Investing in Gold

I went to the bank to bank in the 'accidental' forced savings of $640 courtesy of good o'le Piggy Bank. Together with the $1k I promised myself if I hit the $15k investment target, they would go towards my Japan trip fund (can also be to other places, dont mind taiwan)

After I was done, I decided to get a number to enquire about investing in gold. I had asked Quetzal and she said that my bank offers physical gold, besides paper gold, gold funds and futures. These are the various forms of gold investment.

For Physical gold, they sell in kilobar; which means a solid 1kg gold bar which they issue gold certificates which are exchangeable anytime for that gold or cash equivalent. 1kg gold at today's price is about $85k. Ouch. Definitely cannot afford. Cos I wanted to use the gold limit available in my cpf.

To use that, I would have to go for Gold Savings A/c which the unit of gold is in grams. A minimum of 5 grams per transaction. The only thing about this is that one has to personally come down to any bank branch and do a trade, be it buy or sell. Also found out that there are 3 timings, 9.30am, 10.30am and 2.30pm where the gold prices change. So depending on what time you go in to trade, the prices are reflected accordingly to the current price at that 3 timing. There is an annual transaction fee of 0.25% of gold holdings. That I can live with.

I opened a CPF Gold Savings A/c and bought some gold. This would be those really long term investment. I dont anticipate building up so fast more cash under the cpf gold limit to do more transactions frequently. Also for gold, I rather it be long-term. Using cpf is my way of forcing myself to do such long term investing cos I've realized that those stocks under cpf, I often hold them way longer than my cash stocks. This I can also try the dollar-cost-averaging-technique because the minimum is 5g gold per transaction. So anytime, I reach enough for 5g, I can consider walking in to buy. Or I can buy after a 3-6mths interval depending on how fast the gold limit builds up. Of course there is also cash but given the fact that it is quite illiquid, because have to go in personally to transact, would just stick to current arrangements until otherwise. Nevermind that current gold prices are rather high at $58.70 per gram but since its long term. See how it goes. Its a sort of diversification strategy for me. At least I wont be monitoring daily, maybe once a week or fortnightly.

Then came home and started updating all the Excel spreadsheet for 2011. Also noted important things in my I-Phone. Downloaded 2 new apps for live gold prices and cpf. Pretty happy with myself. Also bought the jack needed for the amplifier so that I can practice at night with earphones. Still thinking about the headphones. Got the battery replaced for the guitar tuner too.

Going to continue reading some books about investment and Go then go gym then go for assignment. Gearing myself for the start of work soon. Getting into the routine of things and also practicising waking up at usual time. Its easier on weekdays cos I often remind myself the stock market opens at 9am.

Behavioural Finance - Money Personalities and Dysfunctions

When I first made my initial foray into investment last year, I've realized through personal experience, there is a lot of psychology at play for investment. I wanted to learn more about this behavorial psychology and took the opportunity to visit the national library to search for books to read. Its about time I got an update in more aspects of finance, cos I would like to admit there are many many things I dont know about.

One thing I realized also is that while we have a personality that is expressed socially. There is also a money personality of sort, as in our beliefs on money and also the way we manage our money. While looking through the books about stocks, I flipped through many books about personal finance, which arent anything new, typical stuff, and came across this book. Its about Financial Dysfunctions. Relevant cos in any behaviour, there's functional and dysfunctional.

The title of the book is " Why Smart People do Stupid Things with Money" by Bert Whitehead. The title looks superficial at first but browsing through it, I found it very different from other typical personal finance books.

Its an interesting and easy book to read. Inside for the first time, I am introduced to the concept of Money Personalities, 7 Common types of Financial Dysfunctions, a thorough explaination about the Financial Life Cycle and Functional Asset Allocation. Its not about numbers but explained with analogies that makes sense and also with parallel references to medicine and doctors. I've recognised some personalities and dysfunctions that I had personally experienced and from people I know. Definitely a good read. Almost finished. I need to look through certain parts again so that it stays inside my brain.
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From the various new ideas to me. I wanna highlight this - Saving and Paying off debts at the same time and a similar idea of not paying off mortage extra quickly.

