Monday, March 31, 2014

What's good about owning a car?

I had a car for about 2 years now and I dare say it's one of the best things I've bought. This is in sharp contrast to other financial bloggers, who are mostly too quick to dismiss car expenditure as something frivolous and definitely under the category of "wants" and not "needs". I thought I should share what's so good about getting a car in Singapore, rather than just focusing on the dollars and cents, which is pretty much anyone who frowns upon owning a car will say.

Firstly, the bad stuff. Everyone knows that to own a car in Singapore, you need the ultra expensive COE, which entitles you to own a car for 10 years at a cost of about 70k these days, and that's not including the cost of the car. Definitely not cheap. The running cost of my car per month includes the following:

1. Season parking (about $70)
2. Parking at other places ($50)
3. Fuel ($230)
4. Insurance ($90)
5. Maintenance (about $60)

Total: $500 thereabout

So the running cost is about $500. I haven't added in the cost of getting the car yet. I don't think I want to spend anything more than 40k on a car, inclusive of COE. So that means I'm effectively priced out of buying a new car. I went to the second hand car market and got a car for 32k, and that car can still last me for 4.8 yrs before I need to scrap or renew my COE. I paid half of it in down payment and borrowed the rest, so effectively my total cost is about $34k. This is way within my budget, and I really think it's affordable for people who wants to get a car.

Total cost: $500 + $360 (installment for car loan) = $860

Let's just bump it up to $1k per month. I chose to pay 50% and borrow the rest, way before it's mandatory to do so. But think if you're not buying any flashy cars, getting 4 wheels that allows you to move from one place to another should cost around $1.2k per month, everything in. Since I'm sharing the cost with my wife, I think I need about 2-3 more classes to offset this expense. That's pretty alright - essentially I work more so that I can work easier, and that doesn't include other fringe benefits that I'll mention right away.

What's the good thing about owning a car then? I can't speak for everyone, but owning a car is great on several levels for me. Now obviously not everyone works in the same kind of work as me, so the experience for different people differ.

These are the good things about owning a car:

1. You can go to several places in one single trip. Often times, it's impromptu and not planned.

True, you can get a cab, but it's just not the same. Sometimes, thinking about all the hassle of getting a cab to this place, then another trip to another place just make it so troublesome. I ended up just going to one single place to do all my entertainment, groceries and shopping. It just severely restricts your range of mobility because of the hassle of public transport. You can't say I'm spoiled because my family never owned a car before and I've been taking public transport for the bulk of my life, whereas I only had a car for only 2 years. The 2 years is enough to convince me that I should have gotten a car sooner, not later.

2. Saves you lots of energy

Commuting by public transport is tiring and drains my energy level. In a normal workday, it's possible for me to change bus/mrt at least 3 times. It's much more tiring if I've to stand and jostle with the crowd during peak hours. At the end of the day, I'm totally dead from all the energy spent. I don't know about you, but spending my time jostling with crowd drains my energy tremendously. Maybe I'm an introvert, that's why. With a car, I'm relative still full of energy even at the end of my most tiring workday. I don't always get to drive (mostly, my wife drove), so I can compare the difference between taking public transport and a car.

3. Saves me lots of time

Having a car can half my travel time, usually more. A trip from my home to a student's place can take 1 hour. The bulk of the time taken is spent just waiting for the bus/mrt to come. I'll say about 20 mins can be spent just waiting. A longer wait is necessary if you have to change buses/trains. The second biggest time waster in public transport commuting is all the stopping. You have to get to A to B, but in between there are multiple stops for passengers to alight and board. That takes up a lot of time, especially during peak hours. The huge time saver for travelling by car means that I can pack another lesson or two in a day. I think that alone can justify the running cost of the car. I didn't even include taking assignments that is further away from home, but pays a lot more, and is only possible with a car.

