Middle Class struggles in Singapore

The Middle Class really struggles in Singapore. I am not sure the exact income group to really categorized as one, but I believe among me and my peers, most of us belong to this class.  This post is not to complain about life being in the middle class, but to look at the common reality of life in Singapore.

Growing up, we are told to study hard, get good grades and you will do well in your career. If you do so-so or what we call moderately well, then as years passes by, you realised you belong to the one of the many in Singapore who continues to slog for a living or Middle Class. How come the schools here do not teach us about financial freedom ? How come there are no subjects about personal finance management in classes? Why is that Nobody told us that we need to be in the upperclass so that we will not be stuck in the rat race?

Average Singaporeans burn a hole in the pocket after their marriage, burn another hole when they get their first flat or property, burn another hole when they have kids. After so many holes, there are none left for retirement.

I had tea with a good friend today, he told me life is a struggle in Singapore, he belongs to the middleclass. After many failed attempts to apply for a HDB and getting fed up, they bought a executive condominium. Why?
They wanted to consider buying a resale HDB, but with them living around Clementi area, all the COVs being extremely high, they decided it is silly to pay for such a premium.

Their combined income had exceeded the ceiling inorder to buy a flat direct from HDB. Both had to used up a huge chunk of their cash to pay for the downpayment for the EC.

With the young baby growing up, they had to buy insurance coverages and endowment policies for the kid's future education. After paying for their monthly properties mortgages and insurances fees, in addition to the daily expenses, they have little left to save for retirement or even investment.

My friend is very thrifty by nature, but circumstances made him to commit himself to this situation. Stuck in the middles class, both need to continue to work inorder to supplement all the expenses. Now they are slowly trying to save up and continue to be thrifty.

The Singapore Government always encourages people to pro-create on Television news or on papers. All of the government officials belongs to the upper class.

You slowly start to understand the term "Talk is cheap" once you step into the middle class.

Personal finance - Car Management

Many years ago, I was debating with a good friend how much we needed to earn before we can afford to buy a car. The amount came to 3,000SGD. However, after much deliberation, I realised the amount is greatly insufficient.

I always wanted to get my own car since I started work, images of sports car was always on my mind. I dreaded the long journey to work on a bus and the need to wake up early.

Having a car back then was a "plus point" to look good in front of chicks and is a sense of personal achievement.

Looking back now, I think it was a matter of going through a phase in life where you just wanted something new.

I got my car 8 years ago and I am still driving the same car, I must say I am the rare breed to continue driving a car for so long and not succumb to the need to have the continental car for comfort and "status".

Some of the pointers I learnt on car management:

1. Get a reliable car that is fuel economical.
2. Go for cars that requires minimal maintenance.
3. The bigger your car, the more road tax you have to pay to Government
4. Buy a car if your job is able to supplement the expenses.
5. Do a cash flow management before you buy a car so as to ensure you have sufficient cash flow on other expenses.
6. Always be prepared to pay "fines" as every average car owner contributes this to the Government no matter what. Need to cater for spare cash for this.
7. If you drink and drive, there might be a risk your car depreciates at a faster rate.
8. Set aside a sum for car maintenance and do more thorough maintenance during the first few years.
9. There is a need to change tyres every few years or based on your mileage, this is a re-accruing cost and tyres can be costly.
10. A driver will always experience tyre burst or other malfunction, be prepared to spend extra on adhoc basis.
11. Try to pay cash for your car if possible.
12. Have ways to offload your car easily should there be a need to relocate or when your company offers you a car.
13. Do not listen to over trade offers on cars
14. Learn to say no to car salesman.
15. Buy cars with a higher OMV.
16. If you buy continental cars, be prepared to spend excessively on maintenance.
17. Cars are a liability unless you rent it out.

Does good education guarantee success in life?

Many parents are putting in savings or endowment plans to plan for their children's education. The estimated cost of a tertiary degree education is expected to be double or triple in 20 years time. Singaporeans being the kiasu lot will want their kids to have the finest education in top schools and many often do volunteer work to ensure they get higher chances of enrolment.

When I first started out work after completing my national service, I had only a diploma and always tell myself I needed to upgrade, the main reason was I thought that by upgrading myself, I can ask for a better salary with a degree.

