The year 2016 in terms of books read

It's becoming clear as we move towards the end of 2016 that my target of reading 52 books this year is not going to happen. Not going to give any excuses for not being able to do so, it is just as it is. As usual, I'm going to list down all the books that I've read, then I'm going to recommend a few good ones that forms a deep impression after reading.

Here's the list of all 38 40 (updated 28th Dec 2016) books that I've read this year:

Alibaba: The house that Jack Ma built - Duncan Clark
The new sell and sell short - Alexander Elder
Living with a SEAL - Jesse Itzler
When breath becomes air - Paul Kalanithi
Continuum concept - Jean Liedloff
Asian Godfathers - Joe Studwell
Pregnancy: for the first time moms - Darrell Spice
Hard truths to keep Singapore going - Lee Kuan Yew
Extreme ownership - Jocko Willink & Leif Babin
Choose yourself - James Altucher
Gorilla mindset - Mike Cernovich
Beautiful souls - Eyal Press
Start-up nation - Dan Senor/Saul Singer
Concierge confidential - Michael Fazio
What money can't buy - Michael Sandel
It's only money - Cara MacMillan
Real Food / Fake Food - Larry Olmsted
Be financially free - Morten Strange
Flashpoints - George Friedman
The monk who sold his Ferrari - Robin Sharma
Left behind 01 - Tim Lahaye, Jerry Jenkins
Dietland - Sarai Walker
The money culture - Michael Lewis
Absolute beginner's guide to pregnancy - John Adams, Marta Justak
The Happiness Equation - Neil Pasricha
The Infinite Sea - Rick Yancey
Forever Free - Joe Halderman
The art of Procrastination - John Perry
Forever Peace -Joe Halderman
The Forever War - Joe Halderman
Fahrenheit 451 - Ray Bradbury
Bartleby The Scrivener - Herman Melville
Man's search for meaning - Viktor Frankl
Do androids dream of electric sheep? - Philip K. Dick
Portfolios of the poor - Daryl Collins et al
Gang leader for a day - Sudhir Venkatesh
The ultimate success secret - Daniel S. Kennedy
The education of millionaires - Michael Ellsberg
Way of the peaceful warrior - Dan Millman
Money: Master the game - Tony Robbins

I can probably squeeze one book book or two before the year is up, but that is pretty much it. Not in any order of preference, here's the shortlist of 6 books that I think are crucial in my personal development:

Portfolios of the poor - Daryl Collins et al

Man's search for meaning - Viktor Frankl

Flashpoints - George Friedman

Beautiful Souls - Eyal Press

Start-up nation - Dan Senor/Saul Singer

Extreme ownership - Jocko Willink/Leif Babin

When breath becomes air - Paul Kalanithi

1. Portfolios of the poor is so good that I can't help but post some sort of reflections while I'm still half way through the book. You can read about my post here. It talks about the financial statements (balance sheet and cash flow) of those who are living wit 2 USD per month or below. No other books I've read talks about the portfolio of the poor and their apparently bad choices in life like this book. I think while it's important to read the majority of the books out there that talks about the portfolio of the rich, it's also important to examine the other side. After all, both cases are extremes and likely we fall in between these two.

2. This book is on so many people's recommended list that you just have to read it to see why. He is a logo-therapist who survived the Holocaust and found that people who suffered needed meaning to understand why they are suffering. Everyone can take suffering, as long as it serves a greater purpose, but nobody wants to take meaningless suffering. It is a very engaging book and is a page turner for me. Beware, because once you started on this, you  might just want to quickly get to a quieter corner to devour this book in its entirety as soon as possible.

3. This is a sequel of the book "The next decade" also by the same author, and I thoroughly enjoyed it. This continues from where he left off and focuses more on the EU region and where the conflict areas, known as flashpoints, are in the region. I read this around the Brexit saga and it allows me to understand the different scenarios that might be played out. This is a very interesting book if you're interested in the global political scene that is happening right in front of our very eyes. What will happen to Russia, and to the different countries that made up the EU? How is Turkey going to navigate the scene, being sandwiched between Europe and the middle east?

