26 August 2019

Rise of the Financial Ruler - by Paul See

Reading stuff on the mobile phone is quite an addictive thing. But I think we are all going to experience increasing cases of eye problems in time to come. As it is, my eyes blur out and lose focus after staring at laptop screens and mobile phones all day long. Hourly breaks are recommended.

So it's probably good to break off and read books and magazines when I don't really have to be stuck to these electronic hypnoses.

The libraries are stocked full of options. And the National Library Board has been setting up shop at places where people tend to commute. Quite clever. Know thy customer.

The one recently opened at VivoCity has a really cool layout. Its reading area at one end faces Sentosa Island with full height windows. The view should be really cool in the evenings. Pun intended.

Anyway, I picked up this book from the VivoCity Library recently. The cover page was partly what attracted my attention (note the "Financial Ruler"). The other reason is that it is really thin. I figured it would be light enough and convenient enough for light reading while I'm commuting on the MRT.

"Rise of the Financial Ruler", by Paul See (Code: 332.024).

The style of writing is really fun. It's definitely not the usual personal finance book with serious overtones. Over 14 chapters of only 74 pages, it weaves a tale centered in ancient Egypt; 7 years of feasts and 7 years of famine. Sounds familiar? Biblicalicious.

It's quite fun if you were to try and relate the events in the story to recent events that impacted financial journeys in the past decade, including events specific to Singapore. At the same time, we could also relate to the personal finance ideas being alluded to.

In the final 37 pages, it explains the motivations and ideas behind the tales of each chapter. Pretty neat.

Worth a read.

So which is your persona? Benjamin or Reuben?

19 August 2019

End of Life - How Much Does a Funeral Cost?

Of the multitude of things we examine into concerning our personal finance, investments, medical costs and such, FUNERAL is certainly not something that I would have gone around to actively find out.

But when the need comes, there is little time to think, nor are we likely to be in the optimal state of mind to weigh options carefully. There is an emotional factor at play. So I guess we would tend to just go with the flow?

So just how much does it cost? For sure, it varies over a wide range, from the basic to the exorbitant grandeur. The type of religious practice, size of family, number of days - these are all variables that will size up the cost of the entire package.

To offer a gauge, here's one sample based on the following parameters:

Religion: Buddhist
Size of Family (mourning): 15-20 pax (i.e. children, grandchildren, great-grandchildren, etc)
Number of Days: 5

Item Description  Amount (S$) 
Crematorium fee  $                50.00
Use of HDB void deck (water, electricity)  $              160.50
Drinks, peanuts and such  $          1,400.00
Funeral services package  $          8,000.00
Meals for 4 dinners, final day lunch  $          4,600.00
Clothings (15-20 pax)  $          2,000.00
Security, tables, chairs, fans  $          1,000.00
Funeral offerings, 2 buses  $          2,300.00
Claim ashes  $                20.00
Newspaper - orbituary  $          5,885.00
Ang pows and miscellaneous  $          1,000.00
Total  $        26,415.50

There will be other costs that affect various members of the family individually.

Security pertains to the hiring of 2 pax to look after the wake at the night. You could save a few hundred bucks if you're prepared to tire up family members to do so instead.

The obituary was published on both Zhao Bao (Chinese papers) and Straits Times. It is EXPENSIVE, and cannot be under-emphasised. This item alone contributed 22% of the costs.

Figures have not included the cost of the niche at the temple and other temple associated 'fees' over the post-funeral 100 days.  Most certainly a few more thousands.

12 August 2019

15 Ways to Save Money, Redux

Was watching this YouTube video by Lavendaire on 15 Ways to Save Money (YouTube) She is based in Los Angeles. So these 15 ways to save money might have a certain slant towards American consumerism.

But here's a quick summary of the 15 ways, and my thoughts on some of these points:

"1. Use cash instead of credit card". You will realise how much you are actually spending. Credit card charges high-interest rates if the debts are not paid in full. By using case, you will be pending what you have, versus spending on borrowed money.

I think it's just a complete lack of discipline that can cause a problem. Credit cards can come with various benefits like cash-back, mileage, etc. So I don't see a problem if one is paying in full the bills every month.

"2. Write down all of your spendings on paper". Know where you are spending.

Some people need to write things down to register mentally. I work fine with spreadsheets. So it's probably ok to record all your spendings on spreadsheets. Also, I find it easy enough since most of my spendings are cashless. The credit card bills and bank statements would have the information I need to reference to record into my spreadsheet. Whatever I actually spend with cash are few and far in between. Much of it for food and miscellaneous. and generally, they aren't much.

