Wealthly within vs wealthy without

Have you ever wondered if those who look wealthy are truly so?

Do you think if you are wealthy you need to show it or it shows through your inner confidence, self-esteem and self-assurance?

Have you ever wondered if that lady next to you wearing a Rolex or that gentlemen with a thick gold bracelet has a high net worth?

Read on to find out if you are just as curious as myself in knowing how well your fellow commuter on public transport is faring in his or her journey towards financial freedom.

A game you can play on public transport
One of the activities I like to do when I take public transport is to observe my fellow commuters. Those of you who take public transport may want to play this little game that I do, guess their net worth! This is just a game and I am not advocating that we judge people by their net worth but rather to examine to see if there might be relationships between how people display their wealth within through showing off their wealth without. :-)

Rich within and without
I've read "The Millionaire Next Door" as well as articles about the legendary thriftiness of billionaires such as Warren Buffet, Ingvar Kamprad and they have inspired myself to do the same. Hence, I believe that many who have high net worth do not indulge in ostentatious displays of wealth while those who have low self worth tend to compensate by appearing to have wealth in terms of jewellery, luxury watches and other more public displays of wealth.

One way of looking at it is that people who have a relatively high net worth know that they have money and do not want to stick out in the crowd with public displays of wealth. Hence, they tend to wear ordinary everyday clothes and accessories that allow them to blend easily in a crowd. The interesting thing you may notice is that people who tend to have gold chains, jewellery, tend to be those whose likely net worth is lower than the average. I've seen many ah-peks who dress is singlets and shorts and spot heavy gold bracelets while travelling in the MRTs. I've also seen more senior ladies who also dress simply but are heavily adorned with gold jewellery. Are they of high net worth? Perhaps. My intuition tells me that it's more likely they don't have too much in their bank accounts and in the way of investments but rather the more flashy on the outside, the less flashy is their investible savings.

You decide on the wealth within or without
How does this relate to you? Life is short, you have the power to decide what you want to do with your money. If it is to use that bonus for an Audermars Piguet timepiece or that Toyota Camry or even that Mont Blanc pen you have been eyeing, so be it. But think about what is more important to you? Having the wealth within as part of investible savings that yields positive cash flows to help build your retirement fund or that Audermars Piguet timepiece that will do wonders for your ego and self-esteem but works essentially the same as a $50 Casio watch?

Financial Freedom : A Reality Check

Flight VF506 touched down on Changi Airport at 12:40 a.m. and within less than 1 hour 30 minutes, I was back from a short-weekend trip to Jakarta. A city is so like Singapore in many ways and yet so unlike Singapore in many other ways.

A tale of two cities
Jakarta is a cosmopolitan city and if you compare shopping malls, restaurants and food courts, cinemas, both are very similar. And yet in this sea of similarity I find vast oceans of differences that separate these two cities. Firstly, the quality of public infrastructure varies widely between these two cities. Secondly, the rich-poor divide is also very stark because you can see hawkers pushing mobile food carts juxtaposed against palatial residential homes just 2 streets behind gleaming malls of Senayan.


How does this relate to financial freedom?

Financial freedom so that you can...
It gives me a reality check on my journey to financial freedom. One of the key dangers of pursuing this path is to forget to appreciate the ride, the experience and the steps that one goes through to reach financial freedom. It is too easy to think that achieving the goal of being able to let passive income exceed daily expenses and allow one to live a life of leisure as being the only thing in life. It is not. There is more to life than this, and the ability to care and lift up your fellow man even as you lift yourself out of the rat race should not be forgotten.

A short-trip now and then to other countries allows us to re-evaluate our priorities and to be thankful for your health, happiness and for our family even as we pursue the wealth that gains us the freedom to pursue other things in life.

What will we do when we attain this freedom?

You need to decide for yourself!

Be well and prosper.

Am I adequately covered for healthcare costs?

If you talk to taxi drivers during cab rides, a common refrain you hear from them is,

"It is better to die than to be sick in Singapore!"

Medical costs are rising with rising affluence and longevity
Wow... Has our society turned so commercial and materialistic that life is not precious anymore? Why does the taxi driver make this observation about healthcare costs in Singapore?

Many of you who read this blog are just fresh out of school, you are starting on your first job or have worked for a few years. You realise that as you start planing for your financial future, healthcare costs must be factored in. In order for you to make the right choices regarding your healthcare insurance and savings needs, you need to be aware of the 3M framework! :-)

Nope, I am not talking about Making More Money but Medisave, Medishield, Medifund.

