During my leave these few weeks, I have sorted out some financial/personal matters and is in the midst of sorting out some others as well.
Well, I'm not really into new year resolutions as I believe resolutions can be made anytime. But since a new year will begin very soon, I may as well take this opportunity to lay down some critical rules/guidelines for myself.
1) Deligently track my income & expenses on a monthly basis
I do track these currently to a certain extent but fail to follow up to complete the tracking & thus couldn't really review the effectiveness of my budgeting & savings.
2) Deligently track my investments (in cash, CPFIS & SRS)
Similarly, I'll need to follow through in this area, focusing on the realised/unrealised returns. This will then enable me to monitor whether I'm on target to build up my retirement funds.
3) Deligently track the dividends received from my investments
Dividends received will be channeled to a separate savings account. (But this is only applicable for cash investments since dividends received in CPFIS & SRS investments will be automatically returned to the respective account with the agent bank.)
This will allow me to monitor my overall dividend yield. At the same time, these received dividends will be accumulated in order to reinvest into stocks.
4) Continue to build up my passive income
One of the ways is via dividend stocks.
Currently, I'm targeting to collect an average of $1000/month via dividends after I retire.
Looking at an average dividend yield of 6%/annum, the amount of capital required will be $200,000.
Initially, I plan to achieve this by age 40. But thinking further, the focus on growing the savings should also not be neglected. If the opportunity comes along, I should liquidate a proportion of my dividend stocks during any downturn to lock in the capital gain & repurchase them at a lower price subsequently to increase the dividend yield. Again, easier said than done but it could be done.
With this in mind, I aim to stabilise the $1000/month in passive income via dividends by age 50 when these dividend stocks will not be liquidated anymore. Instead, it will just be a source of passive income and eventually be a legacy for my children.
5) Review & streamline my insurance coverage
This is already in progress and can be considered to be 75% completed (tagged to current stage of life).
I'm sourcing for disability income protection which my FP is assisting in.
At the same time I'm reviewing on the possibility of surrendering my wholelife policy and use term plan for coverage instead. If I can channel the $200 saved per month (after paying for the term plan) on investments, an average return of 6%/annum will enable me to self-insure, of the same coverage of at least $100,000, by age 58.
6) More efficient usage of credit cards
I'm doing up a summary of the scenarios that I'll be using the different credit cards so that I can gain the most points/rebates.
7) Plan route & timing in advance to save on petrol/ERP/carpark
The savings can be substantial especially for ERP!
8) Exercise more often
Health is wealth!
Thus, I shall run at least once/week & also cycle at least once/week.
9) Send my bike for routine servicing on time
I've the tendency to delay the servicing, giving the excuse of busy at work and too lazy to wake up early on Saturdays. But this is not healthy for the vehicle and might lead to the owner having to fork out more subsequently.
10) Sell off unwanted items via internet
I've some IT & general household items cluttering around at home. Most of these items should be able to fetch a token sum.
Oki, the above will be quite a handful (& brainful) to follow & practise deligently!
I shall do a mid-year review again in June 2011!
Thursday, December 30, 2010
Tuesday, December 28, 2010
SRS Contribution for Year 2010
I had further contributed another $6000 to my SRS Account this afternoon.
This brings my total contribution for the year 2010 to $7500, including the $1500 which I contributed 2 months ago for the acceptance of the rights issue/application of excess rights of Mapletree Logistics Trust.
Along with this, I had achieved my target of an average contribution of $5000/annum to SRS since 2007.
I'm looking at a good entry price for another counter with these available funds in my SRS account, possibly M1/Suntec Reit/First Reit/Singpost for dividend yield or Breadtalk/Capitaland for capital growth.
On a side note, the tax savings from my SRS contributions in 2010 (for YA2011) amount to $637.50.
More details of SRS can be found at Ministry of Finance website.
This brings my total contribution for the year 2010 to $7500, including the $1500 which I contributed 2 months ago for the acceptance of the rights issue/application of excess rights of Mapletree Logistics Trust.
Along with this, I had achieved my target of an average contribution of $5000/annum to SRS since 2007.
I'm looking at a good entry price for another counter with these available funds in my SRS account, possibly M1/Suntec Reit/First Reit/Singpost for dividend yield or Breadtalk/Capitaland for capital growth.