"3. Cancel any unnecessary subscription". For those that you don't use anymore, cancel or put on hold the subscriptions.

I can agree with that. 

"4. Always google a coupon code". Get the discount!

This is something I'm not in the habit of doing. Perhaps couponing is less of a practice in Singapore? Neither do I do a lot of online ordering. Or maybe I'm just in denial?

"5. Use E-Bay to get cash back from purchases".

I don't do much of E-Bay either. Although, I must admit I did quite a bit when I was residing in the US for a short period. It's a whole lot of difference when you click buy one day and the goods show up in a day or two!

"6. Start building an emergency fund". Build up 6 to 9 months of your monthly expenses to deal with any emergency.

Definitely a piece of good advice. Especially if there is any risk of losing your job, or to deal with some unexpected emergencies.

"7. Schedule your shopping allowance". Add items to a shopping list. And buy only on scheduled days. It helps to control impulse buying.

Curbs unnecessary spendings. Window shopping should be kept to simply that.

"8. Wait it out". Give yourself 14-30 days, to curb impulsive shopping.

Good advice.  If after 30 days, the desire remains, then maybe it is something that gives you love.  [Borrowing from Marie Kondo's words]

"9. Buy only what you really need and will really use". Buying bulk just because they are on sale may not be the way. 

Anything else is just clutter and junk.

"10. Use your public library". It's free.

And it's great here in Singapore because the libraries are well stocked. And in recent years, the National Library Board has been locating libraries in publicly accessible places, including popular shopping malls - like VivoCity!  Now if only I can figure out how to convince them to subscribe to all my favourite magazines.

"11. Plan your meals around grocery store sales". Go for items on sale. And use those coupons!

This takes some getting used to. Not something I would particularly bother as neighbourhood food isn't all that expensive around here. Plus, groceries can be cheaply bought in most cases from supermarkets. In Japan, the basement food shops are heavily discounted towards 8-9 pm near closing time. 

"12. Buy used instead of new". There can be good stuffs that are opened but not used. 

I don't feel too positively with this. Too many opportunities for con jobs if bought secondhand from online channels, like Carousell.  Never know what you are actually getting either, hygiene wise.

"13. Make your own versus buying". DIY whatever you can. Cook at home if you're good at it.

I'd leave that to wifey. She bakes, big time. 

"14. Cut or do your own hair". Yet another DIY.

I wouldn't trust myself to do that. And besides, it's only $10 at the local barber. I'm fine with that.  I guess some other equivalents would be: "wash your car yourself", "clean up the house yourself, don't engage a part-time cleaner (or maid)", etc.

"15. Get social and swap with a friend".

Need a lot of friends? Probably end up with even more group buys and spendings instead! Hah.

05 August 2019

Using Leverage for REIT Investment

So here's a play I came across, mentioned by a number of people:
  • Worked for a few years, saved some money. Let's say $100,000.
  • Take that $100,000, borrow some (leverage), say at an interest rate of 4%.
  • Let's assume $100,000 + $100,000, giving a total capital of $200,000.
  • Put everything in REITs, yielding say 6% annually - i.e. $12,000.
  • Pay $4,000 in interest. And still, make $8,000.
  • That's an 8% yield over a starting capital of $100,000!
Sounds good right? The numbers seem credible under such a low interest rate environment.

Let's play out this scenario ...

There is an economic downturn resulting in a drop in the valuation of REITs. The 6% yield may be there, but it is now against a lower valuation.  So suppose the value of the REITs drops 30%.  The $200,000 worth of REITs (at cost) is now worth only $140,000. At a 6% yield, that now generates $8,400. Paying off the $8,000 interest, there is still a balance of $400.  The achieved yield has dropped to 0.4%.  Still ok.

In the following year, the REIT market continues to tank by another 20%.  The $140,000 of REITs is now worth only $112,000. At a 6% yield, that gives $6,720. Paying off the $8,000 loan (that never goes down!), you are now making a loss of $1,280. The achieved yield has dropped to -1.28%. Not so ok, but probably still bearable.

And then the REIT gets taken private, giving a cash value back of $150,000. What happens now? After paying off the interests ($4,000) and the loan capital ($100,000), you're left with $46,000. Poorer than when you started.

That's now a loss of 54% of the starting capital. Can you deal with that?

Leverage, it works both ways.

On good days, there is money to be made. But all it takes is ONE bad day to wipe out everything.

I think there is money to be made with this, but the downside has to be understood.