Over years of working and going through what I saw, I come to a conclusion that with a good education does not necessarily guarantee success, unless if you are in the government sector and a civil servant.

In 2004, I had a ex-colleague who has 2 degrees and was studying for a master. After working with him for 1 year, he was let go due to poor performance, this was at a MNC. In 2011 while at another company, I came to know he was let go again due to similar reasons.

One of my friend, paid good money to earn himself a degree at top 10 university in the world. Ever since he graduated, he had not stayed a job long enough and is now working for a job that does not require any degree qualification.

My colleague, he was a top student at a local University and has a masters degree and is now studying for a MBA. After working for more than 5 years at a private MNC, his wife;who only has a diploma is currently earning more than him.

On the other hand, I look at my army friend, a secondary school dropout, but he is running his own logistic business and easily earning more than 120K$ per year. My property agent friend of mine, only has O levels, but he is earning 6 figures annual income and has a few properties to his name.

Couple of years back, I accidentally came across a few candidates interviews forms at my ex-company, many applicants had degrees and with relevant working experience, I came to realise how competitive the workforce over here is. Almost everyone has a degree nowadays.

However, if you have a high education and end up in any government job, most chances you should be doing fine, unless you happen to do something bad and get "condemn".

I went through my PSLE and O levels with satisfactory results, I ended up at a polytechnic where I hated what I studied. Although it took me a while longer to complete the course, I did not regret taking the course, reason being this diploma has opened doors on many careers for me. Now that I have a degree, I did not have a chance to utilise it unless I switch to another job.

Having a good education does not necessarily guarantee success in your work life. A good working attitude and having passion in your job is essential to drive success. Joining the right company is also very important. If a accountant joins a small firm, very likely his or her salary will not match the bigger companies. When it comes to the real working world, no one will compare your school results, its about meeting your KPIs and results, results results.

But nonetheless, a good education is sill important to have a head start in your career. If I had not gotten my diploma, I would not have the opportunity to work for so many wonderful different companies.

Last but not the least, having financial literacy is important. There is no point being a doctor or a director but yet you do not know how to understand and control your own finances.

For myself, I will plan to continue to pursue my further studies if time permits next year. Let's hope the government give out more educational goodies in the coming week.

New work year and First blog articles being re-published

The start of my dragon work year has been super tiring and eventful, I can't believe I had to work overtime continuously daily ever since I have a baby. Thank god for the confinement nanny here and her presence has indeed helped to lower our burden at home.

Work is work, I have no complaints. But I am starting to realise I had simply no energy to do anything else after work. Maybe it has been awhile since I had worked so late that often. (salesman should not be working so late!) Stress level at work is not helping thanks to some unnecessary problems caused by my ex-manager. I tried to apply the 80/20 rule on my job, but even after with that, my energy level just cannot cope.

I need to start finding time to work out. Hopefully it will boost my energy level. I will need to ensure I stay healthy during these period and has decided to stop my other active income channels for now (like estate agent). Being batman instead of superman is good enough for now.

Luckily there is still passive investment through stocks to generate that much needed extra income. I will be receiving my Suntec reit and CDL trust dividends this month.

This week has been very eventful too as two of my articles are being re-published on http://nextinsight.net/
NextInsight, a hub for serious investors is co-founded by Leong Chan Teik, a former Straits Times senior correspondent, and Kathy Zhang, founder and MD of Financial PR. Both are very well respected and had achieved several successful milestones in their careers.

I am very surprised they took interest in my articles as I had only started blogging only since last October.
It is deeply honoured and I hope I can continue to contribute more meaningful articles moving forward. Hopefully my blogging can also start to make some tea money for me soon.

Financial matters for 2012

A couple of years back, I used to envy people driving that Lexus luxury car and was so tempted to get one for myself, I told my friends I will get one of those as my next car, a rich man son's friend of mine even encouraged me to get one as he said this might enhanced my image in my part time real estate agent job.

