Me On Money Matters

Not paying his full share

So my brother and I went for breakfast again. He was not enthusiastic about having breakfast downstairs, and suggested McDonalds. We went to the Central as we had to return an overdued library book too. (I ate the McGriddles despite saying I would not eat it again.)

I wanted to pay my brother first because I feared he would pull a "tit-for-tat" on me — he owed me $8 for a dinner a few days ago. But then I thought he would not do it.

After breakfast, he said this cleared his dinner debt. I asked him how could it be? The breakfast was only $6. What about the remaining $2?

My brother then half-jokingly said petrol and parking costed money too.

I'm sure my brother didn't know it, but he touched on a very sore point for me. The thing I hate most is for a person to use petrol and parking costs to not pay his share of the costs.

In this case, the thing that annoyed me the most was not the money, but how to account for it. What am I going to put in my expenses tracking? A treat or a loss? (For the record, I'm not recording this item.)

Cheap food aplenty

News: CASE finds many cooked food dishes being sold for S$2.50 and below

Date: 27 June 2008. Source: CNA.

Consumers who feel that eating out is getting expensive will be glad to know that 60 per cent of stalls surveyed are still selling their favourite dishes at below S$2.50.

This is according to the Consumers Association of Singapore (CASE), which conducted a recent survey of 388 hawker centres and coffeeshops around the island.

I agree that you can still find cheap food (now defined as $2.50 instead of $2), but 60%?

A possible explanation: I noticed after the recent hike in food prices, many hawkers have added a new price point at $3 or $3.50, but they still retain their original $2/$2.50 price point for the cost conscious. (They have small/medium/big options instead of the previous small/big options.)

I have not been able to buy cooked food for $2 for a long time. It used to be $2 to $2.50 about ten years ago. Then, it became $2.50 to $3. Now it's $2.50 to $3.50 (a wider spread because some hawkers still serve $2.50 food — I usually go for the smallest portion).

What really kills my food budget is the occasional western and fast food meals. A fish 'n chips meal (at a coffee shop) is easily $6. Fast food is also easily $6 to $8. I don't avoid these "extravagant" meals, but I try to keep their frequency low.

Another 5%

News: Electricity tariffs to rise 4.98% from next quarter

Date: 25 June 2008. Source: CNA.

Electricity tariffs will go up by 4.98 per cent or by 1.19 cents per kilo watt per hour (kWh) for all households from the next quarter, beginning July 1.

Singapore Power said the hike is due to higher electricity costs arising from higher fuel prices.

The forward fuel oil price is 11.03 per cent higher than that of US$74.40 per barrel for the current quarter.

Just one advice: use less electricity.

I use 60 kWh of electricity, 1 kWh of gas and 2.2 cubic metre of water per month for two persons living in a 3-room flat.

To save even more, I have to aggressively switch off devices when they are not in use.

Three candidates: phone, modem/router and printer.

The phone can be turned off during the day, when no one is around.

The modem/router are left on at night because I usually surf to sleep.

The printer is turned off already, but it still consumes power. My brother doesn't like to switch off the main switch.

One way to save cost is to use battery powered devices and charge the batteries elsewhere! However, this is not a real savings, but just shifting the cost to someone else (usually your employer).

Gambling is big business

News: Gamblers spent estimated $4.2b on 4-D

Date: 23 June 2008. Source: ST.

Horse races and Toto also popular, with people spending $1.9b and $535m respectively

SINGAPOREANS gambled away billions of dollars last year, with the bulk of bets going towards 4-D lotteries, according to a Straits Times check.

The survey also revealed that residents spent hundreds of millions on both horse racing and Toto, with bets on the ponies on a sharp trend upward.

Gamble if you like, but don't bet too much.

Lottery is a willing tax on the poor. Is it their only way to get rich? Yes — if you are talking about instant result. But without money management skills, they won't stay that way for long.

The curse of windfall money


Date: 23 June 2008. Source: TNP.

YOU'VE hit the jackpot. Your life has changed. But is it for the better?

The answer is not always 'Of course!'.

For Mr L Chew, 50, life was better - but only for a few months.

He went from jobless to a winner to a weeper - in six months.

He was down when he was retrenched, soared when he won almost $390,000 in the Toto lottery, and is now down again with less than $200 left in his bank account.

If you say this won't happen to you, I got one word for you: it will.

If you have been managing finances in the range of $1,000 to $10,000, adding an extra zero or two will make the money seem infinite, hence you will spend without any inhibition.

To prevent this, you need to plan all the uses of the money before you get it. 50% to 75% should be for earmarked for investments. If you're conservative, then use the money to get fixed income.

It is unfortunate that the CPF money ends up the same way. The retirees don't know how to manage such a big sum of money and spend it within a few years.

Not financially savvy

News: Under 30, employed and deep in debt

Date: 22 June 2008. Source: ST.

Young adults are not just facing credit woes - more of them are also becoming bankrupt

They are below 30, employed and mired in debt.

This is the fastest-growing age group of debtors, say credit counsellors.

On average, they owe $55,000 to about seven creditors, according to new data from Credit Counselling Singapore (CCS), a non-profit group which advises debtors.

Everyone has to learn to be responsible for their own finances. The school doesn't cover it at all and you're not likely to learn from your parents — most adults know zip about it.

She borrowed $50,000 from parents to fund her shopping

Too much, too soon.

If money had not been so easily earned for Joyce (not her real name), 27, she feels she would not have chalked up her $200,000 debt over four years of wild spending.

But it all seemed so rosy when the business graduate started promoting credit cards fresh out of university in 2003.

The job, which also pays her commission, allowed her to take home $20,000 to $30,000 a month.

Earning $20k/month promoting credit cards? Wow. You know how it is. Easy come, easy go.

I'm surprised that being a bankrupt does not discharge you from your financial liabilities. I believe that's the case in US. That's why the credit companies like bankrupts — they are not allowed to declare bankruptcy again for seven years.

He started drinking, gambling after break-up with girlfriend

It all started with a girl.

When James (not his real name), 27, broke up with his girlfriend in 2006, he found himself indulging heavily in alcohol and gambling.

I doubt the $15k would last long, even if James got it back. Also, I don't advocate lending unsecured loan to anyone, no matter how close he or she is to you at the time — relationships change over time.

Parallel-imported goods

News: Cheaper versions of popular brands preferred amid rising grocery prices

Date: 21 June 2008. Source: ST.

Parallel-imports of popular brands are making greater inroads into local minimarts

WANT a bigger bottle of Coca Cola at a cheaper price?

Prime Supermarket is selling it at $1.95 for a 2.3 litre bottle. But that is if you don't mind that the label is not in English - Coca Cola is written as 'ke kou ke le' - or that the taste is slightly different.

It is not made in Singapore but China.

I wonder why the taste would be different.

I find it interesting that parallel imports are legal in Singapore. So the China-pressed CDs are perfectly legal despite the warning on the CDs themselves.

I support using parallel imported goods to save money. But buying pirated goods is another matter. Some people view both as just ways to save money, but one is legal and one is not.

Fear in the market

News: Investors take flight from Asian equities as inflation fears mount

Date: 21 June 2008. Source: ST.

China has taken the largest hit, with funds selling billions' worth of mainland shares

FEARS that rising inflation will choke Asian growth have triggered a dramatic flight of foreign funds out of regional shares.

The outflow - a stark reversal of the trend a year ago - is a sign that foreign investors are no longer sold on the Asian boom story, including China's astronomical growth.

The sell-off has been widespread and has left Asian markets bleeding.

I am nervous because I am vested. I expect to "lose" 50% of the value in the next 2 to 3 years. Let's not get into my buy-high sell-low strategy.

On the other hand, if I weren't vested, I would say, "we live in interesting times".

Compulsory tax e-filing

News: Compulsory tax e-filing for firms with 100 or more staff

Date: 21 June 2008. Source: ST.

Those that fail to do so in next reporting period face $1,000 fines

PUSH has finally come to shove with the taxman now set to impose fines on firms that continue to resist filing staff income statements electronically.

The crackdown announced yesterday has come after repeated attempts by the Inland Revenue Authority of Singapore (Iras) to persuade companies with 100 or more employees to e-file fell short.

I admire the Singapore Government when it comes to rolling out new policies: it can be very patient.

Beware of the Land Acquisition Act


Date: 18 June 2008. Source: Electric News.

When trying to sell house, owners surprised to find out Government acquired their land

THEY were offered close to $2 million for their two-storey shophouse and the back lane behind it.

But while trying to retrieve an online copy of the title deed to the back lane, the Goh family found out that the tiny strip of land had been acquired by the Government in an island-wide exercise in April last year.

As a result, the buyer, a property developer, slashed $290,000 off the purchase price.

The family said they did not receive any letter informing them that the back lane had been acquired.

Neither did they get any compensation.

You don't really own the land, even if it's in your name.

Note: the land was acquired under the Street Works Act in this case, which was worse because no compensation was given!

Singapore is a really small place and the Government likes to redevelop places from time to time. SLA (Singapore Land Authority) doesn't hesitate to use the LAC to get back land at... cost price. Strangely, SLA has no qualms about selling land off at market price.

Tuition is lucrative business

News: Tutors getting private bankers pay

Date: 15 June 2008. Source: ST.

From $220 monthly takings to $20,000

In the first three months of becoming a full-time tutor, Mr Phang Yu Hon earned a mere $220 monthly from his one student.

Now, the physics tutor has close to 90 students and earns about $20,000 a month.

The 41-year-old gave up his research engineer job after four years at the Ministry of Defence in 1994 and decided to tutor full-time.

Tuition is good money, but it isn't passive and it doesn't scale beyond one person.

Key exports down

News: Singapore's key exports down 10.5% in May on-year

Date: 17 June 2008. Source: AFP.

Singapore's key exports fell 10.5 percent in May compared with a year earlier, with pharmaceutical shipments down nearly half amid lower exports to the United States and Europe, the government said on Tuesday.

The fall in non-oil domestic exports (NODX) was the largest since December 2006 when they dropped 14 percent, Fortis Bank economist Joseph Tan told Dow Jones Newswires.

NODX fell in May after a 5.3 percent gain in April, said the trade promotion body, International Enterprise (IE) Singapore.

On a month-on-month seasonally adjusted basis, NODX dropped 9.8 percent last month, compared with a gain of 1.6 percent in April, it said.

I expect it will take a bit more time before the impact is felt.