4. This is a brilliant book recommended by Sillyinvestor. It is collection of stories that portrays real people displaying extraordinary courage by rising above all others to do what they think is right. The author infuses each story with some comments on how difficult it is to go beyond the social rules of the group and act what is right. There is a story of an immigration officer who allowed fleeing Jews into Switzerland, a guy who did the right thing in the conflict between the Croats and Serbs, an israeli soldier who refused to follow orders and a whistle blower in corporate America. It's a very light reading but with a very heavy lesson behind all the stories - when it comes to your turn, would you sacrifice personal gains to do what is morally right?

5. What's wrong with Singapore's education system? How come we don't have a start up culture here, compared to other countries? Israel is one of the most war torn nation surrounded by hostile countries who loved nothing but to see the downfall of their nation, but it still produces a lot of companies that brings so much innovation plus patents that drives technological advances globally. This book explores some of the things that went right for Israel. There's a lot of references to Singapore as a comparison to Israel, so the locals here might find it very relevant. I think any parents or teachers with a stake in educating our next generation will find this book extremely relevant and thought provoking. 

6. Two SEAL officers come together to give business consultation to companies by applying what they've learnt in their combat training and experience. I thought it'll be pretty cheesy, but it's surprising relevant. Every chapter they will illustrate some exciting combat situation and how they navigated through all the screw up and potential dangers and emerged victorious. And after that, they will apply this story to one case in their consulting work, followed by a summary of the lesson. One concept of extreme ownership is what I'm trying to practice after reading it. It's about how everything and anything that didn't go according to your plan is your fault. If my student is not motivated, it's my fault. If my student didn't do well, it's my fault. If my student wanted to leave the tuition, it's my fault. It might be a little harsh, but it empowers me and gives me the ability to change my environment, rather than to give that power away. One of the best self help book I've read this year in 2016. Don't take my word for it, go and read and see for yourself.

7. After reading Viktor Frankl's book on Man's search for meaning, this book seems like accompanying book. While Viktor's book is more philosophical and theoretical, Paul's book is much more practical and it feels that the author is showing us how to lead a life full of meaning even though he is suffering. I think there is a great deal of lessons we can learn from him. This book can be read easily and is a page turner, so be prepared to sleep late at night once you've started on this book. Be warned. You might even cry a little at the end of it all.

In 2017, I'm going to have a major change in my status. I'm going to be a father! I wonder if that will derail my target of 52 books a year. Probably so, but we shall see. As it is, I still intend to read, but I wonder if this is just fantasy on my part haha :)

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Two new systems to change my life

I usually spent the last few days towards the end of the year to do some serious reflection on the practices and the system that I used for the entire year, to see if I can improve it or fine tune it further. I will share two systems that I had recently been implementing that I think will streamline my thought process for further reflection at the end of the year. The first has to do with trading, and the second is more to do with my line of work.


Trading system

Problem: 

In the past before I started using Investingnote in 2016, I have a huge issue with remembering the homework that I do with the charts. The problem is that the charting software I'm using only allows me to save x number of charts. And to add to the problem, it sometimes hangs and all the saved data is gone, including my watchlist. That is extremely frustrating. Due to the lack of a proper system to jot down my thoughts when I'm doing my homework, it becomes highly discretionary. There are situations where I had forgotten some charts that I'm eyeing at, and so missed the opportunity to act on it. The more important thing that is problematic is that I lack a feedback system to tell me if what I'm observed weeks or months earlier will play out as I predicted. This resulted in a very chaotic learning system. This problem is compounded by the fact that POEMS do not have the good till date order system. All orders will be cancelled by the end of the day. It makes planning a trade nearly impossible for me.

Solution:

Since using Investingnote, I started developing a system where I can track the homework that I do. I have four watchlist:

1. General watchlist
2. Bullish divergence
3. Bearish divergence
4. Close monitoring

The first watchlist (General watchlist) is a collection of companies that I've heard about and is interesting to me at that point in time. Usually this consists of roughly about 2 pages worth of various companies from different industries. If I hear or read about anything interesting, this is the watchlist that the company first get stored under.

The second watchlist (Bullish divergence) belongs to a collection of companies that I think will have a potential to go up. Because I'm looking at daily, weekly and monthly timeframe, sometimes the signal might take a while before it happens, so this is a place where I will check on the chart every weekend. During market extremes (usually a fierce market selldown or euphoria), I might even check it every end of the day.