To me, previously for the discussion about credit card debt, I mentioned about paying off more than minimum or it will balloon.

But reading this book, where the author advocates Both Paying off and Saving money at the same time.

If a person with excessive consumer debt only focuses on paying off the debts, he will end up with no savings.

The reason why he ends up in large debts because he is good at paying off the debts.

The reason why the person continues to have 0 savings is because he is not good at savings.

So the permanent change is to start saving while paying off the debt. Aim to save 10% of gross income.

Why not pay off the high credit card? The author observes from his clients (he is a fee-based financial planner of 30 years), those who pay off their debts without saving do become debt free more quickly but as they do not replace their old negative habit with a new positive habit, they will end up in debt again as they feel compelled to reward themselves for paying off. Whereas his clients whom save 10% while continue to pay off their debts, end up more positive because after paying off their debts, they have positive savings (money saved in bank) and not still at a 0 saving.

I think this is a very different approach that is more logical financially than what is being preached as common knowledge.

The other is about not paying off mortgage quicker than scheduled. The new concept for me is 'leveraging' in a positive way. So if there is extra money, instead of paying off the mortgage, invest it. To illustrate:

A - has $500,000
$300,000 paid towards home loan (through extra mortgage repayment)
$100,000 in stocks
$100,000 in liquid assets

versus

B
$150,000 in home loan (no extra mortgage repayment)
$200,000 in stocks
$150,000 in liquid assets

B makes more sense cos the extra money helps to 'diversify' into the other two assets and one is not so exposed in the real estate market.

Makes alot of sense but sometimes due to our money personalities and dysfunctions, we dont make alot of good money decisions. Even make irrational ones.

Misc stuff

Forgot to post someo of the stuff that happened up.

First up is the pic of first try for Stuffed Strawberries. Inside is cream cheese mix and on top to cover is melted chocolate.














This is the 2nd try at it but I decided to half the strawberries so that I can put more of the cream cheese on it but it didnt stick as well cos lop-sided. So in the end is put all the strawberries together, put cream cheese over them and finally chocolate all over the top. Then chuck into freezer. So despite not looking too nice, it actually taste better cos strawberries sweeter (chose more ripe ones), more cream cheese mix, also chocolate.

Overall view. Doesnt look good cos didnt layer well













The bottom view of the strawberries

So no more tries of that, due to fear of sensitive teeth.
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Failed my driving test cos hit curb twice during directional change and also during directional change, adjust >4 times = instant fail... So that's the end of driving for now. Until I can figure out the schedule. Now the test is into mid oct. I really need to replan the schedule a bit if not drag up to next Jan.
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I have decided on how to spend that $1k if I hit investment target of $15k. I will treat family a meal and then put it aside for the Jap trip? Like that makes it easier to get the supposedly $5k needed without having to save up harder for it. Plus I counted the 'accidental savings' in my piggy bank, about $420. So that will also go towards that. So now is still August, still got 6 months of accidental savings to go.

Not long back, there was an article on Yahoo about what type of spending makes a person happy (to be fair, they based the study on 50s and retirees) It appears when one spends money not on materal things but on experiences, learning, the happiness lasts longer. Things like a trip, things like a hobby, the satisfaction is longer lasting. But for them, they qualify that for retirees, they have reached that stage in life where their time with family is important, so they are happier spending on that.

Hmm is my thinking that old instead?

So far personal finances are on track. Should be able to hit back the diminished reserves in a couple of months and then the remaining months save up for annual insurance premiums so that after netting off, still have the reserve amount. Then its onto trying to hit $50k in the next year. Then can consider applying to work abroad in Jap for a year or two. The worry is the job-search again after coming back. That can be alleviated with a higher level of personal reserve. With my 2 years of experience then plus a higher level of personal reserve, plus assignment obligation finished off then can go in peace. Something like that. That's a rough plan still and a work-in-progress.

