Personal Finance Management and Lifestyle Notes

housing in singapore... and that thing called mortgage

2015-11-01T11:30:00.000+08:00

I may have given everyone a false impression that I'm very rich as a millionaire. Well, I didn't give a true representation of net worth, because I do have debt over my head and that is a source of stress. Unfortunately, Singapore's housing prices are relatively high and most people require a 25 year mortgage at least to get by. This is what my spouse and I signed up for.

It is probably also worth noting that our choices remain important. While we could choose to buy resale HDB flats, we did not do so then because we had to save up for our wedding and the reception, there was the concept of COV (cash over valuation), and we'll need to spend quite a bit of money on renovation. A quick and dirty estimate was $50K + $60K + $80K = almost $200K of cash upfront. This is on top of what we'll need to pay in cash as down payment, which would easily be 5% of $600K = $30K (assuming we pay the remaining 15% & stamp duties using our CPF savings). The truth is, we did not have this amount of cash upfront. Well, I did but my partner didn't, and I figured there was no need to stress ourselves over this.

Instead, what we did was to make the choice to stay with our parents post marriage. We're lucky our parents were understanding and had spare rooms to accommodate us, so all we did was to change our beds into Queen size ones and bought some loose furniture for extra storage. At the same time, we bought a private apartment off plan so we only needed to pay for the unit based on construction progress. Interestingly our unit was built rather late and we only started paying our installment a year later, at about $300 a month and increasing to $600 just earlier this year. As the construction developed further and as interest rates rise, we are now paying closer to $1,000 a month in mortgage, and set to rise to $3,000 once the loan is fully drawn. I'm not sure if anyone realises, but cash-flow wise we are much better off as otherwise (in the HDB scenario), we'll need to incur $2-3K in mortgage installments every month from day 1.

Being the finance person I am (I'm the CFO of the family, naturally), I simulated scenarios where interest rates are higher than they are now, and I estimate mortgage interest rates to be at 3.75% by 2H 2017. Honestly, I hope this will not come true but I always try to expect the worst. It isn't entirely impossible too, as interest rates are closer to 2% now and the US has yet to increase rates. Also, let's not forget that housing interest rates in Singapore were about 5-6% just a decade ago. When this happens, we will need to fork out about $4,000 a month for our installments.

Affordability

Now, with median household income at $9,000, is a $4,000/month mortgage affordable? Why I used median income is because our apartment is actually just under $1 million and I've seen many average-earning professionals/workers committing to much larger mortgages. Moreover, if one of us loses our jobs, we will not earn anywhere close to $9,000. But let's say we earn $9,000 and have this 25-year mortgage.

$1,800 goes into our CPF every month, of which 2/3 goes into Ordinary Account and can be used for property payments i.e. $1,200. This means we need to fork out cash of $2,800 every month out of net take home pay of $7,200 (39%). Not that bad, but rather tight - a general rule of thumb is not to exceed 35% of net take home pay. This is because there are so many other needs for our income - savings, food & general expenses, insurance, and even allowances for parents and kids (if any). Not to mention we should always have a stash for emergency expenditures.

In view of this, we actually decided against buying a $1.2 million property (not that expensive, considering most suburban condos are priced at $1,200 per sqf and we're looking for a 1,000 - 1,100 sqf unit). This mean we have to forgo location or convenience by way of being near an MRT station. Instead, we spent just under $1 million for our property and decided to spend $110,000 on a car instead, especially since car parking will be included in the monthly charges.

Our Plan

Ok, now that we've got a car, we need to incur $900 monthly for the loan repayment, and another $700-900 for the car's operating expenses (road tax, petrol, parking, maintenance). This takes out another $1,800 from the remaining net take home pay of $4,400. (For the record, we paid for the car almost entirely upfront from our savings, so we only incur the operating expenses monthly.) Having a car is indeed a luxury, we admit, but it also allowed us to go places, try out hard-to-reach dining places, spend more time visiting parents, and enjoying more couple time as we chat in the car in the drive to/from work (we used to take public transport separately).

We've also made a plan to save up $2-4K each month as a couple. Yes, so essentially we are both relatively thrifty and can get by with under $1K a month each on all our basic necessities excluding insurance. (A side note here - it is important to marry someone with similar values as you, including monetary values, as it takes two to make decisions that bring you closer to your dreams and the life you wish to live.) This 'savings' actually does pay for our joint expenses such as dinners outside and our weekend plans and is basically what we can save up after spending on our needs. So although this accumulates to about $35-45K a year, we plan to prepay our loan by about $20-25K a year. It is for this reason that we decide to still stick with a floating rate SIBOR loan, although I must say the interest rate volatility does upset me quite a bit.

Very few of my friends around me have thought about prepaying their home loan or, if they have, felt that they could not afford it. (Of course, there are some who prepay to the max.) To this, I will say two things: 1. There's always a way to save up, no matter how little it is. We are not particularly high earners but we do not spend that much, so every dollar saved is a dollar earned towards prepayment; and 2. mortgage interest rates are probably one of the lowest secured interest rates you can ever find. Therefore, if one is able to earn a higher rate of return than the mortgage interest rate, over a similar base as the mortgage, then one should definitely not prepay the mortgage. For us, we under-invest and thus find prepayment a very attractive option.

The reason I say this is because I'm not sure if people generally appreciate the savings as a result of prepayment (look, I don't think the banks want you to learn this). Most mortgage bankers provide a simple mortgage table spreadsheet and if you can duplicate the spreadsheet and insert the prepayment amounts, you may learn something new. I did exactly that and realised that for every $1,000 I prepay, I could potentially save up to $500 over the loan term (say 25 years). At least, this is for my case since interest rates are about 2% annually. Extrapolating this, it means our mortgage installments will only briefly exceed $3,000 (like $3,150) over 18 months before falling to below that level forever - using the same interest rate assumptions as before of course.

Isn't this amazing and yet a powerful tool? It means we fork out $1,800 in cash (net of CPF) instead of $2,800 and gives you an extra $1,000 to spend - or rather, save - on prepayment again. See where this is leading to?

The Big C

C for conclusion, and also C for the biggest C in our lives which is condominium. In short - and thank you for bearing with me as you read the long-winded story above - this is how a median income family can actually quite comfortably afford to live in a condominium. Naturally, if you stay in a HDB with a lower mortgage, this can apply too and it may mean you attain financial independence faster. For us, the high upfront payments for the resale HDB meant we could only go to the private housing route, and yet as we think about it, it can be well within our means if we do know how to manage the finances around it properly.

Here's an illustration of how the monthly financials look like:

Household Income (gross): $9,000
Take-Home Pay: $7,200
CPF (Ordinary Acct): $1,200

Expenses -
Mortgage $1,800 ($1,200 paid via CPF, totaling $3,000)
Car $1,800
Insurance $1,000
Household Expenditure $1,500 (condo charges of about $400)

Total monthly savings = $1,100 (or $2,900 without car)
Total annual savings = $1,100 * 12 + 2 months bonus (net of CPF) of $14,000 = $27,000 ($49,000 without car)

Either use the savings to prepay or to indulge in a bit of holidays and enjoy staying in a condo for the rest of the year. On that note, we're really excited to receive the keys to our unit in a few months' time. We need to spend a bit on the furniture and hopefully can keep this to within $15-20K, and will use the remainder of our savings we're going to prepay. Currently we've set aside $10K before end of the year for prepayment. It is my hope we can keep our loan to within 15 years - our current target is 13 years.

