Achieving Financial Independence, or later

I have been pondering about this for months. A decision that will affect my family well being. 

Background

Currently, my wife and I both are working full time. We should be achieving financial independence by end year 2019 (age 35) but with 1 of us working till year end 2022 (age 38) for buffer.  With the arrival of my 2nd child, someone has to take care of him, (baby boy) from next year Aug 17. My wife love her job and her work environment is good. However, my income is higher (I don't hate my job either) but my wife will also enjoy working mother relief n subsidy. Hence, it make more sense for my wife to continue working. So, there is no perfect equation on who should carry on to run the "rat race".

Now, the question is, should I similarly place my 2nd child in the infant care or I taking up the caregiver role? 

Here are the 2 scenarios:

1)  I leave workforce at 33 years old, Aug 2017, to take care of my children:

Pros

• Child will not fall sick every other week in infant care centre
• My wife income is sufficient to cover household expenses
• More manpower to cope with family matters
• More family time for the children upbringing
• No more urgent leave and awkward working arrangements to deal with family matters

Cons

• Leaving workforce without achieving Financial Independence
• 2 more years to achieve our financial goal (End year 2024 at 41)
• I may not be able to get back similar salary and I know I wouldn't be keen to return to full time workforce
• I will have lesser CPF balance

2) Both of us working together to achieve Financial Independence

Pros

• Leaving the workforce with more financial certainty
• Potentially avoiding awkward family financial situations with one depending on another
• Achieving financial goal 2 years earlier (End year 2022 at 39)
• More CPF balance for retirement

Cons

• Children falling sick often
• Less family time
• More taxing to deal with more housechores with more children, especially when they are sick
• Plenty of urgent leave and awkward working arrangements to deal with family matters

Our inclination is for us to continue working since it is only 3 more years from now. If we can't cope, I will then leave the workforce permanently to be caregiver.

What are your views?

How Doing House Chores Can Give You Health, Wealth, Time and Enjoyment

House Chores? Seriously? This is 1 of the ultimate personal financial tips that Frugal Daddy is giving? Yes, this works like magic. If you coupled this lifestyle concepts with minimalism and frugality, you are not very far off from the most exciting lifestyle that you wanted to have.

Let me explains. This can only happened without maid, parents, nanny or any external help (part time helper).
Health
My family are living examples. Without me noticing, I developed "6 packs" of muscles in my tummy.  I was shocked one day when my wife asked me about my tummy. I have to confess other than the once-a-year IPPT, I don't exercise nowadays. I will start soon to exercise, I know. haha.

Where are the muscles from? I simply do all the house chores and taking care of my child concurrently, with the help from Frugal Mummy, and the magic occurred. It helps better that both of us are working full time and need to take care of child 24/7 ourselves with the help of infant care and childcare.

I know, some of you are starting to wonder, wouldn't it be too stressful instead that lead to poor health? No! These are chores that need to be done anyways. Just by "Who". It will only be stressful if you think it is. All in your mind. That is why busy people can make more time and lazy people always think that they have no time. Ok, I always tell people I don't have time nowadays.

I start to wonder why average women in the past live longer. Not because they like to nag the men to outlive. Maybe, there were many housewives and they "live well" by doing house chores.

Wealth
What is the cost of employing a maid? This includes providing food, insurance, medical and necessities. Maybe $1,000 all in per month? Why pay if you can avoid? Of course, there are instances you need a maid. Example, taking care of someone. I am saying in the perspective of if you have the choice to do all the house chores by yourself.

How about parents? I am not sure about this. I never rely on my parents much since tender age. I paid my polytechnic tuition fee anyway. So why now? There is a conventional wisdom why westerners are more independent than Asians in general? Maybe because they live away from parents from age 18? I don't want to touch too much on this aspect as it is super sensitive especially if I talked about parents' allowance and expectations that created as a result of this favour. Good for you that you have parents that willing to be your maid. But, I will do it myself for all the benefits that give me.

