Thursday, 7 June 2018

Four 3-Letter things you are doing wrong (Life in Singapore)

Ok, firstly I want to say that the title is "inspired" by a whole bunch of websites with "Listicles". These are articles with titles like "Five things that you..." or "Seven things about..." or "9 things you should know about..."

(To be honest, I didn't outline this post, realise I had found 5 things Singaporeans do wrong, and the started writing.

I just thought "5 things" sounded about right. Wrote down the title. Then panicked when I couldn't think of a fifth thing. So this is FOUR things you are doing wrong in Singapore.)

Recently, I saw this "rebuttal" of "The Life Cycle of a Singaporean (Male)"

I don't disagree with everything, but there were some things I DEFINITELY disagreed with. I thought the person who wrote the summary of "Every Singaporean's Life" (which excludes women - what does that say about the Singaporean male's attitude?) had a rather limited perspective (I think he's just young.)

His main complaints are about weddings, housing, and retirement. Which I was already going to write about how Singaporeans tend to do that wrongly.

I had also included buying a car, because that apparently is still a big thing. It may not in the future. Or it may still be but for different reasons. But these are 3-letter things that most Singaporeans have to deal with, and don't do it in the most effective way.
1) Buying a flat (HDB)
2) Buying a car (COE)
3) Getting Married (ROM)
4) Preparing for retirement (CPF) 

Buying a flat

Every Singaporean believes they have a right to own an HDB flat.

It is not the Singaporean Dream. A "dream" implies that many will dream, but few will realise. Like winning an Olympic Gold Medal. (Kudos to Joseph Schooling!) But when about 90% of Singaporeans live in HDB flats, it's not a dream anymore. It is a RIGHT.

But just because it's a right doesn't mean you can't do it wrong. And most of us do it wrong.

You may have read this question which I had posed in other blog pieces before:

"Imagine you have two bank accounts. One pays you 0.1% interest on your balance. The other pays you 2.5% interest. You have a mortgage (housing loan) to pay off. Which account will you draw down to pay off your mortgage?"

Of course we all (or almost all) use our CPF to pay off our mortgage because we cannot otherwise use our CPF money before 55 or 65! Or else we can't afford our flats/homes!

Which if you think about it, is wrong. But we do it anyway, because using CPF to pay for our mortgage is "painless". It requires no apparent sacrifice. (It does actually. If you read the grumble from Singaporean Male. You end up with little or no CPF savings for your retirement.)

But it's ok, you say. Property is an investment. You pay $200k for the flat today, you can sell for $400k in 10 20 years time. Or more! (Unless you have been following the Lease Decay issue.)

Sure you can. And where will you stay then? If you have ONE property and it is your home, it is not an investment. Not really. Because sure, you can sell it for more than what you paid for it, but then you will need to get another place to stay, and guess what? Every place you want to buy is just as expensive and after you pay for the new place and renovate it, if you are lucky, you might have a few thousand dollars to spare. A nice bit of change, but not enough to retire on.

The other thing we do wrong in buying our flat is to think too much about irrelevancies, plan too far ahead, and not think enough about what really matters, in the present.

Should we live closer to HIS parents, or HER parents? Is there a good school nearby so that one day our children can go there? We can afford a 5 room flat in Woodlands, but only a 4 room flat in Toa Payoh, so of course we chose Woodlands. It adds 30 minutes to our commute each way, but we really love the extra space. And we will need the extra space when we have kids.

I can't exactly say that "space" is a wrong consideration. But if you think that space is important, I'd like you to be open-minded enough to ask yourself, if it really is. And I know some of you will think, I'm nuts. Or I don't know the friction of a large family in a small space.

But are you currently a "large" family? Sometimes we plan too far ahead. And sometimes we don't plan far enough ahead.

Or if space is an important consideration, would you consider "Time" as another important consideration? How much time are you willing to trade off for space?

If you believe in destiny (or that we have a fixed amount of time in this world), then the minute we are born, we journey inexorably towards our death. The amount of time we have on this earth is finite (or fixed). Do we want to spend it commuting?

Alternatively, look at it this way. We all have 24 hours a day. The person who spends 30 minutes a day travelling to and from work has 23.5 hours a day to do other things. The person who has a 2 hour daily commute has 22 hours. Unless of course, you use your commute time for other things. Like watching videos of Korean drama (on public transit! Not while driving!).

Here's another way to view the question of "Space" or "Time" as being more valuable. There are about 550,000 new homes that are being built and launched for sale in the Iskandar area in Johor. For the cost of a 5 rm flat in SG, you might be able to get a landed property there. Space!

