Best Financial Advice Ever

We all have had friends or family give us some personal finance or investment advice.

While mulling over it yesterday, I was wondering which was the best financial advice I ever received in my life. I realised that the few important or best advice that I got were either from books, family, friends or even people who posted in forums.

Today, I will share with you TWO of the BEST financial advice I ever got.

#1 - Pay Yourself First

I can't really remember where I got this advice from. I believe it is from some book or maybe some forum. It took me quite a while to understand this golden piece of advice and I have been practicing this ever since I finally understood what it means.

To pay yourself first means to take your paycheck and then literally PAY YOURSELF FIRST.

You take out a portion of your income and save it or invest it first. Different people implement this differently so you might like to find out the ways you can go about doing it.

The idea is actually really simple and basically creates the discipline to SAVE FIRST before you even spend a single cent on food or clothing or anything else.

To date, this is the best financial advice I received because I used to pay myself LAST. That means that I basically saved or invested whatever money was leftover for that month. This resulted in months where I had little or no savings at all.

#2 - Don't Contra

This was advice given to me by many people which I failed to heed. To contra stocks means to buy and sell stocks without having to put up any money.

The lure of being able to buy stocks when they are low and selling them when they are high within 3 trading days seems so attractive. Afterall, you don't even have to use any real cash and it seems like one is able to make money without the need to even put up any money.

The problem with Contra is that time is against you. One only has 3 trading days to hope that the price of the stock will go up. If it goes down, you are forced to sell the stock for a lower price and thus incur a loss.

My view nowadays is that one should not contra at all, even if he or she has the money to buy the stock. It does not make logical sense to hold a stock just for 3 days to sell it off later.

Conclusion

Pay yourself first and don't contra. This are two of the best advice I have ever received. I have received many other sorts of advice but these two will always stay with me.

What is the best financial advice you have ever received?

Good Food for Good Dating?

The title of this post seems wrong but I could not come up with a better one.

Basically, the wife and I were discussing over Tim Sum at Crystal Jade today whether it was necessary for a couple (or more correctly, the guy) to splurge on expensive restaurants while dating. (Because we are both poor folks, our idea of expensive restaurants are actually just about any place that is more costly than a fast food outlet.)

She said that it wasn't necessary.

I said it was.

I gave her examples of the times when I dated her and brought her to restaurants to eat. That I argued was confirmation that good food and ambience is critical for a dating couple to progress towards marriage.

She countered and mentioned that we also spent quite a lot of time eating hawker food and fast food.

However, I reasoned with her that during our dating period, we often went to the nicer places (e.g. fast food over hawker center) because of the ambience. The air-con, cleaner toilets, nice music , etc was more conducive for romance to develop.

I also argued that it would be extremely difficult for a couple to be in the mood for love if they are hot and sweaty at the hawker centre. That is unless the guy is very charming of course =). Since I did not have that charm, I had to resort to such "underhand" methods to "win" her heart over.

The wife did not rebut my argument which makes me think that I am correct.

But is it true?

If a guy brings a girl to a hawker centre instead of a restaurant for their first date is there a lower chance of success?

Does that mean that a guy has no choice but to spend more money when he is dating?

Cash Over Valuation (COV) for HDB

Having bought a HDB flat directly from HDB itself, I never had to grapple with the issue of cash over valuation or what is commonly called COV.

If a flat is valued at $300,000 and the owner asks for a COV of $50,000 , the buyers literally have to fork out an extra $50K. This could potentially dry up the savings for a young couple who are thinking of getting their own place. I wonder whether any couple has put off marriage because of the high costs involved in setting up their own homes.

If it were me, the maximum COV that I will be willing to pay will not be more than 5% of the valuation of the flat. A 5% error in valuation is what I can accept as a logical explanation for the owner's refusal to sell. But to have to increase the valuation by 10% or 20% of the valued price seems a bit ridiculous to me. Either the valuation is wrong or the owner is really not keen on selling. Or am I mistaken?

What do you think? What is the maximum COV that you will be willing to pay for a HDB flat?

Review of March 2010

Dear Valued Reader,

Every magazine that you read probably has some notes from the editor. This blog does not have an editor so I thought that I should at least address the reader once a month to give a round up of the happenings for that month.

March 2010 has proven to be another exciting month. At home, we were bombarded with news of how the prices of everything is literally going up. These include HDB prices, COE and also electricity tariffs. This is certainly not good news for most of us.

Here at this blog, I mentioned quite a bit on the increasing costs of housing, COE prices and electricity tariffs and included some simple tips to manage this when it comes to personal finance. Hopefully the tips suffice. You can review the related postings here:

1. Average Singaporean's Largest Expense = HDB
2. COE prices skyrockets
3. Time to Buy a Car?

On the side, I have been overwhelmed by the response that I am getting at this blog/site. The latest number of unique readers registered on this site was 2,000 per month. I still remember the days when less than 10 people visited this site per month.

It is wonderful to see the readership go up and there are lots of interesting conversations that I am having with the online community. Everyday, I wake up and realise that there are probably 100 people waiting for my site to be updated. This makes me look for interesting material to share with them. And this is the reason why I blog today.

Every blogger goes through various milestones where they realise that their blogs are no longer personal blogs but blogs that are read by the public at large. This has happened to me too. CPF has approached me to blog at their IM$avvy site (Invitation to Blog at CPF IM$avvy). I still need to wait and see how all this pans out but it has gotten me to think a lot more about this blog and whether I am prepared to take it to the next level. The desire to remain anonymous has also been bugging at me. Is it time that I put a face to this blog?