Time
Here is the counter initiative concept. Naturally, many people like to comment that time spent on being minimal, frugal and doing house chores are time taken away. I beg your pardon. You spend time earning the money to spend money to buy time? Get it? You may argue the employment hourly rate ratio is lower than time spent doing house chores yourself. Is it? Unless you can generate cashflow every moment of your free time. And we are talking about using your free time to do something for your family that your entire family will enjoy, including yourself. In some instance, time are spent doing nothing to supervisor the maid or wait for external helper to complete the chores.

Moreover, when you do all the house chores by yourself, you get to bond with your family members better. Everyone is involved in making a decision for every small aspect of the house. We helped each other and we appreciate everything and being organised. We saved time not to clutter unnecessary items and we get inner peace when the house are so clean and minimal. You no longer need to spend time thinking where is this, and that. You no longer need to travel all the way to buy something that was already in your storeroom somewhere for decades. Time saved, isn't?

Enjoyment
Wait, don't turn off the page yet. Yes, doing house chores is enjoyable. As mentioned above, you get to involved the family and bonding is created. You enjoy every aspect of your house that you doing your best to pay for. You enjoy the privacy of not having the maid or any external people around. You will not create a false impression for your family, including yourself, that chores are done magically without any effort. You spent a lot of effort to earn the money, so that you have more money to buy the time? Clever you.

Anyway, I am a proud parent because my child helped me mop the floor, wipe the table and tidy up the place from as young as around 20 months old.

So why not today, you spend the long weekends, i mean few hours only and not the entire 3 days, to do house chores by yourself? You can actually do it during weekdays too to avoid doing any during weekends.
Is it really a house "Chores"? I would think it is a house activity. It is my privilege to serve my family, together with my family.

My Thinking on CPF Life

I have never considered CPF as part of my retirement fund when I made financial planning. Why? The policy is always changing and there is nothing much I can do about it. However, it is still good to keep up with CPF matters as it is still our money?


Reading the speculations about CPF Life Escalating Plan and CPF Lifetime Retirement Investment Scheme (LRIS), I know for sure what is my choice now. Things may change, but for now, it is quite certain.

My choice? CPF Life Standard Plan and no CPF Lifetime Retirement Investment Scheme (LRIS).

CPF Life Escalating Plan is for people who "suspect" they can outlive 87 years old - The highly possible age to break even the CPF Life Standard Plan. Knowing my track records of falling sick easily and childhood medical conditions, I doubt I need to "worry" about living over that age. There is another good method to guesstimate your lifespan. Look at your parents, grandparents and great-grandparents' ages. My father is still healthy at 61 but have some medical conditions. My grandparents didn't reached 85 years old for sure.

Having said that, the differences are marginal between various plans. It will not be deadly if you choose the "wrong" plan. We are just playing with probabilities.

How about CPF Lifetime Retirement Investment Scheme? Seriously, I don't want to talk about it until more details have been shared by CPF Board. I would take the 4-5% guaranteed interest from CPF SA as I would have enough risk from personal portfolio, which I have more control over. CPF is like a survival fund, more certainty is good, and it is already packaged with a lot of questions marks.

Wastage In Your Life

Most of us, including myself, have plenty of wastage throughout our lifetime. What do I mean by wastage? For example, you bought that 10 sets of chopsticks in a bundle sale. However, you know clearly in your heart that your family members can only use 4 sets of them. Yes, you may argue that you can replace the extra sets of chopsticks when the existing ones are spoilt. Seriously, how long do you think it will take your chopsticks to spoil?


If you think I am exaggerating, why not you try going through your entire house, items by items, and chances are, you will start to realised that you have accumulated many things that you have no chance of using. There are things that you think you will be using "one day". Trust me, most things that you have not used for past 1 year, will remained unused for another 1 decade or more. Likely, you would have forgotten that you have those things. I suspect there are expired food/condiments/herbs/ingredients somewhere in your kitchen too!

If you respect your space, each unused item is a cost. Yes, you can classified these under logistic and mental cost. That is how warehousing charge you! By mental cost, I was referring to the memory space that you used to remind yourself that you have those things in your...don't know where! Of course, if you are very sure that you need it "one day" and it will still be in good quality, then by all mean keep it.

