Monday, March 04, 2019

The idiot who didn't switch

With the opening up of the electricity market, I recently signed up with another retailer. I'm not here to talk about which is more worth while, but you can comment below to ask me which one I've chosen. The fact is that I've made a choice to move out of the standard Singapore Power SP retailer, because changing to another retailer will cut my monthly bills by at least 20 to 25%. Since electricity is a commodity, I really don't care which company supplies me with it, as long as it is reliable and cheaper than my current provider.



But I've asked around. Quite a lot of people are reluctant to change, mostly the older folks. I've asked my parents to switch to another retailer too, but my mum said that SP is still the more reliable one. When I told her that she can save 25% off her monthly electrical bills, she said paying more is okay because it's higher quality. Wah...okay, then I realised that the reason not to switch is based on something other than rational thought. A.k.a status quo bias.

I guess a big reason why people are reluctant to switch is because there is a lot of information to digest. And it's true. You have to read up, do comparison, which is difficult for people. There are better ways to spend your free time than to pore over boring fact sheets of at least a dozen different electricity providers and their various plans. Too much work.

While I'm pointing fingers at these people for not switching to something cheaper, am I also guilty of doing it on other aspects of my life? Are there some aspects of my life that I am procrastinating, because it is perceived to be too much work even though I know I'll be ultimately better off? I'm sure there are, even if I had sub-consciously buried it in the deep recesses of my mind.

If you're financially savvy, did you neglect your health? If you're health conscious, did you forget about growing your wealth? If you're good at investing in stocks and shares, are you dismissing properties? If you're good at investing in properties, are you missing out the potential in the stock market? If you're strong in savings, are you equally strong in growing your income? If you're good at earning money, did you play defensive well by cutting your expenses?

Too much work to do? You're comfortable where you are right now? Status quo bias?

Realization: Just because I've switched to a cheaper electricity retailer, I'm no better than the people who choose to stay with the incumbent. All of us have some better part of our lives that we can improve and better ourselves, if only we can look past the tough work to get there.


Tuesday, February 19, 2019

Buying two insurance policies

After having a kid, I thought it was due time for me to update my insurance protection. I summed up all my policies and realised that I have a huge shortfall for death, tpd, as well as critical illness. As it is now, I applied for the Mindef Aviva plan to cover this shortfall and am still waiting for them to get back to me. This should add another $700 to $800 per year to cover me until age 65, which I gauge it to be adequate. I'll do a separate post on it when the insurance plan is confirmed. Might be months later, since I likely have to do a health check and all the other documentation.


So that's the easy part. Just spend the money, pay the premiums and lo and behold, you're covered for xxx thousands here and there.

The harder part is this other 'insurance policy' I just started - exercising. I haven't been actively exercising since the birth of my child two years ago. I want to take care of my grandchild many years later, hence it's important for me to maintain good health. I know what motivates me, and that's having a to-do list unfulfilled and waiting for me to do them. Hence, I went straight to get a Fitbit charge 3, which is a fitness tracker that comes accompanied with a great app for use in my mobile phone/desktop. With the app, it allows me to track all sorts of things, like how much water you drink, how much calories you take, how much exercise you do per week and how many hours you sleep. Fantastic. My tracker will vibrate every hour reminding me to move my ass if I didn't hit 250 steps. Yup, every hour it will remind my sorry ass to move, until 6pm.

I started jogging today too after having a break of more than 3 years. Imagine the pain burning through my legs now. I always thought that the IPPT, which is the required annual physical fitness test for all combat fit guys here in Singapore (at least until 40 or when you are in the Mindef reserve), is damaging to my health. I want to run and do all the exercise item, but not to the extent that I had to 'kill' myself to pass. I'm glad all these official tests are over for me so that I can focus on the fitness that I really want. Fitness to me is just this: able to run after my active son without feeling tired and able to live long healthily.

Maybe I will join a gym or something, but we'll see. For now, I want to be sufficiently cardiovascular fit but I think about the gym. Hey, taking care of your health is the best investment you can do for yourself!

Looks like a great start to the year 2019, in terms of coverage lol

Saturday, January 12, 2019

POEMS MMF rate increasing?

I've always been putting my warchest in POEM money market fund (MMF). Recently, I noticed that the unit price of the MFF had been increasing at an accelerated rate. Fortunately, I had some data that I always recorded when I'm doing my monthly accounts, so I had access to the unit price changes of the MMF every month (most of the time anyway). I needed to know roughly how much interest it will generate so that I can properly allocate to the various instruments for my cash.

So far, I've been putting it in these few places:

1) MMF
2) Normal savings bank account (not the hurdled type)
3) Singapore savings bond (SSB)

This is my allocation to my warchest. It doesn't include emergency funds:

1) MMF - 30%
2) Bank accounts - 35%
3) SSB - 35%

I keep some liquid cash in normal bank accounts for day to day use and the bulk of the money under the bank accounts is parked in the CIMB fastsaver account. The good thing about that account is that for the first 50k, there will be a 1% interest pa (thereafter is 0.60% pa), fuss-free. There's no hurdles to jump and no credit card spending to clock. I know many people have the hurdled savings accounts with much higher interest, like about 1.8% pa, if they satisfied certain criteria like credit card spending and salary. Since I'm self employed, I don't qualify for the salary part, hence it's such a hassle to jump over all the hoops to reach that the high interest, only to see it fall away when the hoops are raised even higher.