What is the 3M framework?
Let's see what the Ministry of Health website has to say about this: http://www.moh.gov.sg/

Medisave
"Medisave, introduced in April 1984, is a national medical savings scheme which helps individuals put aside part of their income into their Medisave Accounts to meet their future personal or immediate family's hospitalization, day surgery and certain outpatient expenses.

Under the scheme, every employee contributes 6-8% (depending on age group) of his monthly salary to a personal Medisave account. The savings can be withdrawn to pay the hospital bills of the account holder and his immediate family members. "

This is your first line of defence, essentially, Medisave is YOUR OWN MONEY and you can use for for certain medical expenses if needed and also to buy medical insurance plans either from CPF or from private insurance companies. Now let us look at the 2nd M, Medishield.

Medishield
"MediShield is a low cost catastrophic illness insurance scheme. Introduced in 1990, the government designed MediShield to help members meet medical expenses from major or prolonged illnesses, which could not be sufficiently covered by their Medisave balance. MediShield operates on a co-payment and deductible system to avoid problems associated with first-dollar, comprehensive insurance.

Premiums for MediShield are payable by Medisave. A very large medical bill can easily wipe out your Medisave balance, as it is only a cash savings account. For this reason, you are advised to take up MediShield or an appropriate private health insurance in order to stretch your Medisave dollars.

MediShield will cover an average of nearly 60% of your large medical bill at Class B2 or C wards. Your co-payment and deductibles can be payable using Medisave or cash. MediShield and other Medisave-approved private integrated plans are designed to cater to your different insurance coverage needs."

Your second line of defence is medishield. How medishield helps you is that it is a form of medical insurance, i.e. you pay a premium from your medisave and the insurer will absorb part of the costs of your medical treatment subject to deductible. What is a deductible? A deductible is the portion that you first need to pay either in cash or medisave (which are both your monies but from different sources) before the medishield kicks in to cover a PORTION of your medical bills. According to the Ministry of Health,

"Deductibles are set high because the scheme is intended to cover large or catastrophic bill sizes. A high deductible is also necessary to discourage excessive use of medical services, and keep the premiums low and affordable."

What this means is that insurance is not meant to cover EVERYTHING! It is meant to protect you against very serious illnesses where the treatment costs would bankrupt you. This is an important concept in insurance. The more protection you want, the higher your premiums-- the amount you pay per year for your medical insurance. Hence, the optimal level is sufficient protection so that you will not be financially wiped out by an unforseen illness or condition and yet pay reasonable premiums.

Medifund
The final component of the 3M framework is medifund. This part only kicks in if you have exhausted your medisave, medishield etc and a committee will scrutinise if you tap on this funding. Typically, it's given on a case-by-case basis on a very selective criteria. If you really need to tap on this, talk to a medical social worker in the public hospital who will be able to help you with the paperwork if the need arises.

So what does that mean for me
Having at least seen what is the 3M framework, what you need to know is that your health is in your own hands. In general, your company's plan or your own pocket will cover the outpatient consultations for normal cough, cold and flu. Medisave generally cannot cover this unless it is for specified medical services such as regular consultation for chronic diseases such as diabetes, etc.

What do you do then with your medisave monies? Buy insurance. The basic medishield only covers the bare minimum to reduce the risk of major illnesses and subsequent treatment from bankrupting you. If you are working and contributing to CPF, then you should consider buying privatised medishield plans that provides greater coverage for a higher premium. It's generally easier to join such schemes when you are younger and healthier and your premiums are lower per year.

Keep yourself healthy
However, the most important thing you should do is to keep a healthy lifestyle! One thing I learnt from serving national service in the army is to take care of my own health. This is one of the most cost-effective ways to reduce your healthcare costs.

So eat that apple, go for that jog and be well (and prosper!)

What does money mean to you?

You read about it in the money pages of the newspapers. You work hard 9 a.m. to 6 p.m. for it. You go to school, study, take your exams in order to qualify for a job in the future where you earn enough of it.

What exactly is money
But what exactly is that IT we are pursuing?

"Don't be stupid, Singapore is a very practical society, we need money and a decent income to have a certain standard of living!"

Exactly, money in itself is just the notes and coins in your pocket. The figure in your savings account book. The number that represents your status in society. But what money does is that you use it to exchange for something else. Other than those who collect numismatic coins and notes, money is used as a form of exchange. Money facilitates us selling our labour in exchange for goods and services that we need and want from other people. Money is used as the measure of value and exchange of goods and services between different parties.

If you withdrew all the money in your bank account in terms of bank notes, pooled them in a pile and jumped into them, that would make you happy maybe for all of 10 seconds. After that, you find that you cannot literally eat it or build a house with it.

