A Singaporean Dream of the 5Cs

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.

The Five "C"s

Prior to the Asian Financial Crisis in 1997-1998, the Singapore economy was growing, people were getting wealthier, jobs were plentiful and many of us thought that the 5 Cs represented the tangible measures of success in Singapore Inc.


The 5 Cs were:

• Cash
• Credit Cards
• Car
• Country Club Membership
• Condominum

Fast forward to 2007, 10 years after the property, stock and job markets plunged for some time, we are again moving towards a time of rising property prices for mid to high end developments, full employment in "hot" sectors of the economy such as financial services and hospitality and the STI is at its historical highs durign recent days.

So what does that bode for us and how can we learn our lessons of using the 5Cs as a yardstick of success in Singapore?

You and all may have different attitudes towards the 5Cs, but we can be selective and look to those Cs that actually do help us achieve our financial freedom.

1. Cash
Let us examine the first C, i.e. Cash. Cash is still important to one's financial freedom as with cash in its liquid form, one can participate in the stock market and even property market bubble if one has sufficient amounts of it. It also allows us to move from one asset class to another depending on the time and situation. It is still core to being financially free, i.e. to amass positive cash flows that exceed our living expenses. The trick is to find good returns for cash in the current interest rate regime where bank deposits pay less than 1% on savings and fixed deposits hardly exceed 2% even on tenures of 12 months.

2. Credit Cards
Credit cards are still useful if we make them our tool instead of being enslaved by easy credit. It is a mode of payment and if you pay up within the credit period and never make use of the credit or cash advances usually charged at 24% per annum, you are doing okay. Even personal credit lines are a trap for the unwary. 12 to 16% per annum is lower than 24% but 0% by paying up within the 20-30 days is the most prudent.

3. Car
A car is a liability in my books. Decide for yourself if it is worth it. Car loans are also a form of credit and current car loan rates are higher than even mortage loan rates. So do be careful of what debt you are getting yourself into.

4. Country Club Membership
The era of the countryclub membership is over. Join a country club only if you use the facilities or do regular golfing and even then consider the value-for-money versions such as NUSS, NTU and Polytechnic Alumni Clubs. Many of the institutions of higher learning have their own Alumni Clubs which have a relatively lower joining fee and subscription. Consider these instead of spluring $50,000 to $200,000 on high end country club memberships.

5. Condominium
The condominium is a two-edged asset. If you had bought the private apartments that were targeted by developers for en-bloc sales, then congratulations on making a windfall gain. However, consider the need to shift to a less expensive neighbourhood as the property bubble makes it more expensive to buy a similar unit in a similar area. The property bubble does not distribute its benefits across all private housing. It's all about location, location and location and the central district 9,10 tend to be the ones that are moving up. Lower-end condomimiums such as Executive Condos and those in less choice locations have not moved as much as the high end property index. There are some many people in negative equity over such purchases. However, if your home is owner-occupied, and your job is reasonably stable, just keep up with the mortgage payments since you do need a roof over your head. However, those who have condominiums or private property for rent would benefit from the relatively tight rental market as the influx of immigrants to Singapore's growing economy is creating demand for rental units. Hence, rentals may be good even if valuations may not be. So for those of you who own rental units, should just reap the benefits whilst it lasts. Nobody knows if the China equity market would collapse and bring another round of Asian contagion that will burst our own equity market bubble.

Conclusion
Financial freedom still requires us to work hard, save and invest in assets (cash, condo) that will generate more passive income for us. Use credit cards as a payment mode and for discounts but be wary of the debt trap. Cars and country club memberships are a big no-no unless one looks for one that fits one's budget but there are lifestyle expenses and not assets at all.

Examine your own view on the 5Cs and be well and prosper!