And Going Forward…

One consequence I didn’t really foresee when I took my long break from work was that I would have no income history for 2014.

How is that important?

Well, it just so happens that I may need to look into refinancing for the condo this year.

I am in a bit of a dilemma here, because I cannot really predict the rates of increase. At the moment, I am paying about 1.2% interest, and fixed rates are at around 2+% if I am not wrong (haven’t done my due diligence yet).

The rest of the world is printing money like crazy, but the US has eased off its QE, so I can’t really predict the way interest rates are going to go.

However, the whole thing might be moot if I can’t show a healthy income sheet for 2014. And that is just one headache I have come back to.

My condo lease is up again this coming April, and the rental market is pretty soft right now, so I am not optimistic for the coming year. It is also not a great time to sell, so I have to hang in there for a couple of years more.

I have a small idea though. The condo layout is such that I can cordon off a small part of the place and make it my own tiny studio with my own entrance, while continuing to rent out the rest of the place. If my current tenant decides not to continue the lease, I might just take a couple of months and turn this into reality. The condo is much nearer to my place of work and I would finally be done with the 5.30 am wake up calls and daily 3 hr commutes. And I would finally have a place of my own.

The next most urgent thing is to just work, replenish my coffers, and throw the excess into stocks. This is the year for stocks, I think, given all the liquidity floating around the globe. However, I have to confess that it has been a little hard to adjust to working life after bumming around for so long; I must be really suited to the life of a wastrel. I miss not having to get up to the sound of the alarm clock. Oh well, it’s just nine more years…

Oh, and more money saving! The new company gym had been completed in my absence, and now I can go cancel my gym membership. There is even a free personal trainer at the company gym, and I don’t have to travel anywhere! There is also now a massage service at the company, at the cheap, cheap price of $38 an hour, so that’s probably where some of those saving’s going to go. They certainly are making it hard for me to think about resigning…

And that is the plan for this year. Earn as much as I can, save as much as I can and lose some weight in the process. Let’s just hope the doing is as simple as the planning.

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Tenancy Lease Ending And Other Property Related Ruminations

My current condo tenancy lease is coming to an end in April, so I asked my agent to inquire about a re-contract. Just last week, my tenant agreed to continue the lease for another year, but has negotiated down the rental by over a thousand bucks. With the reduction in rent, and increased property taxes, and slowly increasing interest rates, I will just about break even this year after doing a little maintenance work.

I have agreed and we will be signing the new lease end of April. I can’t complain about the rent reduction though. I have had it good for the last two years, charging 25% over market rate. However, the rental market is now a lot quieter and plenty of other units in the development are on offer. According to my agent, there are about 40 other listings still pending for this development, and some have been on the market to rent for almost two months without any nibbles. My tenant has been really quite easy to deal with, so I just want to keep him. In fact, I intend to bend over backwards to accommodate his every request. J

I have also been thinking about what to do about the property investment once this newest lease is up. I will probably want to go for another one year lease if possible and then look to sell in 2016. Previously I have discussed about acquiring a HDB flat, but now I am hesitant again, due to

1) the new cap on rental to foreigners, and

2) the creation of the BTO scheme for singles reducing demand for local HDB rental, and lastly,

3) the restrictions on minimum occupancy period, and waiting time of 2-1/2 years between disposing of a private property and buying a HDB.

Also, the idea of two properties is fast fading away in my mind because of all extra costs involved – additional 7% buyer stamp duty, higher downpayment, the low LTV (loan-to-valuation limit) for financing a mortgage (though the last two are not really problems if I am able swing a cash purchase).

I could keep the current condo, but it’s not ideal as a rental property because it’s really too big, not that well located, quite old and not that well built (starting to need $$ for continual maintenance).

I was cracking my head, then Mr. C suggested – sell the current place, and get a dual key apartment. Prior to my current condo, I was looking at one such place in the east of Singapore. The layout was split into a studio (complete with kitchen area and bathroom) of about 400 sq ft, and a two bedroom of about 900 sq ft, with separate entries, but sharing a common foyer area. The studio will be mine to live in, while the 2 bedder can be rented. It would effectively be one property purchase but would act like two separate properties. I would have to install extra meters to keep track of the utilities usage, but it could work. And the idea of not having to travel across the island to carry out any landlord duties has its attractions.

At the time I was looking, the dual key place and my current condo (both freehold) had similar prices. So it probably would not lower my mortgage any, but it would be a much better layout in terms of flexibility.

