis and Alis takes you on a longer route towards financial freedom.

Spending should be on the things you truly enjoy and appreciate. Even the obligatory Chinese New Year snacks for us have been reduced to the bare minimum as we are not having any visitors to our place this Lunar New Year as my wife needs more rest during her third trimester. So for me, its 12 cans of coke plus 1/2 kg of bak-kwa (barbequed pork) and perhaps some munchies and ice-cream. For the wifey, it is some pineapple tarts plus a couple of other things she likes but just enough for her own consumption as I also do not eat a great deal of such stuff.

In terms of new clothes, I have only bought 2 casual pants at John Little's sale plus some shirts bought by my wife when overseas. I am not a clothes horse so only buy new clothes during sales or if the spouse buys some shirts for me. Other than that, I hardly shop for new clothes and almost none for causal clothes. :-)

Other than furniture for my maid and for my baby, I have not spent on my own furniture except for an IKEA office chair to replace the worn down 3 year old office chair in our study.

A happy and prosperous Lunar New Year is really dependent on your own approach towards spending. You decide if you want to buy tonnes of snacks that you hardly eat and change your furniture and wardrobe. You decide if you want to do renovation for your home. You decide if you want to spend money eating at restaurants during this period or have more home cooked nutritious meals.

Your Lunar New Year, Your Budget, Your Rules!

Be well and prosper.

How do you ride an inflationary tiger?

2008-01-30T21:29:00.000-08:00

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

2008-01-29T17:38:00.000-08:00

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!

2008-01-25T21:57:00.000-08:00

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

2008-01-23T17:07:00.001-08:00

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!

2008-01-22T00:10:00.000-08:00

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

2008-01-20T22:01:00.000-08:00

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!

2008-01-20T18:01:00.000-08:00

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!

2008-01-20T03:08:00.001-08:00

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??!!

2008-01-17T18:41:00.000-08:00

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!

2008-01-16T21:47:00.000-08:00

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

2008-01-14T17:24:00.000-08:00

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

2008-01-13T21:43:00.000-08:00

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

2008-01-10T19:42:00.000-08:00

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?

2008-01-07T18:15:00.000-08:00

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?

2008-01-06T23:08:00.000-08:00

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

2008-01-06T18:35:00.000-08:00

	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

casino slots

Reading your way to financial freedom

2008-01-03T17:43:00.000-08:00

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!

2008-01-03T00:05:00.000-08:00

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

2008-01-01T17:13:00.000-08:00

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!

Key lessons learnt for 2007 in financial freedom

2007-12-30T18:33:00.000-08:00

2008 is coming soon.

Looking back, I have written a total of 143 blog posts (including this post) since this blog was started early this year. I have averaged a blog post every two to three days and I have learnt more about my own journey towards financial freedom through thinking and writing about my own adventures in fivecentstencents.

What are the 5 key lessons I have learnt in 2007 in terms of financial freedom?

1) Preserve capital
I have come to realise that not losing money is really the fundamental principle in growing my investible savings towards the levels needed for passive income to exceed living expenses. If you lose capital, you have to earn it back through work/business/investments to top it up. When you preserve capital, you have the ability to deploy that capital into defensive investments to ride out volatile climates or put that capital into growth areas for measured risk taking. If your capital declines over time, your networth also declines with it.

The market is always there for you. You do not have to be trading all the time to grow your networth. Choose your engagements with the market in your own time. If you have capital you have holding power. You can always come back to the market again in the near future.

2) Practice risk management
To be 100% in any asset class is highly risky and does not provide for any diversification. The August 2007 correction demonstrated clearly to me when I was in equities that my porfolio could submerge faster than you can say, "sub-prime". Hence, I realise I need to continuously keep a portion of my portfolio in less risky assets such as treasury bills or deposits as a counter-balance to the volatilty in the other assets.

3) Monitor your investments
Knowing what your networth is allows you to better plan the level of risks and returns you can afford to take with your investments. Currently, I am about 13% in cash and cash equivalents and 87% in equities. This is relatively aggressive as I still have a long time horizon before I hit the CPF minimum withdrawal age and hence I am focussed on growing my retirement nest egg by taking more risks now while I still have years of working life in me.

Monitoring my investments allows me to track whether I am moving closer or further away from my targetted investible savings that is sufficient to generate enough passive income to cover my living expenses. You need to take periodic stock take in order to ascertain if you are on course towards your goal of financial freedom.

4) Develop patience
The road towards financial freedom is long. Patience is required to continue each day by living within your means, saving and investing and planning for the long-term. Occasional sacrifices of not blowing bonuses away on the latest gadgets, the coolest luxury good or the exotic holiday need to be made so as to build up investment capital. Patience and a cool head is also needed to ride out the market turbulence and volatility that will be the hallmark of the equity market.

5) Enjoy the journey
This is perhaps the most critical lesson of them all. To be happy whether or not you hit your financial freedom target. Life is to be savoured each day while we are on the journey. The journey itself is half the fun! You strive towards each of your smaller objectives that help you meet your overall goal of financial freedom.

In the meantime, enjoy the process, take pleasure in the simple things in life: a child's laugher; family dinner together; an exciting movie; a pleasant stroll in a public park; feeling the cool water as you swim laps; tasting a freshly home-cooked meal; seeing your networth grow every month, year and decade.

Above all, I wish you the greatest lesson... the lesson of being thankful for the things in life we already have: health, happiness and family.

Be well and prosper!

Cash management 101

2007-12-27T21:05:00.000-08:00

You are interested in your finances to read my blog.

You want to know about investments, personal finance and money management.

Ultimately, you want to be financially free.

Why cash management?
One of the building blocks for growing your net-worth and maximising the returns from your savings is to manage your cash well. Today's high inflation rates of 4-5% in Singapore has resulted in our savings accounts earning 0.25% having a negative return of 0.25% less 4% (or -3.75%). Thefore, just to mitigate the negative return of holding cash, you should consider cash management to hold as little cash as possible in savings or deposits and try to allocate more towards assets that generate a better return that inflation.

All investments come with risk and therefore even if you are 90-99% invested in assets such as property, stocks and shares, bonds, gold, commodities etc, you would still need to hold some cash. This cash acts as both as requirement for day-to-day living expenses or incidental lifestyle expenses such as renovations, purchase of big ticket items such as car, LCD television, washing machine when they break down or when you upgrade. Holding some cash also diversifies your portfolio and gives you some liquidity to take on larger positions in stocks and shares or other investments should the opportunity arise.

How to manage your cash?

1. Determine how much cash you need on hand
The first step is to determine how much of your investment portfolio should be in cash. Some financial planners advocate a 3 month or 6 months of living expenses as your buffer. Others advocate a percentage of your total investment portfolio, say 5% or 10%. There is no right or wrong answer as each of you vary in risk profile, appetite and personal circumstances.

My own approach is to be weighted at about 5-10% in cash which is very aggressive. This is because I am still fundamentally bullish about the Singapore economy (and hence, the stock market) for 2008 but also realise that the stock market is going to be very volatile.

2. Manage your cash among savings deposits, treasury bills, fixed deposits
Once you have decided that you will need, say 10% of your investments in cash and cash equivalents for living expenses and the budgeted big ticket item, it's time to actively decide where you will place this cash. Now cash means different things to different people. For me, cash can be broken down to:

a) Cash on hand
- the notes and coins you have in your wallet, cashcard or prepaid transitlink card

b) Savings accounts
- low interest bearing POSB /DBS /UOB /OCBC /maybank isavvy/ stanchart esaver bank account

c) Fixed deposits
- short-term 1 to 24 month deposit bearing higher than savings rate

d) Treasury bills
- short-term 3-12 month interesting bearing zero-coupon government securities

3. A suggested cash portfolio
My own experience with personal cash management is to keep 3 months expenses available. With minimal kept in the savings account. Every month, after my salary is credited into my bank account, I will transfer most of it into maybank's iSavvy account as it yields 1.68% (as at 28 Dec 2007) for balances S$5,000 to $50,000. I will monitor treasury bills and buy from Poems as it allows me to get in at a known yield less 12-15 basis points (0.12 to 0.15%). I do not get into fixed deposits nowadays because the higher interest paid is not sufficient to offset the relative illiquidity. Treasury bills bought through Poems allows me to sell and convert back to cash within T+1 working day.

During year end when there are bonuses or windfalls, I will reallocate the cash to other investments but put more into treasury bills if I do not wish to buy more stocks and shares or bonds.

In general, Maybank iSavvy + treasury bills are liquid enough as I can get the cash by T+1 or worst-case T+2 which is good enough for most lifestyle expenses. Other unbudgeted big ticket items can be funded through selling some shares but this is usually not the preferred method as I would be under pressure to sell and may even incur realised losses as the portfolio of equities will have some winners and losers.

Tracking your cash
Tracking your cash is important because you should know at any point in time, how much cash you can raise should you need to make changes to your investment portfolio. In addition, I also work out what is my cash holdings generating for me in terms of returns to see how I am doing in terms of growng my net-worth.