For now, am just trying to encourage myself and remember not to burn myself out. Just continue and enjoy the experience. As long as I keep myself open-minded, willing to try out, willing to move out of certain comfort zones, keep myself busy with new experiences that I wanna gain, life certainly seems more hopeful. Though on the aspect of singlehood, I am still heading nowhere.

Personal Financial Plan for 2010 - 2010

My financial plan this year is to finish topping up my Personal reserve of $30k by end of this year. Also have saved up extra including 1 month completion bonus to pay off my Insurance annual premiums at the end of the year without affecting the $30k balance.

Then I want to up the Personal reserve amount to $50k which I will try to save up in the following year of 2011. The reason for this is that I am quite surprised at how much I had depleted in just a space of 8 months unemployed. Yes it was with driving which cost me $2.8k so far. But even without it, it would near $10k for just 8 months, aka $1250 per month. Thats high and really not that sustainable on a $30k.


It should be noted that this is just on my Personal reserve side. I have not touched my Investment account yet.

I want the Personal reserve to cover the annual insurance premiums and also provide the security in case of joblessness/illness.

The Investment account, I am trying to grow it. Of course it feels good that I am making profits here and there through some trades, some ST, some MT, some LT. Am looking for opportuinites to buy-in and sell whenever I can. Sometimes I dont make the best decision due to not being able to monitor 24/7 and some decisions and hesistance but so far on the whole, still pretty good. I take it as I am making some income by not having to sell my manual labour, yes there's still time investment BUT at least I dont have to travel here and there for the extra income. Just that its not enough for my retirement.

I am still young, can work on it. This is just my 2nd plus year of doing so. So far the 5 investment targets at still at $10k, $15k, $20k, $25k and $30k. Havent hit one yet. Almost there but really not selling much. So see how the market goes this month. Cos more free to look at prices and make decisions.

Keeping your yearly savings INTACT every year is the KEY

Hmm it seems that nowadays I have ALOT of thoughts in my mind. I guess partly is cos of the transition from no-work to working soon. So there are some anxieties, some thoughts. Then also thinking about investments, so more thoughts. It would mean alot of 'deposits' of thoughts here.

On the thought of savings again. One point that came up is the fact that most of us try to save some money. Its not that we intend or even purposely spend until $0 every month. We do put aside some money, whatever it is in a saving account.

There are just 2 issues.
First, whether the amount saved at the end of 1 year is kept intact.
Second, whether the amount saved is enough.

To illustrate. Say a person puts aside $400 a month into savings. After 12 months, its a sum of $4800.

For the first point of keeping the amount intact, is this. Is it being drawn out at the end of the year to pay for something? Assuming all drawn out to finance an expensive holiday abroad? To pay for insurance premiums? To buy a few expensive designer items?

IF that is the case. Then after 1 year of saving, the NETT effect is $0. I emphasize looking at the NETT Figure always in planning of savings, cos that is really the picture that matters.

Some might argue that cos of the insurance, all or a huge chunk is taken out of their savings. Hence save very little. I think unless one is earning MINIMUM income, about <$1800 gross a month, that is AN EXCUSE. It can be done but of course it meant spending lesser per month to 'save extra' on top of the insurance premiums.

So say insurance is $3000 a year. Save $400 a month previously. To avoid the nett picture of $4800-$3000 =$1200, a mere sum, one really has to raise the amount per month. So working backwards. $3000 / 12 = $250 extra. So it meant IF can now try to save $400+$250=$650 a month, it would mean at the end of the year, the Nett picture is $650x12 - $3000 = $4800. Hence you have managed to keep your savings intact.

The same principle can be applied to financing for a year-end holiday. You estimate how much it would cost you to have a good and comfortable holiday eg $5000. Work backwards. $5000 / 12 = $417 extra. So a target to try to hit is $417+$400 = $817. After a year of saving up. You can go for your well-earned holiday with a budget of $5000, and yet still have $4800 in your bank account intact. Also if you didnt fully spend that $5000, the extra is extra savings.