Time flies... a stock take

2015-10-31T21:13:00.001+08:00

Wow, it's been a long while since I last took a glance at this blog. Five years in fact. How time flies. In this period, I focused a lot on my career, took on a lot of stress, and (thankfully) got married. In between, and fairly recently, I've turned into a millionaire (in local currency, not in US$ yet).

Most of my wealth creation is through savings from active income. And as I looked back at old posts (not that there were many to begin with), I realize my investments have stagnated since the last time I blogged. Well, I still performed transactions here and there, but not very actively. I'm therefore keen to revive this blog for a few reasons: (i) to help me plan my investments better and improve clarity of thought; (ii) so that I can actively look at market updates and remind myself of how much I love investing and finances in general; and (iii) monitor my progress. It's true they say, you can only manage what you can measure.

It's interesting how I reviewed old posts and notice how my analysis of Starhub's dividends maintaining at 20cents per share was right. Of course, this requires review now with the changing competitive landscape. I also looked at one of my first posts in May 2008 where I planned my wealth growth - I still have a hard copy of this stored somewhere to remind myself of my initial struggles and my eagerness in achieving the plan. It's now 2015 - a good 8 years have passed - and I'm proud to say that I'm close to my 2022 target. Or rather, I've doubled what I had said I wanted to achieve in 2015. This is a good result, indeed. At least, I can tell myself I didn't waste my youth in vain on my career as I managed to earn quite a bit in active income. I also now indulge in more luxuries than before, where I would scrimp and save every cent (it took me two years to consider and almost a year after I passed CFA before I rewarded myself with an ipad, of which my spouse still uses it now).

I probably didn't perform as well as I could have on the investment front, but managed to still reach my goals nonetheless due to conservative model underwriting, lol. Based on the bare records I had on my trades, I figured I had obtained an IRR of about 10.6% over the past 8 years - no mean feat, yet a large part due to luck as a number of investments were made during the global financial crisis. A summary over the 8 years is below:

Initial Capital (2008): $110,000

Increases in Capital over the years (net of sales): $180,000 - mostly injected in year 2011 with some withdrawals in 2012

Trading gains/(losses): $35,000 - definitely more active in early years, with gains of about $2,000 annually over the past 2 years while I sold down stakes in earlier positions

Dividends: $100,000 - definitely the piece I'm most proud of, as I'm trying to build up a stable stream of passive income

Ending Value of Portfolio (2015): $345,000

My passive income hovers at about $18,000 a year, or $1,500 a month. Initially the goal was to attain $30,000 / $2,500 a month but as my needs increased and with higher costs of living plus desire for travel, I believe I should only settle when my passive income hits $48,000 i.e. $4,000 a month in today's dollars. This means I do have some way to go in achieving financial independence, which is sad as I do wish to take some time off work (still very hectic and taking a toll on physical health).

Luckily for me (I guess), there's still the component of interest income which is $5,000 a year or $450 a month as I'm fairly conservative in my portfolio (only ~35% invested). This means I'm probably halfway through my goal now, and the purpose of blogging more frequently is to take a more active approach towards reaching $4,000/month without having to double the capital required.

Going forward, to meet the personal objectives of this blog, I'll only focus on the passive income bits and not on overall wealth. Let's see where this journey takes me to, I can't wait to begin - everyday is the start of a new journey.

AUD trade & some thoughts

2010-11-26T22:45:00.010+08:00

I'm really glad that the price for Starhub has traded rangebound, just as I had predicted (and hoped!).

Just also wanted to share another area of my investments, that of foreign exchange. I never had luck with foreign exchange; I had 1000 HKD that I kept from my previous trip exchanged at a rate of 1S$:4.5HKD and am sitting on paper losses today.

However around the middle of this year, I was very bullish on the Australian dollar (AUD) as I was confident the Reserve Bank of Australia would raise rates. I bought in at about 1AUD:1.24S$, and interest was pretty decent at an average of 4% p.a.

Unfortunately just a few weeks after I made this trade, the exchange rate fell to 1AUD:1.18S$, and I panicked. I had contemplated buying more to get an average rate of say 1.21 but I did not (which of course I regret on hindsight). In fact I had almost liquidated the holdings at a loss.

Thankfully for me, I held on and only just squared the trade at a rate of 1AUD:1.28S$. Overall the trade presented me with returns of 6% (3.5% on currency gain; 2.5% on interest) or almost 12% on an annualised basis! Nice gains of a few hundred dollars and I'm pleased =) Of course if it were a few thousand dollars it would have been nice, but let's not be greedy.

Analysis on AUD
Overall, I'm still confident of the AUD; and I was proved right as the AUD strengthened to the point where it has now breached parity with the USD.

However what I had considered but downplayed is the relativity of the exchange rate. Sure enough, the AUD strengthened against the USD, but so did SGD (my home and base currency). I had thought the SGD would not appreciate that much, nonetheless as Singapore uses its exchange rate as its monetary policy tool, the MAS decided to increase the slope of the NEER band to rein in import-led inflation. Therefore, for me to have made better returns on the trade, it means the AUD has to rise much faster than the SGD. While it had for the past few months, I wasn't sure if it would continue and I decided that it's time to take profit.

I made the trade in the form of a fixed deposit, so am glad to have made profits overall. The returns are calculated net of the bank's bid-ask spread. Of course if the rate of relative increase in the AUD had been much lower, I could jolly well have been hit with a loss. Overall, I felt that this investment was too risky and decided to call it a day.

But I still like the AUD because it has high interest rates - and for some reason AUD seems to go against interest rate and purchasing power parity which makes it seem like a free lunch somewhat - and it is a way for me to get exposure to the booming commodities sector. So if exchange rates favor the odds again, I'll be back into the trade.

Thoughts on Portfolio

Made a few trades this week and had wanted to do more stock analysis, but haven't had the time, so will do so later. But recently I've been reading up more and trying to learn more so I've had many investment ideas.

On my portfolio, I may not be able to hit net worth of $288K by end of this year, which I had initially thought was possible. I realised quite a bit of losses on my fund investments (and Fundsupermart platform fees did not help!). But I always remind myself that I started small (my average income for the first three years of work was under $50K p.a., including 13th month AWS) and I spend around half of it or more as my annual insurance premiums alone constitute $4K every year. If anyone remembers my earlier post - done after my financial planning in mid-2008, my target net worth at end-2010 is $200K. This has now been surpassed thanks to a strong recovery in Asia and to increases in employment income. I also spend my spare time (and some nights) running a small side business. So I am now ahead of the original schedule by just under 2 years, and with inflation rising at 3% p.a. I'd much rather be a millionaire at a younger age of 30 or 35 instead of the original 38. This hopefully would place me much ahead of my peers and allow me to choose the jobs that I want to do - no, I won't stop but I want a choice - and to roam the world as and when I please while I'm still healthy. Perhaps it is now time to relook at the cash flows and financial plan all over again :)

Analysis on Starhub - Q3 2010 results

2010-11-21T19:18:00.025+08:00

Starhub is one of the best perfomers in my portfolio, and I continue to like the counter. I bought the counter again last Friday as it was down around 4% from the week's high but my belief is the long-term uptrend is still intact.