Things to look out for when changing money

My father just told me two interesting tales with a money changer.

When changing to US dollars, look out for the year. Make sure they are new notes from 2003. These have more counterfeit features. Some money changers will give you old notes, but will not accept them in return.

When changing to a currency that has a very large face value, such as the Vietnam Dong (US$1 to 16,285 VND), do not accept notes with small denomination, such as 1, 10 and 50 VND. They may not be accepted despite being legal tender. (My father said 1 VND was not accepted, but the others were.)

In other words, always know something about the currency.

A look at the Growth Dividends (2008)

The Growth Dividend is distributed based on your age, income, type of dwelling and NS-status.

Income has three tiers: $24,000 and less, $24,000 to $100,000, above $100,000. If you earn above $100,000, you only get $100, regardless of your type of dwelling.

Type of dwelling also has three tiers: 1-3 room HDB, 4-5 room, executive HDB and cheap private, and expensive private. The annual home value is used: $5,000 and less, $5,000 to $10,000, above $10,000.

The annual home value is the estimated annual rent. It seems to me it is rather out of line with rent in the real world.

You can see that $2,000 p.m. is the cutting point for "poor". Rich is defined as $8,333 p.m. Middle class is anywhere in-between.

If you are poor, you better stay in a 1-3 room HDB flat, because the Government will give you the most ($400). Otherwise, if you stay in a 4-5 room or executive HDB flat and are not rich, the Government will give you $300. Still not too bad.

A fairer way to distribute budget surplus?

The Government likes to use the type of housing as a proxy for your wealth, hence that determines how much of the budget surplus you get. I agree that using the type of housing is very convenient and relatively accurate.

How about people who are asset-rich and cash-poor? They can choose to downgrade.

There are two problems.

First, paradoxically, some people cannot afford to move out and continue to live with their parents. They will receive a smaller handout.

Second, there are only a few type of housings: 1- to 5-room HDB flats, EA, Condo and landed.

To be absolutely fair, the Government needs to know your net worth. You give permission/authorization for the Government to find out your net worth from various sources, and the Government will work out the handout you are entitled to.

A few obvious categories are:

  • Age
  • Income tax
  • Bank accounts
  • Investment funds
  • Properties
  • Transportation
  • Top 10 high value items

Note that the Government is not interested to know how much debt you have.

You can choose not to declare a certain category if you value your privacy in that area, but you will score much lower and hence get a much lower handout.

It should not be a problem for the Government to find out these information for assets located locally. However, it will be a problem for overseas stuff.

A word of caution

News: Look before you leap

Date: 4 June 2008. Source: BT.

LONG-TERM interest rates have started to rise. This hardly matters for many retail savers who put their money in short-term fixed deposits of mainly three to 12 months. But some who are switching out of their low interest rate fixed deposits (FD) into OCBC Bank's 5.1 per cent preference shares currently on sale should keep tabs on this event.

Enthusiastic retail investors of preference shares may want to do more research into long-term interest rate movements and how they may impact the price of their securities.

You better pray that in five years time, it will be a low-interest environment, so that OCBC will call the shares.

OCBC already has three NCPS:

  • 5 million shares of 4.5% NCPS callable on 28/1/2008, 28/1/2013 and then on each dividend date
  • 395.8 million shares of 4.2% NCPS callable on 14/1/2009, 14/7/2013 and then on each dividend date
  • 4 million shares of 3.93% NCPS callable on 20/3/2015 and then on each dividend date

Good publicity for OCBC

News: OCBC lauded for including smaller investors in offer

Date: 4 June 2008. Source: BT.

IT'S not often that so-called mum-and-dad investors flex their muscles to show that they do matter to the big institutions that take them for granted, but it happened this week.

It was the rush by such investors for OCBC Bank's preference shares that allowed the bank to close the placement tranche of its $1 billion offer within a day. It was three times oversubscribed.

One trader said the scene at some bank branches resembled a 'reverse bank run', with housewives and elegantly-dressed tai tais jostling to put in their subscriptions before the noon deadline yesterday.

And why not? OCBC is offering a bond-like instrument known as preference shares that pay a dividend of 5.1 per cent, well above the paltry interest paid on fixed deposits.

There is pent-up demand and there is a lot of liquidity. OCBC got good publicity because it was the first to take advantage of it. This reminded me of Standard Chartered's e$saver rate of 1.88% a few years back. Big news back then.

OCBC caters to retail market

News: Retail investors get bite of $1b OCBC share offer

Date: 3 June 2008. Source: BT.

FRUSTRATED retail investors who were locked out of DBS Bank's $1.5 billion preference share sale last month have been promised a better deal from OCBC Bank.

The smaller bank announced yesterday that it would sell up to $1 billion of preference shares, and by last night, institutions had already placed orders for more than $1 billion worth.

But OCBC vowed that retail investors would get a fair chance to buy the shares despite the red-hot demand, even if institutional orders have to be cut back.

Why does OCBC insist on selling to the retail market? As a publicity exercise?

Risks of preference shares

I took this from a post in CNA's forum, after much editing for proper English:

Interest rate risk: if the risk-free rate shoots up to above 4.7% - 5%, you will see the p-shares trading at par or just below par. If the risk-free rate goes above 5%, the p-shares will be traded at below $100 to compensate for the risk-free yield.

Default risk: in general, p-shares are ranked just above common shares in terms of rights to claim when there is a illiquidity of the company. The p-shares have lower priority in terms of claim compared to junior and senior bonds.

Liquidity risk: p-shares are quite thinly traded, you may have trouble cashing out.

Non-cumulative risk: if the board decides not to pay the dividend for p-shares this year, there will be no rollover of accrual dividend to next year.

Issue of more attractive dividend p-shares risk: we are seeing a sell-off in 4.2% OCBC NCPS (Non-Convertible Preference Share) and 4.5% OCBC NCPS due to this reason — the shareholders are selling the shares to arbitrage the difference in interest rates.

Credit risk: if Fitch were to downgrade OCBC's rating, the bond yield would have to go up to compensate for the higher risk, which would also put pressure on the p-shares's price.

OCBC preference shares

News: OCBC offers S$1b preference shares to retail and institutional investors

Date: 2nd June 2008. Source: CNA.

OCBC Bank is offering S$1 billion worth of preference shares that will pay a fixed annual dividend of 5.1 percent.

The move is a bid by the lender to strengthen its Tier 1 capital base.

The bank says up to 9.5 million shares at S$100 each will be allocated to institutional and retail investors.

Another 500,000 shares, also at $100 each, will be sold to retail investors through the automated teller machine network of OCBC and DBS.

The dividend is paid twice a year in June and December.

The minimum subscription is 200 preference shares or S$20,000, and thereafter in multiples of 100 preference shares or S$10,000.

It seems there is a pent-up demand for low-risk high-interest investments. The OCBC preference shares for the retail market were reportedly sold out within a day.

There are a few ways you can interpret a high interest rate preference share. One of them is that interest rates are moving up. In two to three years time, 5.1% may not be that attractive any more.

Thoughts when looking at old photos

I love to look at old photos. By old, I mean anything before 1980, but the older the better!

Photos from the '80s onwards are old, but they merely invoke nostalgia in me. Very old photos, such as those from the early 1900s, make me pause and wonder about the life during then.

Many things were still not invented and discovered then, so we don't expect electrical appliances, computers or even televisions, but a lot of stuff that were just recently invented/created could have been done so back then.

Two examples: stories and board games. I won't touch on stories, but board games were what I was wondering about when I recently stared into old photos from the early 1900s.

Almost all board games are very recent. I'm talking about "Euro" board games here. Most of the popular — and good — ones are from the late 90s to present day. Do you mean no one thought about board games before then?

You don't need any fancy materials for a board game. Just some cards, a board and a design. It could have been designed in 1900. So why not?

I won't answer the "why not", but the thought of this always gives me hope: there are so many things that are still undiscovered and uninvented that everyone has a chance to do it — if they put their mind to it.

Euro-board games are still a niche compared to the usual American classic board games of Monopoly, Risk, Cluedo and others.

The best selling Euro-board game is Settlers of Catan (SoC). It came out in 1995 and sold over a million copies in its first few years. This was the game that introduced Euro-board games to the world. Another best seller is Ticket to Ride (TTR). It came out in 2004 and sold over 300,000 copies.

I was still studying in 1995. I could have invented SoC if I were creative enough. Okay, so I wasn't. But wait, I had nine years before TTR came out, and I still didn't think of anything?

A cup of McCafe coffee

Are you entitled for free coffee refills if you upgrade to the McCafe coffee for an extra $1?

The answer is simple: the fact that you choose McCafe coffee means that you will not drink the normal coffee, hence the question is meaningless.

Giving and receiving treats

I don't like to receive treats for no good reasons. Giving people a lift is not a good enough reason for me. Okay, I accept small treats, but I do not like to be treated the entire meal.

Being treated is a slippery slope. What if I hang out with someone just because I can expect a free meal? I don't like to do things because of unrelated economical incentives. I like to do things because I want to.

On the other hand, I seldom treat others. This is a habit I must change. Giving small treats is fine.

When I go out with my colleagues, I like to show my appreciation by treating the driver a drink or dessert, but I am usually the slowest eater, so I can't do it!

What I sometimes do is that I insisted on paying first, then when the buyer gives me back the change, I take less back. This feels more acceptable than paying for both parties later on.

This only works when you buy from the same drink/dessert store, though.

Expenses, looking ahead

I already have a ton of expenses lined up for the next few months.

June: MX-5 insurance, MX-5 road tax.

July: income tax.

August: CB400F insurance, CB400F COE, CB400F road tax.

September: TV license. (I pay the landlord in this month even though it is due to MDA only in December.)

October is currently clear.

November: MX-5 inspection, YBR inspection, YBR insurance.

December: MX-5 road tax, YBR road tax.

I will try for $1,500 again in September, October and possibly November!

It looks that I can expect eight months of high expenses (above $2,000) and just four months of low expenses (below $2,000) this year.

Notice something about my expenses? Almost all of them are vehicle related! The MX-5 is a huge drag on my finances, in particular.

Expenses for May 2008

Category Jan Feb Mar Apr May
Basic 902.71 936.18 2,294.03 817.89 883.92
Cash 182.72 194.95 212.00 304.00 194.45
Credit Card 103.10 44.00 194.50 0.00 0.00
Vehicle 282.32 830.80 196.07 893.33 262.66
Others 304.15 200.00 326.10 239.95 105.89
Total 1,775.00 2,205.93 3,222.70 2,255.17 1,446.92

I met my primary target of spending less than $1,500, but failed my secondary target of $1,300. The last week was tough as I tried to watch my spending.

