Want to retire? Start saving at 24 (08-Aug-10)

Today's ST was featuring some 'retirees' working beyond 65yrs.. because of passion, because of love of job... because of nothing to do at home... or because they need to? Reasons vary.. and what's yours? Do you see yourself working for a long long time because you love to or you need to? Do you love your job now and see yourself working with an iron rice bowl? Or do you want to plan something that is more predictable, at least financially?


The fundamentals of financial planning is to first acknowledge the fact that you want to be in a better position to determine your final destiny. Of course, there will be pple who prefer to take the 'cross the bridge when it comes', but I would take the former anytime. Why? Because all men desires a better life, and not struggle to make ends meet throughout my whole life.

How to?

1. Start saving. When I started out working, it's just money in money out without any consistent effort to keep track of savings. With excess, this money often goes out to stuff like holiday, luxury items... then followed by big ticket items like a house, wedding stuff, renovation... and for those with kids... it would be baby powder money.. education, classes... etc... so where's the excess for retirement savings? You need to force yourself to save.

2. Get yourself properly insured. Can you tell me anyone who will never be sick.. and never die? Superman also can die. Upgrade your H&S plan to a better one if you have not done so, and review your coverage to see if it's sufficient to cover yourself and your dependence. Singapore's statistics has shown that most Singaporean's coverage is only abt $50k, and that is highly under-insured. When crisis comes in the form of major illness, or death, it's not only you, but your loved ones who will be burden heavily, emotionally, if not financially. Be a responsible person to ensure you can protect or minimize the potential damange.

Key thing is, get yourself insured while you are young and healthy. Some pple want it also too late to get it.

3. Long term plan. Time is your good friend. If you do not make good friend with time, it will outrun you before you realise it. If you started working, you are in a good position to make things right for the first time. If you are half way through your career, re-think what you want for your future as you are now in a matured stage. If you are heading towards your golden generation, keep track of your existing assets and see if there's anything else within your means that is to your advantage.

Hope all these little reminders will put you on track on financial freedom. Do drop me a note or call me to review your financial portfolio. And do recommend your loved ones and friends and colleagues to me whom u think I can add value to them.

Starting early is always Prudent (06-Jun-10)

Recently, I was talking to a couple of my friends and it came to my surprise that their net worth is many times more than their peers.. that really puts me to shame even as a financial adviser. What's the big secret? It's as simple as prudent savings ever since they start to work.

What is the lifestyle of a typical working Singaporean? Let's have a simple illustration. Mr X, a young man 28yrs old, earns $3,500 as an engineer. Take home pay after CPF would be $2,800. House loan would be settled by CPF deduction automatically. Every month, he spends the following: $400 on meals, $300 on all sorts of bills (internet, mobile, PUB, SP, Town Council, etc), $300 for parents allowance, $150 on groceries. Balance is $1,650. Sounds gd isn't it? Wait... he now owes a car (w.insurance & season parking)... $900 gone.... + entertainment fee $200....+ holidaes in between... + an occasional luxury gd (e.g. iPhone?), then almost whole monthly savings wipe out.

Sounds familiar?

So how can we resolve this issue of money no enough?? Either you win toto, dump all your money on a World Cup underdog and pray hard, or the other way I can impart to you is via prudent savings in a good instrument. Says for example, we use back the same scenario of Mr X. For the same $2,800, he puts aside 15% of it to savings (somewhere), that's around $400. Balance is $2400. He spends the following: $400 on meals, $300 on all sorts of bills (internet, mobile, PUB, SP, Town Council, etc), $300 for parents allowance, $150 on groceries. The balance now $1,250. He now continues to own a car.... but maintain control on his entertainment fee and luxury items... still manageable.

What's the big difference? In the 2nd scenario, Mr X has put aside buffer for his future consumption... be in for investment account, retirement account, emergency fund account, he is definitely in a better position than before. Don't you agree?

So are you going to do something about it? Or remains status quo?