Bought into Starhub when it was in the low $2s, and with dividend of 5 cents a quarter, or 20 cents a year, dividend yield was as high as 9% per annum! A lot of people have expressed skepticism that Starhub is unable to sustain dividends at that level; however if they were to cut dividends it would still be at least 16 cents per year (previous dividends were 18 cents a year) and at current prices it is still a respectable 6% every year, much higher than the inflation rate.

The stock would go ex-dividend on 23 Nov, which means I will get my 5 cents a share for the new lots that I purchased; of course the stock may drop below the price of the dividend (i.e. by more than 5 cents per share due to general weak market sentiment), and if so I may look to adding to my holdings by buying more shares (I guess I have to thank Fundsupermart for this, for making me realise my losses in my fund investments so as to make money in stocks!).

Is dividends of 20 cents a year sustainable for Starhub?

This is anybody's guess, but we can make an educated guess here by referring to the financial statements. The share capital for Starhub is 1.724 million ordinary shares.

So you ask - for 3Q 2010, Starhub earned only 4.76 cents (diluted) per share, how come they are able to pay out 5 cents per share to shareholders? Are they borrowing to pay us - if so, this is dangerous. Now this is where there is a difference between accounting earnings and cash earnings - the biggest non-cash expense is depreciation and if I add back to earnings, the cash earnings now become 85 cents per share. The quarterly depreciation is approx. $65 million, while dividends is $86 million, so the depreciation expense is able to pay off about 75% of the dividends.

Another thing you should look at is shareholder's equity - or net assets - which at S$53.6 million (around $31/share) is rather low. Compare this against its net current liabilities position of $499 million - over 9 times its equity position! What this means is if its trade creditors ask for money immediately, or if the banks do not rollover the loans upon maturity, Starhub may run into cashflow issues. The mitigating factor is that the operating cash flows are sufficient to cover off the cash flows required for financing activities (which includes repayment of loans and payment of dividends) so cash flow management seems alright for now.

Analysis of Revenue Drivers

Not sure if anyone realises, but Starhub's 3Q 2010 results were better than expected. Operating revenue has increased 3% y-o-y due to higher service revenue driven by its Mobile business. There is an 8% y-o-y increase in Mobile service revenues which is largely due to higher subscription revenue from post-paid mobile services, perhaps due to the introduction of iPhones to its customers (where people upgrade their plans - I did too!) - and this is in my opinion the bread and butter of telecommunications business so it is fairly stable.

And as widely expected, Pay TV recorded a 8% lower renuve y-o-y due to a reduction in the Sports package subscription price from $25/month to $12/month as they try to retain customers after they lost the EPL broadcasting rights. The good thing is, Mobile contributes to 54% of total service revenue while Pay TV contributes 17% so overall the entire company is better off.

Revenues are of course only one aspect of earnings, and we should look at operating expenses as well. There is a whopping 57% increase for the 9 months to 2010 y-o-y for cost of equipment sold, and total cost of sales increased by 17%. This is due largely to the subsidy they provided on the iPhones and other smartphones. Is this a concern? Well, the results are translated into higher service revenues for Mobile, and overall would expect there to be margin recovery in 2011, so while increases in expenses are not ideal, this should be monitored by looking at the profitability in subsequent quarters. Again this could be an accounting peculiarity where the expenses (e.g. cost of iPhones) are recorded in the quarter, but revenues are only going to be recognised slowly over the term of the contract (e.g. a two-year mobile service contract).

Therefore I think Starhub is still on track to pay 5 cents per quarter for at least the next 2-3 quarters ahead. It also offers one of the fastest payment of dividends from ex-dividend date, and you will see the dividends in your account by 8-9 Dec, just in time for your Christmas shopping!

Conclusion

Expect Starhub to outperform, at least perform in line with the broader market. The closing price on 19 Nov is 61.8% of the Fibonacci line (from the peak of $2.82) and expect the price range to be around $2.64-2.67 ex-dividend. If it falls back to $2.50-$2.60 believe there is a buying opportunity; alternatively if it shoots up to $3, I may look to offload some of the lots to take profit. Uptrend based on moving averages look intact; so this could happen just before year-end. :)

Funds and Fundsupermart Platform Fees

2010-10-24T20:37:00.004+08:00

Wow. It's been 2.5 years since I've started investing, and over a year since I've updated this blog! I didn't realise it has been this long, and can only say I'm relieved that the worst of the global financial crisis is over us. Well, I cannot be 100% sure, but judging from my portfolio performance, at least my overall portfolio now shows a positive profit :)

In my last post, I mentioned that my portfolio was segmented into funds/unit trusts - what I call 'indirect' - as well as shares (what I term 'direct'). In the depth of the financial crisis, the funds showed a smaller loss vs. the direct part of the portfolio, possibly due to the diversification (there are typically many shares in a fund). However the funds were also the worst performing section of my portfolio as they never managed to reach the highs I've bought them at; it does not help that I have to continue paying the fund managers annual management fees.

My History of Fund Purchases

I started purchasing my funds through an online platform, Fundsupermart.com. These funds have been with me for two years, ever since I entered the workforce. As the initial investment amounts were small, and I wasn't earning a whole lot when I started, I bought into the funds bit by bit, up to when STI was at a level of 3,800. Even as the markets had improved since then, most of my funds are still under water, some to the tune of -40% still!

I never managed to convince myself to sell the funds, perhaps due to their sentimental value, or possibly due to the fact that I didn't want to sell the funds when they were making losses.

Platform Fees at Fundsupermart.com

Today, nonetheless, I sold off ALL of my funds on Fundsupermart.com out of anger. Earlier this year in April, they had sent all unitholders a letter informing that they would start charging platform fees effective May. As expected, there was a huge backlash. A few months later, we were then told that there would be reduced platform fees for longstanding Fundsupermart.com supporters - I'd like to think I was one of them. Well, that happened to be a wrong assumption.

Money market funds constitute approximately 30% of my portfolio and I've maintained this ratio over the past one year, which means I have approximately $100,000 in my Fundsupermart.com holdings. I thought the platform fees were waived till 2011 (due to the public backlash), so I held on to my investments. As the returns on money market funds were relatively low, I didn't expect them to charge platform fees either (especially as the fees for the Cash Fund was waived).

On their website, this is the official reason for applying the platform fees:

Due to anticipated regulatory change, increased number of funds, switches raising our ongoing operational costs, it is no longer possible to subsidise this just from sales charges. Hence, there is a need to have a platform fee which will apply to all cash and SRS unit trust holdings from 1 May 2010. This fee will be accrued daily and auto-deducted from holdings on a quarterly basis at 0.125% on equity fund holdings and 0.05% on fixed income funds.

I don't know if people realise that they had quoted on a quarterly basis; I'm not sure why Fundsupermart.com did that, it seems there was the intent to mislead people, or to show that the platform fees appear lower than they actually are. For equity funds, which typically return 5-6% p.a. in a good year, 0.5% p.a. goes to Fundsupermart.com. For bond funds, which return 2-3% p.a., 0.2% p.a. goes to the platform. This is in addition to the upfront sales charges payable.