At the end of the day, the combination of your cash flows to match your lifestyle as well as your investment asset allocation strategy will determine how much or how little cash to hold. So long as you are aware of where you cash flows go and that you manage to save each month, you are continuing on your journey towards financial freedom.

Be well and prosper.

Enjoying windfalls from punting

2007-12-26T20:54:00.000-08:00

The picture you see above is the site of the future Integrated Resort (also known as: the Casino@Sentosa) near the northern shores of Sentosa formerly known as Pulau Blakan Mati.

The thin line between investing and speculating in stocks and shares
The stock market is a place where money can be made and lost and both at the same time as every transaction is a match at the price that the buyer is willing to buy and the seller is willing to sell at each point in time. When you have a clear investment objective and your reasons for investing appear sound you are investing. You are trying to grow your net worth and to get a better return than inflation from buying shares in a business. If you are buying shares (or short-selling them) with a goal to make a quick dollar within minutes, hours or days, you could be gambling in the stock market.

Seasoned investors sometimes joke that an investment is a speculative trade that has gone sour. :-)

The thin line between investing and speculation can boil down to what is your intention at that moment in time. In reality, no-one but yourself knows that true reason why you buy/sell that share and it could be due to fundamental analysis, technical analysis or fortune teller's advice depending on your information sources for decision making.

Enjoying the occasional windfalls from gambling on the stock market
I enjoy the occasional punt in the stock market as well. While the majority of my portfolio is in blue-chip companies with impeccable businesses, I do punt for quick gains. I do this because I also love a game of chance, and the stock market does provide that avenue. Let's be honest here, many of you buy the occasional 4D, TOTO or Big Sweep ticket all in the guise of "charity" and helping the less fortunate in society but in reality there is something in our brains that responses to the interesting situations where you can make/lose money.

I do not advocate this approach as one of the ways to achieve financial freedom but I have found that investing can be made interesting with the occasional punt. However, such punts should be limited to small amounts say 5%-10% or less of your portfolio and you must set very clear targets for cutting loss or taking profit. This is pure gambling except that it goes under the guise of investing. So be very clear that speculation is gambling and if you should be adult enough to understand the risks and returns from such speculative activity. No one is asking you to punt and in fact, the point of this post is to say unequivocally that speculating is gambling and is VERY VERY RISKY.

I make the occasional punt to see if I can read market sentiment well for a given stock at a given point in time. Also, I see this as my way of earning some pocket money for little luxuries in life such as a nice meal in a restaurant or the occasional gadget. This keeps the investing game a little interesting for me and adds that flavour to my understanding of the market.

The road to financial freedom is long
The road to investing takes patience and perseverance. It is long and it is hard. For me, the occasional windfall from punting on short term speculative activity on a very small portion of my portfolio is one way to take additional risks for potential additional returns. I also do this to learn to read the market better over time and limit myself to occasional punts and limit my exposure to less than 10% of my portfolio. It also trains me to be less emotional about cutting losses and to be more controlled in when I enter/exit specific counters.

Each one of us travels on the road to financial freedom in different ways. I do not claim that my way is the right way or the better way but I can see my net worth growing every year.

Your financial freedom, your rules.

Be well and prosper.

Appear Rich or Die Trying

2007-12-26T02:41:00.000-08:00

There are 200-300 individuals made bankrupts every MONTH. The Insolvency and Public Trustee Office (IPTO) tracks these sobering statistics in their website.

6 to 7 individuals are made bankrupt every day.

Think about it.

The pursuit of materialism at what cost?
Our consumerist culture that defines Singapore makes those who are not financially aware think that keeping up with the Joneses or Lims, Muthus and Alis is the way to SHOW that we have MADE IT in Singapore Inc. That we are somebody not just a no-body.

Who made it so? Who said that "Making it" or being successful in Singapore has to be measured in material terms? Why is it that we tend to value possessions and trinkets and we tend to devalue human relationships and being kind to your fellow human being?

My friends sms'd me during the Christmas holiday season to complain that no-one gave up their seats for their children who are 2 years old. I sms'd back to them saying that Singapore has become a dog-eat-dog society where we try to "get rich or die trying" and being gracious and giving is a lesser priority.

For those who don't get rich, they want to appear rich and hence leverage themselves to the hilt in order to own that car, 50-inch LCD television or that branded lifestyle. Consumerism fueled by consumer credit is a recipe for financial disaster.

Looking good only lasts a moment. Being made a bankrupt can ruin your entire life.

Only a few will achieve financial freedom
The path to financial freedom is known. It is not a secret. Virtually all personal finance books tell you to:

Work hard at your job/business
Live within your means
Save and invest

All of them tell you to manage your debt and to make clearing your debt a priority. Many teach you to differentiate between spending and saving. In deciding if every dollar you earn will be used to spend or to invest. Compound interest is your friend if you invest but it can be your worst enemy if you take on credit to spend on consumption.

Why are there 200-300 individuals each day who learn not the lessons that are already available in the public domain for the price of a library membership? Not all who are made bankrupt made so due solely to their own spending or lifestyles. Some were unfortunate enough to act as guarantors in loans or scholarships or bonds and ended up being played out by the person being guaranteed. Did you know that the parties to the bond or agreement can sue you for the monies or bond should the person under the bond/agreement not be able to fulfil it?

While many of you want to achieve financial freedom, some of you would have succeeded if you avoid bankruptcy. If you are some of those who still owe some consumer credit, do take heed from the advice given by IPTO on financial awareness. It may save you a good deal of grief in the near future.

Appear poor but get rich
My own personal philosophy towards financial freedom is to appear poor but to get rich by living within my means, saving and investing and not spending a lot on consumption. My wife sometimes complains because I can wear the same old polo shirts and hardly wear new stuff. I try to be always neat and presentable but am not too bothered that I don't spot any jewellery nor own a branded watch. I think the most expensive thing I own in my warddrobe is a suit that was given to me by my father.

You have to decide what is important to you. To look rich or to be financially free.

Being rich is measured by networth and not by the size of your house/car/wardrobe.

Be well and prosper.

Saving is dead! Long Live Saving!

2007-12-23T19:53:00.000-08:00

Singaporeans are increasingly becoming a nation of spenders.

We are what we talk about
I frequent forums discussing personal finance and investments and it never fails to amaze me that in one of the forums frequented by young people from teens to late 20s, majority of the discussion topics or threads are about which is the best credit card to have instead of which is the best way to save and invest. The number of "spending" related threads and posts easily outnumber the number of threads and posts discussing "saving" and "investing" five to one.

We are how the wind blows
Singaporean society is a microcosm of the shifting winds of globalisation that are sweeping the entire planet. Our internet savvy, plugged-in generation Y or even Z are exposed to the latest trends in lifestyle, fashion, gadgets and accessories. The young are into youtube, iPod, MSN, SMS, gmail, PSP and Mp3. They are into the hip, happening and hi-bye lifestyle that goes on 24x7x365.

The unrelenting messages from the media fueled by the advertising dollar of multi-nationals selling the latest product or service is to "consume, consume and consume". Think back to last night's television programmes you watched from 8pm to 11pm. How many programs on television are about savings and investment? How many advertisements are they encouraging you to have the latest handphone, to buy that diamond ring as a symbol of your love or to visit the shopping mall to get the best gifts for your family?

Ironically, the only advertisement that tells you not to consume is the one about drunk driving. And even so the message is to drink responsibly and not to drink AND drive. No-one is telling you not to drink alcohol per se.

What is in our minds drives us as that moment in time
The messages that bombard our senses through sight (internet, television and print advertising), hearing (radio and television), and smell (bakeries and food stalls) are all screaming sublimally or overtly to eat, drink and be merry and to spend because spending is showing love.

How do we stop these messages from subverting us from our journey towards financial freedom? How do we pause and think do we need something or want something when we reach for our wallets and credit cards? How do we resist the irresistible lure of luxurious goods and pampered lifestyles?

By first pausing to think.

Training your mind to think
Our minds can be trained to accept certain thoughts and reject certain thoughts. I realised how malleable my mind was during my 2.5 years of full-time conscription in the Lion City where my body could be pushed beyond what my mind had thought it could. Once you realise you how much you can endure, the power of the mind becomes more apparent.

It is the same in your journey towards financial freedom. You think you cannot save. Then you cannot. You think you don't know how to invest. Then you don't. You think you will never be financially free. Then you will not.

Think or think not, that is YOUR choice.

It is your mind that you have to work on and it is with each and every single thought that comes into it during the day while you are conscious and during the night when you are unconscious that forms the building blocks towards training your thoughts towards financial freedom.

How I trained myself to eat quaker oats every morning from Monday to Friday
As part of my own efforts in achieving financial freedom, I realised that I had to take care of my health first but not allowing my weight to keep increasing every year. Poor health = more doctor's visits = more expenses and poor quality of life.