So, am I advocating you to throw most excessive items away? Definitely not. Memories are worth keeping. Don't throw away your memories and only to realise you have lost your life.

There are other form of wastage too. If you have paid a premium for extra quality that you will never use, that is also a wastage too. For example, you spent $10 buying that "branded" chicken rice where you can get another similar taste nearby for just $3. The $7 is a waste.

If I may anyhow estimate that 50% of our things and expenses are wastage, you may need a lot lesser than you think. That means, if you are spending $30,000 a year, you actually only need $15,000 to live the same lifestyle that you are enjoying now!

By being a minimalist, I have kept my cost low. I reminded myself that whatever i am going to buy, it must add value to my family. Simplicity and clean space are the combination for the most wonderful design. Look at how iphone is created. Clean, with only minimal buttons. Every aspect is being considered to the most simple form. (Anyway, I used Samsung rather than iphone). I simply cannot stand cluttering. I enjoy looking at clean space. It gives me inner peace and the belief that I have more rooms for more awesome things to come.

(Not my house, just giving you a visual reference)

I am proud to be a minimalist, but I am sure I have not yet fully optimised my resources. There are still "room" for improvement!

Cut Travel Expenses by 50% - 7 Practical Ways you Shouldn't Miss

 

Paying for unnecessary stuff is not cool. Additional service fees and charges add up in your travel expenses if you settle on what is already laid on the table. Here are easy tweaks that will help you cut your travel expenses by up to 50%.

1. Be alert on seat sales (save 30-50%)

Simple. You'll be one of the first few people who gets notified for any promotions, seat sales and discounts.

Social media is not even enough. You have to subscribe via email so that you will receive all updates straight to your inbox. And yes, check your emails frequently and book in advance.

Here's the membership page for Philippine Airlines, (aka Mabuhay Miles), CebuPacific (aka GetGo) and AirAsia. On top of the newsletters, you can also earn points/miles for every flight that you can redeem later on.

But take note, in some occasions discounted round-trip tickets doesn't even save you since they are just playing the numbers.

Here's the scenario: destination trip is 70% off but the return trip is 170% more expensive which makes it a break even. Crazy but true. You are not saving a dime.

In this case, you can search other return flights from other airline to avoid the sale scam. I have done this many times already and it saved me reasonable amount of money.

I don't normally buy tickets at regular prices. Why would I when I can have it 30-50% off?

2. Be flexible on your travel dates (save 30-50%)

Most of the time you are not really particular on your travel dates unless it is intended for honeymoon, birthday or spur-of-the-moment trips. I do not personally recommend the latter, by the way.

Major airlines are targeting promotions during off-peak season to major destinations. Hence you are leaving money on the table if you really wish to go to Boracay on Labor Day to catch the #LaBoracay party.

April and May is when ticket prices skyrocket caused by excessive desire of wanderlusts to go out during summer.

3. Skip all the travel package deals (save 20%)

Travel agencies sprout like mushrooms in social media nowadays. Countless travel deals are thrown away every single day and man, they are enticing.

If you want to save on your travel expenses, by all means, avoid them.

Travel packages are unreasonably expensive and less customized. You pay more for less and the service is at par with normal.

Since they also exist for business, they are charging stellar prices for added service of organizing air and land transfer, food and accommodation. Why pay when you can do it anyway?

But don’t get me wrong. Travel packages are still great if you want a hassle-free travel.

4. Call the hostel directly (save 20%)

Another item often overlooked is the accommodation. In the past year I was solely using travel apps like AirBnb and Expedia for booking hostels. It saved me a lot rather than staying on expensive hotels.

But lately I just found out I could even save more by calling the hostel directly via landline or cellular number and it saved me even more.

Here’s how:

1. Search for cheap accommodations through Expedia app.
2. Once you find the name of the hostel, Google it and get the contact number.
3. Most of the hostels have cellular numbers so call them directly and boom, you're booked instantly!

I have tried this already when I went to Davao. I found out that Expedia is charging 20% more on the room rates! That is how much I saved times the number of days I stayed. Big savings.