Why was I angry?

I suppose I have to thank Fundsupermart.com for giving me the reason to sell off my holdings.

The main source of my anger was that the charge was taken off silently; no invoice or email or any sort of notification. I had not traded on my portfolio and rarely perform switching between funds, so when my portfolio dropped by $70 for the quarter, just for the platform fees, I was totally flabbergasted! Which means for doing absolutely nothing with my funds, I would have to pay over $300 annually to Fundsupermart.com! So much for being a 'silver investor', huh? Not to mention that I had paid over 2% in upfront sales charges when I first invested (as the market was less competitive then and average sales charges were approx. 2.5% - 3%).

But the real thing that upset me was how this process was unilateral; if I had not discovered a lower portfolio value earlier today, I would not have known.

Oh, well, I've learnt a valuable lesson and it was my fault for thinking that Fundsupermart.com would value loyalty. I do not think the charging of platform fees is sustainable for them, slowly but surely they would be losing their customer base - other online platforms such as POEMS and Dollardex offer a similar number of funds with no such fees. While I must admit that Fundsupermart.com has the best website layout, and stronger research, these resources are provided free to everyone regardless of whether you are their client or not. Naturally I wouldn't want to pay a few hundred in dollars annually for a free service.

Anyway I've been performing much better on my direct investments, and perhaps it is time to redeploy my funds in this area. I'll be updating this blog more regularly, so stay tuned!

Portfolio Updates

2009-03-22T18:03:00.000+08:00

I have been acting like an ostrich all this while. When I started seeing how my portfolio dropped over 60%, and how my monthly income was barely sufficient to cover what I was losing in my portfolio daily, I stopped looking at my portfolio.

Similar to every other investor out there, I'm subject to behaviourial biases. The fear of regret. It is this similar fear that makes me hold on to my losses, even up till this day.

So just a week ago, I started re-looking at my portfolio to work out exactly how much I've lost. This year alone, I've taken part in 2 rights issues and increased the capital under investment, of which the first rights issue is under water.

I segmented my portfolio into funds/unit trusts, of which I've lost -24% cumulatively since I started investing 2 years back. For my direct investments portfolio (hand-picking stocks), the cumulative unrealised loss was -50%. The latter is alarming, especially as I started investing directly only about a year ago. But they've paid pretty handsome dividends so far, although dividends are not certain. Taking into account realised dividends and realised trading gains so far, the record is -38.5%.

Where do we go from here?

While I wanted to put in trades to cut my losses, I started asking myself what was my goal for investing. It was intended to be for the medium to long term, with the ultimate goal of financing for my retirement. And one thing is for certain, the market is going to recover - it may take 2 years, 10 years or even 20 years. But we all got out of Great Depression, didn't we? How will this be different?

I decided I could stomach an overall -30% loss in my portfolio. Performance, on absolute terms, is frustrating. But I bought during the highs of 2007 and 2008, and have learnt many lessons since then. So I hope this means it's tuition fees well spent.

My strategy for 2009 is to start saving up as much as I can from my monthly income, as well as my dividends. This is to start accumulating as large a cash pool as possible, to take advantage of any mispriced securities. The way to go in the short-term, is definitely not value investing, but trading. Due to the nature of my job, I might not be able to achieve that, but I will continue to buy more of the stocks I'm vested in and which I have high conviction in, to lower my average cost.

Meanwhile, around 30% of my overall portfolio (in market value) are in money market funds. What is most important for everyone now, I suppose, is to save as much as possible for rainy days, especially as pink slips are in abundance lately. However, do not lose sight of the larger goal - take a small part of the savings to invest when opportunities present themselves. I hope to be able to hand in a favorable report card by the end of 2010. When I'm on track with my goals for retirement :)

US Financials in Turmoil

2008-09-28T14:14:00.001+08:00

It's been tumultous weeks for the U.S. finance industry that began with the packaging of mortgage-related assets.

To take stock, here's what happened so far:
* Lehman Brothers filed for bankruptcy
* Freddie Mac, Fannie Mae and AIG were rescued by the US Fed, making the Fed their largest equity holder
* Bank of America bought Merrill Lynch in an all-stock sale
* Morgan Stanley and Goldman Sachs are no longer investment banks, choosing now to be regulated by the US Fed.
This is driven by a need to borrow money from depositors as short-term LIBOR rates continue to remain high amidst the drying up of liquidity.
* WaMu (Washington Mutual) is the next bank to go belly up. JP Morgan bought their good assets and not their liabilities.
* Wachovia Bank is in early talks with Citigroup, Wells Fargo, and Banco Santander.

Is this the end?

No one really knows, but I think it is still early days. At the very least, confidence is shaken and you will start seeing US domestic consumption and GDP growth slowing, especially as domestic consumption forms the lion's share of GDP in the United States.

The market is jittery, and any rebounds in the past seem to be a result of bears covering their shorts. Regulators have since forbid naked short selling (i.e. selling a share without owning it first) and the market is range-bound with further downside potential.

Wall Street is waiting to see if the US Fed is able to convince Congress to agree to the proposed US$700 billion bailout plan. The nearing Presidential elections has made it seem like a political play, and no one is sure it is going to be a cure-all for the US economy. Critics were everywhere and have tugged the heartstrings of the population - namely why are US taxpayers, themselves in massive (housing mortgage) debts, be liable for additional debt while the banks' CEOs get to pocket the US$'millions they have earned over the years?

Another concern I have is, the US Government already have over US$9trillion in debt. Who is going to continue lending to them? And at what cost? It is likely the USD will continue depreciating against most currencies in the near future.

Ben Bernanke's comment on buying the distressed assets at close to hold-to-maturity value is also cause for worry as it could mean buying the assets at a premium over the mark-to-model values and might mean he could not deliver on the promise where US taxpayers are entitled to capital gains when the assets are held to maturity.

How about emerging markets in Asia?

For Singapore where I am based, I think there are both direct and indirect impacts. Direct impacts will be limited as our main trade flows are intra-ASEAN and inter-Asia. However, we will still be affected as we are a very open economy. Also, indirect impacts are harder to measure and lies unknown. Inter-Asia trade is likely to be negatively affected as US demand falters, thereby affecting demand from other Asia countries because the US continues to be major trading partners of many countries, especially that of China.

What's next?

The market is likely to await to see if Congress passes the Bill on the bailout plan, and it depends on which candidate wins the Presidential election and what steps he will take to steer the US economy back on track (or it could be further off). Unemployment figures are likely to rise as banks continue to retrench and it may start overflowing to other sectors of the economy, including manufacturing.

It is thus prudent to keep cash and maintain liquidity till we have more positive news ahead of us. As for my unrealised losses in mutual funds and equities that is reaching 15-20% of my initial value, I have decided to keep it there as I bought them for the longer-term and will relook at them early next year. I am guessing the economy picks up then when the financial turmoil is over (hopefully by end of this year).

Updates

2008-09-14T20:56:00.002+08:00

It's been some time since I last updated.. I've since started work in the finance industry, and that has kept me rather busy.