Fast forward to 2012, I am thankful I did not succumb to my "wants" and made the silly mistake of buying the car, I am already contented admiring the car on my blog's avatar for now. If I had purchased the car, monthly car loan installments might be in the range from near to 1K$ per month or more. I look at my upcoming bills for this month, confinement nanny (3400$), hospital delivery and Gynea charges (6000++$), confinement food (1000$) and cord blood banking fees (2000$). Having to foot all these bills at one go is already a challenge since I only started back regular savings last year, I cannot imagine if I still need to service the high car loan and yet have some many expenses to foot.

I expect to see my savings greatly reduced after this month on these expenses. Coming months ahead, I am expected to get our first 4 room flat direct from HDB, another round of huge expense on renovation and furnishes come to my mind. Ever since marriage I wanted to be the alpha male, to me it is guys' responsibility to bring food to the table and I believe it is my duty to service all expenses. But after looking at my bank account now and being realistic about it, I have limitations to continue to foot all the bills, unless I sell my stock holdings.  I chatted to my wife and we came to a conclusion we will need to tap on her savings for the housing expenses ahead. Her habit of regular savings has helped me and I start to really see the need to have more savings and be frugal.

I can breathe a little easier now and can now continue to focus on our retirement plans. One of my new target now is also to save up as much cash as possible so that I can use it to pay up my next car in 2 years time. (not a Lexus but a second hand car). It is a challenge but I think it is feasible if one is frugal and disciplined.
With the sale of my company's stock options and external income coming in soon. I should be in a better cash flow position by March. I am thankful I will not need to sell any of my stock holdings this time.
Sometimes, two is better than one when it comes to financial matters.

Personal finance 2 - spending habits

I must admit I am not overly qualified to write this, but I would like to share my own personal experience on spending habits and hope that people will also come to realise the importance of good spending habits.

I grew up during the era where there was a silly trend for youngsters to wear branded clothing. I have to put part of blame on my friend back then as he was really a bad influence. Peer pressure got over me. I remembered bringing my father to pay for my Armani clothes and Trussardi jeans. Back then my father was doing pretty well in his businesses and he bought them for me although with much grumbling. He did not really set a good example to me on proper spending habits as well since he was always changing luxury cars and spent lavishly.

When I started out to work, I still had the tendency to go for branded goods, I told myself that the better quality justifies it and it can last longer (I still think they do even now). Over the years I had purchased branded items for belt, watch, shoes, wallet, sunglasses , bags and pen. I grew my earning power gradually over the years and did not contol my spending.

I used to spend 450$ on a pair of shoes, I own a Cartier pen and Prada sunglasses. I even bought myself a Rolex watch in 2006 as my good friend got one too. My spending did not stopped on material items, I even invested in grooming myself by signing up for facial packages which probably could had cost 2 lots of Keppel Corp shares easily.  Although there were no big regrets in spending to pamper myself with the facial packages. ( now wherever I go , auntie or uncles still call me xiao di due to my youthful looks ), I realised that I was spending my money in a very wasteful manner. Luckily I did not end up with any credit card debts like my other friend, he had asked me to be his guarantor for credit loan but I instinctively said no as he could not control his spending.

Things started to change once I got to know my wife, after observing my wife's spending habit and the way she values her money, I felt terribly guilty. I tell myself that I need to be frugal like her. Myself being a Man yet I spent more than her. My journey to achieving positive finance also allowed me to open up my eyes. The needs and wants are clearly defined now once I have a target to reach. There are more important task like saving money for our future house, baby and retirement. Now is not the time to spend, it is time to save and be frugal so that I can enjoy a better life 10 - 20 years on.

Nowadays, I would rather spend money to buy stocks that will generate income/ capital gains than spend money on material things. I still spend to sayang my wife now and then, but I make sure that it is within my budget.

There is a need to cultivate good spending habits from young, we need to set a good example to our children on the way we spend our money, having financial literacy education is also essential, separate the needs and wants while young and understand and appreciate the need to be frugal.

Controlling your spending habits is part of positive personal finance and also related to the journey to financial freedom.

Tips on how to control spending:
1. Set up a budget for monthly expenses
2. Ask yourself if it is a need or want on every purchase
3. Delay spending and spent more time to consider if one should really buy that big purchase items
4. Learn to say NO to sales people
5. Envy and stop there, learn not be influence by peer pressure
6. Cut down on number of credit cards and minimise credit limit
7. Always remind yourself that you do not want to end up old and poor. So start to spend wisely and save!