Some might say that what IF the sum I calculated is TOO high and it is very stressful and impossible to achieve it. As a flexible, thinking person, firstly the target is there to help you have a sense of where you are going with the money. If there are months, a bit tight, cannot hit, so long as most months manage to hit it. The nett effect at the end of the year, is still a larger amount intact in the bank compared to $0 if nothing is done. Secondly, IF after trying to spend less, still not able to hit the target amount, then it is a Strong indication that either you have TOO many stuff to finance at the year end or you are not making much inroad to rein in spending. Then I would advise a re-think on your part to better manage your money. Cos at the end of the day, its your money and your life. I am not one to dictate how much you should spend or save. So you make your decisions and live with it.

The second point about whether the amount is enough?

This is related to the first part about keeping the savings intact. If it can be kept intact. The next question is to ask IF you are happy with the intact amount per year. If yes, continue, cos at least every year, you can add on more intact money to your pot of gold. It WILL grow provided every year, it is kept intact.

But if it is a bit low for your liking. Tweak it by thinking of a slightly higher amount you like eg $6000. That would translate to $6000 / 12 = $500 a month. If there are insurance $3000, that would mean $250 extra. If there is a holiday, maybe lower $4000, that would mean $334 extra. So the total target is $500+$250+$334 = $1084, which seems to be a rather large figure. Now can try it out but montior monthly. If after a while, really is too unrealistic. Then look through the components. This $1084 is arrrived from 3 parts, the $500 intact savings, the $250 insurance premiums, the $334 for holiday. So maybe have to adjust some. Lower the holiday to $2000, $167 per month. The newly adjusted is $$917, lower and maybe more doable. Try out again for a few months, see if can hit, if not readjust the components again.

Some might ask WHY should I limit myself and live on a tight budget? That is so not enjoying life. I rather live with small savings than do this.

As mentioned, this is a method to 'force' out extra savings that can be used to finance those end-of-year huge expense and by doing so, allow your savings to be kept intact. Only the nett picture matters. So unless one is happy with the lowered nett amount cos didnt account for these large end-of-year expenses, otherwise its either earn much more or save much more.

This is an actual method that I use to manage my savings. I would say this is the HIGHEST level of analysis and planning I make to ensure I am saving

The basic being first monitor daily expenses to get monthly expenditure totals, next monitor and ensure monthly surplus mostly, also analyze expenditure patterns and adjust.

Then more advance is to get an annual figure saved eg 1st Jan to 31st Dec. The amount that is kept intact after ALL the annual expenses are accounted for.

Then the highest level is to set targets by looking at the overall picture, work backwards to arrive at a target amount per month.

Next is back to basics, checking nett figure per month to see if hitting the target, monitoring expenditure pattern (not every expenditure amount), total amount per expense item. Then annual figure, less year-end expense. After all of that check if the Intact savings is hitting target. Then repeat.

Too much trouble? Well its your money, its your life.

I did it this way, it doesnt take that much of my time at all. It allowed me to save up alot in my working days, enough for me to get started investing in shares, enough to build up a separate living expense reserve that is used to finace this period of unemployment and change in job.

It doesnt matter how much one saves every month IF at the end of say a year or 2 or even more, ALL or the bulk of it is used to finance something (non-income generating) Only with INTACT savings building up every year. Over a short few years, you can be surprised at the amount you build up, just by being more dilligent, conscious of where your money is going to, what are you saving up extra for, what are the things you have planned in your monthly, annual budget. Just like that.