Also, for STI to fall to the levels of 2,500-2,700 is a setback to my investments. That was the level last seen when I started investing, and after two years, I'm back to square one and nursing my losses. But my own stocks portfolio are in defensive sectors and I'm getting reasonable dividend yields :)

Of course the mutual funds I've invested are >30% down and I'll continue holding them for the next one year or so. I'm not sure if I'm caught in the mentality of "selling winners and holding on to losers", but I still believe in long-term fundamentals, even though oil prices falling below US$100 per barrel is an indication of slowing global demand.

Anyhow stay tuned as I start paying more attention to my investment portfolio again.

The latest hype: OCBC 5.1% Preference Shares

2008-06-03T11:05:00.004+08:00

OCBC has recently announced it is offering its Class B preference shares to its retail and institutional investors that pays a fixed dividend of 5.1% per annum. These preferred shares are non-convertible and non-cumulative and the fixed dividends are tax-exempt, payable semi-annually.

For the retail investor, the minimum subscription is 200 prefernce shares of S$20,000 and thereafter in multiples of 100 preference shares for $10,000. These shares are perpetual securities with no fixed redemption date, redeemable at the option of OCBC Bank five years from the issue date and on each dividend date thereafter. It carries an investment grade rating of A-/Aa3.

Things you should know before you invest:
* Non-convertible preference shares
This means the preferred shares are not convertible to equity. While this might be preferred by some (preference shares rank above equity in liquidation), it essentially treats this like a fixed-income security, but not a loan. A loan debt is like you lent $20,000 to OCBC and it pays you 5.1% p.a. in interest. However, capital is NOT guaranteed, so it should be compared to a fixed-income security such as a coupon bond.

* Non-cumulative preference shares
There are cumulative and non-cumulative preference shares available. Non-cumulative shares means if OCBC faces cash flow problems and decides not to declare dividends, these preference shareholders forfeit their dividends, i.e. no dividends for the year. This is another feature that makes it different from a plain-vanilla loan. However, one consolation is OCBC has to pay preference shareholders before their equity shareholders, and in previous years, OCBC has been regularly paying its shareholders. So the likelihood of this is small, although not zero.

* No capital guarantee
As mentioned, this is not a loan or fixed deposit (as many retail investors choose to see it). This cuts both ways because it also allows for capital appreciation as well. A look at OCBC's Class E 4.5% preference shares shows that prices are relatively stable and it is currently trading at 100.70.

Also, note that should OCBC run into bankruptcy, preferred shareholders are paid before common equity shareholders, but after taxes, employees and debtors.

* Liquidity
Shares are traded on SGX at 0.1 lots. For large lots, market impact costs might be incurred. It is possible that only 10 lots or 10,000 shares are traded daily. This makes it difficult to sell if you should need money urgently.

* Interest Rate Risk
These shares are redeemable after 5 years on each dividend date. The option to redeem lies with the bank; usually the bank will redeem if the current interest rate environment is falling or the level of interest rates is low so they could refinance at a lower rate. For the preferred shareholder, this means that they have to seek alternative investments as they have a lump sum of cash on hand upon redemption by OCBC. However interest rates are low and they might not be able to get good yields on the cash balances and are subject to the prevailing SIBOR rates.

* No voting rights
Voting rights are given to common equity shareholders. Preferred shareholders typically have no say in the business of the company and are not in a position to fire management/directors. This is another reason why preferred shares are likened to fixed income securities.

* Tax-exempt
The semi-annual dividends, like most other dividends and interest income, are not taxed. Dividend income received by common equity shareholders are already taxed at the company level.

Should I invest?
* Risk appetite
This varies from individual to individual. It depends largely on your risk appetite - if your risk appetite is low and you are risk averse, yet would like some exposure to OCBC, this could be a right investment for you. However, if you have medium to large risk appetites, you might want to choose OCBC equity because you have participation rights, i.e. in a good year, you might receive special dividends and could thus get >5.1% p.a. Also, OCBC equity are more liquid and more volatile than preference shares so capital appreciation (and loss) is much faster. On average, equities return ~10% p.a. over a ten-year period.

* Investment Horizon
If you need the money in a year's time, then you should not invest. You get 5.1% in dividends but after incurring transaction costs and opportunity costs, it is less than 5.1%. Thus, this is best for three-five year term horizon and beyond.

* Your existing portfolio
If you have cash lying idle in bank deposits, then yes you should consider this higher-yielding alternative. This is a higher rate than most fixed deposits and inter-bank rates (since the risk characteristics are different). However, if ALL you have is $20,000 to $40,000 I would advise against choosing this. You should have six months of expenses in liquid bank accounts for emergency funds use. And you should attempt to diversify whatever little you have instead of throwing all your net worth (your eggs) into OCBC preference shares (the only basket).

* Current status
If you are currently a retiree looking for stable income, this is a good addition to your portfolio. However, if you are in your early 20-30s, this can be part of your portfolio to diversify (it works like fixed income) if your portfolio or net worth is large enough. Otherwise, choose other (riskier) investment alternatives.

My thoughts
I applaud OCBC for providing retail investors with this option to invest in their Class B preference shares. They did take our feedback into account especially after DBS only offered their Tier 1 capital to institutional investors.

I might consider applying for the shares but I expect it to be over-subscribed. However I'm ambivalent about whether or not I receive the allotment since my existing equity portfolio has provided me with 9% return to date (7% trading gains + 2% dividend yields which I will update on another post) and my funds are still trading at a 10% unrealized loss. I am hesitant about liquidating my equities to invest in OCBC preference shares, or even my externally-managed funds as I hold a three to five-year horizon for them so I am holding on. Given the relative size of 1 lot of OCBC preference shares and its relative return, it is not attractive in my opinion.

NOTE: Please seek your financial advisor's advice about investing in these preference shares. I have brought up a few salient points for you to take note so you are aware of the questions to ask and you could decide if this is the best investment for you.

For more information on OCBC's previously-issued classes of preference shares, visit this website http://www.ocbc.com/global/investorrelations/Gco_Inv_PrefShareBond.shtm.

Setting my financial goals... baby steps towards financial independence

2008-05-25T22:58:00.006+08:00

I have had people asking me, how come I think of retirement planning when I just graduated from university? Most college graduates are working hard at repaying their study loan in the short term.

I must say I am one of the luckier ones. My parents had nil CPF balances (used it to pay for the HDB housing mortgage loan as our flat was bought at the property peak and hence loan amount was very high), so my loan was paid off in cash in full. (To be honest, it was tough on my parents.)

However, for young people like us, time is on our side! Whether you are 25 or 30 or 35 now, there is a good thirty years to retirement at 62, the official retirement age. Using the Rule of 72, generating a 6% annual return means your investment amount doubles in 12 years!

How did I start planning for retirement?

Initially, I started setting aside some money each month, around $400, and plonked them into mutual funds. The funds made money at first, and I continue putting money into these equity funds month after month (in a time of rising prices). However, the recent credit crunch has made me lose a substantial 10% of my investments as of now (it was down over 15% at one point). This is another good thing about starting early: you have the time and patience to ride out business cycles! So I have not sold any of my funds, as I believe it will appreciate in the medium term of 3-5 years. Nonetheless, it made me reassess my net worth and I have since placed a smaller percentage of my net worth in mutual funds (also known as unit trusts), choosing to invest directly in the stock market instead.