Even when I was required to do my annual individual physical proficiency tests (IPPT) as a reservist, my fitness was not very good as I would only train 1 month before my IPPT test and clear it and revert back to my relatively sedentary lifestyle. After I had completed my last reservist, I realised that I would not have the annual IPPT to push me to exercise and therefore I had to control my food intake.

My mother-in-law told me about the benefits of oats and I decided to try it out by eating it for breakfast from Mondays-Fridays. I still allowed myself to eat regular hawker breakfast fare such as cha-beehoon, wanton noodles or carrot cake on weekends so that I wouldn't binge.

Quaker oats plain without milk or anything sweet are not the most flavourful breakfast you can have. But I disciplined myself by telling myself that this was for my health and wealth. I filled my head of thoughts of having a slimmer waistline and my pants being looser over time. I stuck to the regime and occasionally lapsed but stuck with it 95% of the time. I continue to equate health=wealth=quaker oats breakfast and now find it easy to prepare and consume 3 tablespoons full of rolled oats on weekdays. I also consume rolled oats on occasional weekends when I eaten too much the night before.

In less than 1 year I had lost 1.5 kilogrammes in weight and shaved off 1 inch plus off my waistline. This is a great accomplishment because I didn't increase my level of exercise but I try to eat a balanced 3 meals a day with 2 servings of fruits and veggies as far as possible.

You can control your financial destiny
There are many things in our lives that are outside of our control, but our minds and our thoughts are within our control. It is not easy and even for my simple example of eating rolled oats Mondays to Fridays I don't claim that I can do it 100% of the time. But I do it 95% or more of the time and that is good enough for me to slim down and maintain my weight without significant increase in my exercise. The next step for me is to start to exercise again regularly as studies have shown that a 30 minute daily brisk walk can yield significant health benefits compared to doing moderate exercise of a higher intensity for three times a week.

Saving and investing can be done at various income levels. It is easier at higher income levels if you live a simple life. It can still be done at lower income levels. The question is whether you want to take the first step in controlling your thoughts one thought at a time, one day at a time.

Remember, every day in every way, you attract, health, happiness and wealth into your life!

Be well and prosper!

Wishing all my readers a blessed Christmas and a Happy New Year 2008

2007-12-23T17:56:00.000-08:00

In our quest for financial freedom, let us all take time to reflect on the various things we have done (or not done!) in our quest for financial freedom.

Ultimately, financial freedom can be achieved if we are dedicated, disciplined and have an overwhelming desire to do so. I believe that such desire flows stronger from motives that resonate with each one of us personally. For myself, it is the motive of providing for my family both financially and with my time which can be achieved if I have some degree of financial independence away from my job.

For you, it could be to serve the greater good of your fellow humanity through volunteer work or charity which comes only if you can spare the time away from earning a living to do so. Financial freedom from a stream of passive income that supports your living expenses may be the means to do so.

For others, it could be to enjoy live without being a slave to your career, your dwelling place or your expenses and to truly connect with what matters most to you... to people - family, friends and loved ones.

If you truly desire financial freedom, you must focus and be driven from the innermost wellsprings of your heart to serve a greater good than just yourself.

I wish all my readers every success in their individual and diverse paths towards financial freedom and as always,

BE WELL AND PROSPER.

A Bird in Hand is Worth Two in the Bush

2007-12-18T19:44:00.000-08:00

You have heard of the phrase, "A bird in hand is worth two in the bush". What does it mean to you as an investor who puts your money into stocks and shares as part of your strategy towards beating inflation and moving towards financial freedom?

Investing is not a guaranteed thing
In my limited experience of investing in stocks and shares (equities), I have realised that the term bandied about in investment forums, "expect the unexpected" really rings true. Those of you who believe in the random walk theory of stock prices will know that the price of a stock reflects all the available information about its future earnings, prospects and possibilities at a point in time. Market players will take positions to buy, sell or do nothing in response to what is happening or not at any point in time.

When you buy a stock of a company on a quoted exchange, you would like the company to do well and have more earnings so that it's future stock price will go up thereby allowing you to make a capital gain. In addition, if the stock you invest in pays a dividend, you would also like to partake in that return. However, in reality, how many times can you time the market perfectly that the stock price will go UP from the price you buy or it will go DOWN from the price you sell?

PG's personal style of investment
My own approach to stock investing has been to achieve a rate of return from realised/unrealised capital gains of at least double the higher of inflation rate or treasury bills risk-free rate. Given that inflation will be around 5%, that means trying to hit a return of 10%. This is challenging given the low savings and treasury bills yields (around 2%) and hence, equities provide a realistic but risky way to achieve that type of returns.

Deciding when to sell some of your stocks at a particular point in time is one of the most challenging things you will find in investing. Our human nature makes us want to sell at the highest of the highs while buying at the lowest of the lows. Hence, when the market is volatile, one is tempted to hold on to losers to avoid realised capital losses and also hold on to winners to realised the maximum of realised capital gains.

If you have strong holding power and believe in the Warren Buffet style of investing, then you will hold very long term and not cash out. In reality, most of you would need periodic cash payments for big ticket items or for certain lifestyle expenditures at some points in your journey towards financial freedom. You may have to sell some stocks. Should you sell your winners or should you sell your losers?

I recently chose to sell one of my winners because it had already achieved net 7% return (annualised 25%). I would have loved to keep holding it because it was in the money and it was a fundamentally strong counter. But faced with taking realised losses by selling my losers, I decided that this bird in my hand was worth two in the bush and hence sold it to lock in capital gains and also to free up some cash that I wanted.

Realised vs unrealised gains
The stock market unpredictable. Even big boys can get it wrong, what more retail investors like you and I? When you lock in realised gains, it is real and present. Something that literally adds money back into your bank account on T+3. When you continue to hold it, the market and the price of your stock can go up or it can go down. If you chose fundamentally sound companies, if you have holding power, you can ride out market fluctuations so long as the overall trend of your company's stock is up.

I choose to realise profits periodically partly because the market can be volatile as the last quarter of 2007 has shown and that when you can take money off the table, it's good to do so selectively. I aim to have at least 10% of my investments in risk-free assets such as treasury bills or relatively risk-free assets such as fixed deposits or money market instruments.

Your money, your style
Investing your own money is a reflection of your own personality and approach towards the risk-return continuum. I know that I cannot time the market at the peaks and the troughs. But what I know I can do is to lock in some realised profits and to periodically reallocate my portfolio to always have some risk-free assets to help mitigate the risks of the market.

Understand your own style and play up to your strengths but be aware of your weaknesses.

Be well and prosper!

Work-earn-spend-work Cycle

2007-12-17T21:15:00.000-08:00

The endless cycle
You wake up. You wash up. You start the endless cycle of working, earning, spending and then back to working again. This cycle appears to be never ending, to consume our very souls as we wake up and go on autopilot. You wake up. You wash up. You start the endless cycle of working, earning, spending and then back to working again. You wake up. You wash up. You start the endless cycle of working, earning, spending and then back to working again.

STOP!

Pause...

Reflect...

Is this my life? Is this your life? Is this our lives?

Do you want to change?

Are you willing to do what it takes to make a change?

Then read on. :-)

Breaking free
Unless you were given a large inheritance or were born rich, you have to work for a living. If you want to do something else other than work (especially in the job you dislike), then you need to CHANGE in order to break free from what is universally known as the rat-race or working life.

The work-earn-spend-work cycle is necessary for us to feel valuable in society. To contribute by giving of our productive effort and to receive returns through the monthly paycheck. However, this cycle continues to perpetuate itself where you generally have to trade time for money. Each of our 24 hours or 8-10 hours or work a day are valued differently by different employers. Some of you could be making close to what our Ministers make, i.e. a few million Singapore dollars a year. Some of you could be making close to minimum wage or McWage of less than $1,000 a month or $12,000 a year. Some of you are still studying and haven't worked in a permanent job.

If you wish to break free of the rat-race, then you need to consider changing what you are doing in this cycle. I have come to realise that in order for me not to be still caught in this cycle by the time I am 67 or eligible to draw out my CPF monies, then I need to make some adjustments.

Adjusting your spending
This is one of the areas where we have the most control of. Some of you may think that you have power over your earning capacity. If you are able to work harder or longer or get promoted or clinch that bonus, you can improve you pay. But having achieved that, many of you may be tempted to spend more and you are back to your original position.

Adjusting your spending is one of the most direct ways you can control. In doing so, you can save more. Life is not about consumerism. If you do not agree with this, then you will have to work very hard at always increasing your earning capacity in order to save more if your spending pattern stays the same.

If you are able to control your spending, to consistently spend below your income, you will find that extra cash every month to save, save and save! These savings are the seeds of your financial freedom because it is through savings prudently allocated into investments that will yield you the returns passively to help you slowly be less reliant on your earned income.