Basic expenses were higher than expected due to double deduction of phone/Internet bills. I don't understand why Singtel sometimes deducts once a month and sometimes twice.

Cash withdrawal looked lower due to an extra $50 from last month.

I was still not able to get Others to zero. There are always frivolous expenses every month.

En-Bloc Blues

I googled en-bloc trying to find more about it. To my surprise, not everyone gains. There is a minority who doesn't want to move, but their rights are overridden — as long as 80% agrees.

It seems you should not expect to stay very long in a condo. The en bloc'ed condos are only 10+ years old! Of course, this is assuming you stay in a prime/desirable location.

There are two ways you can reduce the chance of an en-bloc:

  1. Be on the management council (MC). Make sure to keep the estate up to date!
  2. Make sure the ratio of owner-residents to owner-non-residents and owner-investers is high. There should be at least 40% owner-residents.

HDB flats are also subjected to en-bloc, called SERS (Selective En-bloc Redevelopment Scheme). However, this is limited to flats older than 30 years.

En-bloc is making a mockery of freehold and even 99-year lease. Might as well make it a 10-year lease!

I've always told myself, don't be too sentimental about places in Singapore. They don't stay put for very long.

Penny-wise and pound foolish

I just realized today that I could improve my notebook's speed by adding a 512 MB memory module. Why didn't I? Because the notebook belongs to my company.

I bought my own external keyboard, mouse and serial-to-USB converter — all unclaimable — but why didn't I consider the memory module? Perhaps it was because it was not portable to another machine. (In theory it is, but in practice, memory modules get obsolete every few years, so they cannot be used on newer machines.)

This is foolish. I wasted so much productivity waiting for applications to open, and the general unresponsiveness increases the stress level and dissatisfaction towards the notebook.

Too bad I only realized this at the notebook's EOL (End-Of-Life).

Reusing pre-paid envelopes

I was told it is possible to reuse a pre-paid envelope by taping over the printed address.

I was skeptical, because the envelope stated, "postage will be paid by addressee", not "postage has been paid by addressee".

In any case, I emailed SingPost to find out. I got an answer the same day. Very quick service.

If you tape over the whole address, the addressee has to pay for the postage, plus a $1 fine. If he declines to pay, the letter will be returned to the sender, who has to pay the fine then.

If you don't tape over the whole address (showing the business account no.), it was vaguely implied that the letter would be delivered to the original addressee, as they go by the business account no. .

The most important thing I found out was that it was not illegal.

Three Important Numbers

The three numbers are, 2.6, 4,500 and 8,000.

2.6 is the interest rate for HDB loan. It is pegged at 0.1% higher than the interest rate for CPF ordinary account. I find it strange that CPF board still keeps a relatively high interest rate of 2.5%, when no commercial bank has been able to offer this rate even for time deposits for the past few years.

The peg from the HDB loan interest rate is not a good enough explanation. It is merely a law and laws can be changed. So, it is possible for the CPF board to offer 2% and HDB loan to remain at 2.6%.

2.6% is a very important number because it decides whether 30-year loans are feasible or not. If you borrow $200,000 over 30 years at 2.6 p.a., your monthly installment is $801 and you pay 44% more due to interest. At 4% p.a., you pay $955/month and 72% more!

$4,500 is the maximum income that is subjected to CPF contribution. Your ordinary account contribution is $1,035 till 36, $945 till 46, $855 till 51, $585 till 56, $517 till 61, $157 till 66 and $45 after that.

If you want to pay for a flat entirely using CPF, be sure not to exceed the maximum ordinary account contribution before age 46 or 51, or you need to pay partially in cash after that.

$4,500 came about from the 10-year CPF masterplan unveiled in 2003. It was set as the projected income at the 80th percentile of the population in 2005. This number is basically where the Government draws the line between the less well-off and the more well-off.

Unlike some other numbers that were unveiled in the masterplan, this number was not subjected to inflation. Despite that, I believe this number will be revised upwards due to inflation.

$4,500 is a very important number because it determines how much CPF you can have, and that determines other things.

The Government has two reasons to keep the CPF contribution cap low. One, it lowers employers' cost due to CPF matching. Two, it gives more cash to the workers, which promotes spending.

$8,000 is the income ceiling that HDB allows for purchase of new HDB flats. It has been called unrealistically low in recent years, but HDB has rejected increasing it.

This number basically sets a limit to the price of new HDB flats. But not always — there are new HDB flats costing $675,000. Can you afford one even with $8,000? The answer is yes, because after 20% downpayment, you are looking at a $540,000 loan and the monthly installment is only 27% of $8,000. There isn't much headroom, though.

Do your homework!

News: Search for dream home turns into nightmare

Date: 21 May 2008. Source: The Electric New Paper.

Couple can't buy flat and may forfeit $8,000 in fees because they can't get housing loan

AFTER several failed attempts to get a new HDB flat, he was ready to give up and pay more for a private property.

Then, home-buyer Dave Tan had a stroke of luck - or so it seemed. He found a new five-room HDB flat at City View @ Boon Keng.

This is the second public housing project to be built and sold by private developers. Hoi Hup Sunway Development is the developer.

Even though it cost a whopping $675,000 - not cheap for a new HDB flat - Mr Tan was okay with the price.

But his happiness was short-lived.

The 30-year-old and his fiancee, who are getting married next year, found out that they may not be able to finance their new home.

An advice to first time buyer: check your loan eligibility first.

What does it take to buy a $675,000 flat?

You need to pay a downpayment of 20% (10% cash and 10% CPF), so you only need to borrow $540,000. A 30-year loan at 2.6% p.a. means an installment of $2,162 per month. Not exactly a cakewalk.

Cash Over Valuation

It is extremely unlikely to buy a resale flat without COV. COV is a problem because HDB only lends you up to 90% of the valuation for resale flats. Forking out 10% of valuation on your own is probably no problem, but COV can range from $10,000 to $100,000 more!

COV is acknowledged by HDB, but it doesn't do anything about it.

Personally, I feel there is something wrong with the valuation method if every flat has a COV component. HDB is saying the flat is only worth so much, but everyone else disagrees and asks for something more. This also shows that there is too much cash around. The COV acts as a sponge to absorb the extra cash. (Singapore has many such sponges.)

Making money from /reading/ my blog!

No, not yet. :-)

I am very particular about my use of English, especially written English. At the least, it must be proper English.

How can I encourage readers from pointing out my mistakes?

By offering them an incentive to do so.

The first mistake (of any sort) is worth $0.01. Every subsequent mistake doubles the payout. By my tenth mistake, I would have to pay $10.24! (Not including $10.23 for the previous nine mistakes.)

I'm not so confident. Let me start with $0.001. It will cost me only $1.024 for my tenth mistake then.

Screw the manufacturing!

MAS decided to use the currency exchange to combat inflation instead of adjusting interest rates.

The reason is simple. Interest rates affects just about everyone: car and house "owners".

In theory, the prices of imports will be unchanged or cheaper. But they are not so. A number of explanations are given:

  • Shortage (regional or worldwide)
  • Old contract prices (especially oil)
  • Profiteering

So far, nobody has mentioned the impact on exports. This just drove the last nail into Singapore's lack of competitiveness in manufacturing.

Although manufacturing is mostly low-end jobs, it is a source of jobs for the lower educated. Where are they going to find work next? Strangely, it affects Malaysians too, as these jobs pay too little for most Singaporeans, even the lower educated ones.

Some higher level skilled jobs will also be lost, especially engineering ones that support the manufacturing process.

TV license

News: Won't pay TV licence? Expect a court summons

Date: 19 May 2008. Source: ST.

THE annual crackdown on people who have not paid their $110 TV licence is under way.

Several thousand home owners who have not paid up so far will get a court summons, and if they ignore this, they risk arrest and fines of up to $40,000.

There are no ifs or buts: All households with working TV sets must pay the licence fee.

Some 925,000 licences were issued as at Dec 31 last year.

But the Media Development Authority (MDA) estimated that about 100,000 households, or one in 10, do not pay the annual licence fee. The ratio has remained fairly constant over the years.

10% of the households which should pay TV license do not do so. Ever wondered how many households do not have TV license?

The General Household Survey 2005 shows that there are 1,049,000 households, up from 923,300 in 2000. I estimated 1,071,731 households in 2006 based on the Yearbook of Statistics 2007. (It was not given directly.)

About 13.7% of the households do not have TV license.

If I have a choice, I would cancel my TV license. I barely watch any TV programs. However, I'm not able to do so because I still have the TV. My replacement for it will be a monitor — no TV tuner.

You need to pay for the radio license if you don't have a TV license. However, I don't need to pay it because I have no radio at home. :-)

For-profit blogging

ST Digital Life (20 May) had an article on blogging and it featured five bloggers who got nice income streams doing so.

  • Poly student (19): $200 to $500
  • Channel rap (19): $500 to $2,000
  • Doctor (39): undisclosed
  • Law student (23): $1,500 to $2,000
  • Model (23): $4,000 to $6,000

Pretty good for them, I must say. The first thing that came to my mind was whether they declared their income to the IRAS properly.

The article noted that these are not constant income. There are some weeks they don't get ads and hence not get paid.

With the exception of the doctor, all of them write about their own personal experience. The doctor reviews food. Xiaxue was not featured, but it was mentioned in the article that she could earn about $1,000 a week.

There are three ways to earn the money:

  1. The blogging website inserts banner ads that match the contents of the blog. The blogger is paid for each click-through.
  2. An advertiser places its ads on the blog for a fixed time. The blogger is paid based on the number of unique visitors (minimum 20 per day). The rate seems pretty low to me, at $5 for a 30-day ad.
  3. The blogger may review a product or service as part of his blog. He is paid $15 to $250 per post, but overseas advertisers may pay US$50 to US$500!

I feel that paid reviews are a slippery slope. This is more so because most of them are not stated as such. You thought you were reading a review from an enthusiastic user? Think again.

I am not opposed to ads on my website. I think it's a good opportunity to apply some economics.

My website now commands a value of $0/month for ads. This is the lowest possible — I won't pay advertisers to advertise on my website. That's negative income.