The third watchlist (Bearish divergence) belongs to a collection of companies that I think will have a potential to go down. This is simply the opposite direction of the second watchlist.

The last watchlist (close monitoring) is the one where immediate action needs to be taken in the next trading week (within 5 days). This is where I will check intraday (the charts from investingnote are live intraday!) and also end of each trading day. Queue orders will be submitted if I think a trading signal is satisfied.

Having a watchlist is not the end point. The key thing is that after every round of homework towards the end of each trading day or trading week, I'll shift them around the four watchlist. Sometimes counters in the general watchlist get shifted to the bullish divergence one, and after some time, they get 'upgraded' to the close monitoring for further action.

The advantages of this system is that:

a. I don't need to waste time looking at all the whole universe of counters to sieve out the ones that requires my immediate attention. Within each trading week, I'll zoom in straight to the 'close monitoring' watchlist and see if I need to do any actions.

b. I can learn if my system works through the follow up of signals because I have a system that allows me to track them over a period of time, upgrading or downgrading them when they occur. This allows me to finetune and improve my observation skills required in my technical charting skillset. I probably learn a lot this year than in the past 5 years!

c. I can tell if the market is turning by looking at the collection of companies in the bullish and bearish divergences watchlist. Currently there is nothing in my bearish divergence watchlist and most of the reits are in my bullish divergence watchlist with many of them upgrading to the close monitoring watchlist. There was a time almost all the reits are in the bearish divergence watchlist. You can see and feel the market movement better this way, including rotational sectorial plays.

d. Time savings. Since I don't waste time tracking things that are not immediate and urgent, every end of trading day homework takes less than 10 mins to do. End of trading week homework takes a bit longer since I have to browse through all the companies in all the watchlist, but that takes at most 30 mins. I feel much more efficient and because just like in an emergency room, this system acts like a trading triage that classifies different counters according to their immediacy and direction.


Why the heck didn't I think of this earlier? I think part of the 'excuse' that I had is that the technology to make this system work is not in place yet. I'm going to continue doing this and finetune it.


Student relationship management system

Problem:

I have quite a number of students in any one year, and I have a pen and paper notebook that I write on after every lesson, detailing the dates of the lesson and also the things that I did after each lesson. The point of doing this is to allow me to reflect after each lesson had finished and also to allow me to remember which point I am in the teaching of the syllabus. The problem here is that because my note book goes page by page in a weekly format, I can see each week which students I had for the week, and the lessons I had with them, but I have no way to see in a page what topics had been covered by me for any one particular student. To do that, I will have to browse through all the weeks before by flipping my notebook. This system had been working well for me for over a decade, but I felt that I could improve it further. I could add a section on the homework that I've given, plus the difficulties faced by the student doing that homework (this I had never captured before in my current system), and also what to do in the following section. I can't do this like a NIE teacher with a prescribed lesson plan because each student comes to me at different foundation and at different times, and I have to address all the issues that they face within a set period of time before they sit in for their exams. With 20+ students, that has always been problematic. I need a proper student relationship management system.

Solution:

The solution is really to digitize my notes. I've been using Evernote for that purpose. Under a notebook called 'Students', I write down a brief profile of the student, including the chapters that they had gone through at that point in time before taking my lessons. It will also include the list of chapters that I had covered with the student. After going through a lesson with a student, I'll write my usual handwritten note on my notebook. When I had the time towards the end of the day, I'll key into Evernote a detailed lesson reflection. This includes the date of the lesson, the type of questions the student had problems with, the exact things that is taught during that lesson, the worksheet given. Under the reflection, there will be a line where I will include the homework given. Under that line again, there will be another line where I will write down the things that I will do in the following lesson

The advantage of the system:

I tried to be rationale and list down a, b and c of all the advantages I can think of. I gave up. In truth, there's really only one reason.

I have an excellent memory, up to 2 to 3 weeks, for all my 20+ students that I had in a year. But as I'm getting older, my memory may fail me. I might forget what I've covered with my students, especially after a long break (say 3 weeks or more). I don't want that to happen. In the past, I'll just ask my students, but now I want to have a journal log of what I've done. This will allow me to track everything through all the lessons I had with the student.