With savings you can pay off debt. With savings you can have a buffer in case of emergency expenses. With savings you can withstand even short-term periods if 1 spouse's income becomes at risk. With savings you have more flexibility in financial planning.

When do you want to retire
Your retirement age is controlled by the Central Provident Fund Board if you only rely on the CPF system. Having savings IN ADDITION to CPF savings, you start to gain control over when and how you can retire. My goal is to develop my own retirement fund outside of the CPF system so that I can choose to retire when my investments have grown enough to generate a stream of recurring income that covers my living expenses. Having established a relatively simple life, I can live at a relatively low income level if I need to.

I don't need to keep up with the Joneses. My working watch is a Hamilton watch received from Mindef upon completion of my 10 year reservist obligations. I only have 2 pairs of black working shoes that I alternate each day. I have taken public transport as my main mode of transportation for the past 12 years. I live simply but I live well. My pleasures are simple. Books from the library. An occasional McDonald's sundae or cone. Movies. I take plenty of yummy fresh fruits and enjoy the occasional cup of Coffee Bean latte. I am happy with my simple life.

Rolexes don't move me. Designer clothes don't excite me. Expensive renovations don't thrill me.

Health and happiness through simplicity in life gets me going.

Family and friends makes me happy.

What are you willing to do to get out of the work-earn-spend-work cycle?

Be well and prosper.

To be or not to be (in debt): that is the question

2007-12-16T17:23:00.000-08:00

Different people see debt differently
The issue of debt raises many points of views among different people.

Debt is an issue all of us have to deal with in one way or another because there are some things in life that we are unable to finance it fully in cash at the point of purchase. Your home for instance. As long as you have aspirations to own your own little abode, in most cases, you would have to finance it with debt besides using cash or your Central Provident Fund (CPF) monies to pay the downpayment of 10% or 20%. If you have aspirations to own your own car, chances are, you would take on some form of car loan to finance it. Some of you may want to splurge during the Christmas season on holidays or spa treatments but your bonus will only come after December in January and you make use of credit cards or personal credit lines to finance your consumption.

Debt makes you a slave
Whether you like it or not, if you want to have your own home, you will have to take a housing loan unless someone gave you your home for free or you are paid so much income that you can afford to pay for your home in full after working for some time.

Taking a loan to buy your home will be the single largest purchase you will make in your life. It changes your financial situation totally because of the quantum of the loan (typically in the range of $100,000 to $1 million or more) and the loan tenure (typically in the range of 15-30 years).

Getting your home through taking up a mortgage makes you a slave to your home like it or not. It also makes you a slave of your job or business that finances the loan taken up to pay for your home.

How are you a slave?
In ancient times, a slave was someone indebted to his master or owner and had to do his master's bidding until he was granted his freedom or he bought himself out of his status. In modern times, slavery is outlawed in most civilised countries but it has been replaced by the current model of the home mortgage. In a mortgage, you are obliged (indebted) to pay the bank your monthly instalments which covers interest payments as well as repayments of your principal without fail in order to discharge your debt to the bank. In return, the bank lends you money to buy your home (normally 80% or less if you manage to save up or use more cash/CPF to pay for your home) and to enjoy its use. You are the owner of your home SO LONG AS YOU PAY YOUR MONTHLY MORTGAGE INSTALMENTS. Once you miss even a single payment, the terms of most mortgage loan allows the bank to seize ownership of your home and realise it to discharge your debt to them. Home mortgages are secured by the value of your home. Therefore, the bank doesn't just lend you money based solely on your income or ability to service your loan. The bank will require you to pledge your home to the bank in the event of your default so that as a last resort, the bank has some collateral it can use to discharge your debt to them.

So you cannot afford to lose your job as if you are unable to make your mortgage payments, you risk losing your home. In the worst-case scenario, if you are in a negative equity situation, even after the bank takes back the home and sells it, you may end up still owing the bank money!

How I felt when I was a slave
During the years when I was paying off my home mortgage, I felt some pressure every time I examined my statement of networth as I was basically in a net liability position during the initial years of taking the loan. Whenever I encountered a work situation that was not going well, the work stress that I felt was exacerbated knowing that I cannot afford to just quit and would have to be careful to ensure my job security and financial security.

It didn't help that during 2001-2002, I witnessed several colleagues working in different departments in the organisation being asked to leave as part of a cost-cutting exercise to increase profit margins. That means the company asked people to leave even when it was making money because the owners wanted even more profits to help improve the return on equity figure.

These and my own conservative nature made me very aggressive in paying off my loan early and I disciplined myself to plough back my bonuses, windfalls and savings in cash and CPF to pay off my mortgage. Some of the sacrifices I made included taking public transport for 12 years of my working life. It also included not taking many long holidays to far away destinations. Opting for closer and short trips and cruises. I lived and continue to live a simple life. My working wardrobe hardly changes and I try to cook more meals at home for health and cost reasons.

I have to admit that I didn't do all these by myself. I am blessed with parents that helped by giving me an interest-free loan which I have paid back to them after these 12 years. Their help was invaluable as it allowed me to take much less than the maximum 80% of valuation for the mortgage. This has made me also want to give the same assistance to my daughter who will be born next year. :-)

Going forward debt-free
Now that I have managed to buy my own freedom from debt, my savings now are all channeled towards my retirement nest egg as well as providing for my family. This frees me to enjoy life that much more without the yoke of mortgage loan hanging around my neck. It also makes me less worried about my job, to do my best professionally but no worrying too much about being a slave to my boss and the big bosses. I do my job to the best of my ability but I am not a slave that has to be at the beck and call of my superiors.

I value my job but am not a slave to it.
I enjoy my home but am not a slave to it.
I live a simple but fulfilling life and also want to leave a positive financial legacy for my family by providing for my retirement without needing them to support me financially in my old age.

How will you manage your own debt? Only you can answer that question!

Be well and prosper.

Multiples sources of income: diversification in action!

2007-12-13T21:29:00.000-08:00

What does diversifying your income mean?
If you read investment and personal finance books, some authors suggest that you consider diversifying your sources of income. This means that your job or business should not be the only form of income that you have.

Diversification can come in many forms. For most of us, if you are married and both spouses work, there is some degree of diversification as the family budget is supported by two sources of earned income from different jobs. If you are single, and living by yourself, then you may have earned income from your job or business as well as passive income from savings, fixed deposits, treasury bills or dividends from holding stocks and shares or yields from bonds.

On an individual basis, diversification means to have more than your job as your only source of income.

Why do you need to diversify
Diversification is a risk management strategy. During our parents' time, during the 1970s to 1990s (subject to blip in 1985-86 recession), with full-employment and Singapore Inc growing as one of the four Asian tigers, jobs were relatively plentiful and life-long employment was realistic. CPF contribution rates were high and people could stay in the same organisation until they retired.

Today's globalised market place has forced companies to rely on workers from the region and beyond. The changing nature of the economy meant that skills and expertise relevant previously may not be relevant for today's market. The compact between organisations and workers also unravelled as increasingly the balance of power shifted to the employers with the Asian crisis and dot.com burst resulting in organisations restructuring, retrenching and remaking themselves, usually at the expense of headcount cuts and downsizing.

Job security went the way of the dinosaur as employers were free to hire from overseas and fire locals in the name of profitability and making more money.

Hence, diversifying your sources of income is one of the ways to mitigate the risks of your job disappearing into the annals of history. By all means keep up your skills and expertise to what is relevant to today and tomorrow's market. Network, network and network and keep your ears peeled to the ground. But recognise that despite your best efforts, no one is irreplaceable and no job is secure forever.

How do we diversify?
The easiest way to diversify is to practice the most fundamental approach in financial freedom: to save and invest!

When you invest, your investment monies becomes your workers, day-in-day out even as you are at your workplace earning your income, your investments make 1.68% if employed in Maybank iSavvy savings or up to 2%+ in treasury bills and possibly to 5%-100% in equities (with a risk of also losing 5% to 100 or even 200%!). Depending on what is the risk-return profile of your investments, these make up another passive income source that is independent of what you do in your job so long as you live within your means and have savings to invest.

The other way to diversify that I am exploring and is earning me interesting returns is my AdSense revenue. I have managed to earn another USD 100 for the past 3+ months from this blog. It's small change but when converted to SGD is around $140. Now if I were to get a return of $140 / 3 mths or $560 per year, I would have to invest an equivalent of $28,000 into treasury bills at 2% for one whole year before I can get $560 a year or $140 every 3 months.

Wow... it will take me some time to manage to save up $28,000 not counting the amount of time I would have to spend working to get that amount of money!

Question your assumptions
Some of you may think, hey, I get get $140 a month or even $200-$300 giving tuition or doing some overtime. Yes, you can. But you need to trade time to earn that amount of money. In addition, you would have to be actively working to get that amount.

For me, AdSense does not bring in a lot but it develops my writing skills and is already something I would do even if I didn't earn a single cent. Just look at my other blogs that were set up mainly for me to write about my various interests in public speaking, my reflections of my national service experience.