On a side note, the tax savings from my SRS contributions in 2010 (for YA2011) amount to $637.50.
More details of SRS can be found at Ministry of Finance website.
Monday, December 27, 2010
Inflation Rate in Singapore
It was recently reported in the news that inflation rate in Singapore hit 3.8% in November; the highest since Jan 2009.
The MAS uses the currency instead of interest rates to manage inflation, which it forecasts will average between 2.5% and 3.5% this year.
From 1962 until 2010, the average inflation rate in Singapore was 2.73%.
To illustrate how inflation rate will erode our savings:
$100,000 after 25years @ 2% Inflation Rate => $60,346
$100,000 after 25years @ 2.5% Inflation Rate => $53,103
$100,000 after 25years @ 3% Inflation Rate => $46,697
$100,000 after 25years @ 3.5% Inflation Rate => $41,038
$100,000 after 25years @ 4% Inflation Rate =>$36,040
$100,000 after 30years @ 2% Inflation Rate =>$54,548
$100,000 after 30years @ 2.5% Inflation Rate => $46,788
$100,000 after 30years @ 3% Inflation Rate => $40,101
$100,000 after 30years @ 3.5% Inflation Rate => $34,342
$100,000 after 30years @ 4% Inflation Rate => $29,386
$100,000 after 35years @ 2% Inflation Rate => $49,307
$100,000 after 35years @ 2.5% Inflation Rate => $41,225
$100,000 after 35years @ 3% Inflation Rate => $34,436
$100,000 after 35years @ 3.5% Inflation Rate => $28,738
$100,000 after 35years @ 4% Inflation Rate => $23,960
A minimum inflation rate of 2% is used as this is the same that financial planner/adviser will adopt.
I presume that those interested to kickstart financial planning will be those from 25 to 35years old. Thus, a period of 25, 30 & 35 years is used to calculate the future value, i.e. when one's age ranges from 50 to 65years old.
For example, if I'm 30years old now , my present $100,000 will be "worth" only $54,548 when I'm 60years old, with inflation rate being 2%. The future value will drop about 50%!
More importantly, this means that during our financial planning (which could encompass retirement funds, insurance coverage, children's education funds etc), we will need to consciously take into considerations the effect of inflation.
The MAS uses the currency instead of interest rates to manage inflation, which it forecasts will average between 2.5% and 3.5% this year.
From 1962 until 2010, the average inflation rate in Singapore was 2.73%.
To illustrate how inflation rate will erode our savings:
$100,000 after 25years @ 2% Inflation Rate => $60,346
$100,000 after 25years @ 2.5% Inflation Rate => $53,103
$100,000 after 25years @ 3% Inflation Rate => $46,697
$100,000 after 25years @ 3.5% Inflation Rate => $41,038
$100,000 after 25years @ 4% Inflation Rate =>$36,040
$100,000 after 30years @ 2% Inflation Rate =>$54,548
$100,000 after 30years @ 2.5% Inflation Rate => $46,788
$100,000 after 30years @ 3% Inflation Rate => $40,101
$100,000 after 30years @ 3.5% Inflation Rate => $34,342
$100,000 after 30years @ 4% Inflation Rate => $29,386
$100,000 after 35years @ 2% Inflation Rate => $49,307
$100,000 after 35years @ 2.5% Inflation Rate => $41,225
$100,000 after 35years @ 3% Inflation Rate => $34,436
$100,000 after 35years @ 3.5% Inflation Rate => $28,738
$100,000 after 35years @ 4% Inflation Rate => $23,960
A minimum inflation rate of 2% is used as this is the same that financial planner/adviser will adopt.
I presume that those interested to kickstart financial planning will be those from 25 to 35years old. Thus, a period of 25, 30 & 35 years is used to calculate the future value, i.e. when one's age ranges from 50 to 65years old.
For example, if I'm 30years old now , my present $100,000 will be "worth" only $54,548 when I'm 60years old, with inflation rate being 2%. The future value will drop about 50%!
More importantly, this means that during our financial planning (which could encompass retirement funds, insurance coverage, children's education funds etc), we will need to consciously take into considerations the effect of inflation.