Personal finance 1 - Savings

Do you have a rich father? If no, please continue to read this.

Savings for Singaporeans is a must have, it is something we need to have and accumulate, if not, we are probably unable to fulfil the below needs:

Car:
To be able to afford a car, you need to have savings to cater for at least a few months worth of instalment, apart from that, there is a need to cater for maintenance cost, insurance cost and road tax. If you intend to cut down on your monthly loan payments, you need to put it a larger sum of down payment.

House:
To book a new flat at HDB, you need to put in 1K~2K worth of option fee. If you are buying a resale flat, you need to cater for agent's commission of 1% of purchased price, option fee of 5K will be required to exercise the option, lastly, the buyer need to come up with the down payment of 20% for the flat's valuation. Lastly, there is the renovation cost required, which easily comes up to around 30K$, it is not advisable to take a renovation loan due to the high interest rates.

Marriage:
You need money to buy the engagement ring, be it lee hwa or cartier. Price varies from 500$ to 12,000$ based on the carat size and the requirement of your partner. A pair of wedding bands can also cost more than 500$ for a mid tier brand. There is also the photography package that cost around 4K$. We have not even included the honeymoon cost, ang pow money for the in-laws (for guys) and lastly to standby the money to repay the difference for the wedding dinner package should the ang pow money received fall below the average cost for part table.

Starting a Family:
Government encourages family planning but the cash perks that there are offering are simply insufficient. The cost for a delivery package for a gynaecologist is around 3K$. There is also cost for repeated gynea visits. Apart from that, major expenses include confinement nanny and tonic food for the wife. We have not included the baby expenses like baby cot, pram etc.,

With enough savings, we can breathe better when it comes to the expenses required, nobody can help us apart from ourselves.

How to save?:
1. Forced savings from young. Pay yourself first. Create a separate bank account, budget a fix amount to be transferred to the account once you receive your pay check. Any other additional income, you can put inside as savings too.
2. Cut down on expenses and instill delayed gratification. Be frugal. Do not be influenced by peer pressure for luxury items and learn to say NO to sale people.
3.Monitor your expenses to up to 3 months to understand your spending habits and make improvement.

After many months, you will see your savings being accumulated. slowly and steadily.

Not losing sight of what is important in the dragon year.

It is another brand new year again! The year of the water dragon is expected to bring lots of volatility and uncertainties in 2012. The stock market has yet to recover to the previous peak in 2010 and we are still unsure when the market will complete the down cycle.
Companies will continue to stay cautious and some will cut cost, people will work harder in these uncertain times to add more value and keep their jobs.

This Chinese new year is special to me, as I am writing this blog on my iPad,I am sitting beside my wife, whom has just given birth to a wonderful baby boy :) Seeing your very own newborn and holding him is indeed a truly incredible feeling. Words could not describe what ran through my mind while I was waiting for my baby to be delivered outside the delivery suite. When I see that my baby boy and wife recovering and doing well now, I already became the happiest man in this dragon year. Although little mini me came out slightly earlier before dragon year, I didn't mind abit, cause he has given me and my wife new meaning in our lifes now.

As we continue to slog , make investments, create multiple incomes, spend time and effort to build our career, it is important not to lose sight of what is most important to us, our family, health and friends.

After becoming a little overweight for the past year, I am planning to get back to fitness soon so that I can catch up with my son when he grows up.

Wishing all a happy dragon year! Huat ah!

Survival in working till 50s and retirement

I see many articles on retirement planning and all, I start to think how can one really plan for retirement in today's volatile business environment.