5. Ditch the taxi (save 80%)

Transportation is one of the challenges while traveling. Sometimes when you are lost there is no other way but to ride a cab and tell the driver to go to the nearest SM. I know, I tried this already. Emergency is an exception.

In normal conditions, avoid riding a taxi for not only it is expensive but most drivers exploit the opportunity of overcharging you - either through scammy taxi meters or stellar flat rates.

Ride the public transportation (used by locals) instead - jeepney, tricycle or pedicab. Don't act like a tourist but a local.

And for any questions you have in mind, ask a local. 90% of the time they will help you.

It also pays to be bargaining all the time. Few bucks saved when accumulated is worth a hundred.

6. Eat where the locals go (save 40-60%)

You can stretch your travel budget by simply choosing where to eat. If you want to go to a famous resto you've been dying to go to, do it just once for the sake of experience but not on your entire 3 days 2 nights stay.

Take note that travel isn't food alone and not all delicious foods are expensive.

When I went to El Nido it was really one of my itinerary to go to Altrove Restaurant - an Italian restaurant famous for its brick oven pizza.

It was a bit expensive but it was really worth it. Just one dinner (for experience sake) and I never went there again.

7. Be safe (priceless)

Accidents are more expensive than being safe. Should have put this on top of the list but I didn’t because you would think this is very obvious.

It is but not really when you're high and stoked. Think again.

Although accidents are inevitable, we can decrease (or even eliminate) the likelihood to happen. One of the best ways to do this is to be mindful on your surroundings.

You can't expect to be safe if you go alone 1 AM in the morning in the outskirts with lots of drunk locals. Not a good idea.

Likewise, it doesn't make sense if you wear jewelries and show it off publicly. You might not be wearing it again.

Mindfulness is being aware in the present with yourself and with other people. Of course this shouldn't interfere with your activities. You should know it yourself if it is not safe (then you need to avoid) so it won't cause you any harm.

Bonus: Do you have a Life Insurance? (priceless)

This is not to exaggerate. We will never know when a serious incident hits us - maybe not at this time (who wants to?) but eventually it will.

Life insurance should be one of your priorities. Yes, on top of your future business and travel plans. Here's why.

Life insurance will save you and your children from any unlikely incidents that will affect your family financially.

Think about being laid off from work, health conditions or accidents (from travel or by other means) that may affect your income. Life insurance can help you on that.

If you want to know more, hit me an email and I can give you a free quote.

Conclusion

Travel is part of life. We go into places and immerse onto experiences to rejuvenate us from the daily grind. Travel, however, is expensive and requires ample budget and preparation.

If we all just go travel right away without proper planning (and saving), we might be spending on unnecessary things that will blow up the travel budget and will affect our nest egg.

Proper planning and saving is a "must" for a worry-free travel.

Do you have any other tips not mentioned in this post? Please leave a comment below.

Passive Income is a Myth

Many so-called passive incomes are not entirely passive. If you happen to see how most people invest, you will know where I am coming from. Most of them are not guaranteed returns and we shouldn't expect to receive it on a regular basis, nor the capital preservation. Here is the definition of Passive Income by Wikipedia: Passive income is an income received on a regular basis, with little effort required to maintain it.
Here are common "passive income" people talked about:

1. Dividends
2. Property rental
3. Bank saving interest
4. Bonds/fixed deposits

Dividends
I will not assume my dividends will come in on a regular basis. Dividends are declared by the company yearly and it is not guaranteed. There is no capital preservation too. I know, some hard nuts will say buying good companies is a natural process for dividends or/and capital growth. I love their convictions. We are just playing with probabilities. Watch your numbers.

Property Rental
Can you guarantee your investment property will be fully occupied 6 months down the road? How about the capital preservation? Many of the investors benefited from rocketing properties prices, decades after decades. Most people will think buying properties is a natural process to exponentially grow your wealth, especially with the leverage. Well, it has been really good, but there is still no guarantee. Again, we are just playing with probabilities. Watch your numbers, again.

Bank Saving Interest
Enough said? Bank saving interest will fluctuate (Anyway, most of the rates are quite pathetic already).