Easier said than done. But getting started in small steps first. A journey of a thousand steps begins with one. Even if one does not manage to do everything listed above in a yearly cyle, the simple fact that you are putting more effort to manage your money is way better than what you started with (a simplistic idea of putting leftover of your salary into your bank account and hope it will grow somewhat)

Another deposit of thoughts

Where I left off, I did manage to buy lunch for dad, then head to Gym near to Driving school, where I did stepper and weights for about 40mins then bathed and change to go straight for driving. After that, I took a bus to Bukit Batok Central to take bus 106 which will pass by Holland, for me to drop off my watch for repairs. Then I hopped onto 106 to head down to National library area to collect my cert. After which, I took a train down to Tanjong Pagar to meet Tab for dinner at Soup Spoon. Quite hectic indeed. I was more or less quite alert until I reached home and then feel the effects of so many stuff. BUT I did cook another pack of magee mee with egg white only to eat cos I felt hungry and cold after my long bus ride back from Orchard.

Hmm there are many things in my mind, if those thoughts are worth money, guess I'll be rich.

Just finished a quick tally up of my expenses for Feb and catch up for the few days into March.

All expenses (except Jap, guitar, driving) = $701.90 (plus minus a few dollars)

Driving $300, Jap $200

Total $1201.90.

A bit on the high side due to the courses. But cos those are more or less transient or at least until I finish those courses, my MAIN concern are all the other expenses.

My budget is $20-$25 a day or $600-$750. So judging from the figures, I have kept within the budget.

Income is $600 from flexi-work (received thus far) So more or less can cover the cost, except for the courses which will eat into part of my reserve.

Higher expense came from a Denim blazer, more eating out cos of birthdays, weekends. Will have to monitor and make sure not to overspend.

So far so good after 2 months of CONSCIOUS budgeting. I can see that expenses are reined in more or less. Its more of the courses that are the more expensive items in my budget. Will continue monitoring into the month of March.

The good thing about getting the flexible work (income) and also monitoring and reining in spending (expense) is that I see that my reserve is reducing much slower than before.

No further sales of shares yet, been buying an order for LONG-TERM portfolio. Then I looked at the excel files and chose those that I decide to put more long term. Turns out, I only have 1 counter for trading. The rest are all Mid-to-Long Term.
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Have another 3.5 weeks more to adjust sleeping hours, nurse my health and get into better shape, finish up flexible work, start setting up routine/timetable to ensure ALL my courses & stuff are slotted nicely so that there is little strain on time and energy. Then its ready for work to start.

On a certain note, cant wait to start.

On another note, would have to say good bye to my 'break'.

It is overall a good and well-deserved one for me.

Monitoring of monthly expenses and savings to continue. Annual comparison of savings to continue. Annual review of Savings and Investment to continue. An overall review in 3-5 years time.

Investment target for 2010

Nothing much blog-worthy happening so I'll just list down some investment target. This actually has been swirling in my mind on occassions.

I had been actually thinking what is a 'comfortable' amount that IF my shares are able to generate annually, meant that I can 'somewhat' do without work.

That led me to think about people, as they rush past me to head to work. What is the average amount they are getting? What are the hours they are putting in for their pay? Of course, I am thinking about the average person, NOT some professional where they earn >$10k. After a while, I realized that the Average person doesnt earn astronomical figures, depending on their education standard. Basically if a person can get gross of $3.5k, its a very good amount. Most hover at $2k to $2.8k (university) unless they work at it long enough and got promoted.

The next question I thought about was given that over time, a person can get promoted and the salary increases accordingly, hence a fixed target over years is also not that viable... cos you dont expect a person to be earning say $2.5k for the rest of his/her life.

Then I thought about how many hours does an average person clock in for work. The maximum is up to 44hrs according to employment law. Then also there is the Gross Figure and the Nett Figure to consider. The Nett figure is more relevant cos that is the amount you get at the pay day. The cpf goes to the cpf account for investment in education, housing, gold, stocks, unit trusts etc.

After more thinking through, I realized that this is only the 2nd Official year of me actually investing in stocks. So I shouldnt be too worried at targeting for $30k annually. Last year, I didnt hit it also, got $24k. Its okay because that is extra $24k not through me putting hours at work. It doesnt mean that I didnt invest time and effort into investing, I did. It just meant a potential source of income.