The reason I started AdSense was to try something new. To train myself to become a better writer by writing articles that help articulate my thoughts about financial freedom and at the same time share a bit of my interest in this journey that I have undertaken to be financially free!

Job insecurity is a real threat in our journey to financial freedom. If you are serious about achieving your goals in reaching financial freedom, free your mind to think about what ways you can diversify your income sources. You will never know how thinking about this possibility would open up potential ideas towards having multiples sources of income.

Have a good week ahead and remember to be well and prosper!

Christmas: Spread the Gift of Your Time!

2007-12-12T18:04:00.001-08:00

We are at that time of year again as the clock winds down the last few weeks of December 2007. The end of the year is typically capped by the period of Christmas. Ah...Christmas! What does Christmas invoke in you? Some of you may think of Christmas trees, Santa Claus, Christmas carols, turkey and ham, reindeer... Some of you may think of the Christmas shopping for party clothes, accessories and blowing your bonus on the loveliest presents that money can buy for you and your loved ones. Some of you may feel that Christmas is over-rated because the commercial aspect of retailers making use of the season to urge you to spend more has spoiled the true spirit of Christmas.

What is the true spirit of Christmas?
Christmas means different things to different people. As this blog is ultimately a blog that focusses on financial freedom for you, I would like to spread a different message about the true spirit of Christmas that my journey towards financial freedom has revealed to me.

Christmas is about caring and sharing, it is about being with your loved ones and cherishing them for some of the unsung sacrifices they made. It is about giving not physical gifts but rather the precious gift of your time!

All of us are given the same 24 hours a day, 7 days a week, 52 weeks a year and years to our lives. Each day is the same for all of us. The defining factor in how we live our lives is what we chose to do with that 24 hours. Christmas has been tainted by the mercenary nature of capitalism, which tries to turn it into a guilt-free orgy of spending and splurging. To indulge yourself and your family's hedonistic tendencies all in the name of love and sharing. Fiddlesticks! There is nothing wrong in spending your money to buy things that you and your family can appreciate. But to see this as the only tangible way to show love is missing the point.

The gift of time is more precious that trinkets and toys. Time is a limited commodity and is doled out in the same 24 hours to everyone rich or poor, happy or sad. When you give someone your full attention, when you offer to run an errand for someone, when you take time out to think about a person, these are contributions of your precious time to them. So instead of giving in to the Christmas commercialism, chose to spend less and do more gifts that involve time than money e.g. write a short note affirming and acknowledging him or a simple sms to say "hi". These are gifts of time are more valuable than what money can buy.

Chose to give the gift of your time
As we move towards this festive period where feasting, followship and feverish spending is the norm, consider spending less in terms of money (and use it for investments! :-) and spend more time appreciating and loving your family and close friends. Send a heart-felt e-card to them. Go out for lunch with them and really listen to what they have to say. And take time to hug and say "I love and appreciate" you for your loved ones.

These gifts of time are powerful. They are enduring and they will leave footprints in their hearts to know that you care about them.

Christmas is beckoning and I would like to wish all my readers of this blog, "A Merry Christmas and a Happy New Year 2008!"

As ever, my gift to you is the continued articles to this blog. Even if I manage to touch just one person through fivecentstencents, it would have been worth this gift of time.

Be well and prosper!

Holding the course: investing for the long-term

2007-12-11T19:22:00.000-08:00

This is one of the toughest challenges facing us in our journey towards financial freedom. The ability to buy and HOLD and not to be tempted by what is happening in the markets to sell either to cut loss or take profit.

Equities have a role to play in our investment portfolio
Stocks and shares (or equities) have a role to play in our financial freedom journey. If you have an interest in general knowledge, about business and companies performance and are able to understand basic economics and how it works in the real world, investing in equities is one way to grow your money if you take a measured, responsible approach to it. Punting or speculating on share fluctuations on a hourly, daily, weekly or monthly basis is NOT investing.

Even I get caught up in share speculation. I have done my share of buying stocks in companies in anticipation that by tomorrow, next week, next month, the price will go UP without fully understanding my reasons for picking up those stocks. Suffice to say, I also pay my due of tuition fees to Mr. Market in terms of losses on sale of such stocks.

However, the more I invest in the stock market, the more I realise that buying and holding quality blue-chip companies is still a strategy that works for me. It may not work for everyone since your style of investment and your tolerance to risk would be different from me.

Here are some of my stock pick considerations in no order of merit. They are simply factors I consider before I make my decision to buy.

1) Profitability and Dividends
This goes without saying but you'd be surprised at how valuations of companies as reflected by stock prices during the dot-com days of the late 90s and 2000s sky-rocketed even when the companies were losing money year after year! When you buy a share, you are buying a part of the company because you want to participate in its profits and not its losses. But as a shareholder, you are exposed to both and hence you have to pick and chose those companies with a proven profit record and who pay you dividends. That is what I look out for.

2) Long-term business prospects
This is more subjective because your assessment about the company's future is as good as mine and as good as the man-in-the street. No-one can predict the future, but we can have some idea on the overall prospects for a company that we understand based on available information now.

I typically like blue-chip companies with monopolies in Singapore as they are in a very strong competitive position and are a price maker and not a price taker. They tend to be big and are able to reap economies of scale. Currently I have Comfort-Delgro, SPH and SPC in my portfolio that meet this criteria.

3) Price
There are many companies that satisfy my first 2 criteria but they are expensive to buy relative to their earnings and prospects. This is where a lot of judgement is involved because everyone wants to buy low and everyone wants to sell high. No-one wants to sell low and buy high. So how do you decide if the price is what you are willing to pay given the available information about the company and its prospects?

I use dividend yield as a gauge. Since most of my counters pay dividends, I typically would only buy at a price where their dividend yield beats treasury bills or fixed deposits returns of 2%. If the company is unable to do so at the price its shares are trading, I will buy the company IF I am bullish about its prospects or think that the general market sentiment is bullish and will buy. But this is risky because if market sentiment changes, which it does very quickly, you can get stuck in counters that pay low dividends (worst than fixed deposits/treasury bills) and yet you face paper capital losses if the share price goes down a lot.

Holding power and patience
The ability to beat inflation by investing in equities takes holding power and patience. Holding power is important as it makes you less susceptible to market sentiment, i.e when market is bearish, you sell (worst time!) or when market is bullish you buy (also can be bad). You tend to invest based on your investment principles and make choices more in line with your investment philosophy. Patience is also important. I learn from stockmarket forums that the market is always there for us, so it is important not to risk all your investible savings at the roll of the dice and take a measured and balanced approach to investing. I continue to keep 10-20% of my investible savings in fixed deposits and/or treasury bills and cash equivalents. I generally do not use contra or margin to invest and hence can ride out short-term market volatility.

Investing is an art and not a science, but I believe that all of us can do better than what we are achieving now with our portfolios prudently using a measured approach that takes into consideration our skills, abilities, risk tolerance and investment objectives.

Be well and prosper!

How do you live?

2007-12-10T18:07:00.000-08:00

You work. You save. You invest.

What does the savings and investment do for you?
What does your money do for you?
Why do you work, save and invest?

Understanding the time-money trade-off
This fundamental question is key for us to understand the time-money trade-off. Most of you work for a living. Some of you run businesses or own investments that generate income for you. No matter how your money is earned, it is used to do something for you.

You trade time for money. The 42 to 60 hours you put in a week into your jobs or businesses yields a return in the form of a monthly paycheck or profits from your business. You then spend that money to buy some time in the form of dining out, having a car to save travelling time and outsourcing your leisure needs.

Only when we have accumulated sufficient wealth in the form of investible savings that can yield cash flows exceeding our living expenses then are we truly free of this time-money trade-off.

What you do with your money
Some of you adopt a consumerism lifestyle. You live to eat, you live to shop, you live to spend. You enjoy this lifestyle, it is why you work hard and earn money to fund such a lifestyle.

Some of you adopt a ascetic lifestyle. You live to save, you live to set aside something for a rainy day, you live to store up your wealth.

You determine the lifestyle you lead knowing the consequences and the impact of the choices you make. One of the challenges many of us will face when we travel on our journey to financial freedom is understanding the true impact of our choices.

Live for now approach
The supporters of live for now approach who adopt a high living high spending lifestyle is that we won't know when we will die either through accidents, old age or lifestyle diseases. So we might as well make merry while the sunshines and so long as our incomes continue to support our lifestyles. Why worry?

I make no judgements on whether this lifestyle is "right" or "wrong". It is a lifestyle that works for those who really see life as something to be experienced to the full using the wealth they have on hand. It works when your retirement can be funded through CPF or through your children supporting you. It can be funded if your job is secure and your income continues to flow. It can work if you die relatively young, i.e. before retirement age of 67. It works if you are able to continue to work or find some form of income even after your main career comes to a close.