Bonds/fixed deposits
This type is definitely most passive and guarantee, unless the owners go burst. Just don't expect high yield. 3-4% per year is already considered good. There are negative rates in a few countries. You may lose out to inflation along the way.

So, all dreams shattered? Financial independence is nothing but a gimmick sold by the financial experts (at least the so-called experts)?

If you have enough money and cash flow, you have achieved financial independence. For example, if your household expenses is $30,000 per year and you have yearly income of more than $30,000, you are somehow there.
If you are solely depending on the so-called passive income, please put in some buffer. How much buffer? I wouldn't know. It is your comfort level. Maybe, 50% more? Expenses of $30,000 will need income of $45,000, in case of rate cut. If you still cannot sleep in peace, maybe living on passive income is not your cup of tea.

Another method will be using the capital draw-down style. Try calling Mr Bill Gates and ask whether he need passive income to be financially independent? If your capital is huge enough to last you a lifetime, there is no need for you to be so fixated at "passive income". For example, if you only need $1 million of cash, lifetime, you know that the $2 millions in your bank account is somehow sufficient.
If you coupled with the "passive income", it will work as your capital preservation, hoping you will never need to draw down the $2 millions by living on the interest earned. Again, who will eventually spent the $2 millions? Pass down generations by generations? Are you so sure that your descendants will be a better person with the inheritances? Will it deprives their survival instincts? Leave it to you to think about imparting the right values to your beneficiaries. Having inheritances are definitely a bonus, but values are more important. Maybe there are no correlation between the two. In my opinion, excessive wealth is useless. You may ask, Frugal Daddy, are you on your right mind?

Do remember to do personal hedging. In a more familiar term, it is called insurance. How much is enough? Only you will know. Maybe an amount that can last your family for >10 years, but a premium of <10% of your income will be a good estimate. Not all events can be covered by insurance, so you need more money for self hedging.

I am surprised by people chasing after money as if it is a life goal. Don't end up chasing after the moon in the river, after 50 years, realised you have wasted your life. If money can solve the problem, it is not a big problem. I know, if there is no money (it is a big problem!), we may not be able to focus on the essentials in life. However, It should never be the main focus, it is a commodity. If you crack your head harder, maybe, the money problem you think you have, need not be resolved by money. You may ask again, Frugal Daddy, are you on your right mind again?

Passive income is a good concept, it makes your money works for you, but it is not entirely passive for most instances. Make sure you strike a balance, because time is a more important resource that you have, and you can't have excessive time. I can guarantee you there are plenty of richer people out there hoping they can have more time than money, and they wish for a different youthfulness if there is a restart button.

There is no restart button, stop looking for it. Live your life now.

Buying That Condominium

Remembered the 5Cs that was commonly used decade ago? :
"Five Cs of Singapore" – namely, [C]ash, [C]ar, [C]redit card, [C]ondominium and [C]ountry club membership – is a phrase used in Singapore to refer to materialism. It was coined as a popular observational joke about the aspirations of some Singaporeans to obtain material possessions in an effort to impress others. 
From the Wikipedia (here), not from me ok!

It is unimaginable for Frugal Daddy to fantasy a lavish lifestyle. Don't get me wrong, I live a highly comfort lifestyle but not a lavish one. By opportunities, I was introduced to the lifestyle of living in a condominium. Not that I have never came across a condominium before, but experience it again and again with improved financial ability does create some real sort of imagination that I may want to live like one.
After-all, it has to be so attractive enough to make most people aspire and "slave" for it.

It is within my reach to buy one which is moderately priced without affecting much of my financial stability. I went to several showflats and done serious thinking. Fortunately, not too long before I realised it is just another distraction. There are good condominiums and most are not that good enough for me to move. For that few good ones, it really take luck to get them at an undervalued or reasonable price. Whether you are a fan of luck or you think the whole world is at your mercy, I leave this part to you. Let me explain why buying a condominium is a distraction that will not enhance much of my lifestyle.