What has started out as a blog to just chronicle my journey has now turned into me sharing my journey with friends and strangers. Somehow, it seems like I was running some race all alone and all of a sudden, I am surrounded by people who have also been embarking on a similar journey to mine.

On the personal side, I have been giving tuition and using my spare time to reflect on certain things. Sometimes, we think we make wrong decisions in life only to realise that these decisions were not wrong but just part of the process of growing up. Our unique experiences shape us into who we are. I just pray that I become a better person through all my experiences.

If there was one thing I could change, it would be to change the name of this blog. Perhaps I would have named it "My Journey" instead of "SgFinancialFreedom". But like I said above, the seemingly wrong decisions in life might not be wrong if we look at it from hindsight.

Thanks for all the wonderful encouragement and support. Let's have a good April 2010!

Warmest Regards,
FF
The Resident Blogger

Higher Electricity Bills

A rise in oil prices will push up electricty tariffs again for the 4th consecutive quarter.

The new rate for the April to June period is reported to be at 23.56 cents which is 3 per cent higher than the current rate.

The Straits Times reported that it will translate into an increase of $2.47 for a family in a four-room HDB flat. Hopefully that will be all that I am paying in extra for the month of April.

The increase in prices is largely due to the price of fuel oil which has gone up over the last 3 months.

You might want to re-read my Save Electricity Save Money post to avoid a shock when you receive your electricity bills for April.

An Average Singaporean's Largest Expense = HDB

In Singapore, people spend the most amount of money on their houses and their cars. With the increasing prices of HDB flats and COEs for cars recently, I think quite a few Singaporeans are concerned that these big ticket items will only go higher and higher.

Our Largest Expense $$$$ = Housing ($200K to $500K)

I remember that there was an article published on Today newspaper over the weekend stated that HDB's policy was to provide housing for the majority of Singaporean, make it affordable and at the same time allow Singaporeans to monetise on their houses. (I can't really remember the exact details so someone will have to correct me if I am wrong).

This being said, it shows that the government is truly concerned about making housing affordable for all. The supply of HDB flats have been increased recently but at the same time, the government needs to make sure that the value of people's houses increase over time. So this supply and demand has to be managed carefully. I have written about this previously when I said that the government should not be pressured into increasing the supply of HDB flats just because people are complaning. Complaints have to be heard but if the supply of HDB flats are increased without any proper planning, the value of all HDB flats in Singapore will be diluted.

Yet in today's newspaper, we hear of one flat being applied for by 6 applicants. It perhaps shows that there is still a great demand for HDB flats. Or maybe the supply is not enough. The cup is either half empty or half full depending on how you look at it =)

But are there any alternatives for people who cannot get a HDB flat?

1. They could opt for private housing which is even more expensive or they will have to put off their buying to a later date.

2. HDB BTO flats are another option. This is quite a funny scenario as I know of people who are still waiting to occupy their BTO HDB flats. Some have waited for 2 to 3 years. The wait is long and at the mean time, they put up at their parent's place.

3. HDB resale flats. More expensive and sometimes require Cash Over Valuation.

4. Another alternative would be to rent a place. But rental isn't exactly cheap either for an entire unit.

5. Stay with parents or in-laws. I know of people who chose to stay with their parents. They do not have to worry about queuing up for a HDB flat. Of course, they will have to forfeit their privacy.

So the point at the end of the day is that we need to manage people's expectations. If your expectations are high, be prepared to pay a high price for it. At the end of the day, most of us will still have a roof over our heads even if we can't get a HDB flat.

With housing being one of the largest expenses that an average Singaporean will incur, the house that you buy has a GREAT impact on your finances and should not be taken lightly. The loan period is usually 30 years and one can expect to pay a grand total of $200 to $500K depending on where they chose to stay. Of course, there are groups of people who purchase houses that cost way above $500K.

When people are desperate to get a HDB flat, they might sometimes make a hasty decision of buying a flat that is way above what they can afford. A rule of thumb used is that your monthly loans (all loans) should not exceed 35% of your monthly income. Please take note that some women also tend to stop working when a baby arrives. It might be wise to consider buying a house where the monthly installments can be managed based on a single person's income.

$1 Fish and Chips

Yes, you heard me right! There is a special promotion of $1 fish and chips at Fish and Co.

All you have to do is go to the Fish and Co Earth Hour promotion and spread the message and they will give you a $1 coupon which entitles you to a $1 fish and chips (terms and conditions applies).

You can only use one coupon per table though.

I used the voucher today and managed to grab a nice pan of fish and chips at $1.00. Never mind that the total bill added up to over $20 in the end, the feeling of getting a discount or good deal always feels good.

Everybody in the restaurant were literally using the coupon, waving the printed sheet of paper in their hands. I saw big groups of people that even split themselves into smaller groups so that they could maximise the number of coupons they had. Some came in earlier and ordered separately before their friends joined them at nearby tables and they then proceeded to combine their tables. The waiters and waitresses seemed a bit overwhelmed by the various methods used though.

Anyway, I was quite surprised to realise that this ongoing promotion was actually part of the Earth Hour promotion. Perhaps the word should be "amused". I can imagine the Green Peace activists flipping in their chairs when they see the amount of paper that customers have used to print the coupons for the discount. Talk about saving the earth =)

Well, fish and chips at Fish and Co is always good and at $1 per pan, it is an offer not to be missed!