So how do I keep track of my retirement plans now?

The first important thing, I believe, is to set a retirement goal. I decided early on that I want to earn my first million dollars by the age of 35 - that would ten years from now, and this is my long-term goal. To monitor my progress towards this large goal, I have set many shorter term goals in between. The hallmark moment came when I first reached a net worth level of S$100,000. That was the first time my net worth crossed the sixth-digit mark, and is a significant milestone in my financial planning management, given that I earn less than half that amount in annual income (not to mention that interim capital losses delayed this special moment).

The following are my net worth targets based on conservative annual returns, i.e. 5% annual returns instead of 6%. Thus, the age that I will reach my S$1 million goal is around 38 years old.

Jun 2008: $120,000
(unfortunately, I am not near this level yet. This is because I made some personal choices, and decided to spend a rather substantial amount on current travels.)

December 2008: $135,000
(Hopefully, with discipline, I should be able to reach this level or near it towards the end of the year.)

To be honest, by then, S$1 million would not mean much, since inflation has been running high lately and probably most of us lower- to middle-income earners are already millionaires by then! However, that point is definitely memorable as it marks a significant step towards financial independence. Using S$1 million capital as base, one could easily double it to S$2 million in 12 years using a reasonable 6% return, and this means this same S$1 million turns to S$2 million when I turn 50 years (38 + 12), notwithstanding that I continue to save up and invest during these twelve years. This should result in financial independence earlier on in my life, so I could choose to work in areas I am interested in, including unpaid jobs.

The Dreams of Financial Independence

I believe my dreams are what motivate me to defer current consumption in favor of future consumption. I want to be financially free, to be able to travel the world and befriend friends from all over the world, learning and understanding customs and appreciating differences in culture. Most of all, I would like to spend my last years in rural areas, leading a simple lifestyle with a slower pace of life, and teaching children during my spare time.

Each of us have dreams, and we should dare to dream. Because only when we dream, then we are able to make dreams happen!

So continue to check back this blog regularly as I make updates on my financial position, and my journey towards financial independence. Importantly, I hope it motivates you to save harder or gives you a pat on the back if you have done well in terms of net worth growth! Join me as I struggle between difficult consumption and investment choices, as I am sure we all do. And let's all work hard towards achieving our dreams!~

Great Singapore Sale 2008

2008-05-23T12:52:00.001+08:00

The Great Singapore Sale starts today!

For every Singaporean, it certainly marks a season of shopping with great deals! This year's sale is especially inviting, since retail sales have been slowing down and retailers are introducing deep discounts in an attempt to boost mid-year sales.

Before you head out to the malls, remember to check the newspapers and the website for cut-out or print-out coupons. It takes up only a while of your time, yet this small act can save you a lot of money!

The official website, for example, has a coupon website. Some savings include:
- Get $10 off with every $100 spent at Watson's
- 50% off Leonard Drake Facial or Health Spa treatment

Also, look out for credit card partnerships to reap more rewards! For example, Millenia Walk has StanChart as its credit card partner, Suntec City has ABN Amro, while FrasersCenterpoint Malls encourage you to use UOB cards. The GSS is sponsored by Mastercard, so it pays to use cards with the Mastercard logo as well if there are promotions in-store.

Honestly, I'm getting confused with the myriad of promotions out there - all I know is, always double check for any discounts or rewards before purchase! Remember, the small cents do count! And happy shopping!~

The Road to Financial Freedom

2008-05-23T12:09:00.000+08:00

The other night, I was talking to a friend, W, over the phone... and I was inspired by the amount of savings she manages to accumulate each month.

W receives salary of around $2,300, and is able to put aside $1,200 in her online savings account each month. That is an impressive savings rate of >50%! And since she gives a monthly allowance to her parents of roughly $600, that essentially means she gets by with only $600 each month!

Let's do the sums. Assuming W starts off with a net worth of $20,000. The forced savings of $1,200 will increase her net worth to $34,400 at the end of one year (ignore compounding for now, since interest rates in Singapore continue to be very low). If, a year later, her salary increases by $500 and she is able to put aside $1,500 in forced savings. Two years later, her net worth increases to $52,400. These calculations did not include bonuses, so assuming bonuses of $10,000 for each year - her net worth at the end of two years increases to $72,400!

To make a comparison, assume another friend, K, earns $3,400 a month, and spends $2,800. She justifies the extra spending as she has to be on par with her colleagues in terms of dressing, and dines out frequently with her friends. After taxes, she manages to save $500 a month. A 15% savings rate is a decent amount, especially for fresh college graduates just starting out. Starting with the same net worth of $20,000, she ends up with $26,000 at the end of one year. A year later, her salary increases by $800 and thus she increases her savings to $1,000 a month. At the end of two years, her net worth increases to $38,000. Her bonuses amount to $30,000 over two years, of which she saved $20,000. Her net worth at the end of two years becomes $58,000.

Earnings (Annual)
K $ 70,800
W 47,600 (48.7% less)

Net Worth
End of Year 1
K $ 36,000
W 44,400
End of Year 2
K $58,000
W 72,400

This may be a simplistic example, but it teaches us an important lesson in financial planning - that net worth is determined not by how much you earn, but by how much you spend! K earns on average 50% more than W each month, but her net worth is 25% less than W's! Extrapolating this trend, it's not hard to figure out who ends up richer. Since both of them live in the same city and are subject to similar costs of living, differences in net worth is a result of differences in consumption and saving habits. And it's all the more inspiring because this is a real-life example so you know it can be done!

So, instead of thinking negatively and complaining about how little you earn from your job, change your thoughts to positive ones! You now know that you can use your cents to build up future riches!

Here is a useful formula to follow: Expenses = Income - Savings.
W makes a conscious effort to spend only what is left after saving up a specified portion of her income. K uses Savings = Income - Expenses, and while the formulae are equivalent, she spends first and saves up whatever is left. This typically leads to overspending, because people tend to spend when they see positive balances in their accounts!

Make it a habit to save from today, or else you'll make it a habit to spend! Which would you prefer? :)

My Credit Card Rating System

2008-05-22T12:49:00.001+08:00

Well it's no secret that banks and credit card companies have been supplying me with plenty of plastic over the years. A typical look at my wallet shows at least 8 cards from 3-5 different banks - the rest would remain in my drawer.

A common (and valid!) question I usually get is "Hey, how do you know which card to use?" or "Don't you get confused? I only use one card." or even "You are not maximizing the use of reward points since you can't accumulate them in one card."

Indeed, confusion ruled in the initial days. I started off applying for one card each from two banks, enough for my use. Then with the advent of roadshows and telemarketing (I am skeptical when they tell me my mobile number and other details are confidential) and free gifts, I started signing up for more cards. Sometimes, it happens when the telemarketers are nice and friendly, and I thought it doesn't hurt me to help them anyway. It gets easier to apply for subsequent cards from the same banks as they already have your information plus, more importantly, your credit payment history.

It is important to manage your credit card expenditure and bills, or your finances in general. More cards do, in some ways, encourage you to spend more. My spending has increased with more cards (not my income though :( ) but thankfully, it is under control. I will leave this topic to another post since I want to address another issue here: namely, which card to use?