On a more sentimental note, it's also to remember that I had gone through all these things with my students.

Just this week, a student came in with a black face. I knew something isn't right and I asked him about it. He just mentioned he had family issues (I guess it's a quarrel with the parents), so I reduced the stress level heaped onto that student. Start to talk a little more to get him into the mood of doing and I also forget about my usual nitpicking. I didn't write it down yet, but I suspect as I'm more familiar with this new system, I'll slowly add it in. Maybe an emotional state of the student. Maybe something interesting that happened in the lesson.

Last year I had another student. He is in NA stream, and I think he is the best learner I've ever seen. He just devours everything he can find in a topic that he is interested in. At that point in time, he is interested in making bullwhips and he searched the internet, watched countless youtube and made his own whip and practiced in it. He knew all the theories and science behind the cracking of a whip. All these will be lost if I didn't record them down.

Is there really an advantage to this system?

Yup. I use my time and life-energy to do the work that I do. The time that I spent with my students ought to be remembered like a treasured faded photograph with my family. I don't want to reduce my students to a grade, or a name. These are living breathing little humans that are learning how to navigate the world. And it's all too easy to forget that while we're trying to earn a living through our work. I don't want to lose that part of it and throw them away. This is what makes my work meaningful and it should stay that way. THAT is the advantage to this system.

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Sabana Reit 42 for 100 rights exercise

Sabana just announced a rights exercise. For every 100 shares that you have before XR, you're entitled to 42 rights shares priced at $0.258. Based on their track record, I don't think it'll be well received.

I once bought Sabana reit at 0.960 back in Nov 2010 and sold it at a 0.910. After dividends, thankfully I still make a very slight profit of 0.7%. I told my wife to get rid of it too. From then, the share price just went lower and lower until it hits 0.435 today. Imagine a 50% loss but with a yield of 8 to 9% pa! The dividend is not going to be enough to cover the loss in capital.

There's quite a few people asking around on what to do with their Sabana reits. I think we can safely classify into 2 types:

A. Those who had shares in this
B. Those who don't have any shares but wanting to get into it.

I can tell you frankly, rights issue is going to benefit people in group B more than group A most of the time.

Don't slip on this slippery banana skin

For people in group A:

1. You can decide on a fundamental basis whether you want to sink in more money into this or not. If you don't want to, you should sell it as soon as possible and close off the case. It'll be silly to subscribe to the rights and put more money, and after XR, the price likely will go down lower and wait for extended periods before going up again. If you're okay with this, then go ahead and subscribe to the rights entitled to you and apply for excess. This will lower down your average price and hopefully it'll come to light one day.

Do look at this post here. Most of the companies that issue right will recover back to the price before announcement of rights exercise between 1 month to 1.5 years. That's just based on statistics on a small sample size. So take it with a pinch of salt.


For people in group B:

1. You can buy nil paid rights during the trading period for the rights shares. But remember, you do have to go to the atm to subscribe (and pay) for them, otherwise they will expire worthless. There could be arbitrage opportunities when the difference between the nil paid rights and the mother share is not 0.258.

2. You can buy the mother shares before XR, get the entitled rights and then apply for a lot of excess rights. This way, you might get a lot more excess rights than the prescribed ratio of 42 for every 100 shares, so you might end up with a lower average price.

3. Buy after XR. Since you have 1 month to 1.5 yrs before the price recovers, you'll have plenty of time to pick and choose a right point to enter.



After the change in lot size from 1000 shares to 100 shares, things need not be so complicated anymore. I'll just go for strategy (3). I'll be looking at this to see if I can get just one more puff out of this used cigarette.

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Somebody staring at me

I wore a new t-shirt out today and noticed a few people, especially the guys, looking at me. I know because I saw their eyes trying to read what my t-shirt says. I took a selfie of myself and here's how I look:

Yeah, I know my face is something that comes out of a horror film. But really, I think it's my t-shirt that these people are looking at. I think my t-shirt is a good conversation starter. I'm wearing it for work and hoping one day my students, out of curiosity, would ask me what Financial Independence means. I'll be all prepared and ready to deliver my heart wrenching, inspirational speech about financial freedom with the soundtrack of Braveheart in the backdrop.