Live for tomorrow approach
The supporters for this approach adopt a live within their means and save the rest way of life. They live simply and plan to live a long life funded by a retirement nest egg beyond the CPF. They do not assume that their job will be secure and hence use their time during employment to maximise savings and minimise debt. They invest prudently knowing that compound interest helps them grow their investible savings to the time when they escape the time-money trap or the rat-race.

Their lives can be too simple for some. Those who take these to the extreme become miserly and do not share in the good things in life that can be bought using their income. Some make themselves so miserable and curse their lifestyles without thinking about why they are doing this besides avoiding job insecurity and fearing to be broke and homeless.

Deferring today's wants for tomorrow's needs helps you to save and invest. But without a balance in allocating some to meet today's wants, those who take this approach to the extreme feel unhappy each day because their happiness is contingent upon them achieving financial freedom.

How do you want to live - You Choose!
The two approaches I have painted are deliberately extreme and most of you do not live at either extremes. Most of us tend to one or another at different points of our lives and our upbringing, our own individual personalities and philosophies towards life gear us one way or another.

How you want to live is really a choice, but no matter what choice you make, happiness does not have to be dependent on you reaching your financial freedom. Life is a journey to be savoured for the sweet and the bitter, the highs and the lows, the exciting to the boring. Each day's experience is unique in itself and each day is a blessing to be alive.

Choose how you want to live and choose well.

Above all, be well and prosper no matter how you choose.

Mind map your way to financial freedom!

2007-12-09T18:40:00.000-08:00

Why is it important to get your mind organised for financial freedom?
Mind mapping is a good way to do brain storming, to put down your thoughts (on any subject) on paper and to improve the clarity of your thinking. I have used and continue to use mind maps to help me plan my life and to articulate my thoughts in a visual form that helps keep my objectives clear in my little grey cells. [By the way the mind map above is something I referenced from the internet and not my own creation.]

It is critical in your efforts to achieve financial freedom to first clarify your goals and objectives. Your mind is a state of flux as we go through life. You pick up all types of ideas and information and your brain tries to sort out all these in some meaningful form before it becomes overwhelmed and then begins to process such information poorly. If you have established clear goals for financial freedom, then it helps if you can map out in your mind clearly the possibilities that will help you reach that goal. A mind map can help you clarify what you need to learn and apply in order to achieve the ultimate goal of financial freedom, where passive income from dividends, interest or yields from your investments cover your living expenses.

Break down financial freedom into digestible chunks
To demonstrate how it works, let me mind-map the essential ideas that I continue to espouse in this blog fivecentstencents.

A picture paints a thousand words and having a mind map quickly allows you to put ideas down and allow you to organise them in a way that is meaningful to you. To structure it into cause-effect or using a input-process-output model. To break down core ideas in the main branches to sub-branches and to generate details to help you execute or flesh out the key ideas into workable bites.

My mind map above was done in 5 minutes using Freemind. Check it out as it is released as a freeware.

A mind map is just one way I find useful in my quest to continuously clarify my thinking about financial freedom. Many roads lead to financial freedom and it is up to us to explore which road will bring us there whether to be a quick and fast path or a slower but more relaxed path.

You may have other ways to record down your thoughts and ideas on ways to improve your own thinking about financial freedom. Do share them here as we learn and grow together!

Be well and prosper!

Think and Grow Rich(er)

2007-12-06T17:40:00.000-08:00

Your brain is the biggest aid to your journey in financial freedom
The biggest tool we have in our journey towards financial freedom is our BRAIN!

"Think and Grow Rich" by Napolean Hill is one of the books that have influenced my approach and thoughts about financial freedom. It is an oldie but a goodie... Napolean Hill does not give you a step by step A to Z tactical plan to reach financial freedom. What his book did for me was to impress upon me of the importance of managing our mindset and our thoughts because our thoughts define who and what we are.

All of us are born with a brain. Our brains and the thoughts that go through our mind determine our actions in life. It is in the mind that the seeds of any idea leading to behaviour and action.

In order for you to stay the course towards financial freedom, you have to consider the commitment to fill your mind with thoughts that help you achieve it. How do we do that? How do we program our mind to be oriented towards thoughts that centre around savings, investments and living a simple life to be less focussed on the materialism and consumerism that threatens to derail our efforts in moving our networth upwards instead of being stagnant?

Master your mind, master your financial destiny
Our senses pick up external stimuli that affects our thoughts and subsequently behaviour. While we cannot control everything that we see, hear or feel, we can influence it by making a conscious effort to absorb material that is conducive in developing a mindset towards financial freedom.

Visit the public libraries, surf the internet for personal finance and investment. Watch CBNC Asia, Channelnewsasia's Money Mind etc. Listen to audio tapes about personal finance. Talk to people who are interested in financial topics but who are not interested in making a commission off you. Visiting and reading my blog helps because you know that I am like you. Interested in saving and investing prudently and living a simple enough life that meets most of my needs, some of my wants and allowing me to still live a life that is reasonably fulfilling. Learn to enjoy a life that is not dependent on achieving material things as the only measure of success.

There is nothing wrong in setting targets for personal networth and a timeline to achieve it. This helps us focus and gives us something to shoot for. But don't beat yourself up and be deflated if you miss some of your intermediate targets because life is a journey to be enjoyed as well as not a series of targets to be achieved.

Your thoughts that go into and circulate around in your consciousness and sub-consciousness affect your mindset towards financial freedom. Before any human endeavour takes effect, your mind will process a thought that will lead you to do it. Sometimes our brains work so fast that you think you just react but your brain's neurons fire faster than you can blink. Hence, train your mind to react quickly and correctly to financial decisions in your life and it will take you to a higher level.

See softdrinks on supermarket shelves, avoid because of health and cost issues. Your eye catches the nice display of diamonds in the shop front, appreciate but file it away as being not practical and requiring you to work another 1-2 months to pay for it. Receive that glossy brochure from your credit card company to spend on Christmas goodies, throw it away after a 5 second glance.

Small decisions taken each day with the mindset to save, invest and grow your net worth will eventually bring you to the level where your passive income exceeds your living expenses. Then you will be able to get out of the time-money trap and use all the time you are given to enjoy your passive income to the fullest.

Be well, think well and prosper.

I hate my job but I love my salary! :-)

2007-12-05T01:54:00.001-08:00

Love-hate relationship with your job
How many of you have a love-hate relationship with your job?

Those of you who have worked for x number of years know that so long as you are an employee, you are subject to some extent to the whims, fancies and idiosyncracies of your bosses, supervisors and colleagues.

Few of you can claim to have the perfect job where job satisfaction, remuneration and bosses/colleagues are all good. More often than not, we will have some parts of our jobs that we hate, other parts that we love and if your remuneration is fair, you appreciate what your salary does for you.

So it is the same for me! I have a love-hate relationship with my job as well. I hate some of the aspects of the job in terms of the actual work, I like some of the other aspects but ultimately I am reasonably happy with the remuneration although nobody will refuse more money. :-)

Jobs=Money=Savings=Investment=Financial Freedom
So what does having a love-hate relationship with your job got to do with financial freedom. Love it or hate it, your job brings with it income and money that are building blocks towards you achieving financial freedom. Before we reach the critical mass of investible savings of say $250,000 to $100,000 depending on your lifestyle needs, we need to trade time for money and work to earn this savings.

It takes time and financial discipline in saving and investing it to grow at a faster pace than inflation. And it takes patience and dedication to grow that investment to a sizeable amount where the passive income from dividends, interest, capital gains, yields is significant enough to pay for your living expenses.

For me, my job is a means to an end. I enjoy some aspects of my job, I dislike other aspects of it. But overall, it provides me with the steady income to continue to provide for myself and my family and allows me to grow my family's networth bit by bit to our target.

Your job is part of your pathway towards financial freedom
Your job helps you achieve financial freedom through the cash flows it generates. You determine how these cash flows help to build up your net worth or is used to acquire useless trinkets and stuff that after 1-2 years you will throw away.

You work 8-10 hours for that paycheck.
You put up with bosses and co-workers idiosyncracies and moods.
You endure stress, tiredness and irritation.
At the end of each day, another dollar(s) earned.

How you spend your dollar defines how far you go towards financial freedom.

You have the POWER. Use it responsibly.

Be well and prosper.

Scared to lose 怕输

2007-12-04T22:25:00.000-08:00

KIASU: 怕输 : pa(4) shu(1): Scared to Lose

Kiasu in the hokkien dialect means literally to be afraid to lose out. It is one of the fundamental human fears and has been linked as part of the ugly Singaporean myth. The reality is that all human beings regardless of your nationality are afraid to lose something that is precious and valuable to them.

Most people do not like to lose part of what they have or what they are and it is perfectly normal. The problem with achieving financial freedom is that the fear of losing hampens us from reviewing risk-return trade-off in any measure of objectivity.

Why is being excessively scared (fear) to lose a bad thing?
Fear is a human emotion that has its uses. It triggers the flight or fight response when we encounter stressful situations. During prehistoric times, when our neanderthal or homo sapien ancestors walked the earth along with all sorts of wild creatures, fear was what kept us from being eaten up by predators or hunted down by other tribes.