If you flip today's Straits Times, you can read that Eastman Kodak, has filed for bankruptcy yesterday. This is one of America's most notable companies and has a long history. Years of poor performances has led to them laying off 47,000 employees and closing 13 factories. I remembered making a sales call at them back in 2008 at their Singapore office in lorong chuan. I am not sure if they are still around now, but this is a really a reality check that even if you plan for retirement, things which are beyond your control happens like companies falling into financial difficulties and end up folding.
The fact is that we depend on our day job for income, this is needed for expenses, payments and retirement planning. I am not sure how many Singaporeans can have a 100KSGD passive income per year. But to be pragmatic, we need our day job to keep us going before we retire. And for this, we need to work till we are in our fifties at least (estimated unless you are a super high flier you can retire in your forties).
I had survived 2 retrenchments in the past and had seen many of my colleagues being laid off. It is a part of life in Singapore, we cannot escape this, but we must find a way to deal with it, manage it and survive.
How to survive?
After job hopping in my earlier years, I can realised that working in Multinational companies (MNC) that has consistent profit, good cash flow, low debt and conservative in nature is a good choice. Usually, these companies will survive during downturns and can stay long. Some MNCs has subsidiary companies, when things go wrong, they might still provide you a back-up plan to find a post there. If your company has some key products to sell, there is a chance where if it collapse, there might be some competitors that will be willing to buy over the firm, so if your skills are needed, you will end up with the new company. (but usually with a pay cut). Lastly for worst case scenario, most MNCs offer retrenchment benefits, if you happen to stay long enough, you will get a substantial amount of severance package. My experience with local companies have been brief thus I cannot comment much.
Staying in a job till you are fifties?
I look around my office, I hardly see people in their fifties working, apart from the Directors, VPs and some managers. I started to wonder why, and I can come to a possible conclusion that only people in their fifties can survive in a company if they are in the top 5% of a organisation. Or have many of them already retired?
If I am in my fifties, can I continue to work at my current job? The answer is no. My personal take is that if we want to continue working till we are in our fifties, we need to move up, or we have to move out. The only way is to ensure your career progression is in place.
 
So if we work the right company, excel in our job, show value, move up the ladder, work till we have save or invest a sufficient amount, probably we can retire?

My top ways to 10 to survive a job till you are in your fifties and plan for retirement:
1. Join the right company
2. Excel in your role
3. Show value in your job
4. Move up the ladder
5. Be in top 5% in the organisation
6. Ensure company has retrenchment or retirement benefits
7. Save and invest to beat inflation and plan for retirement
8. Eliminate debts
9. Have passive income
10. Buy toto and win ( I mean work for Singapore Pools, they will never go bust )

Singaporean in debt

The current starting median pay for polytechnic graduates is 2000$.
The starting median salary for University graduates is about 2700$.
The average median salary per month for Singaporeans in 2011 is 2710$.

I really wonder how can Singaporeans stay out of debt if they continue to spend.

Take some example, a Singaporean couple fall in love and decided to settle down. Man is in his thirties and woman in his twenties. Combined income of about 8K$

Guy buys proposal ring - $7000. (Larry's brand as girlfriend likes it)
Couple bought a pair of engagement rings - $6000 (Cartier- due to peer pressure)
Expenses for wedding photo package - $6000
Wedding dinner expenses came to -$7000 (for in-laws "ping jin")
Honeymoon to Korea - $3000
They decided to apply for a DBSS after countless tries with HDB's BTO without sucess - $350,000 ( took up a hdb loan and wiped out their cpf and savings)

Couple spent 20K on  minor renovation and furnitures.

Man decides to upgrade his car as he could not resist the latest continental car design - $100,000 (car loan)
( this is getting very familiar for people in their 20s, once they get extra earning power, their cars will get extra power too eventually)

Man likes to collect watches, saw the latest rolex and could not resist. Has no cash but buys it with a interest free 24 months instalment since it is so cheap per month - $12,000.

Man tells himself, if he loses his job, he is finished. Stuck in a rat race and saves on food, entertainment and  transport cost. ( will not drive his continental car to areas with ERPs and takes MRT there).
Wife is in the finance industry, with many banks doing cost cutting, she is very concerned now as she realises she has nothing much to do during office hours.

Above is a real life story.

The only way the couple could afford all that if they belong to the high earners group or if they have financial assistance from their parents or if they are born rich. Unfortunately, they are not.

We have not even talked about Singaporeans with lower earnings.
Most Singaporeans will be in debt if;

1) Earn less than what you spent
2) they have no savings
3) they lose their jobs
4) they stay in a company for too long without promotions and their company provides them pathetic bonuses
6) they spent on liabilities
7) they do not practise delay gratification
8) if you marry somebody that likes Cartier or Larry's
9) if you are a not a minister
10) they do not invest