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.

5 Technologies That Can Change Stock Markets Forever

Improved Insight on Risk Undertaken

Disturbance in digital system has been making the financial markets more apparent, reachable and efficient. Besides this it also tends to help the regulators in getting an improved insight on the risks which the applicants may seem to undertake. The following technologies could transform the financial markets in the forthcoming days:

Artificial intelligence and natural language processing 

Several of the financial companies are adopting algorithms in doing the tasks which humans have been performing for years. Mechanism learning systems have been enhanced considerably and with expanding processor potentials at lower cost, these systems are made available for larger usage. The techniques for artificial intelligence enable the system to learn from user connections as well as patterns without the need of being openly programmed for the same.

Machine learning together with other artificial intelligence technologies, in the past few years, has provided us with self-driving cars, real-world speech recognition, chess champions as well as more related as well as realistic web-searches. With regards to financial markets, we have software analysing voice patterns of recorded calls at investment banks, brokerages and on the client side too which could instantly distinguish irregularities and frauds, It can also look at keywords, decode conversational encryption of information and achieve difficult searches on the recordings.

Robo Advisers 

From the present situation, there could be probabilities that we would be seeing the last few Wolves of Wall Street and Dalal Street and moving ahead we may have only robots of Wall Street and Dalal Street. Though the systems hasprogressed in grasping the monetary goals, risk profiles together with the other complex details of investment to come up with personalised investment portfolio, it could alter funds, book profits or square off position depending on self-learning processes. The platform could be either for web-based and/or smartphone based, thus enabling easy access or adapt.This is said to be self-operated without the need of the user talking to a live person. Compared to a human advisor who tends to charge a portfolio management fee, the services here are rendered at no recurring expense.

Quantum `sealed envelope’

Outrages centred on information theft have often been a nightmare for performers in financial markets. Till now, hackers have somehow achieved to stay ahead of security programs as well as passwords though it could change very soon. A team of researchers inGeneva, Singapore, Cambridge and Waterloo and Ontario had utilised the breakthroughspeculative work co-authored by Dr Adrian Kent from University of Cambridge’s Department of Applied Mathematics and Theoretical Physics in providing `unconditionally guaranteed’ security as well as purity of message transferred from any two points on earth. Earlier trials using these digital `sealed envelopes’ is said to be successful and if all goes well, the monetary markets would be entirelysecured against any threat of statistics invasion.

Bitcoin and Blockchain technologies 

The distributed ledger, Blockchain technology after the virtual currency Bitcoin, tends to record the financial transaction of any digital interaction in secured, transparent, traceable and in an efficient manner. So it is appropriate in providing a universal virtual currency as well as for digital accounting and auditing financial transaction of any kind. The possibility of Blockchain technology is understood from the fact that 30 of the largest banks in the world had recently formed a global consortium to research, design and build Blockchain solutions further. Besides this, the Reserve Bank of India – RBI that had issued a cautionary note in 2013, against Bitcoin had changed its stance. The Indian central bank is now of the belief that the Blockchain technology could be helpful in the prevention of counterfeiting currency as well as financial transactions.

Big data and analytics 

Financial markets tend to generate enormous amount of data each second. Storing and analysing these details on real time basis could be critical. With a combination of private as well as public cloud tends to resolve the issue of storage as well as real-time access to this multitude of data at reasonable charges. Big data analytics tend to make it likely to highlight correlations which seem incredible for humans to locate. For instance, envisage a situation where 90% of orders that are positioned on NSE and BSE through high-frequency algorithmic dealing platforms tend to abruptly get cancelled within a span of less than 30 seconds.

 A human may never have known such trends with so much accuracy; RBI had highlighted this trend last year and alerted the market regarding it. Such kind of analysis could never be done without leveraging technology for big data scrutiny. There could also be software which could analyse thousands of social media feeds regarding the sentiments and news of a company and could try to forecast future as well as probable sentiments regarding the company. These visions could change the way institutional as well as retail investor trade in the market. Though some of these technologies could be in its initial stage of development and may need substantial enhancement together with market interest, the base has been set for digital alteration.

Are Teachers Middle Class?

The July 3 issue of Bloomberg Businessweek had an interview with President Obama.  It was quite interesting, and I found myself surprised to be agreeing with a number of things the so-called ‘anti-business President’ had to say about business in America.  One comment he made, though, really seemed way off base so I did some digging into the facts.  The President was quoted as saying:

"Think about how difficult it is right now for young, idealistic person who wants to go into teaching to figure out how they're going to live middle class life as a teacher.  There's no job that's more important to our economy than having really good teachers in the classroom, but right now, the way our economy is structured, it's very hard for young people to make that decision unless the parents are subsidizing them in a fairly significant way."