I am still talking to Mr. C about alternatives, and would probably start shopping around later part of the year to see what’s available and have an idea of the price levels. I do feel like I keep going around in circles on the whole property and rental income issues, so I apologise if readers feel dizzy from all the ruminating I keep doing.

Networth November 2013

I had a slip and fall recently, which resulted in a visit to the nearest hospital A&E. Four stitches, a tetanus shot, and a hundred bucks later, I have learnt my most valuable lesson ever – reading while I am walking is not a good idea.

Also, the best way to appreciate various parts of your body is to take them out of commission for a while. I have always taken my left hand for granted, until now when I have problem using it. It has only occurred to me just how many actions require both hands. Sigh.

Luckily, the stars don’t seem to be as out of alignment in my financial life, because I am happy to report that I am worth about $792,000 at this very moment. That’s approximate increase of $7,500 over last month’s numbers and the immediate impact of getting regular paychecks again.

If I end December with just a modest increase of $3K, I would have clocked a total increase of $150K networth for this year, not including any paper capital gains from the condo. And really, my investment gains outside of the condo is really quite abysmal. That $150K increase came mainly from just plain savings – CPF, cash savings, whole-life insurance premium payments and mortgage principle paydown. It just goes to show how powerful a high savings rate can be when you first start out.

For a year where I worked only ¾ of the time, this is pretty phenomenal, and just a tad…scary. I didn’t have a single month this year where my networth didn’t increase, even when I was not working and getting paid. It feels almost too good to be true, and I am wondering if I somehow made a pact with the devil in my dreams or something, because how can I be so lucky? And while I can analyse the numbers and get some logical explanation, at times, I still feel like I didn’t do anything to deserve all this. I keep expecting something bad to happen every time I turn the corner.

Sigh…the life of a born worrier. I wonder if I will end up worrying myself into a self-fulfilling prophecy.

In other news, another neighbour at the condo development with an identical unit to mine sold his unit at $1.85 million, which is quite a bit lower than I expected. Since I don’t live there, I am not privy to the grapevine, and thus have no idea whether he sold so low because he was in urgent need of money or the market is lower than I expected. Anyway, I am adjusting my expectations of my condo valuation a little due to this sale.

I have also completed next year’s budgeting exercise. The biggest uncertainty so far is the condo lease renewal next May. I do have the advantage of a high initial rent, so I do have room for a substantial discount to keep my tenant, but the development is rather old and I haven’t really spent money in updating the unit, so I am keeping my fingers crossed that my tenant will want to continue his stay.

And so, that’s about it for now. More to come soon.

Retirement Budget and Plans

Previously I made mention of how I intend to approach my (semi-) retirement at 45. Here are my projected retirement expenses again, close up:

PL3

I didn’t manufacture these numbers out of thin air. Most of them are based on what I have already been spending, with some adjustments based on a non-working lifestyle.

Regarding my parents’ retirement, I personally calculated that with their current HDB flat paid off, they should be able to live very well on $2,500 a month as long as they don’t do the Santa Claus act (my dad can give quite indiscriminately). For now, I anticipate that my sister and I will each contribute $1,000 a month with the remaining coming from my parents’ own savings. Heck, they can even rent my current room out for some extra cash once I move out of the house (and once they come to terms with it).

Based on the numbers, I should be able live quite well on a rental income from a well situated paid off HDB four room flat (about $2,500 a month), if I didn’t have to consider the support of my parents. The situation becomes pretty marginal once parental support is involved.

However, part of my retirement plan is also to make sure I have small dividend returning portfolio, giving me something like $10-12K a year (300K at 4% dividend yield). I may also annuities eventually, but only if the interest rate environment is more favourable. If this is also considered, then I have more than enough to cover all our costs with enough left over for small vacations here and there if we want. I am also likely to continue working part-time for a while, just to make sure I don’t drop out of society totally. All that income will be gravy.

It seems pretty cut & dried, but there are a few challenges ahead of me though:

1)      Locking in the condo capital appreciation at the right time. Buying a HDB in cash hinges on this move and I have two years to go before I can sell without the penalty of paying the seller’s stamp duty.

My father wants me to keep the condo instead of exchanging it for a paid off HDB. The HDB will give me a better rental yield and cash flow, but the condo has better chances of further capital appreciation. So this is where my father and I locked horns – I want the cash flow to stop working; my father sees it as throwing the chance to earn big money away.