Friday, December 24, 2010
SRS (Supplementary Retirement Scheme)
SRS is one of my 3 main modes for savings and increasing my retirement funds as described here.
Important features of SRS:
- Amount contributed yearly to SRS will be eligible for tax relief.
- Maximum annual contribution is S$11475.
- Funds in SRS account could be used for Fixed Deposit, Single Premium insurance products (such as endowment, annuity), bonds, unit trusts and stocks (except for direct property purchase).
- Investment proceeds are returned to the SRS account.
- Funds in SRS could only be withdrawn upon reaching the statutory retirement age prevailing at the time of one's first contribution. Premature withdrawal will incur 5% penalty fees (unless on death, medical grounds or bankruptcy).
- Only 50% of the withdrawals from SRS are taxable at retirement. Amount withdrawn in a year will be considered as part of income for that year and thus, the income tax rates will depend on the total taxable income for that year. For premature withdrawals, 100% of the amount withdrawn will be taxable (50% for withdrawals on death, medical grounds or bankruptcy).
- Withdrawals on or after, the statutory retirement age prevailing at the time of one's first contribution, could be spread over a maximum of 10 years. This could further reduce the taxes to be paid.
All these seemed attractive to me as I could save on current taxes and yet can invest the contributions too. Thus, I targetted to contribute S$5000 annually to SRS since year 2007.
I purchased stocks using the available funds in my SRS account since 2008 and have satisfactory returns in the past 3 years. More details will be in my year end review of my SRS funds.
Last day of contribution to SRS will be 31 Dec to be eligible for tax relief for YA2011.
More details at Ministry of Finance website.
Important features of SRS:
- Amount contributed yearly to SRS will be eligible for tax relief.
- Maximum annual contribution is S$11475.
- Funds in SRS account could be used for Fixed Deposit, Single Premium insurance products (such as endowment, annuity), bonds, unit trusts and stocks (except for direct property purchase).
- Investment proceeds are returned to the SRS account.
- Funds in SRS could only be withdrawn upon reaching the statutory retirement age prevailing at the time of one's first contribution. Premature withdrawal will incur 5% penalty fees (unless on death, medical grounds or bankruptcy).
- Only 50% of the withdrawals from SRS are taxable at retirement. Amount withdrawn in a year will be considered as part of income for that year and thus, the income tax rates will depend on the total taxable income for that year. For premature withdrawals, 100% of the amount withdrawn will be taxable (50% for withdrawals on death, medical grounds or bankruptcy).
- Withdrawals on or after, the statutory retirement age prevailing at the time of one's first contribution, could be spread over a maximum of 10 years. This could further reduce the taxes to be paid.
All these seemed attractive to me as I could save on current taxes and yet can invest the contributions too. Thus, I targetted to contribute S$5000 annually to SRS since year 2007.
I purchased stocks using the available funds in my SRS account since 2008 and have satisfactory returns in the past 3 years. More details will be in my year end review of my SRS funds.
Last day of contribution to SRS will be 31 Dec to be eligible for tax relief for YA2011.
More details at Ministry of Finance website.
Thursday, December 23, 2010
PSBP (Phillip Share Builders Plan)
I mentioned that I make regular monthly purchases of stocks via the PSBP (Phillip Share Builders Plan).
Before this, I used to do RSP (Regular Savings Plan) of $600 monthly via FSM (Fundsupermart) into Asia Pacific Ex Japan Unit Trusts. The charges incurred back then were typically:
- One time sales charge of 1.5 to 2% for lump sum purchase of equity Unit Trusts (no charge for selling)
- Fees of 1 to 1.5% for monthly RSP of equity Unit Trusts
I'm not really into UT (Unit Trusts) but it can offer diversification (in terms of geographical & sector) as well as DCA (Dollar Cost Averaging) via monthly RSPs.
However, as I got to read about the PSBP available from POEMS, I did some research & facts finding.