The next level up is of course to sell banner ads for a fixed amount of money. I may set a price of $1 for a month. If there is no competition, then the ad is allowed to continue for free up to a year! If there is competition, then I'll set up an ebay auction to see the real worth of the advertising space.

One note. A website has an infinite advertising space, but as a guide, the real space is limited by the contents. I'm sure you have seen ad sidebars that stretched way beyond the article. That's just greedy.

HDB's Mission

HDB has four mission statements. The first one is,

We provide affordable homes of quality and value.

Recently, I came across some criticism of this online. The posters felt HDB had not lived up to this statement.

The most usual complaint is of course that HDB provides market-based subsidy instead of a real subsidy.

According to one poster, a 5-room HDB flat costed $35,000 in the 1970s, $70,000 in 1990 and north of $200,000 in 2000. Starting pay for graduates was $1,000 in the 1970s and $3,000 in 2000.

(I have not verified these numbers, but I do think there is selective representation. Graduates are a dime a dozen in 2000. They are much rarer in 1970s. I would say a graduate in 2000 is like an 'O' level degree holder in 1970. Not too shabby, but nothing impressive.)

I have two explanations for this.

In the 1990s, it seemed like a good idea to use housing to tie people down. People who worry about their mortage worry about job security, hence they will not rock the boat. Someone forgot to check how much money they have left in their CPF account at retirement.

Second, there was simply too much cash around. I believe the full effect of the CPF withdrawal at retirement was first felt in the early 1990s.

(The retirement age was 55 until 1993, 60 until 1999, currently 62, will be 65 by 2012 and 67 in the far future.)

Since the supply of resale HDB flats was fixed, the huge influx of cash meant that prices could only go up. If HDB continued to price its new HDB flats using the cost-based pricing approach, there will be a pricing anomaly that would be exploited by the new flat buyers. Everyone would want to buy a new flat and sell it off. Guaranteed instant profit! No cash needed! The waiting time would be insane. And people who didn't qualify would be incensed.

The second most usual complaint is that since HDB uses market-based pricing approach, the new flats and resale flats end up chasing each other in a upwards spiral.

This is not true. It is limited by income and loan duration. It used to be norm to take 15 years loan. Now it's 30 years — the longest allowed. This is the first cap. The second cap is the fact that income is not going up. New immigrants come in all the time to take up jobs at the same income level. Globalization works both ways. The high in demand can demand more, but the merely highly skilled (and not limited in supply) will be stagnated.

Paying off your home loan

Due to the cheap HDB loan at 2.6% p.a., some people advise paying off the loan as slowly as possible and investing your money in higher yield products instead.

As with most things in life, it depends. If you owe $300,000 but only have $30,000 cash/CPF to invest, it's difficult to get a positive return after taking the interest repayment into account. Moreover, paying towards the loan is guaranteed return. Investment is not. If you owe $100,000 but have $75,000 to invest, sure, take your own sweet time.

Some people even advise doing the same for car loans. Even if you have enough money to buy the car outright, invest it and take a 10-year car loan with 0% downpayment instead.

IMO, unlike the HDB loan, this is a very high risk move.

Private Medishield rider

Private Medishield products allow you to buy a rider to cover the co-insurance. The deductible remains unchanged.

I used not to know whether to get it or not. After all, if a hospital bill ends up at $100,000, a 10% co-insurance means I have to foot almost $10,000 from my own pocket.

After reading the books on micro-economics, I now know the purpose of the deductible and co-insurance.

If you think you will be in good health, you will not get the rider, since your chance of claiming is very low or zero. If you don't think so, you will get the rider because you think that the chance of claiming is high, even a certainty. Hence, the insurance company will charge you a premium for it. (It needs to break even, after all.)

So, the rider is basically a way for the insurer to find out your confidence in your own health.


I get at least one call from telemarketers per week. They are mainly about applying for credit cards, cashlines and sometimes insurance and investment.

I used to listen to most of their presentations. After all, you never know if there is something beneficial to you. Then, I realized it wasted my money — I didn't have free incoming. So, now whenever I hear the magic keywords "credit card" or "cashline", I just say I'm not interested. It is sometimes not obvious from their opening speech because they say they would give you free money to spend. (Free money! Who doesn't want?) I would ask if it were a cashline. It has always been yes.

As for others, I allow them around 30 seconds, then politely reject them and hang up immediately.

Once, I received a call about investing in wines. That was interesting. After listening to his presentation, I told him I had to go because I had business to attend to. He wouldn't take no for an answer and insisted on calling back at a better time. I said it wasn't needed, but he persisted. After going on for the next few minutes, I finally realized it was a standard modus operandi: he was not allowed to take no for an answer. I finally agreed and he hung up. He never called back.

Some of the more unusual calls are from yoga classes, gyms and dating agencies. I like to speculate how they got me into the lists. The finance related ones should be from the time I opened my e$saver account and when I applied for the HSBC credit card. The yoga and gym calls must be because I attended my company's yoga lessons — someone must have sold that information away! Dating agency? No idea. Sometimes, I wonder if I should give it a chance.

Fresh grads earn $4k to $10k!

News: SMU graduates get jobs faster, paid higher

Date: 11 May 2008. Source: CNA.

Singapore Management University (SMU) graduates are finding better paying jobs and getting employed sooner, despite the Class of 2007 being 84 percent bigger than the 2006 cohort.

Three-quarters of them found jobs even before graduation, while the remainder secured employment within six months.

Graduates with cum laude degrees, or degrees with distinction, started with an average pay of $3,500 - which is $200 more than what the 2006 cohort got.

69 graduates also landed high-flying jobs that paid between $4,000 and $10,000 a month.

The overall starting pay for the Class of 2007 rose by 6.7 percent to $3,040 from $2,850 for the Class of 2006.

The data are from a survey of 618 respondents.

$4k is peanuts these days. The news article make it seem so easy to earn so much money. It is not true.

CPF is restricted to the first $4,500. The Government targets this as the income at the 80% percentile of the population.

How difficult is it to earn $4,500? The first thing to ask is, are you earning this amount for your employer every month? If not, why should he pay you so much? (R&D folks may need to look at annual income as R&D needs a longer time frame.)

ATMs, human traffic and queuing theory

It is usual to find one ATM standalone. But why are there two ATMs sometimes? This tells us that the expected traffic is high.

If you have queued in a bank, you would realize that not all counters process at the same speed. Some clients have very lengthy transactions. Naturally, I realized this while queuing up in a bank.

If you have just one counter, the waiting time is of course the sum of the time of the transactions before you. If you have two counters, you would expect the waiting time to be halved. But in fact, it is usually less.


The probability of one slow counter is, say, 0.3 — most transactions are reasonably fast. The probability of two slow counters would then be 0.09. In other words, it is likely that one of the counters will finish several fast transactions before it encounters a slow transaction. Thus, the queue is overall faster.

This brings us back to the ATM. In banks, we only have one queue. ATMs usually have one queue per ATM. One overall queue is faster, but it is harder to enforce without supervision.

If a place has three ATMs, two side by side and one some distance away, which one should you go to?

When there is light traffic, you should go to the two ATMs. It is likely that one ATM will be free. Light traffic follows the Poisson distribution. When there is heavy traffic, you should go to the single ATM. It is usually less accessible, hence it is less likely to have a queue.

Sometimes, you can't tell whether it would be heavy or light traffic beforehand. Suppose you end up at one of the ATMs and you find a queue longer than you are willing to wait. Should you walk over to the other ATM?

That's probability in the real world for you.

I know economics!

I recently read three economics books recommended to me:

  • Freakonomics
  • The Naked Economist
  • The Undercover Economist

They are very interesting to read, although the contents overlap slightly. If you were to read only one, choose the last one. I like it the most.

These books are on micro-economics — things that influence our everyday actions, whether we realize it or not. This is because every action involves time or money, and we have a finite supply of them.

I took one compulsary economics course in school. It taught the traditional textbook economics. I'm sure everyone knows the supply and demand curve. Works well in theory, but not so in real life. That's everyone's impression of economics: a bunch of textbook theories.

Economics do rule our lives, but life has many variables, that's why a neat 2D graph doesn't work so well in real life.

There are two particular examples in these books that struck my mind.

How do you maximize your profit? By charging what the market will bear. But you can't be too obvious about it. Take coffee. You want to sell coffee at $4 to those who could afford it at $4, yet you also want to sell the same coffee at $3 to those who would not pay a cent more. How do you do it? It's a wonderful read.

Putting money where your mouth is. Industries complain that the cost of cleaning up the environment is costly. The Environmental Protection Agency (EPA) introduced pollution rights that are auctioned off. If it were indeed expensive to clean up the environment, then the rights would fetch a high price. It's interesting to read what actually happened.

Library membership

The Singapore library is a wonderful bargain. Singaporeans are automatically members. PRs become life-time members for a $10.50 registration fee. In return, you get access to all the knowledge there is in the world.

What about foreigners? $40.80 per year. Not such a bargain after all. It is expensive because this is the premium membership: allowed to borrow four additional items, including AV items. (Singaporeans and PRs pay $21 annually for this privilege.)

If I were a foreigner, I would borrow a friend's library card.

Reserving a library book

You can reserve a library book for $1.55. You can even specify the collection point, so it is the cheapest way to get a book if it were halfway across the island.

Needless to say, I don't use it and would rather ride out to get the book myself. I can't beat $1.55 even on my 38 km/l bike, but the ride is worth it.

Recently, I needed to borrow a book where the library only had two copies. Both were perpetually borrowed and reserved before they were returned, so I had no chance to grab them from the shelves. After waiting for an eternity for the book to be available, I finally made a reservation myself.

This is not selling out. I decided that it was likely both copies would be borrowed in the next few months (each borrowing period is three weeks), so the only confirmed way to get the book was to reserve it.

This was different from the time when I had tried to borrow another hot book. There were 31 copies, so I could wait for one to be available. First, the waiting time for a book to be returned was low, on average 3 to 4 days. Second, it was unlikely that a book will be borrowed the same day it was returned.

So, it's a matter of efficiency. If I have a high probability of getting the book on the shelf, I'll do it myself. If not, I'll reserve it and get it effortlessly — and cheaper too.

A side note. The library now requires you to clear your outstanding fine when you pay for the reservation.


Medishield is a hospitalization insurance plan. The default one is cheap, but comes with a string of conditions. It is very likely that if you are not familiar with them, you will inevitably violate them and not be able to claim most of your medical expenses and hence be saddled with a huge bill. This has happened.