I live in a top floor corner unit with complete privacy, beside MRT and shopping mall, unblocked view and quietness. To buy a condominium with equal size that comprises all the elements mentioned, it can be more than $1.5 million easily. This is easily 5 times of what I have paid for my current house, to replicate the same privilege my current house given me. This is to say if I moved, I may have to compromise on the location and some of the conveniences that I am already enjoying. I am not a fan of leverage, so getting mortgage that I can't fully paid off now to service my condominium is definitely not a consideration. If you do your math assuming the Singapore property market continues to grow at currently already pricey rate, you may get your capital back. However, this means your cash-flow is highly affected. Of course, I assume my readers are not multi-millionaires/billionaires. The pull factor is not strong enough. How about the facilities?

Facilities Embedded in the Condominiums

No doubt, it is great having gym, swimming pools, Jacuzzi, cosy chairs and park to loiter around with your family within your "highly guarded" premise. There are tons of other facilities customised for each project that are not mentioned. Talking about highly guarded, I actually went in the premises just by saying I am one of the potential buyers and wish to take a stroll. I suspect if I don't approach the security, they may not even noticed that I have walked in.

My house happened to have oversight of a relatively new condominium premise. Anyway, not that I enjoy invading others' privacy, but just happened the condominium rest in front of my cosy sofa at the direction of my TV. Might you, it is supposed to be a "premium" project among condominiums. From my observations, less than 15 persons in the 3-4 swimming pools during peak hours, which I deemed as weekends. For other facilities like BBQ pit and Gym, says, another 30 people max? There are easily more than 450 people living in that condominium project. This works out to be less than 1% of the population using the facilities during the peak hours. Let us not imagine some of the users are not owners, but visitors. I actually also have oversight at some part of their houses, trust me, most of them ended up paying the premium to watch the same TV and resting on the same sofa that you have in your HDB flat.

Let us assume that you are a heavy user of the facilities, can you pay maintenance fee of $3,600 to $4,800 a year to get the similar facilities that condominiums' owners are paying for additionally? It is not difficult if you think hard enough. How huge Singapore can be? You will find yours, even you decided to skip public sport facilities for private ones.

I do have access to quiet swimming pools, gyms, nice parks and cosy chairs. Just that I have to travel 30-45 minutes for it. Come on, don't be so lazy, you can't have the best of both world.
I know it is good to just jump down from your apartment into the swimming pool, assuming you are still alive after that. For me, I would like to swim at 5am daily, that can most probably happen, only by owning a condominium or staying near a club house. There are always things that are good to have. What are the essentials and what are the things we are willing to pay money, the money that most of us used most of our youth and precious time in exchange for? I can't say for all, so you have to think it for yourself.

There are instances that condominiums can be treated as a form of investment, just make sure you do your math and enjoy the facilities on the by-the-way basis. It can be done.

No offence to all who bought condominiums. If you are rich enough, nothing wrong to own one.

For me, my fantasy is over. I am happy with my house and my neighbours. I may move one day, if there are better unit that may serve my family better. Wait till that day...I don't know when, I may also have all the 5Cs, that I am the least motivated for.

This new 5Cs (Not really new actually) could serve you better: Compare less, Cherish what you have, Choose your attitude, Complain less, Change your circumstances and yourself. For more explanation, click here.

What are your 5Cs?

Should We be worried about our Pensions

Pension Scheme – Attention on Health of Final Salary Pension

The efforts of BHS together with its pension scheme have drawn attention on the health of final salary pensions. Over the years, 20,462 members of BHS staff right from shop workers to executives have paid into the BHS final salary pension scheme and now will receive less during retirement than they had expected. The scheme which is said to be like a black hole or deficit of £571m is presently in the hands of the Pension Protection Fund – PPF, which is a lifeboat organisation that tends to step in when companies seem to be ruined.

The BHS scheme is considered to be only one of thousands of final salary pension schemes linked to companies all over UK, schemes that guarantee to pay retirement income depending on certain percentage of the ultimate salary each year for the rest of your life. Latest figure of the PPF portrays that UK final salary pension schemes tend to have a collective deficit of £302bn and there are 4,891 schemes in deficit when compared with 1,054 in excess. It is a bit doubtful that some may be struggling. Joe Dabrowski from the Pensions and Lifetime Savings Association – PLSA which is the trade body for pension schemes has stated that schemes are facing challenging times.