Concept & Critical Information
- Same concept of monthly RSP (minimum of $100/month)
- 19 share counters available (18 STI Component stocks and STI ETF)
- Monthly fees depend on investment amount & number of selected counters
- Client is entitled to dividend, if any, issued by parent company
- Purchased units are in custody of Phillip Securities (if one transfers to his own CDP account after sometime, costs incurred will be $10.70 per counter by CDP & $10.70 per counter by Phillip Securities)
Fees
Some calculations for varying investment amount & number of selected counters:
Investment Amount $300, 1/2 Counters, 2.14% Fees
Investment Amount $300, 3 Counters, 3.57% Fees
Investment Amount $500, 1/2 Counters, 1.28% Fees
Investment Amount $500, 3 Counters, 2.14% Fees
Investment Amount $700, 1/2 Counters, 0.92% Fees
Investment Amount $700, 3 Counters, 1.53% Fees
Investment Amount $1000, 1/2 Counters, 0.64% Fees
Investment Amount $1000, 3 Counters, 1.07% Fees
Investment Amount $1100, 1/2 Counters, 0.97% Fees
Investment Amount $1100, 3 Counters, 0.97% Fees
Note:
a. Turning point is when investment amount is above $1000 or more than 2 counters are purchased
b. For investment amount more than $1000, the fees will be the same for any number of counters purchased
For investment amounts less than $500 (1 or 2 counters), the fees are even more than UT.
Thus, to lower the fees to a level that it will not be more than UT, one will have to consider the amount he can afford monthly for the RSP as well as the number of counters to be purchased.
Counters Available
The counters are all STI Component stocks are thus, the risk is controlled in this sense. And the bonus is that the STI ETF is in the list as well which is essentially an ETF (Exchange Traded Fund) that tracks the STI (Straits Time Index). Essentially, the STI ETF is similar to the concept of UT. At the moment, I cannot find any platform that enables one to RSP into STI ETF directly (I might be ignorant here so if anyone know of any, pls let me know!).
Own Investment
I decided that I will terminate my UT's RSP and sign up for a PSBP account:
- Monthly Investment Amount of $700
I can afford to add $100 to the $600 that I had already committed to UT's RSP. This will also lower the fees to less than 1% (0.92%).
- 2 Counters ($400 on SGX & $300 on STI ETF)
STI ETF is definitely one of my selection due to the reasons above!
As for the second one, it was a difficult choice as there are quite a few that I'm interested in. Eventually, I chose SGX mainly because that it's the "mother of all shares in Singapore" and it will take a while for me to save up to even buy 1 lot given its price of $7 to $8 back then (may as well DCA for it).
I invested via PSBP for about 1.5year so far and are earning some profits. I'll further share about this during my year end portfolio update.
My Opinion
This is a good alternative beside Unit Trusts & ILP for those looking into saving/investing an amount monthly or looking for ways to make disciplined savings.
More information @POEMS
Before this, I used to do RSP (Regular Savings Plan) of $600 monthly via FSM (Fundsupermart) into Asia Pacific Ex Japan Unit Trusts. The charges incurred back then were typically:
- One time sales charge of 1.5 to 2% for lump sum purchase of equity Unit Trusts (no charge for selling)
- Fees of 1 to 1.5% for monthly RSP of equity Unit Trusts
I'm not really into UT (Unit Trusts) but it can offer diversification (in terms of geographical & sector) as well as DCA (Dollar Cost Averaging) via monthly RSPs.
However, as I got to read about the PSBP available from POEMS, I did some research & facts finding.
Concept & Critical Information
- Same concept of monthly RSP (minimum of $100/month)
- 19 share counters available (18 STI Component stocks and STI ETF)
- Monthly fees depend on investment amount & number of selected counters
- Client is entitled to dividend, if any, issued by parent company
- Purchased units are in custody of Phillip Securities (if one transfers to his own CDP account after sometime, costs incurred will be $10.70 per counter by CDP & $10.70 per counter by Phillip Securities)
Fees
Some calculations for varying investment amount & number of selected counters:
Investment Amount $300, 1/2 Counters, 2.14% Fees
Investment Amount $300, 3 Counters, 3.57% Fees
Investment Amount $500, 1/2 Counters, 1.28% Fees
Investment Amount $500, 3 Counters, 2.14% Fees
Investment Amount $700, 1/2 Counters, 0.92% Fees
Investment Amount $700, 3 Counters, 1.53% Fees
Investment Amount $1000, 1/2 Counters, 0.64% Fees
Investment Amount $1000, 3 Counters, 1.07% Fees
Investment Amount $1100, 1/2 Counters, 0.97% Fees
Investment Amount $1100, 3 Counters, 0.97% Fees
Note:
a. Turning point is when investment amount is above $1000 or more than 2 counters are purchased
b. For investment amount more than $1000, the fees will be the same for any number of counters purchased
For investment amounts less than $500 (1 or 2 counters), the fees are even more than UT.