Never too early to build your nest egg (16-May-10)

Whether you want to retire in comfort or maintain a simple lifestyle, you should take retirement seriously. Yes, I do mean it. With the increase in life expectancy, as well as rishing inflation rate that runs so much faster than your bank interest rate, it's very logical to ensure your nestegg is well prepared for.

Ideally, the best time to start planning is the moment you start work. When you have time to build your nest egg, you do not have to play catch-up. You do not have to take a higher investment risk to meet your retirement goal.

BUT, be it whether you just started working, in your prime working years, or approaching your retirement, it is important to understand your own financial status at this very moment so that you recognize how to progress from here.

No better time to save than NOW (04-Apr-10)

If u read the Sunday Times regularly, on the 'Invest; column when they interviewed any particularly guy, they like to pose this question: "Are you a spender or a saver?" The conclusion I draw, to be "rich" eventually, the answer is always the latter. (But of coz the definition of "rich" varies from one to another.)

In true blue financial planning that I am dealing with, there's only a few aspects to follow. And the most fundamental one would be TIME. The power of compounding over time is simply so powerful that it should not be ignored, but rather to be utilized to your advantage. This is why any form of savings, be it in the bank, fixed deposit, endownment, (or even property?), etc.. should be done at the earliest possible time.

This is especially important for your retirement planning many years down the road where you really want to enjoy your golden years rather than continously working for survival. Retirement planning is an important equation that requires so much knowledge in how to make use of your CPF, how to leverage on your property, etc... that's where professional financial help is needed. (Me!)

For those who really wants to have clarity how your finance would work out to be in the medium and long run, do gimme a call for a detailed analysis. Good planning is definitely better than NO planning. U agree?

Tuition Fee Hikes at 3 Universities (19-Mar-10)

Almost 10yrs ago, when my mother sponsored me to go to NUS using her CPF money, a freshie like me would not have realize the importance of money until I grown up. I remembered my course fee was around $5,000/annum, now it has balloned up to $7,000+/annum.

It's a fact, quality education in Singapore doesn't come cheap. Imagine you have a kid now, 1yr old, 20yrs down the road, just by going on a humble 3% rate of increment in course fee each year, the course fee would be $13k / annum. Multiply by a 4-year course, it would be $52k++. All these are excluding those admin fee, material fee, or even medical or law courses, or even overseas courses. Where would your child get all these money from? Your CPF, or loan from bank?

You can help reduce the burden of your child (or rather yourself), by going for a simple education plan which takes time to grow your asset in a slow, but conservative and steady manner. These are the kind of instruments you want to have low risk, and a form of guarantee to have at the end of the savings cycle. Imagine yourself saving consistently in a bank, bearing a miserable 0.125% / annum? Wait for the cow to come home.

For more information, pls do not hesitate to contact me at 9876-0237 for a more comprehensive understanding on how you plan for your kid's education.

Low-interest carrots to tempt home buyers (17-Mar-10)

Latest home-loan skirmish also sees banks speeding up their approvals

By GENEVIEVE CUA

(SINGAPORE) A skirmish of sorts has broken out on the home loans front with banks pushing down their interest rates a notch or two over the past week or so. The first volley was fired by DBS Bank and the others have responded.

This is welcome news for home owners and investors who are looking to re-price or refinance their home loans. The rates also provide a positive backdrop to the upturn in the property market. But advisers are telling clients to be prudent and watch their debt servicing ratios.

To date, it appears that Maybank is offering the most attractive loan rates in terms of variable rate loans - and not just for the first 'honeymoon' year. Maybank's package, which is based on an internal board rate, starts from 1.18 per cent for the first year and edges up to 2.28 per cent in the third year.

For those who prefer a more transparent benchmark rate - typically Sibor (Singapore interbank offered rate) or SOR (Singapore swap offer rate) - the spread over the benchmarks has plunged to 0.5 per cent. DBS uses Sibor and OCBC uses SOR.

As always, there is no free lunch. Lower rates usually come with shorter lock-in periods. Borrowers who want certainty in the rate they pay over a longer period should be prepared to pay more and be locked in for two to three years.