Calum Cooper of pension consultancy Hymans Robertson portrays a bleak picture. He states that there are between 600 and 1,000 final salary pension schemes at risk of not being capable of paying the pension of their members at the time of their retirement and this is a very substantial number which puts over a million pensions as well as the jobs at risk.

Experts agree that there seems to be two main causes of the black hole in final salary pension schemes. The first is comparatively simple; people are living for longer period which makes pensions more expensive for companies since they are paying the pensioners for a longer period. The second main issue is the uncertain economic position wherein pension schemes tend to depend on the contributions from employees being invented successfully. Long period of low interest rates together with volatile markets have made it difficult in making money from investing.

Pension Schemes Related to Performance & Strength of Parent Company

Mr Cooper states that the final salary schemes pushed in £30bn in the last year in an attempt to make up for poor returns though it has not gone more than a fraction of the way in ensuring things are evened up. Senior partner at actuarial consultants Lane, Clark and Peacock, Bob Scott informed that another problem is `over-regulation’. He stated that this added to the problems for businesses attempting to keep schemes in good health.

According to Tom McPhail, head of retirement policy at investment company Hargreaves Lansdown informs that there is a wider threat considering the design of final salary schemes. He states that were there many more schemes to get into trouble, they would seem to be very expensive to rescue.

He adds that the challenge is whether it is accepted that there will be these constant failures maybe ultimately putting the subsidy of the PPF itself under pressure. Pension schemes are related to the performance and strength of their parent company as pointed out by Mr Cooper, deficits of some schemes tend to be larger than the actual business supporting them.

Too Much Dividend can be a Turnoff, say Investors

European Companies – Highest Amount of Dividends

European companies have been paying the highest amount of their earning by way of dividends in over 40 years fuelling fear among analyst on whether such kinds of pay-outs are viable. Investors have for a long time dealt with queries of what companies need to do with the escalating cash load, to return it to shareholders or spend it on technology, research and development, top staff or bolting on new business for the future growth.

For the past five years income-hungry investors received dividends from the European firms and the pay-outs offered a solution to the combination of sluggish economic growth, aggressive central bank policy, enabling what had pushed bond yields to record lows and changing stock markets.

However, the growing cut off between earnings as well as dividends together with worries which companies would be adding debt to fund the shortfall was urging a reconsideration of this proposal. Senior research manager at S&P Global Market Intelligence Julien Jarmoszko stated that they were seeing a lot of companies trapped into their dividend policy.As per Thomson Reuters’ data, almost 60% of Europe Inc.’s earnings per share had been returned to the shareholders as dividends.

Cautionary Sign to Companies – Investors to Stop Rewarding Capital Returns

Companies’ partiality regarding dividends is in no small amount fuelled by investors encouraging companies to part with cash due to restricted opportunities for capital spending. However a shift is in progress. Last month’s Bank of America-Merrill Lynch survey of global fund managers, in one of the cautionary sign to companies that tend to borrow to fund buybacks and dividends, had suggested that investors may stop rewarding capital returns to the same degree as done earlier.

Net percentage of fund managers saying pay-out ratios to be `too high’, had been at the highest level since March 2009. Fund managers instead are progressively searching for earnings and rewarding companies which are either reinvesting back profits in order to expand their business or those which have cut pay-outs to protect their balance sheets.

Tim Crockford, lead manager of the Hermes Europe Ex-UK Equity Fund had said that they like companies which do not essentially pay too much of their cash flow out since they have good opportunities of investing in fixed capital, generating higher returns in the future through these investments.

Leaner Balance Sheets Indicates Substantial Shift

Crockford pointed out Spanish Technology Company Amadeus IT and German laboratory equipment company Sartorius as good examples. For instance, Amadeus had spent money for investment in its IT business, making the services of the firm much more appealing to customers like airlines.