What do you want out of money
So what do you ultimately that want out of your lifelong endeavour to earn enough money from work, investments or gambling? That is what drives you. If you find that it is to continue this endless cycle of exchanging it for goods and services you do not need but want, then it could be time to examine the reasons that drive your very existence.

How many of us are trapped in our daily grind and we blame it on the mortgage, taking care of the family and obligations? How many of us can reframe money to see it that it is the reward for us contributing to society in productive ways so as to facilitate us bringing life into this world and sustaining the next generation for the future? How many of us can alter our perspective that we have choices.

We have choices
We can choose to work or we can choose to starve, but these are choices! Instead of seeing ourselves as the victim of our circumstances, see ourselves as masters of our financial destiny. We choose to work because we want to build up enough money to exchange our time for other pursuits. We chose to save because we want to bequeath a positive financial legacy to our children. We chose to invest because by building up capital for the future, we give ourselves more options when we get there.

Are we able to reframe our attitude and approach to money?

Pause in your daily life, think about what is the ultimate aim of this endless pursuit of money? If you goal contributes to the universe, money will flow onto you.

10 ways of using less electricity to save money

Singapore Power has just announced that average electricity tariffs will be revised upwards by 8.83% for the quarter 1 July 2007 to 30 September 2007. What good timing! 1 July 2007 is also the date for the increase in Singapore's goods and services tax from 5% to 7%, a 40% increase.

What can you do, as a hapless consumer who can only buy retail electricity from Singapore power who is the only provider for domestic consumers of electricity? You need to tighten your belt. I need to tighten my belt. We all need to tighten our belts by conserving our electricity use. How can we save money by using less electricity?

1. Switch from air-conditioning to fans
Airconditioner units use up massive amounts of electricity. Turn to using fans to help cool yourself down during this hot June weather

2. Visit libraries and shopping malls more often
Use less of your own fans/airconditioners by leveraging more on those provided by public places. It helps you to cut down your own electricity use since you are cooling down at those locations.

3. Have more cold showers
Before you switch on the water heater, consider bathing in cold water as the weather now is so hot!

4. Switch from CRT monitors to LCD monitors
LCD monitors use less electricity thatn CRT monitors so do your part for the environment, and you electricity bills as LCD prices are falling.

5. Drink more plain water at room temperature instead of chilled drinks
Your refrigerator is the next biggest consumer of electricity in the house. Drink more water at room temperature instead of chilling them which consumes electricity.

6. Wash your clothes with a full load
The washing machine also sucks lots of wattage from your electricity mains. Ensure optimal capacity before running the washing machine. Helps to save water too!

7. Switch off and unplug unused appliances
Appliances that are not used, e.g. computers still draw small amounts of power even if they are switched off. Switch off the power outlet and unplug the appliance.

8. Sleep early
Use more of natural light and less electricity for lighting and cooling by sleeping early. Reduces the need to rely on electricity powered illumination and fans/airconditioners.

9. Iron less frequently
Make use of the iron by ironing more clothes at one go to maximise the use of the iron.

10. Watch less TV read more books
Read more books and magazines (free if borrowed from the library while you are cooling off) and switch off the TV earlier. :-)

Do give your own tips too in the comments section and all the best in your efforts to save money by using less electricity!

How to invest in listed securities in Singapore Stock Exchange

P1010025
Originally uploaded by panzergrenadier

In today's buoyant stock markets in the Asia region and in the US equities market, people are thinking, should I jump into the market? With the Singapore Exchange's Straits Times index at historic highs, many first-time investors are asking basic questions, how do I get into the market?

Start to investing in securities
Let me share how you can participate in this market. But please perform your own risk assessment and analysis if:

• Do you have an investment objective?
• What is your investible savings available?
• Am I prepared to accept the risk of losing it all?
• What is my investment time horizon?

If you answered "No" to any of the questions above, may I re-direct you to my post on investing in treasury bills which are much safer though they yield a much lower potential return as compared to equities. If you accept the risks that come with investing in equities, here is how you can go about applying be a share investor in Singapore.

The steps are simple.

How to start investing in stocks and shares

1. You must first be old enough to invest - are you at least 21 years old?
You must be 21 years old to open a Central Depository (CDP) account as the SGX uses a scripless book-entry system for recording your share transactions.

2. You need to open a CDP account with the Central Depository
The detailed instructions are here. It costs nothing except a bit of time to open one and anyone can open a CDP account, you just need to produce a form of identity be it your NRIC or passport.