Here's how my fantasy reply goes:

1. I'll ask what they think financial independence is all about.

2. I'll ask them for some reasons why people work.

3. I'll ask if they had ever done anything that they will gladly do for free because it's exactly how they would spend their leisure time on

4. I'll ask if they would want to be able to do things like that for the rest of their lives

5. I'll ask how they would feel if I can show them a way where they no longer have to work for a living, and have all the freedom and time to pursue what they want to do (cue for Braveheart music)

6. I'll sell them a series of video links at $99.99 each and be freaking rich

6. That's what Financial Independence is all about.

7. Students leave my place, all teary but inspired. Each step they take take sparkles with the fire of passion. Each breath they take fills their lungs with air and purpose. Each heartbeat sends positive energy and optimism that vibrates throughout their body. Sounds coming out of their mouth are like angels singing. Light entering their eyes are rainbows brightening their vision.


Nah, most likely my students will mouth out an invisible huh, and proceed to play with their handphone on their way out, with me screaming at their backs to remember to do their work for the next lesson. Or they wouldn't even ask because their curiosity about the world had been deadened by the burden of the school. I bet they wouldn't even ask where I got my t-shirt from.

It's okay, perhaps my readers will ask. Or perhaps one day when my students are ready, this blog will be here for them.

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Closing off a tranche of LP 'bonds'

I handled my parent's portfolio since end 2013, and I'm still handling them now. Recently, my parents wanted to withdraw out 40k. My parent's portfolio is handled in tranches, according to the timing where they gave a lump sum to me. Since the first tranche of money is 50k, and the portfolio also consisted of Capital mall asia bonds (CapmallA3.8%b220112) that is going to be redeemed back in Jan 2017 (here), I decided to cash out the entire portfolio and return it to them.


When I first started out, the options are pretty limited. I looked back at my older article here on the philosophy behind the allocation. The fixed deposit for foreign banks are giving 1.25% pa for 2 years, while the local banks are giving about 0.55% for the same period. Now, the rates for local fixed deposit for 2 yr is doubled, at 1% pa. For POEMS money market fund (MMF), it was 0.5% pa in end 2013. Now the MMF is giving a return of about 0.9% pa and still rising. You can see the macro environment changing over the last 3 years. There isn't even a singapore saving bonds back then. If it's available, I'll definitely consider putting some money in it since it satisfies the criteria of handling my parent's money, which is a guarantee on capital and also a higher than fixed deposit return.


And so I did the allocation of the 50k. The terms are laid out in this post here. I'll summarise the gist of the terms here too. It's like a bond, with a fixed yearly yield of 2% pa, no fixed duration or maturity period, and I will guarantee that their capital will stay intact when they want to cash it out. So the actual instruments I used to achieve this aims can be found in this post here. Mainly it's pref shares from banks and high quality retail bond. There is a change in the portfolio because the pref shares from OCBC bank (OCC 5.1% NCPS 100), was redeemed back in Dec 2015, which I've mentioned in this article here. The portfolio didn't lose money, but it affected the returns because of the unexpected earlier redemption.


I took the money and reinvested in Frasers centerpoint ltd bonds (FCL Trea 3.65% b220522), and that's all the transactions there is until today. Let's see the returns over the 3 year period where I handled the money.


Initial capital: $50,000
Date of inception: 27th Dec 2013

Total brokerage fees in buying/selling: $342.13
Percentage of brokerage to capital invested: 0.68% total or 0.225% pa
Total amount of dividends given out: $2,000
Cash retained in portfolio: $3,881.43

Current value of portfolio (all in): $53,402.43
Total portfolio returns (inclusive of paid dividends): $55,402.43
Date of closing: 12 Jan 2016 (that's when the capital from the redeemed cap mall bonds will be returned)

Absolute profit: $5,402.43
Percentage return: 10.80%
Time period of handling portfolio: 1112 days
Average returns per year: 3.55% pa

That's fantastic, in my own opinion. I beat the Singapore savings bond over the same period of 3 years. Even at their best of 2.78% per year over 10 years (Issued in Nov 2015), their 3 yr average return per year is 1.48%. Their Dec 2016 issue is worse. At 1.87% per year over 10 yrs, their 3 yr average return per year is 1.03%.