In the meantime, some commodity connected firms that had cut dividends in an effort todeal with the slump in metals prices had seen their share prices gathering. Glencore that had lost more than half of its value last year before suspending dividends in September, had profited by 13% since then. BHP Billiton had gained 30% since cutting its dividend in February.

The inclination of accepting lower or no dividends in favour of leaner balance sheets indicates a substantial shift. Besides, it would also signal to European firms that attempts to spend on themselves and getting in front of a pickup in growth would be compensated while stubborn reliance on pay-outs would not.

The Most Important and Overlooked Personal Finance Tip

Surprisingly, most Singapore personal finance blog only talk about equity and maybe a little bit more of other things. However, most didn't touch on the secret to achieving financial independence in the "easiest and surest" way. Living your best life, enjoying every single moment of your life, doing things because you want to, spending time with your loved ones...Are these not the reasons for you to have more money? Or it is about showing wealth to others, comparing gadgets with your peers, eating and facebook what overpaid food you just had or that overpaid travelling?


To begin with, you don't really need to have a lot of money to live well and with dignity in Singapore. Knowing what makes you happy and what your family needs will speed up your financial wealth. In another words, more saving from your income. This is provided your income is at the median range or above. Here is the news that reported on median income in Singapore: click here

If you think the amount is high, please note that it could have included bonuses and employer's cpf. Since this is household income, you will have to divide the $8,666 by 2 or 3 persons. For simplicity, let divide by 2.5 and minus off a bit of bonus and employer's contribution. So, it should be about $3,000 per month. If you are reading this blog and you are not a fresh graduate or students, this figure shouldn't be that overwhelming? I was told fresh graduate nowadays earn more than this figure.

I will do a simple calculation to illustrate my points why most people, including financial bloggers, think too much. Of course, there are some assumptions needed.

Age	Monthly Income	Yearly Income with only 1 month Bonus	Total Income for 2 persons	Saved 70% of income	Total Cashflow Saving at 3% Interest
24	2,800.00	36,400.00	72,800.00	50,960.00	52,488.80
25	2,884.00	37,492.00	74,984.00	52,488.80	106,552.26
26	2,970.52	38,616.76	77,233.52	54,063.46	162,237.63
27	3,059.64	39,775.26	79,550.53	55,685.37	219,593.56
28	3,151.42	40,968.52	81,937.04	57,355.93	278,670.17
29	3,245.97	42,197.58	84,395.15	59,076.61	339,519.07
30	3,343.35	43,463.50	86,927.01	60,848.91	402,193.44
31	3,443.65	44,767.41	89,534.82	62,674.37	466,748.05
32	3,546.96	46,110.43	92,220.86	64,554.60	533,239.29
33	3,653.36	47,493.74	94,987.49	66,491.24	601,725.27
34	3,762.97	48,918.56	97,837.11	68,485.98	672,265.83
35	3,875.85	50,386.11	100,772.23	70,540.56	744,922.60
36	3,992.13	51,897.70	103,795.39	72,656.77	819,759.08
37	4,111.89	53,454.63	106,909.25	74,836.48	896,840.65
38	4,235.25	55,058.27	110,116.53	77,081.57	976,234.67
39	4,362.31	56,710.01	113,420.03	79,394.02	1,058,010.51
40	4,493.18	58,411.31	116,822.63	81,775.84	1,142,239.63

Your family became millionaire family at 39 years old just like that. Do you need to stare at the annual report day in day out to get that wealth? Don't get me wrong, if you enjoy doing that, please go ahead. Also, it is good that you are capable to do investment, it is a bonus and it is a great skill. Not to use more time to buy money, and use more money to buy time later. 

There are people who think that being frugal must be living a miserable life trying to save money for that end goals. Actually, it is reverse. I spend my time and money the way I want with total freedom and I don't need to justify to anyone. I could be way happier than buying that new "toy" to show off to friends, you know. And, my lifestyle, is not anything less than an average Singaporean's. If you still think my income is "high" that why I can achieve early financial independence, look at my illustration again.

Here, I am wishing you a happy long weekend and may one day, we don't need to "labour" for our basic needs. Pampered? I earned it, not inheriting a single cent!