YET cos I am still young, not some 70 year old retiree, hence I do have Many Many more years to live out, hence EVEN if my current investment can yield me a passive income, it is not enough over the LONG term to consider not working entirely. That would come maybe in another decade or so. A re-think after say another 5 years from now.

Also being young still, this period of 'fun employed' made me realize that I want to do some more stuff still. Also More Income is good. Helps to replenish the reserve, build up investment capital also. Hence the decision to get work. I will rethink this in about another 5 years to see what level of capital I had managed to build up then.
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So after all this think-through, I have decided to stick to $30k annual target. If I can hit near it, its good also. It would mean, I am going somewhere in terms of my judgement and maybe timing.

Currently $6.8k (purely stocks) I had let GREED get to me, cos during Jan, could have made $10k but didnt sell/act to realize then when mkt went down, quite a bit of gains evaporated. I had bought back some since then and currently not much upside. Through this though, I learnt A VALUABLE LESSON - IF ITS A GOOD ENOUGH AMOUNT, SELL TO GET IT IN THE POCKET FIRST. A bird in hand is worth 2 in the bush. Also given CAPITAL is always limited, I have to spread it among my counters for those that are somewhat 'cheaper' within my list of identified counters. Currently about 2/3 invested in terms of capital. 1/3 to wait for more opportunities and some sort of shares reserve. Dont want to dip into my living expenses reserve. It meant really have to limit the amount invested so as not to be too overinvested and stuff. Something to keep me occupied, not entirely but I am 'busy' as it is... with all the courses and errands, plus monitoring investment, exercise and outings.

1 thing I realized about myself is that I dont reward myself tangibly for achieving targets. I didnt exactly reward myself by buying something I REALLY wanted, last year. Usually for me, the achievement itself is reward enough... Hmm

So this year, as part of being GOOD to myself, IF I can hit $15k, I shall take out $1k to get stuff. SO far 3 things came to mind, give family a treat, buy an Oakley sunglass and a WII(guitar hero) Think should be able to squeeze them all in... I must learn to reward. Then if hit $30k, another $1k.
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The problem with me is that IF I am given $1k cash and told to spend it on something I really wanted to buy. I would really be at a loss to think of something I REALLY wanted. I guess this has partly to do with my financial discpline. I think of purchases in terms of Need and Want. The whole idea of 'deferring consumption' is important to achieve a balanced, healthy personal budget, also the basis for savings. Usually for Wants, I dont dwell on them, or keep deferring them until I dont really want them anymore.

Also I dont really have so much impulse. Even IF I do go a bit crazy at Marks and Spencer for their cookies, biscuits, it wont hit $1k in a single transaction. Guess I dont see the point of expensive 'toys' for adults.

I go for functionality and costs considerations. Asethetics maybe a bit. So if I really dont see how I can use the 'toy' in my daily routine, very high chance I wont buy or even if I do, it might become white elephant.

My I-touch is a semi-white elephant. It didnt replace my mp3 as it was expected to. Its only useful if I am out of home, have wireless to check my stocks. Also function as a calculator. Recently cos I got the Jap Kotoba, it became a tool for revising my Kanji. So I am trying now to incorportate it more into my routine. The monthly calendar for keeping track of menses is also good, same for currency conversion. These are my uses so far for it. Mainly functionality.

Suddenly my PSP became a bit more un-used. Its been quite a long while since I used it. I do carry it but not sure if still charged... I just favour more of listening to mp3/radio using walkman hp on long bus rides back home from town.

Guess I got my mp3, psp, i-touch covered. Have a laptop still functioning, have tv, have ps2, have ps1, have dvd player, have sling bags, backpacks, have 2 pairs of shoes, 2 pairs of slippers, got jeans, got t-shirts... even some work pants and working tops, have guitar, have watch, spectacles, contacts. Somehow when I list these all out, dont see much of anything else I want. Maybe when certain things give out, then have to get replacement but I dont really feel compelled to buy anything else. Space is a consideration too.