Private Medishield plans are per-charged and allow stays in better wards. The downside is the much higher premium ($220 vs $40) and higher deductible ($3,000 vs $1,500). Co-insurance is same or lower (10%). In other words, you are only likely to use it for really serious cases.

There are two things to consider.

Should I buy a private plan at all? Although per-charge is attractive, the maximum payout to date has not exceeded Medishield's limit. The claim-to-premium ratio is also lower for private insurers.

The other thing is whether to pay using Medisave or cash. Although Medisave is almost untouchable, it is better to let it accumulate to the cap first ($33.5k currently) before using it. This is because it gives a guaranteed return of 5%. Using cash makes the plan lose its integrated status, making it harder to claim.

Insurance from my point of view

What do I currently have?

My company covers life, hospitalization and personal accident. There is a major medical plan to supplement hospitalization.

My mother buys a term life policy for me.

I have two insurance policies: a life insurance policy that has critical illness and permanent/total disabilities riders, and a personal accident policy. Both policies have cash value.

The personal accident policy is very interesting. It is actually a life insurance with personal accident and TPD riders. I wanted to cover personal accident against my insurance agent's advice: "insure only what you cannot afford."

I used to have more policies, but I have either let them lapsed, or I have terminated them.

I also have some investment-linked insurance. Rather, I should say insurance-linked investments. However, the insurance portion is negligible and can be safely ignored.

Lastly, I have the default Medishield plan.

Going forward

I have sufficient coverage for life/TPD. It should really be called death insurance, as it is payable upon death. I don't really need much life insurance as I have no dependents. I may buy a decreasing term life insurance to cover for 10 to 15 years until I can self-insure.

I am going to advise my mother to stop buying term life on my behalf. Is she afraid of losing her source of income? But she doesn't really need me to provide for her.

I am going to cancel my personal accident policy next year. (I missed the deadline this year.) I misunderstood what personal accident insures. Some only cover death due to accidents, others cover injuries too, but with much lower payout. Hospitalization covers serious injuries (a reasonable assumption) and is more general. Non-serious injuries will be self-insured.

I will not consider any more critical illness insurance until I evaluate each of the illness carefully. Right now, I believe they are extremely low probablity events and are usually non-survivable. Hospitalization partially covers critical illness (a reasonable assumption) and is more general.

I wanted to buy occupational disability insurance, but I read through the clauses of one product and found that it is not easy to claim, especially when mine is a desk-bound job.

I am still deciding on the right level of hospitalization insurance to buy. I am considering upgrading my Medishield, but I got conflicting advice on this. I will take more time to consider it.


A common advice is 10% to 15% of your income. This is ridiculous! How are you going to afford it when you are retrenched? Insurance counts as an expense in my books, so I'm definitely going to keep it low. I am targetting 1.5% to 3%. Remember that this is money you will never see again.

To sum up

I am looking forward to the day I can self-insure. :-)

Insurance overview

There are a few types of personal insurance:

  • Life
  • Endowment
  • Critical illness
  • Disability
  • Hospitalization
  • Personal accident

(Whole) Life insurance insures your life. You usually need to pay the premium up to a certain age, say 60 years old, but you are insured until a cutoff age, say 85 years old.

Endowment insurance is similiar to Life, but with a fixed time frame. You get your money back at the end, so it can be treated as a way to save.

Critical illness insurance covers a list of illness. This is usually a rider of Life insurance.

Disability insurance kicks in when you are disabled. The usual one is total and permanent disability (TPD), but it is possible to buy occupational disability insurance as well. TPD is usually a rider of Life insurance.

Hospitalization insurance is used whenever you are hospitalized. There is usually a deductible and a co-insurance component. The deductible is the portion not covered by the insurance. Co-insurance, usually in percentage, is the sharing of the remaining bill between you and your insurer.

Suppose your hospitalization bill is $100,000, deductible is $1,000 and co-insurance of 10%. You have to fork out the $1,000 deductible and 10% of $99,000. Your insurer will pay the rest ($89,100).

Personal accident insurance covers death and injury from accidents. High risk activities are usually excluded.


Insurance can be confusing because all insurance products pushed by the insurance agents have a savings or investment component — there is a cash value. There are all sorts of combinations, making it very difficult to choose because you are really choosing investment together with insurance.

One type of products that look very attractive is the limited premium products. You just need to pay the premiums for a fixed number of years, say ten years, after which you will receive free coverage! Well, there is no free lunch in this world, so just analyze the product to see how it tries to accomplish this. (You can replicate it yourself if you want to.)

Today, I prefer to decouple insurance from investment for two reasons: insurance should serve its primary purpose, and transparency and control over the investments.

Products that purely insure are called term insurance. They are much cheaper — five to ten times cheaper. Singaporeans buy a lot of insurance, but they are still under-insured due to the cost of insurance products.

There is even cheaper term insurance, called decreasing term insurance. (Normal term insurance is also called level term insurance.) It is two to five times cheaper than level term insurance. The coverage reduces as the years advance. It is good for a short time frame, say ten to fifteen years.

A general guide

Life insurance is meant to provide for your dependents until they become self-sufficient, which is typically 18 to 23 years old. A general guide is five times your annual income. Do you need to cover every single thing? IMO, no. Your kids should be able to supplement the family income by doing part-time jobs as young as 14 years old. Higher education can even be exempted if you believe your kids are clever enough to get scholarships. (If they are not, they can get study loans. A little debt right out of school is a good first lesson in personal finance.)

This advice is strange because the first thought is to make your absence less traumatic for your dependents. However, your absence is a low probability event and you have to weigh the opportunity cost of paying the premiums — what you can provide for them when you are around.

Hospitalization and disability should be the top concerns for a working person. He has tons of bills to settle, but he also has no income during this period!

Disability is a very low probability event, though. A usual clause is that you must not be suitable for any for-pay jobs, which makes it almost unclaimable. Occupational disability is what you really want, but it has higher premiums and is not easily claimable too.

Critical illness and personal accident are very low probability events. A sensible recommendation is that serious illness and injury involves hospital stay, so hospitalization insurance is more general and useful.

Some insurance can be skipped because their low coverage. Personal accident insurance, for example, has very restrictive clauses and has low coverage. It may be better to self-insure. One advice I received is to insure what you cannot afford. This only makes sense after you have some savings.

Insurance must be considered in total. Most companies buy insurance for their employees, so you can reduce your coverage accordingly. But review your coverage when you change companies!

It is important that you have sufficient savings to pay for three to six months of premiums. Being unemployed is bad enough, but to lose your insurance at this time makes it worse.

Finally, whatever you do, always read the clauses carefully. There are always a list of exclusions.

Paying off a mortage

If you take a loan of $200,000 at 2.6% p.a. over 30 years, your monthly installment is $800.68 and it costs you 44.13% more due to interest.

If you loan over 15 years, your monthly installment is $1,343.02 and it costs you 20.87% more due to interest.

Clearly, a shorter loan is better. But what if you are not sure if you can afford the monthly installment?

In that case, take the 30 year loan and put aside $542.34 every month ($1,343.02 - $800.68). In a year, you will have $6,508.08. Pay that towards the principal. If you do that every year, you will clear the loan in 15 years and 11 months. It will cost you 21.75% in interest. While this is more than a straight 15 year loan (0.88% more), it is more flexible in case you encounter some down years.

HDB affordability, part 3

I overlooked three things: VL, HWL and AHWL.

Valuation limit (VL): market value of the flat at the time of purchase. CPF allows a 100% of VL for new HDB flats, 90% of VL for resale flats using HDB loan and 100% of VL using bank loans.

Housing Withdrawal Limit (HWL): 120% of VL after 1/1/2008. Not allowed to use CPF after this limit. This applies only to bank loans.

Additional Housing Withdrawal Limit (AHWL): ordinary account balance after setting aside prevailing minimum sum. Not allowed to use CPF if the balance is zero or negative. AHWL kicks in once VL is reached.

For a $228k loan at 2.6% p.a. over 30 years, the VL is reached somewhere in the 20th year. It is unlikely the couple can meet the AHWL requirement, hence they have to pay cash from that point onwards. Their CPF will then have time to accumulate.

HDB affordability, part 2

A 25 year old person earning $2,000 per month is able to afford just a 30-year $114,000 loan at 2.6% p.a.

What if he waits for 5 years? He would accumulate $460 in his ordinary account every month. In 5 years time, he would have $29,347.

He can then choose to buy the same flat, but only need to take a $85,000 loan, or buy a $143,000 flat.

If he chooses the first option, he will be able to clear his loan in 20 years. He saved five years!

The numbers look low, but you can multiply by two for a couple. Singles are only allowed to buy HDB flats when they are above 35 years old.

HDB affordability

Are flats still affordable in Singapore? I crunched some numbers to find out.

A 25 year old person as of 1/1/2008, earning $2,000 per month. How much of a flat can he afford?

Let's assume he wants to pay entirely through CPF. His ordinary account contribution is $460. To keep his ordinary a/c contribution at a constant $460, he has to earn $2,191 at 36 years old, $2,784 at 46 years old and $3,955 at 51 years old. This is because the contribution to ordinary account drops at these ages.

After 56 years old, the ordinary account contribution drops so much that even at maximum income ($4,500), it is only $452.81. Should his loan extend beyond 56 years old, he should expect to pay his installment partially by cash.

So, how much loan can he afford with a $460 monthly installment? He is able to borrow $114,000 (30-year loan at 2.6%). HDB allows a loan up to 65 years old or 30 years, whichever is shorter.

Can you buy a flat with $114k? If you say no, then do one of the following:

  1. don't buy
  2. earn more
  3. put down some deposit
  4. pay out of pocket (using cash)
  5. buy first, wait for flat to appreciate, then sell

If a couple earns $2,000 each, they will be able to afford a $228,000 flat. However, their ordinary account will be empty until age 56. This is extremely unadvisable. Besides paying way too much interest, they have only ten years to build up their retirement funds.

It is better to pay down the principal periodically, say $6,000 every year. This means the couple must save an additional $500 every month. By doing this, the couple can pay off their flat in 16 years.

A person earning $3,000 will be able to afford a $690 installment. He can borrow $172,000. He needs to pay partially by cash at age 51. A couple can borrow $344,000.