I get it that people want to retire early, reach financial freedom, then do whatever they want to do with their lives. Perhaps work life is so terrible that any moment spent working to earn a living is a thought so terrible to stomach. But instead of living a life after retirement, you can also live a life while working towards retirement. A car is just one example where the intangible benefits far outweighs the cost - it might be any other things. Heck, the only reason why I didn't commit to buying one earlier is because I was so put off by the 1.2k per month expense. To this day, I regretted not getting it earlier. I could have spent the same money and got either a better car or a car that I can drive far longer before renewal of COE/scrap.

Don't be blinded by numerical value. Financial bloggers are, by definition, more conservative than the general public. My advice to all financial bloggers is this: Just live life a little. Being a little more risk taking is still less risky than most people, so chillax.

Thursday, March 27, 2014

Which method of savings will you adopt?

I wonder how many people feel the same way that I did. Whenever I'm busy earning more money, I spend much less time outside shopping or eating at restaurants, so my income shot up and my spending shot down. This resulted in my savings rocketing skywards with a boost in earned income and a drop in expenditure. Conversely, when I'm more relaxed and have more free time because work winds down, I spend more despite my lack of income. So savings suffered a massive plunge.

Don't they warn that it never rains but pours? Well, I guess it's the same for my savings too. There's either huge savings, or there's very little of it. Maybe it's just an anomaly for those who are self-employed. I guess for salaried employees, there's very little variability in income. In fact, they have fixed pay but variable hours, so the busier they are, the less they earn on an hourly basis. Not good to be too busy, haha!

I know how to save more money. My way is not to save more by cutting down on expenditures. The reason is that I know that I'm not a spender. I know this is because I've been tracking my daily expenses for so many years. Cutting down on expenditure is a legit method of savings - I'm not denying that, but I dare say that it won't be the main driver in getting my savings up. I know that because I know myself by reviewing the records that I keep. The better way for me to grow my savings is to earn more money. This might not work too well for all, because there could be some people who would reward their hard work by spending more money. The net effect is just running harder on a treadmill - you run faster but you didn't move an inch forward.

I do know that if I spend more time earning money, I will have less time and inclination to spend money. It might not work for everyone, but it works for me. I think when you read about people saving more money through different ways, you got to figure out the best way that works for you. This will require you to know how you react in different situations. If you don't, then you got to experiment and give each method a try. You can't just take a general guideline and follow everything to the T, because you're ultimately not the person who came up with that guide. Whatever works for others might not work for you. And if that method is not suitable for you, you'll give up easily.

I know that my wife won't spend money that she can't see, so the best way for her to save up is to squirrel a part of her income away to some account that isn't easy to withdraw. If she can't see it, she won't spend it. There are also some people who live life dangerously - they save more if they are forced into situations they compels them to. For example, these type of people will buy a condo (regardless of whether they can afford it now), then go and find the money to upkeep it. It works for them tremendously, maybe because they can see why they are working and saving so hard for. If I do that, I'll probably lose sleep.

I'll leave you with this famous quote from Sun Tze- "Know your enemy, know yourself ; A hundred battles, a hundred victories". The biggest enemy towards building a healthy savings habit is yourself. Either from lack of self-knowledge or the inability to control yourself.

Tuesday, March 25, 2014

How to ride through the bicycle of life

I went for a course on learning how to ride a bicycle recently. The course last for 2 days and I just completed the course on Monday. It was great! The experience is well worth the money ($190 per person, including rental of bikes) and is further enhanced by the fact that I'm doing it together with my wife. Coincidentally, both of us didn't manage to learn how to ride a bicycle when we're younger. Kind of rare actually, considering that most people will learn how to ride one during their childhood, so what's the chances of finding a couple who both can't ride a bicycle? Practically zero, I bet.

Anyway, it's good to put yourself in the shoes of a humble newbie again. When we're good at something and we've been doing it again and again for a lot of times, we lost touch with something magical - the joy of doing something for the first time.

I learnt a few things that might be applicable to life in general.