But you have to travel quite a bit everyday. Would you? Some people would.

In other words, location, location, location. Buy a home that will save you time. Unless time is not important to you.

Or maybe you shouldn't buy a home at all. Or perhaps just not in Iskandar. Unless you have unique and highly idiosyncratic reasons for doing so, it would not make sense for most of us.

This may be a little extreme, but this young man thought out of the box (or out of the apartment) to save some money. This may not be applicable or workable for you, but it is an (extreme) example of unconventional thinking.

Maybe you DON'T need to buy a flat. Maybe renting makes more sense?

My one advice to my child would be, "buying a home is a commitment. It is an investment, a long-term investment. It may be the right thing to do for you. Or it may not. You have to decide for yourself what do you want, and if you can commit to it, or is it more important for you to keep your options open, so you can seize opportunities as they arise. Or is buying a home an opportunity you want to seize?

Also, most people opt for the longest term of loan. If you have a choice of 10, 15, 20, 25, or 30 years of loan to choose from, almost everyone will choose 30 years. The instalments are low and practically painless.

But the interests over 30 years would more than double the cost of the home!

I chose 10 years when I bought my flat almost 20 years ago. If I recall, my instalments to be paid via CPF was a little more (less than $100) than my monthly contributions to CPF. But with year-end and mid-year bonus, I would be able to service the mortgage with no cash top-up or a very small top-up until I got a bonus.

So I paid off the loan in 10 years, and could start saving for my retirement. I think I paid less than 20% of the value of the flat in interests.

Buying a Car


Just, don't.

There are several ways to approach this issue.

Financially, a car is a money pit. And a tax drain on you.

Logistically, living in Singapore, one doesn't really NEED a car. It is at best an expensive convenience. But more likely an expensive, unnecessary luxury.

There are lots of arguments, and I do not want to rehash them all, so here is just something for you to think about.

Calculate how much it would cost you to own a car. Here's a quick and simple estimate.

Let's say you buy a car for $100,000 (this figure is simply for ease of calculation. You can use more "realistic", updated numbers.) And this includes COE.

Let's say it costs you the same amount over 10 years in running costs - fuel, parking, ERP, routine maintenance etc. (Let's assume you don't have an accident in 10 years.

So, owning a car will costs you $200,000 for 10 years, or about $20,000 a year. Or about $1700 a month.

Now, based on your travel patterns, would you be likely to spend $1700 a month on cab fares? Less? Way less?

Simpler computation? Take your monthly instalments for the car loans you have to take out. Say, $1000? Add monthly fuel, and parking charges. Total, say $1300 a month. Would you be taking $1300 in taxi fares a month?

If you do, by all means, you should get a car. Maybe.

Because when you own a car, you can only drive the car when you are driving the car. You should not be texting, or checking your FaceBook, or replying to emails, or watching Korean drama serials or Hollywood Blockbusters.

If you were taking a train, or a bus, or a taxi, you could.

And after a while you might forget about the bad mistake you made buying a cheaper flat an hour away from your workplace, instead of the more expensive flat that was just walking/cycling distance to your office (see above).

Then someone will raise the issue of the frequent breakdown of the MRT.

Personal question: how many times have you been personally affected by the train breakdowns? How many minutes did it add to your commute? How did you eventually get home or to the office?

I haven't tracked the number of breakdowns but let's just take a round number. Say there were 10 breakdowns in the past 12 months, and let's say they ALL affected you personally, and they on average added 30 minutes - no - ONE HOUR to your commute. So you wasted a total of 10 hours over 10 breakdowns in the last 12 months.

So you decided, after the 10th breakdown, and the 10th hour you wasted that ENOUGH IS ENOUGH. You're going to buy a car!

And you are willing to spend at least $15,000 a year to avoid wasting 10 hours of your life annually on a public transit that breaks down regularly. Or too regularly by your reckoning.

$15,000 a year to save 10 hours. That's $1,500 an hour.

Ok. Maybe 10 hours is a low estimate. Say the breakdowns in a year caused you 30 hours in wasted time. That's $500 an hour. What this means is that even if the GRAB or Uber Surge pricing rises to $500, you'd still be better off taking the train, and spending $500 in "Ride Sharing" THAN TO BUY A CAR!

But we don't make decisions that way do we?