Fast forward to 2007, fear can be good for protecting our hard-earned money from being risked on high-risk low-return investments. My experiences in this continuing journey towards financial freedom is that knowing our own fears and overcoming them using logic, experience and a dose of decisiveness supported by an understanding of human psychology in markets help us achieve returns that can potentially match if not beat the rate of inflation (4-5%!).

However, fear works against us because when we are scared, we are afraid to try out different investment approaches, we become closed to new possibilities in investment and we become lazy to learn about the risk and reward trade-off between different asset classes and stick to tried and tested investment products such as fixed deposits that are safe but guarantee us loss of purchasing power of our money due to recent record inflation rates of 4 to 5%.

Feeling the fear and doing it anyway
I was also afraid of participating in the stock market during my first few years of starting work. I heard about stories of people making and losing fortunes in the stock market. It appeared to be a legal casino where people betted on prices of shares of companies going up or down on any given day. Like many of you, I also wanted to protect my hard-earned savings in order to grow it. Thus, at that time, my investment was mainly in fixed deposits and unit trusts.

The fixed deposits were okay because they were very safe and I deposited during a time when interest rates was 3-4%. However, as time went by, interest rates went south and then the Asian Crisis also hit. I saw my Singapore and Asian Unit Trust melt in front of my eyes. After all was said and done, I exited by unit trusts in 2002 with losses of up to 40% of my unit trust portfolio.

I had encountered my worst fears, i.e. losing money from unit trusts and it opened my eyes to the main weakness of such instruments, the fund managers earn their management fees whether or not they hit their benchmarks. That made me disillusioned with this type of investment and started me thinking about managing my own money by buying stocks and shares in the SGX and exploring other investment instruments like treasury bills.

Overcoming fear in the market place
The lesson I learnt (and am continuing to learn) in the stock market is that it is a market where buyers and sellers interact and is a confluence of fears of people at a particular point in time. Because people are involved, the movement of the market is as rational as the next human being, i.e. it can be high irrational.

That beingthe case, we then need to be as rational as we can be in approaching our investments because if not we tend to be derailed by our own fears and greed. Here are some ways I overcome my fear:

1) Get knowledgeable about investments
There is no excuse not to know more about investments. With the internet and public libraries, you can get information about stocks and shares, property, commodities, treasury bills etc all at the touch of the mouse and keyboard or a short trip to the library. Get yourself a free education in investments. Read all the investment books you can get your hands on!

2) Have an investment plan and objectives
Most people say I want to make money from investing my money. Be specific, set clear goals, e.g. I want to have total net worth of $500,000 by age 50. Or I want to have $1,000,000 investible savings by age 60.

3) Work out strategy to achieve your investment objective
Having a target to shoot for will help you focus your efforts and energy but you also need a strategy how you will execute your plan. For example, my strategy is to ride on the stock market while Singapore's economic fundamentals are strong to grow my investible capital with a view of switching to property in year 2010 where I think there may be a correction. This approach is fluid and is not cast in stone as I have to make allowances for changes in family circumstances as well as market developments.

While doing so, I will also maintain a reasonable allocation of 20-30% cash and cash equivalents (treasury bills/fixed deposits) vs 70-80% in equities. This allocation can change if for example the equities market turns bearish.

4) Execute strategy and keep eyes and ears open to market developments
Having your objective and strategy allows you to be less swayed by fear in the market. While no-one can consistently time the market 100% of the time, if you have a strategy, at least you will be less panicky and reactive and make your investment decisions in a thought-out methodical approach. I know I cannot fully time the market hence I invest in many blue-chip sound businesses and monopolies and have 20-30% cash/cash equivalents to buffer myself. Being 100% in one or another is too extreme and does not fit into my investment strategy.

Fear is a two-sided knife - it can cut both ways
Fear can be used good if you use it to your advantage. I fear financial insecurity and hence work at disciplining my spending and lifestyle habits. I fear the effects of inflation on my networth and purchasing power and hence invest in portfolio of assets to try to beat 4-5% return. I also fear losing my hard earned savings and hence do not put ALL my investible savings in ONE asset class.

What is your own fear doing to or for you?

Take control now.

Be well and prosper!

10 ways to moderate the rising tide of cost of living

2007-12-03T20:01:00.000-08:00

Rising tide in the cost of living
Singapore is facing one of the highest rates of increase in the Consumer Price Index (CPI) in decades. The BRUTAL TRUTH that is facing all of us living in Singapore is that your money is losing value even as you save and put it inside bank savings accounts that are yielding 0.25% against the backdrop of 4-5% inflation.

We can sit around and engage in moaning and groaning about WHY, WHY and WHY is the cost of living going up while wages may or may not have gone up but it is more productive to engage in brain storming ideas that we can make our dollar stretch in today's high cost pressures.

10 ways to moderate the rising tide of the cost of living

1) Save and Invest
Some people believe that you should in fact borrow money when the cost of living is going up because saving results in the value of your money declining even as it sits in the bank. This works if you can profitably invest the money you borrow. If you are unable to get consistently low risk returns that overcomes the rate of your borrowings, this may put you at greater financial risk.

Save and invest, continue to do so because when you save more, you will tend to spend less given a certain level of income.

2) Cut down travelling expenses
For those who take public transport, consider walking instead of taking that feeder bus if it is only 1-2 bus stops. Take less taxis or perhaps take a train to somewhere near your destination then take a taxi for the final stage. For those driving, pump the cheaper 92 or 95 octane petrol because most vehicles are able to accept lower octane petrol.

3) Eat more vegetables
Reducing the amount of animal protein (and fat) in your diet and substituting it with tofu, beans etc as well as more vegetables is healthier and helps you save money at the same time. I consume rolled-oats from Mondays-Fridays for breakfast and it saves me a huge bundle plus helps to maintain my weight while providing for good dietary fibre for my system.

4) Drink more water less colas and soft drinks
The cheapest and healthiest beverage you can drink is water! We can still enjoy the occasional soft drink now and then but we should avoid drinking soft-drinks on a daily basis. I carry around a 500ml bottle of boiled water from home and drink it when I am out of the office. I still drink my daily cup of coffee but also consume the 3-in-1 packs on alternate days along with the $0.70 or $0.90 kopi-C.

5) Exercise to destress and relax
Ever since I completed my reservist and no longer have to jog because my Individual Physical Proficiency Test (IPPT) requirement has lapsed, I continue to jog to destress and help me manage my weight and keep myself healthy. When you are healthy, you incur less medical costs and see the doctor less.

6) Sleep early
Sleeping early is under-rated in Singapore because we have the internet, cable television and movies along with various options to entertain ourselves. Giving ourselves sufficient rest and on occasion, more rest by sleeping early saves on electricity and allows us to feel refreshed and energised after a hard day at work.

7) Borrow Books, Audio-Visual materials from the Library
Our public libraries are well equipped in terms of books as well as facilities for a relaxing evening. If you are looking for a place to sit down and read some free magazines, newspapers and books, you can make use of the various public libraries for education, entertainment and relaxation all at once! The best thing is that it's mostly FREE except for premium services such as borrowing of DVDs from library at Esplanade.

8) Sleep without the air-conditioning
December is the month when the weather turns cooler and you'd be surprised that you can sleep on nights that are cool. Just use the fan as opposed to switching on your air-conditioning for 8 hours in the night and you can still get a good night's sleep with the fan that is more energy efficient.

9) Shop during sales
The Great Singapore Sales (GSS) does offer good bargains for working clothes and accessories that one buys. I usually shop for my clothes during the GSS. As a guy, I tend to shop less for clothes and spend my money on gadgets more. My new rule of thumb now is to use up gadgets until they physically fall apart on me before I buy a new one.

10) Visit public parks
If you have visited the various public parks and park connectors in Singapore, you will realise that the Government has spent a lot of money beautifying our surroundings. Make use of these facilities with your families for exercise and recreation as they are also free but provide great value in terms of the playground equipment and the soothing sites that nature (assisted by man) can offer!

There are many other ways to moderate the rising tide of costs of living. Do make use of them and be well and prosper.

Who do you live for vs what do you live for

2007-12-02T19:31:00.000-08:00

In our quest for financial freedom, some of you work hard at your jobs and careers while some of you work smart at your businesses and investments. Your hard/smart work allows you to contribute productively to the whole value-chain of human endeavour and at the same time provides you with the money to spend on your lifestyle wants and needs.

Have you ever paused to think if you are living for someone or something?

What vs Who do you live for?
Your motivations drive you both consciously and subconsciously. Your choice of food and drink, your choice of spending or saving, your choice of investing or gambling hinges on your motivations. "What Drives You" by Mercedes Benz is a pertinent question that we need to ask ourselves.