A person earning $4,500 will be able to afford a $1,035 installment. He can borrow $258,000. He needs to pay partially by cash at age 36. A couple can borrow $516,000.

If a person does not want to pay by cash until he is 46 years old, his maximum installment is $945. If he wants to delay it until he is 51 years old, it becomes $743.

It is unlikely that a person earns $4,500 at 25 years old. However, it is possible to do so at 30 years old. If he prefers to take a 25 year loan instead, he can borrow $228,000. A couple can borrow $456,000.

In all cases, if the couple pays 12.50% of their annual income (that is subjected to CPF) towards their loan, they will be able to clear their loan in 16 years.

Net worth, revisited

I decided to account for my net worth more accurately. Net worth has a standard definition. I should stick to it. There is no basis to applying paper loss while ignoring paper gain. Hence, I should use the current price for equities and funds.

To avoid an overly-optimistic picture, I put in a bear market estimate, where prices are depressed (by my estimate).

Category 3/2008 Bear
Cash 52.1% 57.9%
Company shares 6.8% 3.7%
Equities 13.8% 9.8%
Funds 7.6% 7.3%
Insurance 3.7% 4.1%
Material asset 13.1% 13.9%
Working cash 3.0% 3.3%

I intend to slowly increase the frequency of updating my net worth. I am updating it once every six months for now. In the future, I will update it every three months and eventually every month.

Other indicators:

Ratio 3/2008
Bear ratio 0.899
FFR 6.26
FIR 0.05

The bear ratio is the ratio of net worth in a bear market to the current situation.

FFR is the financial freedom ratio: liquid net worth / annual expenses. I counted the entire net worth, so that means selling everything at the end.

FIR is the financial independence ratio: annual passive income / annual expenses. This is a rough estimate currently.

Vouchers and gift cards

I say it first: I hate vouchers! Even free ones. Please give me cash. Vouchers are cash, but restricted to certain retailers.

I especially hate vouchers with expiry dates. Cash do not expire.

Vouchers are also not as flexible. Ever heard of a retailer not giving you back change? They do that for vouchers.

Why trade a legal tender for a shop tender at face value? It doesn't make sense to me.

A long time ago, I thought companies were able to buy vouchers at a discount (bulk purchase, perhaps), otherwise why would they want them? Later, I realized it was because it was too "vulgar" to give cash directly.

Mr Tan vs Mr Tan

Mr Tan Kin Lian, the ex-CEO of NTUC, was displeased that the new CEO, Mr Tan Suee Chieh, unilaterally reduced the annual bonus for existing life insurance policies. The new CEO promised higher special bonus instead.

There is a lot more to it, of course. The juicy part is that the new management is much more extravagant than the old one.

Is it worth the trouble for 1.5%?

POSB MySavings account offers 1.5% p.a. for a monthly deposit of $1.5k to $3k (max). For $2k monthly, it generates $41 more per year. For $3k monthly, it generates $62 more.

Catch: any withdrawal will make that month's interest rate 0.45%.

Is it worth the trouble to tie up $24k or $36k for a year?

Forgotten money

I used to have a habit of squirreling away money and forgetting about it. This was due to a deep distrust of my own spending habit. I am now more confident of my own spending, so this is no longer necessary.

When I worked out my net worth two months back, I thought I had accounted for all my money. It turned out that I had overlooked my POSB account! I have added it to my working cash.

I had not updated my POSB passbook for over a year. POSB used to send you your statements once you exceeded 22 transactions and your passbook would show a consolidated line. It seems they don't do it anymore. I also find it interesting that POSB deposits the interest only once a year.

Financial statements

Note: I took most of these ideas from The Wealthy Accumulator blog.

A company uses financial statements to track its financial position and progress. We can do the same for personal finance.

  1. Income statement
    • Operating revenue
    • Operating expenses
    • Non-operating revenue
    • Non-operating expenses
  2. Balance sheet
    • Current assets
    • Non-current assets
    • Current liabilities
    • Non-current liabilities
  3. Cash flow statement
    • Cash flow from operating activities
    • Cash flow from investment activities
    • Cash flow from financing activities
    • Net change in cash

Operating in the context of a person means active and day-to-day. Non-operating means passive.

Current means liquid. Non-current means it will take a while to dispose. For me, I estimate an illiquid item's market value using the 2-week rule: how much could I sell it for if I need to find a buyer within two weeks?

I have created spreadsheets to track income statement and balance sheet, but not cash flow as it seems redundant.

Financial performance indicators

Note: I took some of these forumlae from The Wealthy Accumulator blog and some from My Money Blog.

  • Savings ratio = savings (and investments) / gross income
  • Expense-to-income ratio = expenses / gross income
  • Debt service level = debt service / gross income
  • Financial freedom ratio (FFR): liquid net worth / annual expenses
  • Financial independence ratio (FIR): annual passive income / annual expenses

The first three can be applied to on a monthly basis or yearly basis. It seems to me saving ratio + expense-to-income ratio + debt service level must equal to one.

In Singapore, you will already have 0.2 in your savings ratio if you are contributing to CPF.

FFR shows the number of years you can live without working. But then, you need to distinguish between liquid and non-liquid assets.

FIR above one means you have achieved financial independence (for the moment, at least).

If I keep to a frugal lifestyle, I estimate my FFR to be 5.90. I'll need to sell off everything towards the end, though. I estimate my FIR to be 0.05. I have a long way to go towards financial independence.

Estimating net worth

I found two thumb-of-rule formulae to estimate net worth:

  1. annual_income * age / 10
  2. annual_income * num_working_years / 10

The first is of course from The Millionaire Next Door. The second is from some personal finance book.

The second formula, as I told my colleagues, is for ordinary people. It is the same as saving 10% of your income every month.

The first formula is for people who are aspiring to be wealthy. Using absolute age penalizes people who start work later, usually due to higher education. This is right because it means they have more to catch up.

If you have less than 50% of your expected net worth, you are an under-accumulator. If you have 200%, you are an over-accumulator.

It may seem obvious that net worth should depend on income, but it wasn't obvious to me until I saw the formulae. I always see people ask on online forums, "is $500k (or any number) enough to retire?" I don't know how to answer as there is no one-size-fits-all answer. Now I know why.

The formulae can be "gamed" to give you higher or lower scores, depending which you prefer. There are of course more complicated formulae around. However, they are not as inituitive as these two.

Auctioning failure

I tried to auction off toy shop vouchers with face value of $29, starting at $1 without any reserve. I got no bidders.

Auctioning requires a pool of buyers. I advertised on two local forums. No luck.

I have auctioned some unwanted anime figures the same way, starting at $1. They were mint or almost mint, but fetched only about 10% of their original prices.

These do not bore well for my future auctioning attempts. I must figure out what went wrong and change my approach. There are two things I need to determine: (i) did I choose the right auctioning site, (ii) did I manage to reach my target audience?

Expenses for April 2008

Category Jan Feb Mar Apr
Basic 902.71 936.18 2,294.03 817.89
Cash 182.72 194.95 212.00 304.00
Credit Card 103.10 44.00 194.50 0.00
Vehicle 282.32 830.80 196.07 893.33
Others 304.15 200.00 326.10 239.95
Total 1,775.00 2,205.93 3,222.70 2,255.17

Cash withdrawal increased quite substantially. I wonder when it will level off, nevermind dropping. However, the actual usage is not as high as it seems because I have a lot of unused cash ($50) left in my wallet.

I used my credit card last month to subscribe to some magazines for my company and they were reimbursable, so the net expenses were zero. (Not totally — I'm taxed on the reimbursements.)

Vehicles is high due to changing of tyres ($668) and repairing of rims ($30).

The bulk of Others is paying for my website ($165) and bill for a meal treat ($52.50), spilt with my brother.

Looking at the next few months, May is the only month that the expenses can go below $1,500; there are many vehicle related expenses from June to August. Let's see if I can do it.

The Millionaire Next Door

I thought this was a personal finance book, so I was rather surprised it was in the social science section in the library. It turned out to be very easy to read and I finished it within one night.

The book's reputation preceded it, good and bad. Usually frugal people have good things to say about it. However, it has many negative reviews on Amazon.

I learnt a few things from the book.

There is a difference between wealthy and appearing to be wealthy. Most high earners appear to be wealthy, but they probably are not if you go by net worth. High earners are whom we normally associate the wealthy with, but we are wrong! Wealthy people are often frugal and live simply. (I already know this — I see debt where people see flashy goods.)

The book shows how to estimate your expected net worth: multiply your age by your realized pre-tax annual household income from all sources except inheritance. Divide by ten. This, less any inherited wealth, is what your net worth should be.

It is also interesting to find that the children do not always inherit their parents' thrifty ways because of their upbringing. Not that the parents spoilt their children, but the children turned out so because they were encouraged to go to higher education, more stable/prestigious career paths and finally, being sponsored for their new lifestyle.

One big chunk of the book deals with what it calls EOC (Economic Outpatient Care): children who require their parents' subsidies to live their lifestyle, even into their forties and fifties (the children's age, not the parents).

I find this very interesting because I have not seen this mentioned anywhere else before.

Note that a millionaire is not what it used to be. US$1 million in 2007 has the purchasing power of US$260k in 1975 (using CPI), US$116k in 1950, US$85k in 1925 and US$39k in 1900. So, being a millionaire in the US these days is no big deal.

Analyzing interest rates

Most banks have tiered interest rates depending on the account balance. For Maybank and Standard Chartered, unlike other banks, the interest rate applies to the entire amount, not just that tier.

Maybank gives 0.25% p.a. for average daily balance less than $5k, 0.88% p.a. for balance between $5k to $50k, and 1.18% for balance of $50k or more. In addition, it gives a bonus interest of 0.06% every six months for average monthly balance of at least $5k.

I am managing a Maybank account for my father. It has $33k inside, so it is generating an interest of $290 p.a. at 0.88%. If I top it up to $50k, it would generate an interest of $389 (for the same $33k). That's $99 with zero effort!

However, I am not confident that I can divide the money correctly. Combining is easy, but splitting is difficult. Just a few months back, I incorrectly claimed that part of the money in my father's account belonged to me. This was because I shifted the money around in the early days of opening the account to take advantage of the interest rate. The transaction records were not available anymore. I had to reconstruct the transactions from day one to realize that I was wrong. By that time, my father had already written off the money.

What happened to the money? I didn't take it, of course. I left the "disputed" amount in my father's account until its ownership was clear. In the end, since the money belonged to my father, I just left it there.