[Edit: After I had published this, I realised that the argument above is a simplistic argument, and computation. I would still leave it there because, it is sort of relevant as a "push factor" for one to get a private vehicle. But if you DO decide to buy a car, it would NOT just save you time from when the public transport breaks down, but every day in your commute. Say a private vehicle saves you 1 hours a day -- no! let's say it saves you TWO hours a day in commute. Or about 48 hours a month. Assuming it costs you about $1500 a month to own a car, you would need to earn about $31 an hour to make it worth your while to own a car ($1500 / 48 hrs a month). If you earn only $15 an hour, you need to work 4 hours a day to save 2 hours in commute. So for half the day, you are working for your car. How much is $31/hr in terms of monthly salary? About $5500 a month. That is if you are saving 2 hours a day in commute with a car. If your time savings is less, you really need to earn a lot more.]

What about autonomous cars? Cars that can drive themselves?

It would be great! If it ever comes about. I don't mean intermediate autonomous (or nearly autonomous) cars. I mean fully autonomous. So I'd just get into the car, tell the car my destination. Then sit back, relax, read a book or take a nap. And then minutes later I'm at my destination. Just like taking a cab. And in fact when my car has taken me to where I want to go, instead of parking it somewhere (have to pay parking charges), I'd "release" it to be an autonomous Grab car for rent, and make money for me.

Except... everyone will likely have the same idea, and Autonomous cars would be seen as an investment, and not just a money pit. So people will pay a premium to own and use and "Uberise" ("Graberate"?) the car to offset its costs. And because it can offset its costs, its costs will rise. Until it is no longer makes economic sense to buy one.

It sounds like a good idea, but society and economics will adjust to this new factor, and any economic advantage will be neutralised in due course. But I could be wrong. Check your math.

[Note: This may be the last generation that needs to learn how to drive.]

Getting Married


Just kidding.

But don't be in a hurry to get married. Yes, this is against the govt's policy but screw the govt. This is YOUR life! You're getting married for your reasons, not the government's. You have to live with your choice.

Remember this: Weddings are for a day. Marriage is for a lifetime. Focus on the essential, and everything else fades into the background.

The video above is funny, cynical, but there are truths in it.

Of course, if my wife had insisted on a diamond ring, I might have gone with her wishes. I would have weighed her importance to me, verses her pragmatism, and I might have agreed that she was more important than her whimsical need for a overpriced stone.

But my wife and I were very pragmatic people. We chose an inexpensive engagement ring, had our wedding dinner in a restaurant instead of a hotel (Restaurant food tend to be better. Hotels tend to be expensive because of the 'ambience', and food is often iffy), and kept the guest list to about 20 tables. We skipped the wedding photo shoot (has some friends take our photos instead for free), and then I put the photos into two albums using Apple iPhoto.

We rented our suit and gowns, and didn't bother with designer gowns, because a wedding is for a day, a marriage is for a lifetime. And if you will spend your lifetime looking through your wedding photos, and thinking how lovely you were on that wedding day, and how it has been downhill all the way since then... The designer gown may have been the most correct decision you made, and that would be very, very sad.

My aunt also had very unexpected (and scandalous) advice. She said, don't get married. Don't need to. My wife was tickled that she was just advising us to... well, "live in sin".

My aunt wasn't all wrong. We already had a place to stay, and as we were a little older, our combined salaries exceeded the household income ceiling at the time, so we couldn't get a flat from HDB anyway. And because we were a little older, we didn't really plan to have any children, so no need to get married.

(Good thing we did. One came anyway. Because, sex. Ask your mother.)

We were a little unorthodox, but we weren't the sort to scandalise our parents, so we got married like nice couples do. I guess I am just saying, you should be brave enough to think for yourself. But you also don't want to burn bridges just for the heck of it.

Also, we are living longer and we have more options today. Before you get married, make sure you have lived your life as a single to the max. I see lots of younger married couples, now with children, trying to go back to their single or pre-parenthood lives.

Children changes you. For the better I think, but it also changes your priorities. You find yourself going for more children movies, and children shows (Hi-Five!) instead of the shows you would rather watch (Kumar! Hossan!).  If you haven't got your fill of the shows and entertainment you want, then you may see your children as an obstacle.

Since my child was born, my wife and I have not been to a cinema. My wife doesn't miss it, cos she's weird. I don't miss it either. Usually. But once in a while something comes along that makes me miss being free enough to go to the cinema. Like "Logan".

So don't be in a hurry to get married. You have years ahead. Maybe. But also, don't put off marriage either.