I will attempt to articulate my thought process here although I am not sure if it is clear for all. I applied for supplementary cards for my mother and she is confused with me telling her which cards to use.

There are only two general rules to follow:

Rule No 1. If there are ongoing promotions, use the card that qualifies for the promotion. If many cards are eligible, follow Rule no. 2.

For example, if a store advertises a 10%-storewide sale for holders of CB-credit cards, use CB-issued credit cards. This is a no-brainer. Similarly, when dining out, ask if there are dining privileges - if credit cards from XX bank offers 15% off total bill, dish out your XX-credit card from your wallet. If you stick to using only one credit card, then too bad - yes, you accumulate points (good for you!) but at a miserable rate of 0.5%, while I get 15% off a total bill of say $100. That is $15 vs. your point-equivalent of $0.50. You choose.

If the promotion applies to all Visa-cardholders for example, you suddenly realise that any of your five Visa cards qualify. When in doubt, use Rule no. 2.

2. Use the card that ranks the highest in your credit card rating system.

This applies when there is no particular promotion and you are free to choose which card to use. I know your immediate question is - "What are you talking about? I don't have a credit card rating system!" No worries, I will show you mine and you can modify it for your own use.

I use a quantitative measure, i.e. I will not use a card because of its prestige or exclusivity (only for the ladies, or only for the rich), because it is a fair measure. Plus, where I am now, prestige does not count. It's not as if I'm in any tai-tai social circle anyway! I have chosen to use Cash and Cold Storage shopping vouchers as the benchmark. Cash, because cash is king. Thus I use the card which offers me the most cash rebates because I can use cash to buy a.n.y.t.h.i.n.g. since it is a medium of exchange. And why Cold Storage? Because prices are rising, and groceries are necessities. Yes I can make a comparison using Takashimaya Shopping Centre shopping vouchers, but anything I purchase there is not a need. And if groceries are necessities, you ask me, why not NTUC? Simple, because Cold Storage vouchers are accepted widely! Just name it - Cold Storage supermarket, Shop and Save, 7-11 (buy your parking coupons, your bread, etc.), Guardian, Photo Finish, etc. I usually pass these vouchers to my mom when I receive them :)

Okay, so how does my ranking system work? Cash should be clear enough. For Cold Storage vouchers, I visit the individual banks' websites or flip through the booklets they send me with the updated conversion rates. These rates do change as often as the weather! So it pays to do a little bit of research every now and then.

For a sample calculation, let us use hypothetical figures:

Bank A gives 1 point for every $5 spent. For 700 points, it allows you to redeem $20 Cold Storage vouchers.

Bank B gives 1 point for $1 spent. For 3000 points, it gives you a $10 Cold Storage voucher.

Bank C gives 1 point for every $1 spent. For 3500 points, it gives you $20 worth of Cold Storage vouchers.

My rating system tells me I should use Card C, Card A then Card B in this order. If I do not exceed my credit limit and there are no specific promotions (Rule no 1), I will only use Card C to 'maximize' my reward points and receive my Cold Storage voucher sooner.

How did I get this rating result?
Card A's exchange rate is: $20 per 700*5=$3500 of spending, or 20/3500 = 0.57%
Card B's exchange rate is: $10 per $3000, or 0.33%
Card C's exchange rate is: 0.57%, same as Card A.
I prefer Card C to Card A because I assume Card A rounds down the rewards points (it may not be the case), i.e. for $6 spent, you only receive 1 point and a spending of $19 entitles you to 3 points. Over the long term, you receive 4 points for every $25 spent while its Card C provides you with 5 points equivalent (25/5) so Card C provides a better deal in this instance.

Now lest you think that this is complicated, you only have to do this rating once and revise it ocassionally. Let me use my real life example to show you how easy this really is.

Disclaimer: This is for illustration purposes and does not constitute a recommendation to use any particular bank's card! This is not a sponsored post, just a desire to share some tips and my practices with fellow consumers. Follow this example at your own risk - results differ due to differences in spending habits, consumption patterns and spending levels. There is also Vnothing inherently wrong in using only one card to meet all consumption needs, or boycotting the use of credit cards. Pay your credit card bills in full to enjoy the privileges of credit cards usage.

This is an illustration of Rule no 2 (I may use other cards more often in order to follow Rule no 1):

1) UOB One Card
In using this, I applied my rule of Cash is king. This is also a relatively new card so it shows that I am using updated information to revise my rankings.

How this works? Spend $300 ($800) each month for three consecutive months or a total of $900 ($2400) each quarter and receive cash rebates of $30 ($80) for the quarter.

Effective rate: 30/900 = 3.33% cash rebate

Tips: It is close to impossible to keep track of your exact expenditure each month. I usually spend ~$400 each month, over the minimum required of $300. Still it is an impressive 30/1200 = 2.5% rebate! I do not make it a point to hit the $80 cash rebate because there are months when I spend around $500, even though my aggregate bills exceed $1000 usually (recall Rule no 1). The downside is I have to consciously ensure that the minimum of $300 is met else I forfeit the entire cash rebate for the quarter (I have not met this month's minimum yet!).

2) StanChart's Visa Platinum Access Card
I applied for this card only after the telemarketer's persistence.

How it works? It converts every purchase of $100 into 24 equal monthly installments at 5% interest rate and 6% administration fee. I hardly purchase individual items above $100 so this installment scheme is not attractive to me, as such I sign for purchases under $100 using this card and receive double the reward points.

Effective Rate: $20 voucher / (700 points / 2 * $5/point) = 1.14%

3) HSBC Visa/Mastercard Gold

Effective Rate: $20 voucher / (3500 points * $1/point) = 0.57%

Tips: This effective rate is similar to my StanChart platinum cards but I prefer HSBC simply because it provides unlimited supplementary cards for life. Thus both my mom and dad have supplementary cards and my dad uses his card to pay for his petroleum, thereby allowing me to accumulate the points across all three cards.

See how easy this Rating System is? All I do is use the One Card for my first $300-$400 of purchases, subsequently use StanChart's card for any subsequent purchases under $100 and HSBC for the rest. UOB cards used to rank high on my list (I spent a five digit sum in the past year across my various UOB cards) but it fell lower on my ranking system as it changed the terms of its reward system and accordingly, I spent less on my UOB cards.

There you go - I hope you found this post useful for your credit card needs. everyone's smart enough for finance! Now 15 credit cards under your belt does not seem so scary anymore! Grin.

Now this is what I call street-smart. Oh, and did I mention I simply adore credit cards? =)

Note: Rewards information correct at time of writing. The banks have every right to amend their rewards at any point in time. For accuracy, please refer to the bank's website or latest brochures.

ABN Amro Switch Platinum Card

2008-05-21T11:59:00.001+08:00

I recently applied for the ABN Amro Switch Platinum Card, and I was told by the telemarketer it comes with a ABN Amro Platinum Card as well. With a belt of over 10 cards under my name, I was hesitant. But here's what made me agree to the switch (apologies for the pun ;p):

* No annual fees ever!
Now this is an explicit statement saying that they are not going to charge any annual fees! So there is no need to call their customer service hotline seeking fee waivers, and no worries about minimum spending to qualify for the fee waivers!