3. You need to open a stock broking account
Having a CDP account will enable you to apply for initial public offers for securities listed on the SGX. If you intend to sell or buy securities on the SGX, you can open a stock broking account with any of the members of the Stock Exchange listed here.

I myself use Phillip Securities with their POEMS trading platform. It has served me well for the past 4 years or so. Most of the stock broking firms do not charge for opening up an account but may have some minimum deposit required (e.g. $1,000 or $2,000) which is refundable. Check with the stock broker you intend to use about the details. Stock broking firms earn commissions when you buy and sell shares, so check which one is offering a competitive price. Internet trading accounts are a must nowadays as the commissions are lower than broker-assisted trades.

4. You need to understand the stock market
Investing in stocks and shares on the stock market is not gambling. It can turn into speculation or gambling if you do understand the risks and what is your targeted returns and time horizon for investment.

The stock market is a market where securities are listed for buyers and sellers to buy and sell securities at a given price. As the market is made up of people and facilitated by computers and networks, why the market moves up and down really is based on the sentiment and information available at any point in time to the market players. As retail investors, we tend to be nimble but we may have less information available to us compared to the big players such as fund managers. The internet has helped to level the playing field a little bit but still because of the volumes bought/sold by the big players, they can literally "move" the market.

Depending on your investment objectives, you pick the stocks that you want to buy, sell or hold. Caveat emptor, let the buyer beware. The stock market comes with opportunities but also risks as well. In general, if you are new investor, do not use margin trading or leverage to buy shares. Use only money you can afford to lose. Read books such as "One Up on Wall Street" by Peter Lynch or "The Intelligent Investor" by Benjamin Graham before you plunge into the exciting and risky world of stock investments.

Be well and prosper.

Pay Per Post - An Experiment in the New World of Web 2.0

Having got back on the internet bandwagon with blogging about my interests, I had decided to plunge into the world of blog monetisation to see if it can turn a hobby into something that is able to generate postive cash flows.

I chanced upon the Payperpost website where there is a unique business model, in that bloggers (who naturally love to write and post pictures and articles about their hobbies, work and lifestyles) are paid some money to actually write a post about a product, service or a blog. This is one of my first experiments in trying out this opportunity that pays you USD5.00 if you blog about the topic and your post stays up in your blog for at least 30 days.

http://quirkybitsnpieces.wordpress.com/2007/05/15/payperpostwhat-is-it-all-about-and-how-i-found-it/">
The blog that I am reviewing is called Quirky Bits and Pieces and it is a personal blog. The writer is also part of this experiment where he (or she?) is being paid to review another person's blog and am able to get remunerated as well. It's an interesting business model and has even gotten the blogger Quirky who specialises in beautiful patchwork and craft to blog about something out of her interest in her regular blog.

Now what does this blog have to do with you my dear reader? :-)

As Five Cents Ten Cents is ultimately about financial freedom, every single opportunity to earn that little bit of cash while doing something that comes naturally is a win-win situation. It really has opened up my eyes to the possibilities of the evolving nature of internet and ecommerce and really the entire paradigm of the global economy is staring to change even from the day I got my first internet account with cyberway (before it became Starhub) logging on at a blazing 33.6kps modem. ;-)

The internet beckons for those who can write. Explore the possibilities and be well and prosper!

This post is sponsored by PayPerPost

How to get the best interest rates for savings of S$1000

You are fresh out of National Service, polytechnic or the university.

You just secured your first job.

You are excited, exhilarated and excited on seeing that first thousand (or more) dollars in your bank account.

Returns on savings accounts and fixed deposits are low
Then, reality sets in... How do you get any decent return on your savings given that the average savings rate and even fixed deposits (time deposits) rates are at a low level of less than 1%? To makes matter worse, fixed deposit rates are usually only given for balances of at least $5,000 to at least $50,000 or even $100,000 for the higher interest rates to be available.

So what does that leave you, a young up-and-coming professional who wants to work hard, save and invest the money in relatively safe assets that generate decent returns?

The solution
Two words: Treasury Bills

My earlier post describes the detailed steps in investing in treasury bills issued by Monetary Authority of Singapore through the POEMS trading platform.

What is a treasury bill
Now what exactly is a treasury bill?