Coming from a family where both my parents were teachers, with my own college degree in teaching, and a number of very close friends and their spouses being teachers, I thought I had a pretty good handle on what that life is like.  And while not the path to untold riches, teaching for everyone close to me has been the path to a comfortable middle class career.  So I got to questioning ‘Is my perception of being a teacher and/or being middle class skewed?’

The data I found says no.  According to the US Bureau of Labor Statistics, the national average of annual salary for teachers in middle and high school is about $54,000, with surprisingly elementary teachers averaging $60,000.  Here in Wisconsin, information available from the Department of Public Instruction said that the average salary for a teacher in 2011-12 was around $55,000.

So teachers in my geographic area earn about as much as the national average.  But are they middle class?  CNN Money has a calculator that addresses that question by assuming that ‘middle class’ means incomes being between 1/3 less than and two times more than the median income in the county.

I live and work in Dane County, and when I plugged that into the CNN calculator I came up with middle class being defined as annual income between $40,418 and $120,652, which must mean that the median income here is about $60,000 per year.  The income listed is for a three person household, which I assume to be two adults and one child, although I couldn’t find any definition of a ‘three person household’ anywhere.

That data means that a household in my area with one employed teacher is on the low end of middle class, and if there were two teachers in that household they are on the upper end of middle class. 

Make no mistake – this has nothing at all to do with whether teachers are over or under paid, or any argument whatsoever along those lines. Most teachers I know are passionate, dedicated professionals and deserve their entire community’s gratitude.  

It’s just that the idea of it being ‘difficult to figure out how to live a middle class life as a teacher’ doesn’t hold water to me.  I always felt that growing up decades ago in a one income teaching household - my Mom stopped teaching to raise us kids - that we were solidly middle class; and the data above shows that a typical teaching household is middle class today, and perhaps even on the upper end of that. 

This is an interesting topic to us, since one of the ideals we value at Trinity Financial Planning is that that objective, holistic financial advice should be available to anyone who seeks it regardless of how many zeroes are in their net worth.  Let us know what you think about whether teaching can provide for a middle class living.

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.

The Brexit Effect -What’s next for Markets

Britain’s Vote – European Union Likely to Disturb British/European Economies

Mentioning that Brexit vote on June 23 which had taken the financial market unaware could be an understatement and the pound, British stocks as well as the Gilt yields had mounted sharply in the week which lead up to the vote but crashed once the results began coming in.

Generally speaking, strategists on Credit Suisse’s Global Markets and Investment Solutions and Products (IS&P) teams anticipate markets to stay volatile in the forthcoming days and for the investors to favour safe assets to the uncertain ones.

 Some of the views have been highlighted from across the bank on how Britain’s referendum vote leaving the European Union is likely to disturb the British as well as the European economies and a broad range of financial resources.

The Economic Impact

The Credit Suisse’s Global Markets and IS&P team are of the belief that the Brexit vote would be creating a considerable amount of uncertainty for British businesses which would eventually lead to a weakening in GDP. Both the teams also tend to believe that the Bank of England would step in with cuts in rate.

Moreover, the Global Markets team believes that the Bank of England to cut rates from 0.5% to 0.05% and had another round of measurable easing to the tune of £ 75 billion which would not be later than August 2016.

Credit Suisse’s Chief Investment Officer for International Wealth Management, Michael O’Sullivan, pointed out that the central banks all over the work seems to be on alert to step in, ensuring that their own banking systems tend to have sufficient liquidity. Besides weak corporate spending, Global Markets economists anticipate growing inflation as well as the decline of the British pound to squeeze household expenditure.

Accordingly, they predicted that GDP would fall 1% between the third quarter of 2016 and the first quarter of 2016 which would have lessened their growth predictions for 2016 from 1.8% to 1% and the 2017 growth predictions from 2.3% to 1%.

Significant Slowdown in Growth

The analysts of Credit Suisse’ IS&P also expect a significant slowdown in growth and the teams contemplate it possible that the deteriorating value of the pound would be causing a front-page inflation to spike. The Global Markets team also seem to anticipate an impediment to the recent pickup in corporate spending especially in Europe together with the tightening of financial conditions.