Bullythebear learned how to cycle, and miraculously found how to
ride through the bicycle of life 

1. Learn how to move slower before you move faster

The coach removed all the paddles of the bicycle when we first started. The idea is to paddle by pushing your feet on the ground, so that you can control the bike and learn how to balance before you start paddling. It was such a simple strategy but I wondered why nobody told me that before. All the well meaning advice from people trying to teach me how to cycle is that I should paddle and move as fast as I can. But I never managed to put both feet on the paddles before the bicycle leaned way out of my control and I've to start again.

Trying to save a substantial amount? Try a smaller amount first. Trying to get a huge passive income? Try getting a smaller one first. A journey of a thousand miles begin with just one humble step.

2. Lean towards the side you're going to fall on

Again, another simple instruction that nobody had told me before. I had a preconceived idea that I must steer the bicycle away from the direction that my bicycle is leaning towards i.e. if the bicycle leans left, I must steer right. How wrong am I! I need to steer towards the direction that I'm falling so that my bicycle remains upright! Quite counter-intuitive, I must say.

Are you running away from your fears? Maybe you should face it head on instead.

3. To keep your balance, keep paddling

Once the basics of balancing without paddling is mastered, balancing and paddling at the same time becomes that bit easier. If you keep paddling, it'll be easier to maintain balance. How interesting! Another counter-intuitive action. You would have expected that by keeping still, you'll maintain stability, but who would know instinctively that by moving continuously, you'll also be able to keep your stability?

Next big project, learning how to ride a motorbike :)

Thursday, March 20, 2014

Allocated 2 excess rights units for AIMSAMPI rights exercise

This post wraps up the entire episode about the rights exercise for AIMSAMPI Reit.

Before the counter went XR, I bought 6 lots of aims mother shares at 1.385. I didn't buy any nil-paid rights off the market. I'm entitled to 1050 shares of rights units, and I've fully subscribed and applied for excess rights units too. Today on 20th March 2014, I checked my CDP account and saw that I've a total of 8 lots. The refund is not in yet though. I'll probably see the refund into my bank account on 21st March. This means that:

1) I've successfully converted my 1050 shares of rights units into ordinary units at 1.08 per unit

2) I'm also allocated 950 shares of rights units at 1.08 per unit, rounding up my odd lots to 2 full lots

This brings my total average cost per shares, excluding brokerage, to be $1.30875. If inclusive of brokerage, it'll be $1.31262. Not a big deal right, considering that today's closing is $1.310. Well, I wanted to get into this for some time, so the rights brings me a good opportunity to enter at a good time. All in all, if you want to get into a reits with rights issue, the strategy of buying enough shares to reap the maximum number of excess rights units granted to you, is still a valid and good strategy.

Not such a good deal for existing holders of aims, I'm afraid - it's better for new comers like me.

Wednesday, March 19, 2014

Need a seat? Just ask for it.

I was reading the news about Singapore being unkind and ungracious with interest. There's a lady reporter, being pregnant and feeling nauseous, wasn't offered a seat when she took the MRT. Even our top politicians are remarking on that.

I think that if you are in a restaurant, seated, and nobody comes up to you to take your orders, you should wave your hands wildly and call for attention. That will draw attention to yourself and people will come to service you. But why is it that when someone needs a seat on the MRT, then the person needing service have to wait for others to offer one to him/her? That's an interesting observation, no? I think we have to be a little proactive in what we want, rather than waiting for others to volunteer.

I think people everywhere generally practice polite inattention. You do that when a stranger enters a lift with you, so you look at everything except the person. You do that because you don't want to look like you are nosy and you just want to pretend that you're minding your own business, even if you're very curious. Well, I think the same thing happens in the MRT. When someone exhibits weird behaviour, like stripping naked, or sitting down on the floor, people generally practice polite inattention. You mind your own business.

If I'm needing a seat, I've to break this cultural barrier of polite inattention and the by-stander's effect (which means that in a crowd of strangers, everyone think everyone else will help, so in the end nobody helps). The best way to do is this:

Single out a person, tell him you're unwell and ask politely if it's okay for him/her to give up her seat for you. Giving a reason is important because that is generally more persuasive than just ordering people around. Being polite helps all the time. 