Naturally, I have had to explain to my father about my early retirement plans and how this one move is critical to the whole project. And then, I had to sit and listen to a lecture about wasting my youth and potential, and how things will not always go as I plan, what will I do in retirement, yadda yadda yadda…

I could unilaterally decide, of course, the condo being mine and mine alone. But that is probably not the best course for family harmony. I would prefer to try and get my father’s buy-in in the next two years before making the authoritative decision. But man, it is frustrating to talk to him about this.

2)      Getting my dividend portfolio up to snuff. I am now averaging only a dividend yield of 2.5% due to some non-performers.

3)      Making sure I keep up the income and savings rate for the next ten years. The rental HDB will depend on the condo sale, but my forever home, the private studio apartment will need a cash injection of about $800K. That means saving $80K a year including CPF. I think I can swing that…barely…

So, there it is, my retirement plan in all its glory. Even if I cannot retire fully at 45, I see no reason why I should not be able to downshift to work that I enjoy by that time. Like shelving books in a library, or becoming an admin clerk, or becoming a PI’s assistant…

Choices…the best part of financial independence…mmmmmm…..

Personal P&L Statement – 2013

Seeing that it’s coming to the end of the year, I decided to run this year’s numbers a couple of months ahead, since I do not anticipate any major income or spending coming up. Not a celebrator (word?) of Christmas, hehe.

So here are my finances, laid bare for your perusal:

PL1

There is also another $20K+ worth of company stock given to me that is not included above, since I did not encash the stock. The stock still sits in my portfolio earning dividends.

Expenses figures under current are for 2013 spending. Under the retirement column are the projected expenses for early retirement.

The numbers in red are my greatest current weaknesses – cabs and snacks/eating out. Cabs are…well, a symptom of having to wake up at 5.30 a.m. every morning for work. I am trying to get that cut back, but I am at that point where I am wondering if it is worth spending the money just to make sure I get to the office faithfully instead of calling in sick…or quitting before I am ready. As for the dining out/snacks numbers, most of that is due to being at home for the last few months…I have been going overboard with delivery. As long as I am at work, it shouldn’t continue to be a major issue. I also have a habit of picking up the tab when dining out with certain friends, though that doesn’t happen so often.

I have also been trying to up the parental allowance portion; pay more rent, so to speak. But my parents refuse to take more as they are still earning an income. So, I just bank everything for when they actually retire.

The huge expenses for insurances are mainly due to my whole life insurance, as I am on a limited pay scheme. This means I pay extra premium each month, but I will finish paying by 45. Signing up for this was a youthful folly; I am now educated enough to realise the opportunity cost of tying up $700 a month in whole life insurance. However, given that I am now not in a position to qualify for more insurance cover, I am not sure if the whole thing did not sort of work itself out somehow.

You will also see no line item for charitable donations. I normally do them out of my savings and do not wish to disclose the figures. Personally speaking, my charity spending does not excite me, because it is all institutional donations. I do them simply out of duty. What I really want to do charity-wise is to give directly to people who need them, like, pay off a large medical bill for a specific kid in hospital, or something like that. I prefer the more personal touch of such donations. But I’ve done my research and found no reliable way of doing so at this moment. All charities seem to just want you to give them the money to disburse as they deem fit.

Charity rant aside, I think I did okay generally, except for the few weak points mentioned above. If we take away the spending on taxes, rip-off life insurance and on my parents, my current lifestyle costs about $17.5K currently, and that involves quite a bit of luxury spending. I honestly don’t think I am frugal frugal based on that kind of spending; it will be an insult to some people I know. 🙂 But I do think I spend relatively low against my income.

Well, $17.5K is certainly a figure that I could work with in retirement.

And here is the other half of the picture of my 2013 P&L:

PL2

As can be seen, I lucked out in the rental aspects for the past two years. When I bought the condo, I expected to only be able to marginally cover all my costs and earn my return through equity gain. Some deity in heaven must have been watching over me, and I managed to get a lease that paid almost 25% above market rate. I personally don’t think that is going to continue once the lease comes up for renewal next April, so I haven’t gone crazy spending that extra income, and have saved it all in case of any vacancy next year.

Okay, this is getting too long. I would like to talk about the retirement column a little bit, but it will have to be the next post

Net Worth Update – April 2013

I don’t know why people who are not looking to withdraw their retirement funds are happy that the markets are up.

Because, even though my net worth has been boosted by the market upsurge, things are now expensive. I transferred another 10K to my brokerage account last Saturday, but I am now hesitant to buy anything, because all the stocks that are worth buying (and some which are not) are now freaking costly.