The big question is the direction of interest rates. The widespread expectation among home owners is that rates will head up at some point in the next year or two. Rates are currently close to their all-time lows over 10 years. Between March 2000 and 2009, the lowest points for Sibor and SOR were 0.56 and 0.54 per cent, respectively, in 2003. Today Sibor and SOR are not much higher at 0.66 and 0.42 per cent, respectively.

Alvin Liew, economist at Standard Chartered Bank, says the 3 month Sibor rate could stay below one per cent over the next two years, in line with the bank's expectations for USD Libor.

'Moderate loan demand and ample SGD liquidity will also help to keep rates low. While we believe there is a possibility that the Fed would increase further the discount rate spread over the Federal Funds Target Rate (FFTR), this should be viewed as a continuation of financial market normalisation, and not signalling any change in the FFTR until late 2011.'

OCBC's head of treasury research and strategy Selena Ling says any upward rate movement is likely to be 'quite gradual'. 'The liquidity story is still intact, and none of the central banks are really talking about aggressive tightening.'

Sibor reflects the interest rate that a bank charges another for the excess SGD it does not need. It is influenced by US interest rates and domestic loan demand, says Mr Liew.

SOR, on the other hand, includes bank funding costs. It is typically slightly higher than Sibor; but the last few months have seen SOR fall below Sibor. While most banks peg their benchmark rates to 3 or 12 month rates, Citi is even giving customers a choice of one month Sibor.

Mortgage adviser Patrick Tan of Morgan Mortgage International is advising home owners not to leap too quickly into a long fixed rate contract as the differential in servicing costs between a floating and fixed package can be substantial. 'Even if the variable Sibor or SOR rate does move up, it will not move up too much or too quickly unless we see an inflationary scenario in our economy.'

Fixed rate packages start at about 1.25 per cent for Stanchart, but only for one year. The second year moves to a Sibor-plus rate. OCBC and Citi's two-year fixed rate are currently at 1.88 per cent per annum, with a two-year lock-in.

DBS says its fixed rate packages remain 'very popular' with about 60 per cent of customers opting for them. Says a spokesman: 'The response is not surprising as they were designed specifically to give home owners both the certainty in repayments over three years, and the flexibility to make partial repayments. The flexibility is usually not found in fixed rate packages.'

Dennis Khoo, Stanchart's general manager (retail banking products) says: 'We continue to see a balanced demand for both fixed and floating rate (packages).'

Citi said it continues to offer an interest offset feature where deposits in the offset account earn an interest which can be offset by up to 70 per cent against the loan rate. Says Vibha Coburn, Citi business director for secured finance: 'Our packages are tailored to our customers' needs... and we advise customers to take a long term perspective when planning their home loans, rather than go for the lowest price points.

Meanwhile, banks have also speeded up loan approvals. DBS says more than 50 per cent of loan clients get their loans approved with an offer letter within the same day.

Stanchart says it offers 'approval in principle' within 15 minutes at showflats, which it says is a first. A spokesman says: 'This way customers know how much they can afford to borrow without over-leveraging.' In-principle approval is based on basic information such as monthly ncome and other financial commitments. Final approval is subject to necessary documentation.

Providend's head of financial planning Eddy Cheong is advising clients to follow the prudent path. 'For a start, do your budgeting and know your limits. Don't assume interest rates will stay this low. Make sure you can still afford the loan if interest rates go up to 3 to 4 per cent.' The annual debt repayment over annual salary ratio should ideally be less than 35 per cent. Anything above 45 per cent is seen as excessive, he says.

Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.

Love Me, Love my Money Habits (14-Feb-10)

It's true. Money can affect a relationship when the issue of bread and butter comes into the picture. We cannot live purely on love as illustrated in TV drama. Disagreements and conflicts on money issues rank high among couples, along with in-laws and work stress.

And of coz, it is better to argue about having too much money to spend, rather than quarrel on where to find money to put food on the table. Imagine one day, one of your spouse loses his/her job, or when an unexpected hospital bill pops in, all without your preparation, I am quite sure life will never be the same. The article highlights the myth of financial issues that you should not be ignorant of.

