Financial Freedom

Bills to Pay

Lots of bills to pay for this month.

First there is road tax. If I renew it for a 6 month period, it will cost me $367.00

Next is housing installment which I need to pay in cash. That is close to another $500.

Then there is my upcoming car insurance which I need to renew. That will set me back by a good $1000 plus.

Credit card bills also add up to over $1300.

Lots of bills to pay for this month. Less my usual contributions to my investment linked plans, I have very little savings for this month.

Everyday I try to draw some lessons from the books that I read or the things that I experience.

I have been reading Outliers by Malcolm Gladwell. In one of the chapters, it mentions that 10,000 hours is what it takes to make a person good at a particular field. That is roughly 10 years. The most gifted person or the most talented person still needs to practice 10,000 hours before they get really good.

Come to think of it, I have never really truly put in 10,000 hours into any particular field. Even during my university days, I don't think I managed to study 10,000 hours. And that perhaps explains why I am neither talented in any sport or in any musical instruments.

10,000 hours is all it takes. Of course, there needs to be some talent involve. But even with talent, you still need 10,000 hours.

Where should you devote 10,000 hours to?

Funny Incident at MRT

Memories often fail me and so I thought I should record down some of the funny incidents that I go through in my life as well.

While I was taking the MRT today, I wanted to know the time. As the MRT was packed, I looked at the watch of another passenger who was holding the handrail next to me. I got a shock to realise that I might actually be late as the time on his watch showed 845am. To be certain, I peeked at another passenger's watch and her watch showed 842am. At this point in time, I was wondering whether my own watch was behind time.

However, after looking a round at other watches, I realised that the time was actually much earlier at 825-830am.

What a funny incident! I peeked at 2 separate watches of 2 different passengers and somehow, they both had watches that were 15mins ahead of time. 10 mins I can understand. But isn't 15 mins a bit too much?

Girl Made to Sign Pre-Nup Agreement

Apparently, some girl was about to get married when her in-laws and husband-to-be sat her down and wanted her to sign a pre-nup. They also wanted the marriage registered in the US so that the pre-nup will be enforceable as pre-nups are not recognised for marriages registered in Singapore.

The forum thread is attached below:

Read this : http://forums.asiaone.com/showthread.php?t=33015

Do you think pre-nups are necessary? Is it wrong for the rich to try to protect their assets?

SIA Bonds and SGS Bonds

I read today's news article that SIA was issuing $300 million of 5 years bonds with $50 million to be placed out to retail investors. The minimum subscription is $10,000 with coupon rate of 2.15% per annum.

Yet in the same newspapers, I also saw a notice by MAS on the Singapore Government issuing Singapore Gvt Bonds at a minimum subscription of $1000 with a coupon rate of 2.875% per annum.

What is interesting is that the Singapore Government Bond is actually paying a higher coupon rate than the SIA bond. In addition, the minimum subscription amount is also less at $1000 compared to SIA's $10,000. From the investor's point of view, it seems to make more sense to invest in SGS bonds over the SIA bond since the coupon rate is higher.

Another interesting thing that blew my mind away was the coupon rate. From what I gather ( I could be mistaken), I always thought that governments (not Singapore in particular) are able to acquire debt more cheaply than private entities. This is because a Government can simply raise taxes or print more money to pay back its investors. As such, a government when compared to a private entity should be able to issue bonds at a LOWER coupon rate than a private entity. It makes sense since the institutional investors will view government bonds as being less risky than bonds that are being issued by private entities.

However, for the case here of 2 similar 5 year bonds, what I observe is that the private entity (SIA) is actually able to borrow money (through the issuing of bonds) at a cheaper rate than the Government! That is 2.15% coupon rate versus SGS bond's 2.875%! That is a pretty significant difference!

How a private entity can actually borrow money at a cheaper rate than the Singapore Government (which has an excellent credit rating) totally baffles me. I don't understand.. Maybe there is something I don't understand about bonds yet. Or maybe I could be badly mistaken. Can someone correct me on where I have gone wrong in my thinking?

[After note (23 Sept): In this post, I compared SIA bonds and SGS bonds and was wondering how could a private entity offer coupon rate that was lower than the Government. I asked readers to correct me on where I have gone wrong in my thinking. After all, I was utterly baffled from my supposed assumption that this was a scenario where a private entity was able to borrow at a cheaper rate than the government.

Thankfully, a reader (named Sen) corrected my mistake. The SGS bond had a coupon rate of 2.875% but that did not translate into yield as the pricing of the bond was still not known. That means the yield of the SGS bond will most probably end up being lower than the yield of SIA’s equivalent 5 year bond.

Morale of the story: When you think that you have found an anomaly, it is most probably not an anomaly.]

SMRA 4% Interest

So the news has reported that the SMRA interest rate will remain at 4% for another year till Dec 2011. That is good news for all to hear!

After pegging it to the SGS yield plus 1 per cent, interest rates seemed to have drop significantly such that the Government has to keep extending the 4% interest rate. The last time I blog about this was almost a year back! That is how fast time flies.

Now a new year is almost upon us.

Recently, I conducted a survey on how much money people have in their CPF Ordinary Account. Only 27% of the respondents had more than $100,000. Considering that the readers of this blogs span a wide age range, it is certainly not surprising that some people have accumulated more than $100,000 in their Ordinary Accounts.

For me, I belong to those who have hardly any money in my CPF-OA. Afterall, most of my contributions to CPF OA goes to paying off my monthly housing installments. Considering that there are more than 20 years of payment left, I wonder when my CPF OA will start to rise to that kind of amount.

Canadian Income Trusts

It has been a long time since I last wrote on Canadian Income Trusts or Canroys.

I did a check to see what the situation was on these investment instruments after they fell out of grace because of the planned tax by the Canadian government which will effectively lower the distributions of these income trusts by 2011.

It seems that nothing much has changed since I last read the news. The finance minister is still coming under strong criticism from opposition parties because of the new tax ruling. The reason why the tax ruling was changed was due to a white paper released by the Department of Finance that estimated 300million Canadian dollars in tax money was being leaked away because corporations were using the income trusts structure to avoid taxes. When news of the new tax ruling broke out, billions of dollars were wiped out as the income trusts tanked.

Nothing has changed thus far and it is best that investors wait at the sidelines.