Shit, I should just take a cut of 0.7% pa of NAV, as 'management fees' over the last 3 yrs in which I managed my parent's money. I'll get about $1k, and the average returns per year will drop to 2.86 % pa. Still very decent lol!


Reflections:

It had been a very good learning experience for me to start and close off this tranche of investment money. I had to think deeply about the benchmark I want to set, and also the criteria in which my allocation philosophy is based on. In addition, I also have to think about how to set aside the amount I want to distribute out so that I can retain the cash to pay for things like commission and more importantly, to offset any possible losses from early redemption from my parents and also from the inherent capital loss from buying retail bonds at above par value. In between, there is also switching of the portfolio allocation because of redemption by the issuer. I'm glad I didn't lose any money on my parent's behalf!

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I knew I loved you before I met you

I knew I loved you before I met you, so goes the song by Savage Garden. When I first heard that song, I thought it's just some mythology that some romantics had dreamed of. I don't really believe in love at first sight. Until it happened to me (okay, technically there's no 'sight').

That little kick, that little tremor, especially at night. The black and white pictures we took every other month. The vast amount of conversation we had regarding what we're going to do, and how we plan to do this and that. The huge amount of research reading we did and the youtube videos we watched.

All these for someone whom I've never met. How can it be?

I believe more and more these days that if we gone through all the various cycles of life, then we will empathize and understand why people do certain things. I think that's one of the first insight as a parent, that there are two persons in the world who loved you even before you are born. My parents, no matter how bad I was as a kid, or how naughty I am, loved me before I was born. So is everybody.

That's an incredible insight.

I'm waiting with fear and tribulation for more such experiences.

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Where did all my savings go?

I started tallying the past records of all my savings recently. My aim is to find out where all my hard earned savings go to. Did I 'waste' a lot of my life energy, which is captured in the form of savings, into frivolous stuff? It's a pity that I only started tracking seriously in 2008. I started work around mid 2003, so those 5 years until 2007 are like my lost years


The breakdown over the years

2008: $53k
2009: $50k
2010: $50k
2011: $53k
2012: $29k
2013: $25k
2014: $68k
2015: $64k
2016: $67k ?

I haven't close 2016 yet as there's still some weeks left before the year is up, so that's just an estimated figure. To sum it up, I've accumulated about $460k worth of savings over 9 years, ignoring the lost years from 2003 to 2007 where there's no data available. It averages out to be about $51k savings every year. There are good years and there are bad years, and here is the record that I've made in the most recent 9 years.

I checked back on my past records in order to find out more about the lost years between 2003 and 2007. I should have about $100k to $120k accumulated over about 4.5 years, since I started work in mid 2003. That means I save about $25k per year during that period.

How did I double my savings rate?

On reflection, I think the best thing I did was to buy an freaking expensive whole life plan. I wasn't financially literate back then and I was like a sheep out for slaughter. If I remember, the plan will cost me about $3k every month to service, and that makes me wake up to the fact that I might be scammed. I sucked it up and took it upon myself to find out more about investments, and this lead to that, and eventually I entered the stock market to pay even more tuition fees. It's silly how I resented the fact that I have duped myself to buy such an expensive whole life plan, but years after that incident, it turned out to be one of the most important inflection point in my personal finance. It's the pain of having been scammed that made me push through the hard work to read up all the stuff needed to understand all about finance.

The second thing was that I started tracking my expenses down to the cent. In the past, I had used the old school method of keying expenses in a notebook in my mobile phone, then transfer the data over to my desktop spreadsheet. In 2012/13, I switched to YNAB and never looked back again. An initial experiment to just track my expenses fully for 1 month lead to a start of a habit that lasted for nearly 10 years now. The thing about tracking expenses to this level of detail, is that it leaves no room for mental accounting. It is what it is. I make it a point to reflect upon the data I've collected every end of the year (like what I'm doing right now), and that lead me to believe that there's only so much room to cut expenses, and so I started looking at a lot more ways to squeeze in more work to earn a higher income. This lead to a series of actions to slot in more work and up my game.