This was quite embarassing to me because it happened despite me trying to keep proper records.

Passive returns

I will track my passive returns from this year onwards. Passive means I don't have to put in continuous effort to generate it once it is set up. Right now this means interests and dividends. In the future, it could include royalties.

I don't envision having a non-passive side income. Setting up an online store to sell stuff is a non-passive side income because it requires effort to maintain it.

Library fines

I owe S$0.15 on a library book for returning it a day late. I have not owed any fines since middle of last year, after raking up S$2+ in fines over the past two years. I then made a resolution not to pay fines that are easily avoidable.

NLB really goes out of its way to show you your fines now. First, they print the fine amount on the receipt. Then, they have a scrolling message as you are borrowing your books. Finally, they now show you your fine amount before you are allowed to borrow any books!

Credit card statistics

You can pay S$5.35 to obtain your credit report from the Credit Bureau of Singapore . I didn't do so because I didn't have much of a credit history. The sample credit report doesn't show a simple number to easily understand your credit standing, unlike the FICO score in the US.

Nevertheless, there are some interesting statistics on their website.

In January 2008, 39.1% of the credit card holders have at least one revolving credit card. Revolving means not making full payment on the card. 1.32% had at least one delinquent credit card. Delinquent means no payment was made for 30 days or more. These two numbers have been fairly constant in the past year.

In the same month, 41.06% had balance below $1k, 35.6% below $5k, 11.53% below $10k, 7.22% below $20k and 4.59% over $20k. The number of people with less than $1k balance is fairly constant, but the number of people in the other categories has been increasing over the months.

I believe the balance includes the amount charged to the card. It may or may not be fully paid off every month. If it refers to the rollover balance, it would be very strange because the statistics do not tally.

The next statistics, the average balance by age group, is very interesting. The 20s hold $2.6k, the early 30s $3.7k, the late 30s $4.7k, the 40s $5.3k, the early 50s $5.4k and older folks $4k. The figures are constant for the past year. These figures seem to indicate the users owe one month's salary on their cards!

Terminated my PruSave policy

I terminated my PruSave policy after six years, one day short of its seventh birthday. Six years ago, I wanted to use this policy as my conservative long term savings. The projected return was 5.25% p.a. over 25 years, but the expected range was 3.75% to 6.75%. Since the return is projected, there may not be any returns at all.

3% to 5% returns are entirely achievable through simpler methods. I now view this as providing a loan to Prudential at 1% to 2% interest rate over 25 years!

I got back 58.3% of the total premium I put in. I do not expect to earn back the 41.7%. It seems pretty high, but it is just over $3k in absolute terms. I have already written it off, in fact. Insurance premium counts as an expense in my books. However, I only count the cash value when calculating net worth, so I have already accounted for the loss.

I will now be treating insurance and investment separately. I will buy term insurance for protection and do the investment myself. This gives me full control and flexibility and allows me to liquidate any part without having to worry about impacting my insurance coverage.

End of one year freeze

News: Sharp hike in kindergarten fees

Some 1,500 students attending the seven PAP Community Foundation (PCF) kindergartens in Woodlands will see their fees shoot up by 30 to 100 per cent from July.

Then, about 50-odd PCF branches will raise their fees when a freeze in effect since last July comes to an end.

The PCF, which has 84 branches, each with up to eight centres, told Today "65 per cent of the branches will be adjusting their fees because operating costs have increased".

A letter sent by the PCF Woodlands branch to notify the parents of its 250 students said that PCF branches in the Sembawang Group Representation Constituency (GRC) - which comprises Sembawang, Woodlands, Marsiling, Admiralty, Canberra and Chong Pang wards - "collectively submitted our applications for a standardised GRC fee structure for approval to PCF HQ".

Woodlands kindergartens in Blk 601 and Blk 875 will hike monthly fees from $50.90 to $110 per child because they will be air-conditioned. Air-conditioned kindergartens in blocks 899B, 652 and 824 will increase fees from $86.60 to $110, while non-air-conditioned ones in blocks 624B and 853 will hike theirs from $50.90 to $95.

Nurseries run by PCF Woodlands will also see a $20 to $30 monthly fee increase from July.

PCF Woodlands' letter attributed the hikes to, among other things, rising operational costs and the need to fund training programmes for staff to meet new Ministry of Education (MOE) requirements.

Brace yourselves.

Funds transfer limits

The funds transfer limit of my main UOB bank account was $3,000. Ever since I started my expenses tracking, I ran into this limit almost every month as I transferred funds around. I staggered the transfers over a few days to work around the limit. Recently, I have finally increased the limit to $10,000.

When I opened my StanChart e$saver bank account, there was no way to get the money out other than funds transfers, so I set the limit to $10,000 right away. ($5 fees if withdrawn through the counter.) Through a bank mistake, it thought I was a priority customer and it increased the limit to $20,000. My status was later corrected, but the limit stayed. The downside of the StanChart Internet Banking is that you are not able to schedule post-dated inter-bank funds transfers. Need to transfer $60,000? You need to log in on three separate days. (There's a new interface coming up that promises this feature.)

When I opened my Maybank bank account, I set the limit to $10,000 right away. I had realized it was much easier to transfer money from StanChart to UOB than the other way round. Maybank allows you to schedule a post-dated inter-bank funds transfers, but not for the next working day. I wrote in to ask. Yes, it was an intended feature. So, to transfer the same $60,000, you need to log in on two separate days. The first day, you schedule $10,000 for that day and the third to sixth day. On the second day, you schedule $10,000 for that day.

Family matters

Even though I'm relatively open about letting people know various aspects of my financial standing, I balk at letting my family members know too much — especially my parents. My mother has asked me on more than one occasion how much I make. I declined to tell her. You see, my parents like to compare to their peers' and relatives' children, who are always better off than me in one way or another. My father must have been very quiet in his friends' company. I told my father merely that everyone live their lives differently.

It's not that I don't care. I do. I have the same job scope for the past few years and it's clear it's unsustainable. I am starting to have a bigger job scope this year. However, work is work. I'm also interested in developing a secondary income stream, that's why it doesn't bother me much that I am stagnant at work.

Let me tell you about an ex-colleague of mine. You would have never guessed he was the richest man in the department. He retired last year at 47. Was he highly paid? Probably. Was that why he was rich? No. He invested in various financial instruments for over 20 years. If I recalled correctly, he said he made his first million dollars at age 36.

Back to family. My family has always been secretive in our financial matters. No wonder I turned out to be the same! However, I'm moving towards more transparency in my financial matters. I've created spreadsheets to track my income, expenses and others. I am already disclosing some statistics in this blog and will disclose more figures in the future.

To be fair to my parents, I don't think they intend to show us off. They are worried we are earning below average compared to our peers and that we are not saving enough.

Writing a will

It may seem strange, but it's on the back of my mind to write a will. I read in one personal finance book that it is good to have a will and updating it every few years. "Everyone has an estate!", the book claims.

I don't have much things of value, but everyone has to start somewhere.

The will will proabably go something like this: all monetary asset is to be shared evenly. My comics, books, games, CDs, DVDs and camera equipment should be allowed to be lent out. Really expensive stuff, limited editions and out-of-print items may be exempted. My toys, figures, models and cards should be displayed or be sold off.

Is an executor needed?

My parents made a will one or two years back. It should be a very simple one as they were at the lawyer firm for only around half-an-hour! Interestingly, my father was in a happy mood even though he had to pay RM300 (iirc) for the lawyer to witness the wills. (RM200 per will, but the lawyer gave a discount.)

I did not ask anything about it, of course. We seldom discuss financial matters in my family. I do not know their net worth, although my father once disclosed how much liquid asset he had, then he told me not to tell my mother — go figure.

If I were to guess, I'll say my parents spilt the estate evenly. The only thing I'm curious about is how they divide up the properties.

Now, I don't want to be seen waiting for my share of the inheritance. :-) I've hinted to my father a few times that he should spend almost all his money. He deserves it, after all. But you know how it's like: when it's your hard-earned money, you are not willing to spend it frivolously.

Renewing COE in 40 months

My car's COE expires in August 2011. It is 40 months away. I expect the COE to be around $20k then, so I need to save $500/month from now till then.

A few months back, I expected the COE to be around $10k, but this seemed unlikely now. It now looks like the stable region for COE is $15k to $20k. Although the COE quota is reduced, there is very little headroom for the COE to go up further due to the poor economy and higher running costs.

My father was somewhat surprised that I would choose to renew a 20 year old car. I told him a $10k COE was a no brainer. I would still renew at $20k. How about $30k? Perhaps. $40k? I kept quiet.

A high COE is scary, but you can get back the unused portion, so even if you paid $40k for COE, you can get $32k back two years later.

Giving out a loan?

Suppose someone asks me for a loan of $5,000. Usually, I would say no. But suppose I have to lend — it's a close friend or family.

The first thing is to treat it like a business, not a favour. This means setting the terms and conditions, preferably in black-and-white.

My proposed terms:

  • A grace period of one to three months
  • $250/month (5% of principal) over 20 months (that's over 1-1/2 years)
  • Repayment is suspended up to six months if the lender has no source of income
  • Backed by any collateral(s)?
  • Any guarantor(s)?
  • One missed payment must be paid together with the next payment
  • Two missed payments (not necessarily consecutively) trigger a call on the rest of the loan
  • Three missed payments (not necessarily consecutively) allow me to seize the collateral(s)
  • Any remaining amount not covered by the collateral(s) will be borne by the guarantor(s)

Note that there is no interest. However, I am considering setting a flat rate 2% p.a. to discourage people from asking for loans. I will rebate the interest linearly, not by rule of 78, on early settlement.

How about smaller loans? The smallest loan I'm willing to give out is $1,000. Anything smaller, it's usually a cashflow problem, and it's better to give financial advice rather than money in that case.

Finally, I won't give out $5,000 loans to everyone might otherwise qualify. I only have $5,000 to lend in total. That can be one loan of $5,000, five loans of $1,000 each or any combination up to $5,000.

Playing the lottery

Singapore has a few types of lottery. However, I have only bought 4D and Toto.

In 4D, you pick a number from 0 to 9999. There are 23 prizes: first, second, third, 10 starter and 10 consolation. Then you have the big and small bet. A big bet qualifies for all 23 prizes, a small bet only the top three (with higher payout).