Actually, the point of this section on getting married, is get married for the right reason. Not because you think you should, because of your age, or because you don't want to be lonely, because you want children (getting married to have children is probably a bad reason to get married, but that's for another discussion), because you've been together for so long, because you can't think of a reason to break up, or whatever. It is better to be alone for the right reason, than to be with someone for the wrong reason. Get married when you are ready for it, when you have found the right one (or right enough), and you are ready. Then remember, no matter how ready you think you are, you are not. Be humble.

That said, don't let anyone (including me and this blogpiece) tell you not to get married or to get married later or only when the time is right, or that this is not the right time. No one can tell you that. You have to decide that for yourself.

And when you do decide that it is the right person, remember that the wedding is just for a day. The marriage is for a lifetime.

And the marriage vows? That "till death do us part"? That means no divorce. Either my wife will have to kill me, or I, her. So put some thought into the vows.

Preparing for Retirement

There are broadly 4 strategies for Retirement.

First, don't.

Don't retire.

If your job allows you, work like LKY until your last day. But we are not all like LKY, so this is not for everyone. Also, if your work is physically demanding or at least has some menial or physical element, your physical fitness and endurance will be a limiting factor. Unless you have a powered exoskeleton supplied by your employer, or rented at $1100 a month, or buy your own at about $18,000.

Also, many of us want to take it easy in our silver years.

Some may try to "downgrade" to a lower paying job, with less stress and physical demands, but these are not always available.

The point is, most people do not "enjoy" their work, or do not find it intrinsically enjoyable, or meaningful. Of course if you are fortunate enough to find a job you love, enjoy, and gives you meaning and purpose, you should work until your last day.

Second, savings. If you have a job that allows you to save (say about $2m) by the time you are 60, and you do not have a very expensive lifestyle, nor many expensive medical conditions, your savings can see you through. Barring any catastrophic incidents. The life expectancy of a man is about 80, and a woman about 85. So if your savings is supposed to support you until death, it needs to cover about 20 years. So about $100k a year. Or about $8,000 a month. Very comfortable.

If you save only $1m, then about $4000 a month. Still quite comfortable.

But most Singaporeans are unlikely to be able to save that much. Even $200,000 may be a stretch. Is it?

Say you work from age 25 to 55. That's 30 years. To save $200,000 you would need to save almost $7000 a year for 30 years or about $560 a month for those 30 years. Do you save $560 a month?

Or if you work from 25 to 62, you would just need to save $450 a month. Do you have $450 a month to save?

And this is just to save $200,000. $2m is 10 times that and you would need to say $4500 to $5600.

(This is also not considering compounding of interest. But bank interest rates are so low, it is not going to make a lot of difference.)

Third, passive income from investment. This is the "Gold Standard" of retirement, where you do not have to actively work, but you still get an income from your investment. I have NO idea how to do this. BUT... lots of people will try to tell you that they KNOW how to teach you to build up a passive income. Listen to them but watch your wallet. The moment they ask you for money is the moment you need to reassess everything they told you to see if YOU are going to be providing THEIR retirement income.

These advisors will tell you things like, "it's never too late to invest for your retirement". They are lying. Other platitudes are "There is no amount too small to start investing". What they really mean is, no one is too old to con, and no amount is too small to con.

Of course, I could just be cynical, but you should judge for yourself.

The reason I am sceptical is this: If I have savings of $2m and I expect that to finance my retirement for 20 years, I would be budgeting $1m for 10 years or about $100,000 per year.

If that $2m was invested, in say property, let's say I got two condo apartments, each $1m, and I can rent each out for $3000 a month. I'd have... $72,000 a year income. Which is less than the $100,000 a year from the savings. Of course, in the savings, you are drawing down on the savings, and in the investment, you are spending only the returns. But the rental scenario is a best-case, ideal scenario. And it doesn't take into account costs - property tax (estimated at about $4000 for both apartments), Condo maintenance fees (about $3000), renovations and repairs whenever a change of tenants (hard to estimate, depends on frequency of change of tenants), and it assumes that you would be able to rent out the apartments for the whole duration. The rental market is quite soft right now. But it could improve, and it could also get worse. Rents may drop, or rise, but the long term outlook is that it is not likely to rise very much, or improve very much.

So first of all, the $72k will have to be reduced by $7k (so $65k). If I am unable to rent out the units for the full 12 months, I will lose some income. If I have to lower the rent to attract renters, my income falls. Of course it is good that I hold onto my capital investment, and hopefully the value of the property will appreciate.

The point is, investment returns are uncertain.

You may read the above and think I am too timid. You are right. You could say that if need be, I could sell my apartments and use the proceeds as savings.

Again, not wrong. And while it is unlikely that I would lose capital, it is not unheard of.