Long term financial planning helps you in this area but helping you to prepare for unexpected crisis in terms of potential high hospital bill, or loss of income due to death, disability, or even critical illness. As for unemployment, and retrenchment, this is something you have to keep yourself economical valuable.

Be Bold but Agile, just like the Tiger (14-Feb-10)

Coming to the new Tiger Year, how should you proceed to invest in the market? Being through the economic crisis and recession, alot of investors have learnt their lesson well. Emotions play so much a factor in how you invest that you sometimes fight a losing battle, do you have this feeling that the moment you enter the stock market, the tide turns against you automatically?

The dollar-cost averaging is not a silly theory, in fact, it is one of the most fundamental theory that works if you are not a daily trader. Most "experts" will claim the Tiger year will be a volatile year with some sharp pull-backs and periods of turbulence, but that should not keep you on the side line. Those who miss out on the opportunity early last year would have sigh alot during the bull-run.

NTUC Income recently launched a campaign called "Get Rich Slowly", true to a certain extent, provided you have stay invested in proper champion funds with the right adviser looking after your portfolio on a regular basis.

For those keen to start their investment, or upsize their portfolio, do give me a call @ 9876-0237 anytime.

Higher Medisave to pay for Long-Term Treatment (29-Jan 2010)

"As the longevity of Singaporeans increases, the likelihood of us falling ill for a longer period in our lives increases as well"

With the ever increase in medical cost over time, the Medisave in your CPF account may not be sufficient through your lifetime. Depending on your working lifespan as at now, it could range anything from $5k to perhaps $30k? One big operation or surgery can easily wipe out your Medisave savings in one shot, if you know the market rate for hospital bill.

This is why it is so critical to upgrade your existing MediShield plan to a privatised "as-charged" plan so that you are able to minimize your H&S bills. Many of my clients have taken that extra step to ensure this, have you done so? Do not under-estimate how medical bills can eat into your financial plans. You may be in the pink of health right now, but can you guarantee that you will be healthy forever even if you eat well or exercise regularly? I can't.

If you are keen to protect yourself and your family from facing any medical financial crisis, pls ring me to find out more. I cannot prevent you from getting sick, but I can help cushion you financially if you use the right instruments to help yourself.

Most of the economic articles I read tend to give a positive outlook on the year 2010. Why? I guess it's simply because many companies have learnt their lesson during this crisis and have improved their strategies in how they do business. Alot of companines should be out in the woods, and should be back into profitable territory.

My sentiments followed these articles, but my personal feel is that the climb would not as sharp as the V-shape recovery in 2009 as the steam has to rest somewhere. As an IFA, we still firmly believe on a dollar-cost averaging concept, meaning to stay invested and do it on a regularly basis so that you would end up on a reasonable position when market shift in either direction. In the long run, you will stand to profit from economic run, verified by historical data.

If you are still standing outside the fence playing a waiting game, what's the trigger point? Wait for the market to run up and sigh, or wait for the market to decline and say 'heng ah...'. So wat's next?

Were your investment hit badly by the 2007~2008 crisis? What was your reaction? Pull out of the market and monitor from the side, stay invested, or put in more investment? Probably there are so many articles and books saying that the smart ones became millionaires, or even billionaires, during crisis.

As Warren Buffet said: "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." But unfortunately, not many of us think like Buffett, or to put it bluntly, many of us cannot afford to behave like Buffet.

As an independent financial adviser, we aimed to bring our clients to a bigger picture. We cannot make you rich overnight, but we can plan out a systematic plan (a combination of short/medium/long term) to ensure you can ride out the waves and reach your targets in a certain time frame. Isn't that wonderful? If you do not have a plan in place.. and simply live day by day, save month by month, are you confident of reaching your goal?

In this article, the author shared with us how the different age groups can react in order to meet your retirement nest egg. If you wish to put your thoughts into action, pls do not hesitate to call me at 9876-0237 to have a coffee discussion over it~