If you do that, and nobody helps you, then I will also conclude that Singapore are generally unkind and unhelpful. Until you try helping others to help yourself, I think it's a bit premature to say that others are unhelpful. There's a million reasons why others are not helping you, and one of the most compelling one is that they are giving you space to be 'weird' by practicing polite inattention. A celebrity might like Singapore precisely because nobody gives a hoot even if they know you're a celebrity. They might give a longer look at you, but generally leave you alone, unlike the paparazzi culture in other countries.

My stand is this: If you need help, and people volunteer to help you out, that's good and an ideal case. If you need help, and nobody volunteers, then you got to be proactive and seek the change that you want to see. Not everything needs a law in order to force certain good behaviour. Sometimes, all you need to do is just to ask.

Monday, March 17, 2014

Elderly folks getting bullish?

I noticed that quite a number of elderly folks wanted to put their money to better use. They realised over time, that the miserable interest offered by banks are not keeping up with the general rise in prices. This had been going on for some time after all. Perhaps they heard stories where their friends, or sons or daughters are making a good harvest from investing in the stock markets. Being in a bull market for 6 yrs is a pretty long time for people to think that the good times will last another 6 years. So, the elderly folks are naturally interested because everyone around them are making money but not themselves.

That is all well and good, but it's a little worrying. Usually the elderly folks are pretty conservative. Look at my own parents. They only put money into fixed deposits and perhaps the occasional savings plan offered by insurance companies (aka endowment plans). When I told them I can get better returns, they jumped immediately. They are still conservative in the sense that they don't want to lose any capital (actually who wants to lose any capital?), but they are also unconcerned that I'm investing in the stock markets to generate better returns to them. My in-laws? They had been asking their daughter whether it's good to invest in this or that because their colleagues or bosses had been making a good profit on certain counters. Generally, I find that the risk profile of the supposedly most conservative bunch of people are rising. If I'm a hound on the scent of greed in the market, I'm sure I can smell a whiff here and there now. Fear, the yin-yang twin of greed, is taking a holiday for now.

This doesn't mean that the market is going to crash soon. But I think everyone should be more cautious and on the look out for more signs of exuberance in the market. The good thing about experiencing through 2 bull markets is that you get to see things and how people react to them. All these forms subconscious cues, or a hunch, that perhaps the beginning of the end is near. I remembered reading news articles of young students, skipping school and wanting to become full time investors because they are earning such a good profit trading in the market. Who needs a degree and a job when they can earn a few thousands per day?

Just start squirreling excess income into your war chest. A market downturn is useless if you do not have the means to make use of it. So save up, do your usual things, and perhaps when an opportunity opens up in the future, we can all be thankful that we still have bullets to fire.

Tuesday, March 11, 2014

To remember, you have to suffer every now and then

People are funny; only when things that matters to them disappear, will they realise how much they lost.

Recently, I had a very bad bout of flu. It's so bad that I was quite immobilised for 2 days. On the 3rd and 4th day, I've no choice but to drag myself off bed and go to work. Thankfully, it's all over now and I'm fully recovered. But the illness did make me so happy that I'm healthy. Imagine suffering from some illness that isn't that readily recovered in 3-4 days. You probably can't imagine it because you have to go through it to know it. Even then, you have to go through it once every now and then to remember it. Such is the forgetfulness of humans.

The air quality is also getting worse. The haze comes early it seems. I just hope that it's not as bad as last year where all outdoor activities had to be stopped. Again, only when the air quality is bad would you realise how good it feels like to breath fresh sulfur free air.

I say it's good to suffer every now and then, if only that we can remember and empthasize with those who are suffering all the time. Knowing is not understanding; you must go through it to remember and hence to truly put yourself in the shoes of others.

Monday, March 10, 2014

Accepted, applied and paid for Rights Units!