Thus, to lower the fees to a level that it will not be more than UT, one will have to consider the amount he can afford monthly for the RSP as well as the number of counters to be purchased.
Counters Available
The counters are all STI Component stocks are thus, the risk is controlled in this sense. And the bonus is that the STI ETF is in the list as well which is essentially an ETF (Exchange Traded Fund) that tracks the STI (Straits Time Index). Essentially, the STI ETF is similar to the concept of UT. At the moment, I cannot find any platform that enables one to RSP into STI ETF directly (I might be ignorant here so if anyone know of any, pls let me know!).
Own Investment
I decided that I will terminate my UT's RSP and sign up for a PSBP account:
- Monthly Investment Amount of $700
I can afford to add $100 to the $600 that I had already committed to UT's RSP. This will also lower the fees to less than 1% (0.92%).
- 2 Counters ($400 on SGX & $300 on STI ETF)
STI ETF is definitely one of my selection due to the reasons above!
As for the second one, it was a difficult choice as there are quite a few that I'm interested in. Eventually, I chose SGX mainly because that it's the "mother of all shares in Singapore" and it will take a while for me to save up to even buy 1 lot given its price of $7 to $8 back then (may as well DCA for it).
I invested via PSBP for about 1.5year so far and are earning some profits. I'll further share about this during my year end portfolio update.
My Opinion
This is a good alternative beside Unit Trusts & ILP for those looking into saving/investing an amount monthly or looking for ways to make disciplined savings.
More information @POEMS
Purchase of Postage Stamps/Labels
I usually purchase postable labels from SAM Machines as it's so convenient (I can even weigh my letters/cards for the correct value of the postage) and practically "queueless".
Yesterday, after volunteering at a Christmas charity event, I further leveraged on my motorbike day parking coupon since I was on leave and parked at a HDB MSCP near Hougang Mall while on my way back home.
After settling a few banking matters, I went to Singpost intending to buy some postage stamps from the counters. The queue was at least 20pax long but luckily Counter 1 is for collecting/sending of parcels & purchase of postage stamps and there was only a couple there! I requested to buy 10 standard (26cents) postage stamps and I paid only $2.40 as compared to the $2.60 value!
Nothing great about this with reference to the absolute value but hey, at least it's some savings (7.69%). The % is comparable to credit card discounts at petrol kiosks, some restaurants of 5% and dividend yield of numerous stocks! For SMEs or small businesses that do not have prepaid envelopes and yet utilise postage stamps extensively, this might have more substantial savings for them.
Yesterday, after volunteering at a Christmas charity event, I further leveraged on my motorbike day parking coupon since I was on leave and parked at a HDB MSCP near Hougang Mall while on my way back home.
After settling a few banking matters, I went to Singpost intending to buy some postage stamps from the counters. The queue was at least 20pax long but luckily Counter 1 is for collecting/sending of parcels & purchase of postage stamps and there was only a couple there! I requested to buy 10 standard (26cents) postage stamps and I paid only $2.40 as compared to the $2.60 value!
Nothing great about this with reference to the absolute value but hey, at least it's some savings (7.69%). The % is comparable to credit card discounts at petrol kiosks, some restaurants of 5% and dividend yield of numerous stocks! For SMEs or small businesses that do not have prepaid envelopes and yet utilise postage stamps extensively, this might have more substantial savings for them.
Back after a long break
I'm back in this blog after almost 1 year... been crazy with busy workload till May 2010.. and since May, I was posted to another unit and that might have made things worse for a few months till Nov as I had to juggle between a few projects that I held on from my previous portfolio.
Things have more or less been stabilised after Nov though.
I'll start to blog weekly again! But with a wider focus now on financial planning as a whole, thus including insurance planning, personal budgeting etc.
Things have more or less been stabilised after Nov though.
I'll start to blog weekly again! But with a wider focus now on financial planning as a whole, thus including insurance planning, personal budgeting etc.
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