I normally bet $20 small on one single number. The payout is $60,000. $20 sounds like a lot (it is), but look at it this way: the last thing you want is to win the first prize ($3,000) on a $1 bet. You can tell that I'm not interested in the small prizes as the payouts are too low ($250 for starter and $60 for consolation for a $1 bet). I used to buy one number a month (that's all I can afford), but it's now closer to once every six months.

In Toto, you pick 6 numbers from 1 to 45. There are six prize groups, depending on how many numbers match. The group 1 prize starts at $600,000, shared among the winners, and rolls over when there is no winner. I usually only buy 2 numbers ($1) when it crosses $2 million and $2 if it crosses $3 million. This is very rare. Interestingly, I buy less when it exceeds $5 million. This is because more people are buying and the chance of sharing the prize increases. Indeed, the $10 million Ang Pow draws had always been shared by 3 to 8 people.

Did you notice that for 4D, you need to spend a lot on a number to get a reasonable return? For Toto, it's useless to spend more, unless you are talking about thousands of numbers. There are 8 million combinations. One number or ten numbers doesn't make much difference.

That's the buying part. Have you ever thought about what to do with the money after you won? You should think about it before you win, while you are still rational. Do you have a list of expenses/to-do? If you don't, it's either because you have not thought about it, in which case you should start, or that you have really nothing to spend on. In the latter case, you should be contented with your life. (If you're not, it's definitely the first case.)

It is easy to spend this kind of easy-come money. Usually people think of buying two things immediately after a windfall: a condo and a car. These two are sufficient to soak up to $2 million.

Finally, let's discuss if you should play the lottery at all. First of all, in case anyone doesn't know, the house always win. Always. Yet, every weekend, I see a long queue at the betting station in my neighbourhood. It has been said lottery is a tax on the poor. The difference is that they don't complain about it.

Some people go to the other extreme, never buying lottery at all, either on the basis of mathematics or their principles. In either case, they are right. However, I'm more pragmatic about it. I look at it from a utility standpoint. $1, on its own, is not worth much to me. $2 million is. Thus, I bet.

Gastric pain over a dollar?

My brother wanted to buy a foldable cushion, so I volunteered to help him cos I wanted to spend my $20 Takashimaya vouchers. Since Taka is in Orchard road, I wanted to go in after 8 pm to avoid paying the ERP.

I went for my dinner at the Redhill hawker centre, but found the store I intended to patronize closed. Yes, I can only eat at one store there. I decided to skip my dinner until I run my errand. I went to Queenstown library to past time. I left at 7:50 pm. Good timing. I saw a carpark warden making her rounds. Another 5 minutes and instead of saving 50 cents for the ERP, I would have paid $8 for the fine!

It was a wasted trip as the cushion was sold out. It was time to grab dinner. Delifrance and McDonalds were side by side. I have not had a tuna sandwich for a long time, so I went to Delifrance to check the price. $7.90. Goodness! It used to be $3.90, then $4.80 when Delifrance became a "bistro". So it's McDonalds for me.

Because I delayed my dinner for three hours, I suffered from gastric pains even after my meal. Luckily it was a mild case and I recovered soon after I lied down straight.

Sometimes, I wonder if I'm so poor that I need to save on $1 ERP (entering and exiting Orchard road). Parking was free because I rode a bike in.

Update: I went to Delifrance's website and it listed ala-carte sandwiches at $5.50 before 10% service charge and 7% GST. $6.45 is still too expensive for me. I need to find another source of budget tuna sandwiches.

Is the handout sufficient?

News: Rising cost of living

Mr Liew Ah Yap's family survives on a monthly handout of S$490.

The 79-year-old takes care of his asthmatic wife, a middle-aged son who can't work because of his mental illness, as well as a teenage grandson.

Mr Liew's family receives free meals for lunch and dinner, thanks to the Moral Society Charities.

Despite help from community groups, most Public Assistance (PA) recipients have said it is still a constant struggle to make ends meet.

Under the current system, single needy adults each receive S$290 a month. Married couples, like the Liews, get S$490.

For the Liew family, about S$50 goes to paying for the rental of their one-room flat and conservancy charges. The family spends over S$100 on basic necessities like bread and Milo for breakfast, and over S$100 on utilities.

Besides their grandson, the elderly couple also has to support their son, who is receiving free medical treatment at the Institute of Mental Health for depression.

Being on the PA scheme means that they get free medical care and transport allowance when they go for their medical check-ups.

Mr Liew cannot supplement his income with odd jobs. PA recipients could be stripped of their handouts if they are found to be earning income on the side.

The listed expenses are about $300 ($50 + $125 + $125). How about the remaining $190?

Their utilities bill is pretty high. I suggest they turn off the tv and the fridge. That should cut their electrical bill by 2/3!

The underclass

News: More people join the queue for free meals

Several religious, welfare groups foresee problems if this trend continues, as donations from sponsors have fallen by 10 to 50 per cent in the last three months.

Rising food prices have prompted more people to turn up at places serving free meals.

The organisers - religious and welfare groups - say they can cope with the demand for now, though some have noted a worrying drop in donations from sponsors.

A Sunday Times check with about 20 welfare and religious groups reveals that almost half have the same story to tell.

At the Singapore Buddhist Lodge in River Valley, about 1,800 people turn up daily for vegetarian breakfast, lunch and dinner.

The temple's president Lee Bock Guan, 63, said the turnout has risen 30 per cent and includes the unemployed, students from China and construction workers.

At Henderson Senior Citizens' Home, the turnout for its Saturday lunch has risen from 60 to 100 in the last four months. At times, it has had to turn people away.

In Toa Payoh, the Care Corner Seniors Activity Centre, which serves lunch daily to 80 people, reported a 10 per cent jump in attendance. More than half of these people also ask for some food to take home for dinner.

Poor people, I can understand. Students and workers? I would turn them away.

And read this:

And though rice prices have more than doubled, most welfare groups are not switching brands.

Mr Wong Kok Foo, 68, centre coordinator of Moral Seniors Activity Centre (Toa Payoh), which serves lunch to about 50 people, said: 'They are so used to eating AAA rice; if you cook the normal grain, they won't want to eat.'

Mr Lee, the Singapore Buddhist Lodge's president, said: 'Needy people already have very few dishes to go with their rice. If we can't even give them proper rice, how do you expect them to have their meals?'

I'm not eating AAA rice. Looks like I better queue up too.

Money and relationships

News: Money was at the root of break-up

Friends say it was a mismatch from the start - cracks appeared as couple's differing attitudes towards money became apparent.

They started dating soon after they returned from the Manchester Commonwealth Games in 2002. But friends said cracks began appearing as early as 2003, when the couple's differing attitudes towards money became apparent.

'Money is very important to Ronald. He is careful to the point of being stingy. He will chide her for buying expensive gifts for friends,' said a mutual friend.

'Jiawei is the complete opposite. She is very generous and is almost clueless about how to manage her finances. She gave him access to her safe and she was the one who paid for most of their dates,' added the friend.

It is understood that the monthly instalments for the couple's $80,000 Honda Civic were paid for by Susilo although she paid the downpayment, road tax and insurance. The car was registered in her name but he was the one using it as she does not drive. It has since been sold.

'Initially, they wanted to buy a BMW as he felt they were both sports stars and should not be seen driving a Japanese car. She changed her mind only after we stopped her,' said the friend.

He is also claiming that he had spent money on their apartment in Kembangan, including renovation costs. She had paid the six-figure downpayment for it.

Said another friend: 'She doesn't even know how to write a cheque as her English is bad. Whenever Ronald handed her a bill, for things such as road tax, she would simply give him cash to settle it. As a result, she has no proof that the money came from her.'

Can't say I blame Susilo for being careful with his money. It's his hard earned money, after all. Jiawei's casual attitude towards money scares me.

Cheap labour

My brother and I went to a prata house near Old Upper Thomson road for our dinner yesterday. We originally went to Satay Club beside Sembawang Shopping Center, but discovered it had been torn down.

The prata house had eight waiters, four people behind the counter and perhaps two in the back kitchen. The business is actually quite decent, given that it's Monday. Assuming they are paid $500/month, that's $7,000/month already. The shop takes up two shop-lots, so let's say the rent is $4,000. This seems very low, but remember that this is a very secluded place. The shop is air-con'ed, so let's say the utilities bill is $1,000. That's $12,000/month to break even.

Now, $12,000/month is not much when it comes to running a business. It may be surprising, but even a small business should expect a cash flow of $10,000 to $15,000 per month. A huge chunk of it is rent. The second biggest is often labour.

$500/month is very low for a local, but it is different for a foreign worker, especially if the company provides lodging and meals. The $500 is nett. Try saving $500 on a $2k salary. It isn't easy.

A word of caution

News: Ball's in your court, Jiawei

Ronald Susilo is preparing to take legal action against former fiancee Li Jiawei to claim his share of a car and a condominium they had bought while they were together.

It had already become a fairytale romance without the happy ending.

Now, the relationship which had the Singapore sports world - and Singapore - talking is set for another twist.

National badminton player Ronald Susilo is considering taking legal action against his former fiancee, national table tennis player Li Jiawei.

Susilo, 28, wants to claim his share in a condominium unit and car they bought together during their 51/2-year relationship. It is believed that he is seeking between $50,000 and $100,000.

He has consulted lawyers on the matter.

The couple broke off their engagement in January, after almost two years of speculation that their relationship was on the rocks.

Two rules when it comes to tying your finances with someone else.

Rule no. 1: don't.

Rule no. 2: don't forget rule no. 1.

Tied up finances makes it harder for people to move on, especially if one party makes it so.

Even when it comes to family, you must spell out the "exit rules" properly, especially when the asset is worth less than its purchase price. Will one member refuse to sell?

If one person puts in just cash and the other person both cash and effort, is the effort worth anything? It's best to state it upfront.

Expenses for March 2008

Category Jan Feb Mar
Basic 902.71 936.18 2,294.03
Cash 182.72 194.95 212.00
Credit Card 103.10 44.00 194.50
Vehicle 282.32 830.80 196.07
Others 304.15 200.00 326.10
Total 1,775.00 2,205.93 3,222.70

Basic expenses are high because of an insurance bill.

Cash withdrawal continues to increase. Food still remains the same price, but portions have decreased, hence I'm eating more.

Credit card bill is high due to a payment of $120 for a 5-lesson car course.

Others is high due to a $299.10 FF-VII sculpture. It is pre-ordered from last year.