When I first started working, what drove me was to catch up economically and to gain experience after losing 2.5 years of my productive life to the Singapore Armed Forces as a conscript. Hence, I basically worked hard and took little leave and didn't buy myself many luxuries except for mobile phone, pda, personal computer and internet access as well as the occasional vacation. I was saving up to have money to buy a home and to settle down.

When I reached 30, I was settling down, getting married and adapting to married life. This involved a lot of financial responsibility as the housing loan was indeed daunting at the beginning of one's status as a home owner and married person. At the same time, I started to see first hand how fragile corporate job security was! People in their mid to late 30s were getting counselled out even when the company was making profits. It developed in me a deep fear of financial insecurity and has been a key source of what drives me... TO BE FINANCIALLY FREE and not be at the mercy of any employer for my life!

I used to live for financial security
I still see financial freedom as the key goal of my efforts to learn, absorb and apply the principles of living within your means, investing prudently and deferring (as much as practicable) today's wants for tomorrow's needs. However, it doesn't drive me because my main motivator is not SOMETHING, instead, it is SOMEONE.

My daughter will be born in a couple of months time and I realise all my efforts in working hard and working smart is to achieve financial freedom so that I can be a good father to my daughter and a good husband to my wife. Of course, it doesn't sound so noble because when you invest in your family, the dividends reaped are happiness and family harmony. When there is family happiness and harmony, then I have less problems to deal with and can enjoy the journey of life more instead of worrying about them. :-)

What is the purpose of working so hard if you are just going to spend it all on yourself? Overtime, I realised no matter what luxuries I bought myself, I would get bored with them because of the law of diminishing marginal utility. My favourite analogy is how many bowls of sharksfin or abalone can you consume before it becomes meaningless?

I realise happiness derived from using the benefits of financial freedom, i.e. release from pressures of debt, being able to work without worrying about your job and worrying about appeasing your bosses (especially unreasonable ones) is what is meaningful. My time on this earth is limited, so while I am still productive, I want to use my money to touch the lives of my wife and that of my daughter when she is born, so that my time on this earth was well spent and not merely engaged in hedonistic self-gratification in material consumption.

Who do you live for?
As we continue on our journey on this earth and on our journey towards financial freedom. Ask yourself this question, "What Drives You?"

Why do you do the things that help you build up a strong net worth, what makes it so satisfying and is the thing you get up in the morning for?

You decide.

There is no point being so driven in our quest for financial freedom if what drives us turns out to be another THING.

I've decided that what drives me is SOMEONE.

Who is that someone to you? :-)

Be well and prosper!

Year-end bonuses are here!

2007-11-27T19:18:00.001-08:00

What are you going to do with your year-end bonus?
November and December are the months when the school holidays start, people clear their annual leave and dream about what they are going to do with their bonuses.

Different organisations pay different amounts for the year-end bonuses. Tight-fisted employers may pay nothing. Generous employers may pay the 13th month (i.e. 1 month) plus something extra. Other employers may benchmark year-end bonuses to performance and pay handsomely to their rainmakers or those who make a lot of money for the organisations or exceeded their key performance indicators. No matter the quantum of the year-end bonus, if you are fortunate enough to receive this windfall, you have to decide what to do with it?

Spend or save?
The key issue facing all of those who are receiving some form of year-end bonus is... SPEND or SAVE? How much to spend/save and how not to feel guilty about our decisions. If you have been following my blog, you will realise that it is not about what decision you make, but it is about how that decision brings you closer or further away from your financial goals.

If your goal is to live life to the fullest and have $0 to your name when you die, then you will probably consider spending ALL of your bonus because that is how you want to live your life.

If you goal is to retire BEFORE the CPF withdrawal age of 62 or 67 or whatever the gahmen decides after the next general elections, then you have to set aside SOME or even ALL of your year-end bonus towards savings, paying off debt or investment.

There is no magic formula on how much you should save or spend. It is entirely up to you to determine from 0% to 100% in either direction.

Panzergrenadier's year-end bonus decision for 2007
Ordinarily, my own rule of thumb is to spend 10%-20% of windfalls and save the remainder for investment. This year, I have decided to tweak my rule in the opposite direction because my own life circumstances will be changing. A new addition to the family will be coming early next year and I need to plan for my revised transportation needs and wants. I have been using the public transport system since the day I started work until now. However, given that I want to transport my family in better comfort next year, I have earmarked a lot of my year-end bonus towards financing a vehicle.

Some of you who have read my posts about not driving would be horrified! What heresy! Wasting your retirement fund on a car! Horror or horrors! :-)

Whilst I would have loved to continue to retire earlier based on my current rate of savings, I realise that I would probably need to shift my plans to retire earlier than 67 but later than what I wanted to. This is because I have decided that I WANT to drive to give my family a better way to get from point A to point B. No excuses. It is a WANT and I am not ashamed to say so.

Life is about balancing between the wants of today with the needs of tomorrow. I have decided that I have used the public transport system long enough and should live life a little better by paying (through my nose! haha) for a car and subjecting myself to the joys or ERP, COE, road tax, insurance, parking etc. So, for once in my life, Panzergrenadier is choosing to give himself a bit of luxury in transportation.

The rest of my frugal lifestyle remains. I still own only 3 pairs of watches of which 1 is sponsored by Mindef being the token of appreciation for my 10 years of reservist service while 1 was a gift for my birthday. The other watch that I bought costs all of $35. I hardly buy new clothes except during Chinese New Year and the Great Singapore Sale. I am happy to consume vegetarian food for lunch that costs only $3.00 and I go jogging in my Mindef sponsored New Balance running shoes for recreation and to destress while keeping fit.

What will your year-end bonus be doing for you?
There is no right or wrong answer. You alone determine how your year-end bonus is to be used. Making capital repayment of your outstanding mortgage loan. Going for a trip to Japan for a holiday. Buying the latest iTouch from Apple. Having your home renovated to look like the latest IKEA catalogue.

Your bonus.
Your rules.
You decide.

Be well and prosper.

Investing in your health by cooking

2007-11-26T17:51:00.000-08:00

Cooking is one of the most under-rated ways in which you can save money in the long-term for your family!

How does cooking save you money?
If you have a family and are cooking for 3-4 persons, it makes both economic cents (sense! - pun intended!) as well provides a way to practice healthy living habits. While you can have a plate of economical rice for the low cost of $2.50 at some hawker centres or coffee shops, if you are cooking for a family of 3-4, using a budget of $10.00 per meal for 4 persons, you can buy wholesome ingredients that can be whipped out quickly for a healthy and nutritious meal.

A basic meal should comprise of the basic food groups:

1) Carbohydrates
Rice or noodles are relatively cheap when you buy in bulk. You can also use potatoes that if cooked via baking, steaming or boiling is both healthy and energy giving. Bee hoon is also relatively low cost at $1.00 for a pack that serves 4-6.

2) Protein
Protein can come from eggs ($0.20 ea), lean pork ($3.00 serving for 4), tofu based protein is relatively cheap and nutritious. For those who have bigger budgets, fish also comes in a variety of prices and provide good sources of omega 3 (e.g. salmon).

3) Vegetables and fruits
Vegetables and fruits provide you with much needed dietary fibre as well as minerals and vitamins. Vegetables are generally cheap with one bunch costing $0.45 to $1.20 depending on the type of leafy vegetables you choose. More high-class vegetables such as broccoli and cauliflower costs more as well as green/yellow/red peppers. Tomatoes also provide a good source of antioxidants to help combat free radicals. ;-)

Piped gas is a reasonably cost-effective way of cooking if your main approach is to stir-fry as well as boil. Deep frying requires more gas to heat and is very unhealthy!

Water is also a relatively low cost item
While utilities costs are going up, you will realise that the major culprit is actually electricity. Water, a fundamental component required for washing, preparing, cooking and cleaning is relatively cheap. Cooking for 3-4 can provide for more economical use of water as the preparation, cooking and washing up is divided among 3-4 persons.

Health is wealth
Arguably the most powerful case for cooking at home is health. When you cook your own meals for your family, you control the amount of salt, oil, sugar, spices that goes into your food. Also, you can add fresh ingredients and condiments such as fresh garlic, ginger, onions to flavour your food as well as to provide the healthy goodness from such items. Fresh garlic and onions have been known for their anti-bacterial properties and are great additions to your arsenal in combating germs and bacteria!

I have been cooking meals over the weekends for the past 2 years and have started to reap the benefits of it. I have lost weight, partly through eating rolled oats for breakfast on weekdays and avoiding oily fried noodles/beehoon combos while controlling what I eat during weekends through cooking at least 1 if not 2 meals to make sure I consume nutritious foods. I have also upped my intake of fresh fruits and vegetables to 2 portions daily as far as possible and cut down on animal protein.

The results have been positive as I have lost 2 kg over 1 year and feel much leaner than I ever have in the last 5 years of my life.

If I can cook, you can too!

What you need is sufficient motivation, willpower and an interest in the well-being of yourself and your family!

Be well and prosper.