And perhaps the main reason why I have problem spending that $1k is this. The things I really want are what that $1k cant buy. Things like freedom, things like having the time to look at the afternoon blue skies, things like feeling the wind in my face, things like not having to rush. I think about how to make that $1k multiply itself so that those can become reality. Then end up, I dont feel like spending that $1k. I rather it work hard for me, generating money.

Yet now knowing myself, I dont want to end up as a Scrooge or 守财奴. So I also have to LEARN how to enjoy the gains. I dont want to work and save hard, deprive myself of pleasures, then die and money goes to someone else. That is SO sad and typical of our parents and theirs generation. I am so not going down that path.

Enough said, so until I hit my target, I will be thinking about how to get there and Only then think about how to spend that $1k.

Stock results 2009 and Lessons in 2010

Just to do a book closure of my stocks for last year.

Made SGD$19.6k, RM$10.3k and CPF$5.7k.

Cash about $23.9k but some of these is taxable especially for those REITs distribution.

I have been unemployed since early Aug, meaning about 5 months plus including Jan. Though I did work flexible for Jan.

I am feeling kinda sian. Last year was a good year indeed esp on the stock market front. The gains helped me make the decision to leave easier.

But cos stock prices have gone up quite a bit, so this year is not that easy to earn something of this figure. For 2010, I have made 4 trades, 2 buys, 2 sells in Jan, not all of them good decisions. But the least is that I didnt lose capital in overall terms. The cost is wasted opportunity and lower gains ba.

Then after the Capricon effect, aka since Last Thursday, the Stock market has been diahorring down. As I am still mainly invested, I am seeing gains evaporate. Man I need to learn to read the market and am starting again reading that Chinese wave theory book again... only at chpt 2.

This quick downturn in prices has prompted me to sell off as prices are going down.

WHY?

Cos if prices are headed down south, I wanna to have capital on hand to take advantage of the lower prices. Then I actually bought in some... another judgement mistake, cos yesterday bought, today fell lower. Must remember this lesson about buying in a falling market... Getting a bit rusty and reckless. Need to remember this.

So this waiting and seeing prices going down south, meant that I COULD have earned higher profits esp before prices started going down. It meant that IF I had made the decision to sell just a few days earlier, I could have made several hundreds of dollars extra, and not the paltry sums I am getting... Signz another lesson to learn and remember about being more vigilant about changes and also making a selling decision earlier.

Hope the job front can fare better, then I dont need to monitor so intensely and can afford to put into more middle to long term investment.

Continued about budgeting...

Man I was knocked out after posting up. Feeling under the weather too. Thinking back, its been more than 5 months and I havent had to see the doc so far for any medicine. So I am actually healthier this period and not to mention, can concuss and sleep things off like today.

Really knocked out from 5pm until when I woke up, its already close to 9pm. No intention to practice guitar. Signz this week been rather busy, feeling the tiredness creeping back on me. I better clock in 1 more gym to make it twice. Past two weeks, I managed once a week only... but weighed myself just wednesday. Surprised that almost back to my original fat self firstly. K small consolation that the Christmas and New Year binge didnt leave a lasting impression. Good, now to up my exercise...

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I wanna comment about the 2 different budget method I mentioned in my earlier post, the one about Phantom money.

I feel there are 2 ways of budgeting, which I use at times.

First one is fixed amount a day for 30 days calculation.
I decide to spend between $20-25 per day for 30 days. This amount excludes driving and guitar course. Cos these are higher cost and they are really for a rather transient period of my expense. Also if these are included, it is near impossible to keep to $20-$25 a day target unless I really go into Scrooge and Bear mode (stinge and hibernate at home) I rather take this 2 items out and not consider them my monthly expenditure. But any other things like hp, internet, shoes, clothes, transport all goes into this. But of course I recognise that I spend money on guitar and driving. They are outflows too.