Wikipedia defines it as:

"Treasury bills (or T-bills) mature in one year or less. They are like zero-coupon bonds in that they do not pay interest prior to maturity; instead they are sold at a discount of the par value to create a positive yield to maturity. Treasury bills are considered by many to be the most risk-free investment for U.S. investors. Treasury Bills are commonly issued with maturity dates of 28 days (~1 month), 91 days (~3 months), and 182 days (~6 months). Treasury Bills are issued each Friday after weekly auctions which are held on Wednesday at about noon. Purchase orders at TreasuryDirect must be entered before 11:30 on the Monday of the auction. Mature T-bills are also redeemed on each Thursday. Banks and financial institutions, especially primary dealers, are the largest purchasers of T-Bills. They are quoted for purchase and sale in the secondary market on an annualized percentage yield to maturity, or basis. With the advent of TreasuryDirect, individuals can now purchase T-Bills online and have funds withdrawn and deposited directly to their personal bank account and earn higher interest rates on their savings."

Singapore Government issued treasury bills work the same way except that the minimum tenure is 3 months. There are also other Singapore Government Securities that even retail investors can buy from the primary dealers.

How to invest in treasury bills
Get starting with investing as little as S$1,000 into treasury bills today and get a better return on your money in your savings accounts today!

5 ways not to lose money on the stock market

Photo_021007_002
Originally uploaded by panzergrenadier

The recent bull-run in the Singapore Exchange and regional stock markets led by China has fueled an euphoria in equities. People ranging from working professionals, businessmen, office ladies, students, housewives are all talking about how to make money in the stock market.

But wait, how many of us really understand how a stock market works and what is it that we are risking our monies when we venture into it?

I started out investing in the SGX around 2003, just when the SARS crisis hit in Singapore. I was fortunate in that I got into SGX when the stock market in Singapore was on a bullish trend up to today. So what are the 5 ways I learnt not to lose money in the stock market？ （In fact, I have made decent returns each year for the last 4 years plus from investing in blue-chips on the SGX.)


5 ways not to lose money on the stock market

1. Decide how much you have to invest
2. Determine what is your targetted investment returns and time horizon
3. Read and learn about the stock market
4. Hold for the long-term
5. Review your portfolio

1. Decide how much you have to invest
This is possibly one of the most critical decisions you need to make as it is dependent on your income level, your expenses and the leftover for savings and investment. You may realise that you have not actually sat down to calculate how much investible savings you have. Some financial planners recommend that you should have at least 3-6 months in cash savings as a buffer before additional savings accumulated beyond this buffer can be used for investment.

If you have not decided how much investible savings you are willing to invest (and potentially lose - at least on paper), you should do it as the discipline and knowledge in knowing that you have holding power allows you to be more rational and less affected by the two emotions of fear and greed that strike all of us who invest in the stock market.


2. Determine what is your targetted returns and investment horizon
When I started out buying shares in the stock market, my targetted returns was to beat time deposits (fixed deposits) interest rates. Now that I have accumulated some experience in share investing, I raised my target to double that of time-deposits. Now time deposits yield about 2% plus for tenures of 3-6 months, hence my returns annually should be 4% plus. In addition, you need to know how long you want to keep your money. My strategy for the last 4 years had been to invest my savings into the market with an eye at selling and using the proceeds plus my bonus from my job to pay off my loans. Hence, my time horizon was relatively short around 1 year to 2 year horizon. That resulted in me doing more buying and selling of shares to realise the capital gain and use that to make regular partial redemption of capital for my mortgage.


3. Read and learn about the stock market
As I bought and sold shares, I also used the trading platform (in my case is poems) to learn more about the shares and the market characteristics. I also took time to go to the library on weekday nights or weekends to borrow books about investments and equities. You may want to consider investing your time in reading about investments and personal finance.


4. Hold for the long-term
Now that I've gotten past the phase of having a short-term view on the stock market, my investments have turned into buy-and-hold approach. I tend to buy blue-chips because such shares are of companies which have a large market capitalisation, are relatively liquid in terms of trading volume and very importantly, have sound profitable businesses and have a dividend policy that rewards shareholders for investing in them. Some shares I have include SPH, Singpost and OCBC bank.

5. Review your portfolio
Even with a buy-and-hold strategy, you should review your portfolio periodically. I make at least a weekly review of my shares against the market. I actually have a personal net worth excel worksheet that computes the lower of cost or market price for my share holdings. I will review the paper gain/loss each week and on a yearly trend to see how I am doing. In general, if I feel the market is going crazy, I may reduce my holdings but will stay invested in the market. Currently I am 56% invested in the market with the remainder of my investible savings in time-deposits, treasury bills and cash.

Our hard earned money is our responsibility and we should invest time in looking after our money. Nothing beats seeing the dividend credits into the bank account and to know that I am achieving a better return on my savings that time deposits and the CPF ordinary account rate.

You can do it too!