I will probably put in the order for two blue chip stocks later today. Blue chip stocks are not spectacular dividend payers actually (between 3% to 5% p.a.) due to their high costs, but they are stable. My portfolio is a bit heavy in the small and medium cap stocks at the moment.

Oh, I was also considering putting in orders for some ETFs, since we don’t have index funds in Singapore. I didn’t quite like the idea of ETFs, because I feel like I cannot control them as well as stocks (an illusion?), but reading Andrew Hallam’s blog gave me some confidence. The only problem was that the monetary authority considers ETFs derivatives, and I have to pass a special online test before I can trade them, which is pretty stupid in my opinion. Anyway, I haven’t had the inclination to take the online test yet, so investing in ETFs is still hanging in the air. My bad.

I also moved some cash last week. The fixed deposit rates are disgusting (0.5% p.a.), but Standard Chartered had a promotion where I can get 1.88% p.a. with a checking account as long as I keep charging $500 per month on an associated credit card. No problem – I will just move my savings endowment payment from another card to this one.

With that said, let’s move on with the actual net worth update for April – not too shabby at $730,750, approximately $8K increase from March, thanks mainly to the retirement accounts. The retirement contributions from last month’s bonuses have finally hit the CPF statements. I am also up about $87,000 since end of 2012.

The valuation for the rental condo is also holding up, though I am curious as to whether I’ll actually get any bites if I put it on the market down. From the feedback I am getting, the property market seems to be rather weak and there seem to be a lot of discounts out there for newly completed developments.

Taxes were filed this month – a ten minute exercise, thank goodness, because I totally forgot about it until quite the last minute. I had a rather large income last year due to the rental, but managed to pare that down quite a bit with all the rental expenses deductions (mortgage interest, agent fees, maintenance, repairs etc).

I think I’ll end up with 5K to 6K worth of income taxes for 2012’s income. That’s an effective rate of 3% after deductions. I cannot complain, especially after my mum came back from a visit with a Malaysian relative earning about the same as I do, and him having to pay 30K in taxes even after maximum deductions.

May will be a month of financial spring clean. I need to streamline my bank accounts and consolidate my credit card charging. The latter especially, is all over the place. It is going to be a PITA process to have to change most of my billing instructions, but the OCD part of me won’t let go.

May will also be the month when I reign in my spending a little bit, because I was kind of reckless in March and April. I didn’t do much damage, but only because I have plebeian tastes when it comes to life. Wants like this or this are actually pretty rare.

So, that’s all, folks. See ya next time.

Net Worth Update – Mar 2013

I know I missed the Net worth update for February, but it was such a short month anyway. So here is the picture at the end of March.

Net worth for March 2013 – $722,168.83 (+$49,616.23 since Jan 2013). Exciting things that contributed in February and March:

  • Garnered a few hundred bucks in Chinese New Year Red Packet Money in February.
  • My best dividend stock also turned out to be the one with the best capital appreciation. The stock doubled in price, so I sold all 15,000 shares. I made about $6,000 of pure profit from the sales. It didn’t make sense to keep the stock in my portfolio after it appreciated, because dividend yield went from 10% to 5%, but if it ever drops back to the previous levels, I’ll definitely stock up again. On a side note, my mentor also sold off the same stock. The difference was that he had about a million shares in hand. Suddenly, a $6,000 profit feels like nothing. Pfffttt…
  • Received annual variable bonus – 4.5 months = Approx $16K. By the way, this is supposed to be a bad year. We have had 9 months bonuses before.
  • Received employee share award – 4,915 shares. Market price for shares = $4.50 per share. Total value of stock received = approx. $22K

I also transferred $25K to my stock brokerage account in February because cash was accumulating pretty fast and I was sitting on too much of it. I bought five stocks, four of them speculative buys for potential capital gain, and one a blue chip dividend stock. Due to the bonus coming in, I have yet more cash that I have not decided what to do with. I would like to buy more dividend paying blue chips, especially those super expensive banking stocks, but the market is up, so I will probably wait a while for the price the die down.

Property prices appear to be on a downward trend, thanks to all the cooling measures put in place recently. It is now so expensive to buy a second property. My condo valuation seems to be holding steady, so that is a comfort.

It will probably be back to business as usual after March, unless any of my stock positions move. I wanted to try and achieve a $100K in networth increase this year, but it is only March, and I am at $78K increase already compared to Dec 2012. I think I should be able to attain a $120K to 130K increment this year if the stocks don’t plunge (God forbid!).

So that’s one more step in the direction of FIRE by 45. Surely, there can be no other woman who looks forward to her 45th year as much as I do!