I think this is a smart move - how many of us pay the annual dues? Traditionally it has been a source of revenue stream for credit card companies, but in recent years it has dwindled in importance. Of my 15 cards (I think... I lost count), I have never paid for the fee subscription, as I took advantage of the x-year fee waivers. There was once I was asked to pay the annual fees, and I cancelled the card. No loss, really, the banks just keep presenting me with cards! It definitely pays to have a good credit history :)

* No cash advance fee
This is attractive for those who obtains emergency cash advances from ATMs, whether locally or overseas. The cash advance fee ranges from an upfront 2-4% usually. However, do note that although there are no upfront fees, the bank does charge interest on the cash amount withdrawn at the prevailing rates! So use it as an emergency back-up line.

* 18% p.a. interest
There are some months when cash is tight - and we are only able to pay off the minimum payment. So a lower interest rate, vis-a-vis competitors' rates of 24% p.a. helps, since interest is calculated on a daily basis.

My advice is, try to spend within your means - spend only what you can afford. And attempt to pay off your credit card bills in full. Credit card companies and banks still love you for this - if you spend enough (like I do!), they still want your business! The business model has changed such that the bulk of revenues come from retailers (credit card companies charge an average of 2-3% to retailers for offering their services).

Still, for the ocassional months when cash flow becomes tight, it helps to be able to pay lower interest.

* 3 times more rewards points
You also get 3 times more reward points for your spend within the first 30 days of card issuance. It's temporary but still it's better than nothing. It goes to show how competitive this retail bit of business is and banks are becoming more creative at luring customers at all expense!

* Waiver of admin fees for cab rides
For those of us who take cab rides often, you will know that for payment by credit cards, the cab companies charge an additional 10% on top of the cab fare. ABN Amro partnered with Comfort, City Cab and Yellow Top (i.e. the biggest cab companies locally) to waive the 10% admin fee and GST for payments using an ABN Amro credit card. Now when there is a huge jam and the cab fare turns out higher than expected, there's no need to worry about not having enough cash in your wallet!

I know this feature appeals to auditors especially. Due to the nature of their work, extensive travel is needed. And cab fares, like other out-of-pocket expenditure are paid first while it takes at least a month for the accounting firms to reimburse their staff. So by using ABN Amro credit cards, they are able to get on to cabs and get the reimbursement on time to pay their credit card bills! Not to mention ABN Amro offers a priority booking hotline as well - comes in handy on rainy days when hotlines are swarmed with bookings!

Overall rating: Average
This rating is based on a self-made rating system using Cold Storage vouchers. The conversion rate is S$80 Cold Storage vouchers for 3200 points (an average spending of ~S$16,000), or approx. 0.5%. The rate compares well with other banks but other banks provide voucher denominations of $10 and $20, so you get to exchange for vouchers sooner. Alternatively, you may choose to use S$50 + 1200 points (~spending of $6,000) to redeem the vouchers.

Standard Chartered Promotion

2008-03-14T14:41:00.001+08:00

I recently received a call from Standard Chartered Bank in Singapore and was told of a really good deal. Here's what it is:

"Apply for a Standard Chartered Platinum credit card before 31 Mar 2008 and enjoy 10% cashback on all your retail purchases for the first two months*.

So if you spend S$1,000 on your card within the first two months, we will credit $100 cash to your account."

This essentially means there is a 10% cashback for all purchases you make from the day you receive your card for a period of two months, subject to a cap of $100 rebate. You don't have to spend >$1,000, so if you spent $800 over two months, you get $80, still 10%! Better still, there is no minimum expenditure involved. And I was told you are still eligible for regular reward points. I signed up, and will most likely see a jump in my shopping expenses next month! Heh. If you are interested, contact a SCB representative before the promotion deadline!

Terms and conditions apply*:
The 10% cashback is based on the total retail transactions charged to the Principal/Supplementary Cards within 2 months of receiving your card. The cashback amount is capped at a total amount of $100 regardless of the total spending within the 2 months period. This will be credited within 3 months from the transaction date. Promotion is valid for all new sign-ups till 31 Mar 2008.

* Information obtained from Standard Chartered pamphlet in Singapore.

Booking Hotels Online

2008-03-12T08:39:00.001+08:00

Over the past few days, I have been actively planning for my upcoming trip to Cambodia, and this of course includes finding accommodation and as much as possible, book the rooms online. I usually avoid the uncertainty of not having rooms when I get to a new foreign place, especially for the first night.

So searching based on my friend's hotel recommendation, I chanced upon this site http://www.asiarooms.com/ and I like this site! Let me tell you why...

It lists hotels (flights too, btw) by city and country so it's easy to find. Or just use the search tool like I did and you find the hotel you were looking for. Also, it provides a comprehensive overview of the hotel - an impressive four paragraphs! - and gives you a glance how much you pay for the various room types Standard, Deluxe for which periods. Rates include all taxes and service charges so you see the nett price, no hidden charges involved! Here's a sample of the user-friendly information:

And the best part of all is, to me, the option to pay in local currency! This is so you don't incur additional charges from your credit card paying for 1.5% exchange rate commission, and it's easier to tell your friends how much the hotel costs (if you're sharing the room and paying first) instead of waiting for your credit card bill to arrive. Not to mention being at the bank's liberty at charging you unreasonable exchange rates! Choose from SGD, AUD, GBP, EUR, HKD, JPY, NZD and USD. Most of the other sites I've used only allow the option of USD, and possibly GBP and EUR. This is a premium feature in my opinion!

Here's how the confirmation process works:

You first choose your currency, select your check-in and check-out dates, and proceed with booking. Enter personal details such as name and address, and provide your credit card number. You then receive an email saying your reservation has been picked up, subject to the credit card being confirmed. A few minutes later, when your credit card is verified, asiarooms.com sends you an email telling you so, with the amount temporarily blocked on your card, and tells you reservation is under progress and that they're checking with the hotel itself. Then they send you a confirmation to your local mobile phone (regardless of the country, how cool is that! - do select this option!) when your booking is confirmed. You of course get an email confirmation and will be able to check status/confirmation online at the website. Typically I get my SMS response half a day to a day later, very prompt. And it saves me the hassle of checking my emails constantly to get the load off my mind that I have a room to stay in!

So next time you're thinking of traveling in Asia and booking a hotel online - check this site out! The downside is it does not have all hotels so it's a bit restricted if you have a hotel in mind. But your hotel is in the list, then I think the local currency payment + the global SMS confirmation makes it a pretty good deal.

2008-03-01T11:57:00.000+08:00

This blog is officially revived!~

Now you may ask why... and I think it's for a very simple reason - I can't kill the blogger in me! And I enjoy recommending stuffs, dishing out my hard-earned knowledge to people, so I'm back with tips! Typical Gemini I must say... and I might just venture into sales one day. Haha.

And with the various cost increases, I thought it would be cool for some value-for-money tips, so I will share my ways of saving money and earning money! Grin. It's not the right or best way, it's just my way. These tips in general benefit Singapore-based users though. Feel free to share yours with others by leaving comments! I go for ecommerce too, so expect some to see some cool sites online!

Tada!~ With this formal announcement, my return is complete! Heh. So check back often, ya? :) And leave your footprints!