Savings bond (SSB) is always a good place to store cash because recent issues has been giving 2% for 1 to 3 yrs, but it is slightly less liquid. MMF takes about 2 working days to cash out, while the cash in banks is immediate. SSB takes a maximum of 1 month, but if you actually apply to cash out towards the end of the month, you really just need 1 week to get the cash out. Hence, it's also a timing issue.

What about MMF? Below is the raw data for the tracking of the MMF unit price:


The compounded interest rate for the years are shown below:

2016: 0.868 % pa
2017: 0.818 % pa
2018: 1.117 % pa

You can see that the interest rate is creeping up for poems MMF recently. This is of course far from its heyday about 10 yrs ago:

2007: 2.01% pa
2008: 1.33% pa
2009: 1.04% pa

As you probably already know, the interest rates had been creeping up from the start of 2018 till now. It's still increasing, but at a slower pace now compared to the start of 2018. Hence, in order to forecast how the MMF's rates is going to be like going forward in 2019, we should look at the latest quarterly rise in the unit price in 2018 to get a gauge. It's 1.231 % pa so I think we can expect the MMF's rate to be around this in 2019. In fact, I expect it to be more than 1.2%.

That means it's better than the interest given by the CIMB fast saver account. Well, slightly better with some caveat. There is FDIC deposit insurance for cash parked in banks. For mmf, I don't think there's any. But it's been a pretty safe MMF with nary a drop in unit price since I've been tracking it in 2006. I think the more important thing is about the cap for the 1% interest rate in CIMB. That's only for first 50k, whereas for MMF, there is no cap whatsoever.

I need to rejig my current set up. With a kid in tow, I need more emergency cash. And I will need to park them in a place I can't touch easily. The best place right now is SSB. I will also be parking more money into poems MMF since it has higher interest than my bank accounts, doesn't have a cap and makes it easy for me to buy equities (MMF account is linked to shares account). Yet, I also can't keep pumping money into MMF, because what if the MMF goes kaput? There's no insurance for me. So maybe a self imposed cap of 50k in MMF is what I'll do, coupled with a cap of 50k for cimb fast saver account and another self imposed cap of 50k in SSB. Fill up MMF first, then fill up fastsaver, then fill up SSB, in that order.

That totals...150k. I don't even have that much cash right now, but at least this exercise makes me think of the hard and soft limit that will be staying with me for the next 3 to 5 yrs I guess.


Wednesday, January 02, 2019

First day in childcare

Today I sent my boy to the childcare centre. He's about a month shy of 2 yrs, so it's his first experience going to a proper school environment, hence his crying is all expected. But I left the childcare centre, being all warm inside and proud. Why?




I think it's important to establish a very strong emotional link between the child and the parent. With this strong emotional link, you can motivate the kid to limits beyond the wildest expectations from the parents. There are times when we brought my son out for walks and after an hour or so, he starts to get tired. We don't ever have a pram, because my thinking is that we (as parents) either grow stronger by carrying him, or my son will grow stronger by continuing to walk until the destination is reached. So when he is really tired, he will want us to carry him, right? That's normal. But what we will do is to tease him a bit. When he runs towards us, we'll run further away and he'll laugh and continue running after us for a little bit more. We can drag this 'game' for another 30 mins or so, pushing him beyond his own perceived limits. And he'll do so because he trust us completely.

In essence, we're using this strong emotional link between the child and the parent to do great things together. This is what the book by Dr. Petunia Lee, Internal drive theory, had mentioned. I quote these from the book (I might have paraphrased it when I took down notes from the book),


"A child might give up in the face of difficulties, but if he can draw upon someone else’s emotional energy, they can still stay on the course. Hence it is a strong motivating force."

"This is so important that if emotional connection is not there, the first thing to do is to fix it up. That will make all the other motivation strategies more powerful."


Aha! Now I finally join the dots and link the connections. Initially when I first read the book, I was just knowing. Now I really understand. It is the same motivating force when my tutee likes me, and do not want to disappoint me, hence with the strong emotional bond between us, I as a tutor can push the tutee beyond his/her own perceived limits. And that's how a real change can be observed.

So, what happened at the childcare centre that had me beaming with pride? My wife stayed on with him, while I left the room. Only one parent is allowed and we decided to have my wife accompany him, at least for a while, to calm him down. Initially my son was inconsolable. After a while, he started being his jovial playful self again. When my wife gave a firm goodbye, he was still smiling, and I knew it's going to be alright.

Seriously, I've never had a prouder moment as a parent. It's a great start to the year 2019!