Personal Finance in the 21st Century

Just before I was going to sleep last night, I was just brainstorming on certain ideas that I could further develop in the future for my postings. After all, there are those "desert" days when I have lots of topics that I would like to write about but when I start writing them down, I realise that I do not have much "meat" to add to make it a worthwhile posting.

I was just thinking about the concept of personal finance and how it is different in the 21st century compared to the previous centuries.

I personally feel that the concept of personal finance has changed over the hundred of years.

In the past, people had a shorter life expectancy, had close family support and most probably did not have the concept of retirement. These three factors alone were perhaps the reason why most people perhaps only practiced basic money management concepts like saving. Let me expound on the three factors a little more.

In today's developed countries, most people can expect to live way past the age of 70 or 80. Very often, they will no longer be physically fit to carry out any form of employment and thus need to save up to make sure they have enough to survive on when they are no longer working. This was different in the past where people just worked their entire lives (probably because they owned their own business too).

In addition, they no longer live with their children as some even migrate to other countries to live. In the past, families used to stay pretty much together and one could rely on your immediate family members to take care of you once you are old.

The concept of retirement must also be a pretty new concept as people used to work all the way till their death beds. They simply did not have the concept of retirement!

So with these changes, comes the need for people to understand personal finance. When we live longer lives, expect not to receive financial support from our children and expect to enjoy our retirement lives, we will need to actively plan our finances to ensure that we secure a good financial future for ourselves.

The questions we need to ask ourselves are these:

How long do we expect to live?

Do we expect to be financially independent or will we be reliant on our children or family members during our retirement?

Do we even expect to retire by a certain age?

If we know the answers to the questions above, we are better prepared to face the future.

Money Saving Tips

A little while back, I wrote an article on 1001 ways to save money. I thought that I could expound on some of the common money saving tips proposed by various experts and see how it can actually work out in the Singapore context.

One of these money saving tips that you commonly hear is this:

Shop at outlet stores. You can find a lot of nice, even brand names, clothes for a fraction of the price.

Outlet Stores in Singapore

In the first place, I don't really know where to find outlet stores in Singapore. I am not much of a shopper so I would really appreciate if everyone can share the best outlet stores in Singapore to get stuff like clothes and shoes.

Outlet Stores in Malaysia

Over at Malaysia, I frequently come across Factory Outlet stores and also the Reject Shop. These shops often carry certain branded shirts at really a fraction of the price. And that is in Ringgit also! Tell me about a good deal.

The shopping mall just opposite the new immigration complex is where you can find a Factory Outlet store and a Reject Shop. If one does not mind making the trip across the causeway, you can find pretty good deals there.

Out of My Comfort Zone

Today, I did something which I never imagined I would actually do in my entire life.

There are alot of things that I have been doing lately which I never thought I would have done but this single step really brings me out of my comfort zone.

For the longest time, blogging has always been something which I have done anonymously. I have never met any of my readers or met up with any of those from the online community.

Today, I took the first step and met someone from CPF regarding the possibility of me contributing as a guest blogger at IM$avvy. It was a scary thought for me as this was the first time I was actually meeting someone regarding my blog.

The feeling was actually like me going for a job interview except that the interviewer had lots of personal information about me!

Most of you will know that I feel that this blog is certainly not like a masterpiece. I would actually be embarrassed to showcase it to anyone. Afterall, my writing has at best been incoherent and at its worst, totally incomprehensible. I don't spend much time editing my work so it is really not amazing that I feel inadequate.

Yet, I came across this quote recently that really inspired me to step out of my comfort zone and to embrace myself for who I really am. I share with all of you this quote:

Our deepest fear is not that we are inadequate.

Our deepest fear is that we are powerful beyond measure.

It is our light not our darkness that most frightens us.

We ask ourselves, who am I to be brilliant, gorgeous,
talented and fabulous?

Actually, who are you not to be?

You are a child of God.

Your playing small does not serve the world.

There's nothing enlightened about shrinking so that other

people won't feel insecure around you.

We were born to make manifest the glory of
God that is within us.

It's not just in some of us; it's in everyone.

And as we let our own light shine,
we unconsciously give other people
permission to do the same.

As we are liberated from our own fear,
Our presence automatically liberates others.

—Marianne Williamson


Well, I am glad that I actually took this step out of my comfort zone.

Jim Rogers on Saving

I came across some gems when flipping the Sunday Times.

"Everybody should save, especially early in their careers when they need to have reserves. My first wife wanted to buy a sofa but I told her not to do so because if we put that money for the sofa into investments, we could eventually buy 10 sofas." - Jim Rogers, investor

Good piece of advice about savings from Jim Rogers.

The problem with many people is that once they start working, they suddenly find this urge to spend their money on things that they have never been able to buy before. What they do is go out for some retail therapy. And instead of saving money first, they end up spending lots of money.

"Saving is something you should do to satisfy your liquidity needs. However, the main purpose of saving beyond your immediate liquidity needs is to generate higher returns for your future consumption." David Lee, managing director of Ferrell Asset Management.

Something for all of us to think about.

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?