However, I think the whole point of retirement is so that you can leave the tiresome worries of "working" for an income. And so-called "passive income" like rent from property, is not passive enough for me. There is still too much worrying for it to be "passive".

In any case, this is all moot. Can you save $2m or build up a $2m investment protfolio by the time you retire?

The fourth strategy is hope.

Hope that there is enough in your CPF. Hope that you have enough to meet the minimum sum. Hope that your non-CPF savings don't run out. Hope that you don't have a major medical or healthcare crisis in your golden years that might derail your retirement plan. Hope that some kind of "safety net" will be around then to catch you if you fall or fail. Hope you win the lottery.

But of course, hope is not a strategy. It just so happens that it is the strategy of last resort for many people because they suddenly realised that they do not have enough for retirement. And then possibly some "investment adviser" came along, and told them that it is never to late to start investing for their retirement, and got them to part with some of their savings, and then they realised that they are in an even worse state and their retirement has been pushed back even further.

The reality

Most of us will need a combination of work, savings, and CPF life. Note that retirement is 62, but CPF Life payments only start at age 65 (for now, may change later).

So assuming you intend to retire at the official retirement age, it would be 62, and then you need to survive until 65 when your CPF life kicks in, assuming you had enough in your CPF Minimum Sum to fund your CPF Life annuity.

Which means that you need to have a plan for the 62 - 65 gap when you have retired, but your CPF Life has not kicked in.

You may have the option of continuing to work (re-employment). That would help.

If you have not squandered your CPF ordinary account on paying for your flat, you might have some savings. That could help.

Or maybe just ordinary non-CPF savings. You must be very disciplined.

The Ideal

Ideally, we would like to retire early.

But few of us would be able to. I would estimate that based on my lifestyle, I may need about $400,000 for every 10 years of retirement, or about $40,000 a year. Currently our life expectancy is about 85 years. If I want to retire at 65 with no CPF Life, I would need about $800,000. If I want to retire at 55, I would need about $1.2m. And so on.

But if I could save $1.2m by the time I am 55, I must be earning quite a bit. which means I would probably be used to a higher lifestyle. And so $1.2m may not be enough.

Also, if you are earning enough to save $1.2m by the time you are 55, you would be saving about $3400 a month, and you don't need my advice. YOU should be giving me advice.

Some things to consider

Most people HATE the minimum sum and the idea of CPF Life. Or at least those people who complain on social media. Or to the press. Or who have nothing better to do.

I happen to LOVE the idea of CPF Life (I'm not on it yet). I want to get the ENHANCED CPF Life (if I can afford it at 55). To do that, you should have enough in your CPF Special Account and Ordinary Account.

Here's a tip on how to increase your retirement savings. And the ONLY investment tip from a very risk-averse person.

Once you are done with your mortgage (you have bought your home and settled your mortgage), transfer your Ordinary Account balance to your Special Account.


Your OA earns 2.5%.

Your SA earns 4%.

Before I finished paying off the mortgage on my flat, I had some balance in my OA and I thought of paying off my mortgage to save on the interest.

Think about it. If I left my OA balance in the OA, I would earn 2.5% interest. My mortgage was at 2.6% interest. So it made sense to pay off my mortgage.

BUT, the SA paid 4% interest!

If I transferred the OA balance to SA, I would be earning 4% interest while paying 2.6% interest on the mortgage. It made more sense.

And because I did so, I managed to hit the minimum sum well before 55.

[BUT... the CPF is a CON job!
Hoo Boy! A conspiracy theorist. OK. I'm not going to try to convince a conspiracy theorist that he is paranoid, and that his beliefs are irrational, and there is no reasonable basis for his conspiracy theory. If you REALLY believe that the CPF is a con job, I am sure I cannot disabuse you of that belief. IN which case, your best strategy is to become a CPF blogger, get lots of followers, and earn enough money from your blogs to finance your retirement.]


In summary, don't just do, think before you do. And after thinking a lot, trust your gut, trust your feelings. But not too much!

The thinking you do is to spell out the pros and cons and the hazards of doing or not doing. Thinking about things can tell you what are the worst case scenarios.

BUT sometimes that require experience.

So, this blogpiece.

And sometimes your situation is unique to you and the advice here is irrelevant.

Good! That means you are thinking. (Or bad! That means you are in denial! One of these sentences should apply.)

I find it hard to give advice, so take these as the ramblings of an anonymous blogger who tends to overshare. If it helps you, good. If you don't think it applies, well, thank you for reading and thinking about things.


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