Where did all my savings go to?

Adding up all my savings in my 13 years of work, it'll amount to $580k of my life energy. Not a small amount! It was quite a shock to see the figures like that. I'll show you roughly my breakdown below. The disclaimer is that it's really a rough figure, and while I tried my best to trace out what data I can especially during those years without proper record, it's highly possible that I could have missed out a few details. My aim is just to see where my hard earned savings went to.

1. About 41% goes to my portfolio, warchest and emergency cash

2. About 14% goes to cpf

3. Another 18% goes to renovation and furnishing of my flat

4. Home related expenses like downpayment and option takes up 9%

5. 6% is lost away plus bad debts (don't ask me that)

6. Down payment of cars takes about 4% (monthly expenses and installments is under expenses)

7. Another 4% is for partial capital payment for HDB to reduce the loan quantum

8. The last 4% is just a big fat unknown.

I add up all those categories as best as I can, and it more or less tallies with the $580k, so it's fully accounted for. The 4% big fat unknown could be things like headphones, guitars, games, computers, handphones and other stuff that I now classify under 'play fund'. These are the assets that I didn't include in my networth calculation because realistically, nobody will really buy them. It should also include money spent on vacation, also one of those things you use your savings on, but never really reflected in the asset part of networth calculation.

Is that okay? I guess so. I realize I don't have a lot of bad habits financially, so a bulk of my savings is invested in assets. Housing is one big part where I might have gone a little overboard, but it's also a place where I spent a lot of my time in.


What's the difference between expenses and allocating your savings?

Savings = Income - Expenses. We save so that we can use the money in the future, for fulfillment of both short and long term goals. Some people might save up for that nice bag they wanted to get for themselves, others might be saving up for that dream car. You can also save for retirement, so that you have a sum of money to draw down years down the road. Something one off. Expenses are usually more immediate and is chronic, so things like food, bills, even insurance premiums, pocket money for parents, all these are classified under expenses for me. You can even see expenses as spending from your cash flow while allocating your savings is more like spending from your balance sheet. I'm not an accountant, but I think the concept is similar to capitalised cost. I stand to be corrected.

I generally use my savings to advance my goals in life. If I'm a company, savings are like my retained earnings. You distribute some as dividends to reward yourself, but not excessively, so that you can continue to do the same good work you've been doing. Some of it you use it to buy other assets so that it can generate future earnings. If you don't know where your retained earnings go to, then you're not utilizing it the best it should be. I will use my savings to purchase financial assets so that it can continue to generate income for me to prepare for the eventuality where my human assets can no longer generate income for me.

That's my goal and I use my savings to advance it. And that's how I intend to do so until the goal is reached.

Could I have done things differently?

My wife saw me typing this and asked me what I could have done differently. I don't usually think things like that, but I gave a few ways:

1. I would have gotten married as soon as possible and get a flat as soon as I can

The rationale is that housing prices kept going up and it disadvantaged conservative people like me. If I got into a property without ensuring a certain amount of savings first, I could have been debt free by now. My flat could have been cheaper by 100k to 200k if I had bought it a few year earlier. But we also see cases where couples getting married when both are not ready or their mindset is not aligned, so they break up before they even get the keys to their flat. I don't think I would advice anyone to just get married and get a property asap - it's plain irresponsible. My wife added that we might end up in divorce if we married any earlier, because she is not the same person back then and I'm not the same person right now.

2. Start gearing up when I start work in 2003 to reduce/remove that lost years

I took 4.5 yrs to save 100k. Thereafter, it only took me about 2 years on average to reach the same amount. Why? I was putting so much limiting beliefs on myself that I have to break it one by one. That first 100k is the hardest amount I've ever saved because I've to learn how to have that mindset through trial and error. At the end of the research needed to write this post, I am thinking how great it was if I had shortened that journey. Imagine I could have saved another 150k to 200k if I had started tracking my expenses way way earlier! This is hindsight analysis and is just pure fantasy, I know, but one couldn't help but wonder. I alone knew that certain mindset is honed by battle, and even if there is a mentor to guide me on how to gear up my work, I might have a million excuses to avoid taking action. The teacher might be there, but the student is not ready to receive, so that's that.