The economists of the team had dropped their European GDP growth expectations from 1.7% to 1.5% in 2016 and from 2% to 1% in 2017. Credit Suisse’s IS&P team are of the belief that the Eurozone would not be following the U.K. into depression unless the Brexit vote ends in severe financial infection to peripheral economies like Italy. However, the analysts on the team envisage this as a tail risk. The IS&P team are of the belief that the European

Central Bank would lengthen its quantitative easing program whereas the Global Markets team consider that there is a possibility with added easing through the prevailing TLTRO program offering low-interest funding to commercial banks.Credit Suisse’s Investment Committee has downgraded European stocks to neutral as well as British stocks to drift whereas the U.S. stocks to neutral. Moreover strategists of Credit Suisse’s Global Markets had shifted their year-end goals from 6,600 to 6,200 on the FTSE 100, 2,150 to 2,000 on the S&P 500 and on the Eurostoxx 50, from 3,350 to 2,950.

Doing investment using CPF Ordinary Account and Special Account

Hi Folks! I believe you have heard or went for seminars in teaching you on how to make use of your CPF money? As you may have know, we can do some investment using our ordinary account and special account but it has some restriction in using the money in it. It does make sense for the government to impose some limitation to prevent the CPF members from gambling their money to invest on all sorts of investment. All form of investment has risk and government do not want to bear the full responsibility if things went ugly. The subprime mortgage that happened in 2008 is a good example of how the investors reaction when their investment collapse and they could not take the loss. Therefore, certain level of control is needed. After all, we are not welfare state country. We have to do something extra to get more funding for ourselves. Having those restriction, it helps to meet the purpose of CPF, to fund for purchasing hdb flats and have money at retirement age.

Restriction:
1) Ordinary Account - As you all know, this account is more flexible to be use for your house, education or even transfer the funds to special account or to family members account. First $20k cannot be use to do any form of investment. The amount from then on can be used to purchase any stocks, unit trust, singapore bond and etc. Please take note that not all investment product can be purchased even though you can purchase almost all type of product. Most of the investment product will have a label to indicate it can be use with CPF money.

2) Special Account - Since this account is less flexible in their usage in the early stage of our life, it has higher amount that is mandatory to be kept in the account. For the first 40k, it cannot be use for any form of investment. It has also some limitation in the investment product that you can purchase.

For more comprehensive details, please click here.

When or Why use it?

Many of us may not be so lucky to earn a high income that literally capped on their ordinary account each month. If you are one of them, it may not bring any impact to you as you are able to fund almost anything. This is more applicable for those low or middle income earner who wish to enhance their CPF money through achieving more than the interest given every year. It is also can be use as a "emergency fund" since it is quite flexible to sell off the unit you own. Ordinary account is given at 2.5% each year and if you follow up with the economy, it may not in favor to us at all. Similar to you putting your money in the bank that give a very small interest every year.

If you are currently or aiming to purchase your first house in three years time, it would be good if you can consider placing some of your CPF money through an investment that provides you a good dividend. It could help you to supplement the monthly payment of your house. You would know that once you are able to stay in your new house, they would wipe out the money inside your CPF Ordinary Account. But please before you do any form of investment, seek advise once again from your insurance agent or your personal banker. They are one of the best people to give you advice on it. Putting some of the money in an investment is like setting aside some money for future use. This money would be use to fund for future needs. It really can help you in a long run. Trust me.

For those that have pass this stage, you can still consider doing this. You just need to do some homework with your partner or yourself to see if you can do so. Check your CPF account and do some calculation. You cannot depend too much on one source of income, SALARY. You need to constantly and strategically find an alternative way of how you can earn more income other than getting promoted in your organisation. This is very important so that you can keep up with the changes. Investment seems to be apart of our life now if we want to have a little bit of comfort in our life. Unless, you own a business and able to sustain the operation. I am sure you will be better off than the average people. To add on, investment using your CPF could also help to meet the retirement sum. If you look at the list, it is constantly increase to be able to meet up with the current standard of living. Based on the amount of $161,000. The payout would be roughly around $1,300. This amount may no longer be the same in the future. Below is an extraction from the CPF website:

5th birthday on or after	Full Retirement Sum
1 July 2003	$80,000
1 July 2004	$84,500
1 July 2005	$90,000
1 July 2006	$94,600
1 July 2007	$99,600
1 July 2008	$106,000
1 July 2009	$117,000
1 July 2010	$123,000
1 July 2011	$131,​000
1 July 2012	$139,000
1 July 2013	$148,000
1 July 2014	$155,000
1 July 2015	$161,000

credit: https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-scheme

It is time for you to do some consideration and restructure your finances so that you will take more ownership of your life. Remember, do not depend heavily on the government to supplement you till old age. You got to make it happen. There is a reason why skillsfuture is being created. To get yourself equip with new skills set or be updated with the latest technology that are related to your current career path.

So stay hungry always people! Always think positive and you will see the reward thereafter! Cheers!