Today I went to an ATM and exercised my rights units for AIMS AMP Capital Industrial Reits. I bought 6 lots, entitled to 1050 shares of rights units, applied 950 shares to round up my odd lots and also applied an additional amount for excess rights. All these rights entitled and applied are paid up in full (plus another $2 for the service fees) by the time I leave the ATM.

Again, the last date of exercising your rights units through ATM is 13th March 2014, 930pm. Don't miss that dateline. I've heard a horror story of someone who bought a lot of nil-paid rights off the market during the trading period, and forgot to exercise it. In the end, all the nil-paid rights expired worthless and nobody can save you. You can read this horror story here from Mr. Tan Kin Lian's blog post here.

At the end of the whole transaction, make sure you read the receipt issued. There are two important rows to check and double-check, and these are "Rights accepted" and "Excess Rts appl". Make sure that the "Rights accepted" is the exact number that you are entitled to, plus any nil-paid rights you bought off the market during the trading period. For example, if you have 6 lots like me, you'll be entitled to 1050 shares (6000*7/40 = 1050). If you didn't buy any nil paid rights off the market, then that's the amount you should have for "Rights accepted". If you also buy 3000 nil paid rights off market, then the total number of nil-paid rights you have is 4050 (1050 + 3000 = 4050). So make sure that your "Rights accepted" is 4050.

The "Excess Rts appl" refers to the excess rights that you applied. This one is less of a problem and wouldn't cause a catastrophic financial disaster if you press wrongly. Just press any amount that you want (provided you have the means to pay!). Minimally, you should apply enough shares to round off any odd lots. Anything above that is given lower priority, so it's up to your luck.

The timeline is as follows:

Expected date of issuance of rights units: 20th March 2014
Expected date for crediting of rights units in CDP and refund of money: 21st March 2014
Expected listing of rights units and trading of rights units as ordinary shares: 21st March 2014

Monday, March 03, 2014

Rule 4: Living on last month's income

Had a pleasant surprise this March.

When I opened my YNAB to do my monthly budgeting, I realised for the first time that I'm having a $0 for my budget from Mar instead of having a negative number. For those who don't have YNAB, you might not realise how fulfilling this situation is. Since they are using a system where every dollar has a job to do, having a non-negative starting budget value for the start of the month means that I've succeeded in using last month's pay to settle all the expenses of this month, without including any income stream for this current month. Since I've a variable income instead of a fixed salary, I really have to take a much longer time to get to this state. Exactly 7 months is how long it took to have a non-negative starting value for a new month.

Rule 4: Live on last month's income

This is a sort of gamification to make personal finance fun and interesting. By setting intermediate goals or achievements, similar to playing a game, you'll make it through the tougher months where you feel like giving up. For this case, if you're using YNAB, there's 4 big achievements or Quests to be done:

1. Give every dollar a job

Easily done really, just that I don't use a budgeting system in the past until I started using YNAB. I use the 'pay-yourself-first' system where every drop of income I have I'll transfer some to my savings first. Whatever is left is whatever I spend on. I changed because I see a point in budgeting. Budgeting can average out your expenses for all the months of the year because you break down one-off expenses (like annual insurance payment, planned travel etc) and spread it over 12 months. Easily to handle for those with tight cash-flow. Easier for me too since I've variable income.

2. Save for a rainy day

Not a problem for me because I've been saving way before using this software. Makes it easily to track everything though. You can even save for different things. Really reduce the possibility of doing mental accounting down to zero.

3. Roll with the punches

This is manageable for me - basically this means that you need to cut yourself some slack on months that you can't fit your budget. If you spend above your budget, then whatever excess is subtracted from next month's budget. Conversely, if you spend below, you get to spend more the following month. Great system, I must say.

4. Live on last month's income

Ah.. this really took me some time. To achieve this, you need a combination of saving, reducing expenses, increasing income and really proper budgeting. It's hard to appreciate this without the software really.

Still love this software after 7 months. For those who tried this, any feedbacks on how YNAB makes your life better? Care to share with me?