In summary

I'm not here to preach about savings. I already know that if the reader is not ready, he won't even be here to read this. Or it wouldn't have that eureka moment where all things clicked inside you. I'm really doing it for myself, as a chronicle of what I had done and/or what I should have done. I have my own family with a kid coming soon, and I'm doing pretty decently in a job that I really like, have a roof over my hand, have a lao pok (old and used) car to drive around, and also building up my portfolio to generate dividend income for me. There's a tremendous sense of satisfaction and achievement in seeing the long term plans fall into place through careful planning, hard work and meticulous use of my savings.

I suspect that sense of gratitude and happiness is something I can never achieve by using that savings to buy any material things. This is who I am, and this is what I'm going to be. Working hard to save up, one year at a time.

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Financial competition

Lim, Tan and Lee sat around the marble table of the kopi-thiam. They are classmates that had not met each other for the past 30 years, so naturally they had plenty to share. The conversation flowed along, interrupted only by the periodic crunch of the kaya butter toasts and the sipping of kopi-o in the quaint porcelain cups, until it came to the topic about their children.

Tan started it first when he said that his son is very capable. He is earning $100k per year at age 25 as a banker. Lim said that was nothing to boast about. His daughter is already saving $100k per year at age 22 as a property agent.

Both of them turned their heads towards Lee, fully expecting him to top their stories. Lee looked back at them, and gently put down his cup of kopi-o back to its saucer. The porcelain tinkled like a bell, as if reminding the audience to keep quiet while the curtains are rolled back and the show is about to start.

Lee did not disappoint. He said that his son gave him a million dollars just after reaching 21 yrs old.

Wow, the two of them exclaimed, unable momentarily to process all the sound that they had just heard. Tan, who started all this, naturally asked how Lee's son manage to earn so much money at such a young age?

Lee's faced was sombre.

He said that his son bought an insurance and jumped off the building.

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Networth updates in 2016

Usually I'll do a networth update around end of the year, so with few blinks of an eye, we're here again after 1 yr. This year is a fantastic year for me, but I'll talk more about that when I reflect on the year 2016 and how grateful I am for the ups and also the downs. The last time I did my networth was back in 7th Dec, 2015, here.


There are so many ways to calculate networth, but I've always done my this way. It's assets minus liabilities. So, the assets part include:

1. Cash in my wallet
2. All the money in my various bank accounts
3. Cash holdings under mattress and milo tins at home
4. Money in my paypal account
5. All the money in the 3 accounts in my CPF
6. Money market fund account
7. Marked to market investment portfolios
8. Surrender cash value of whole life insurance plans

I do not include the value of my 5 room flat that I'm currently staying in, and also the value of the family car that I own.


Under liabilities:

1. Credit card bills
2. My portion of the HDB mortgage loan (total remaining loan amount divided by 2)

This year I finished the car loan of my previous car and paid up in full for my next car, so I do not have any existing car loans, unlike last year.

So, here are the tabulations:

2014: Assets: $226k, Liabilities: $220k, Networth: $6k
2015: Assets: $295k, Liabilities: $207k, Networth: $87k
2016: Assets: $351k, Liabilities: $188k, Networth: $163k

Compared to 2015, I increased by assets by about 56k. The increase in assets mainly comes from work. A tiny percentage comes from dividends and market returns of my portfolio. This is pretty in line with what I had planned, which is to add a minimum of 50k to my assets every year.

I had also decreased by liabilities by 19k. The bigger drop in liabilities is likely due to my car loan, which I had entirely paid up for. If only this is for my flat!

With that, my networth increased by 76k, which is slightly bigger than expected. This figure doesn't mean much for me, so it's just a number that tells me I'm on the right track. It had been a long while since my networth was nearly 0 in 2014!

The projection for 2017 is that my networth will increase by another 60-70k, so that will bring my networth to be higher than my liabilities. That means my assets will be twice that of my liabilities by next year. Since my liabilities consists mainly of my mortgage loan divided by 2, that means I can choose to cash out everything and pay off my HDB entirely if I chose to. But of course, I won't do that. It's still a thought though, haha

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