Hence I target a monthly expenditure of $600-$750 for normal expenditure, adding in $120 guitar and maybe $200 driving. That would bring to a sum of $920-$1070. Not an astronomical figure but remember for now, my income is near nil. Hence would have to see if can further minimize, if not, at least keep it within this range, NOT way beyond this figure.

Now at the end of a day, I would recall all the expenses for one day and get a TOTAL figure. Say by today, its already 8 days into the month of January. I recorded immediately the expenditure for today and yesterday which are very fresh in my mind. Receipts helped also. Then I work backwards a bit to trace, starting from New Year party and then the weekend, and then this week where I worked 2 days, went 2 interviews. Of course if you already started a bit late eg >10 days and really cannot get a pic, well simple. Start from today and end your 'accounting' exactly on the date 1 month later. Just to get an better idea of the cash outflows. I am not too concerned if I missed a few dollars, cents but I have to record most of the expenses accurately and also capture all large expenses.

So I am going to show my actual figures. No harm to me. Dont mind ya knowing my expenses pattern. I managed to get a figure accumulated for 8 days $321.10, I paid guitar $120 already. So I am going to subtract it out, $201.10. This seems like a high figure but remember I had a target of $20-$25.

Lets see how I fared, $201.10 / 8 = $25.14. Okay very close. But still at a higher end after averaging. Hence it meant for the weekends and even next week, I will consciously reduce spending, head out lesser etc. I will come back to check this average figure. Definitely would be better if I can lower to closer to $20 but I still have 23 days of the week to fiddle around with. Not to mention other bills like hp, cable tv coming in. Yup its going to be a challenge.

The 2nd method is discussed in the previous post. To put aside a TOTAL amount for each expense item that usually appear in your monthly expense. Eg $200 transport, $100 hp, $200 clothes, $100 shoes, $50 hp, $50 cable, $100 misc, $800 food, $300 outings, $120 guitar, $50 CD, $50 comics => $2120

Now for a nett pay of say $2900 (my old pay), it meant $2900-$2120 = $780. So IF I finished spending most of those amounts allocated in the expenses and didnt exceed much, I should have a nett figure of $780 in my bank account by the end of the month.

Whether how u check it, either using checking nett difference at end of the month method or actually drawing out $780 physically and putting into another savings account.

But of course, sometimes expenses are rather high, maybe cos I take public transport. Maybe I take cab more now, shop more cos need change of wardrobe that even $200 a month is too low. So the planned figures changed.

Cab $250, transport $100, $100 hp, $500 clothes, $200 shoes, $50 hp, $50 cable, gifts $200, misc $100, food $800, outings $500, $120 guitar, $50 CD, $50 comics => $3070

Now you see that this is above the nett salary of $2900. It is NOT FEASIBLE unless I have more income inflows. This is just the bitter truth of Reality. You are spending way too much for your income. There is no other way about it but to either GET more inflows per month immediately or cut next months expenses immediately.

Why do I say immediately? Because this is a situation of negative budget. You are running a negative. Now since money doesnt drop out of the sky, it means, this negative of $170 is being financed out of your savings. It will drain your savings down(like what I am doing now) But at least its your own money. BUT if you dont have savings, its being financed by debt. Either overdrafts or credit cards, cos these are the consumer loans out there, that is easy to draw up on and without having to put in asset as collateral/mortgage. The downside is the higher Interest Rates.

And had earlier explored the whole interest on interest on rolling over debt. It is really difficult to pay off, if every month is tight. So I rather err on the downside and ensure that every month is a surplus instead of a deficit. Some months cos of travelling, so really overshoot. I still have to see how much deficit, so that I can ensure the following months, there are enough surpluses such that the Nett figure at the end of the year is still positive.

I must admit, it wasnt easy, and required more discipline and also monitoring and conscious decision making, deferring Wants alot of times, even evaluating whether this purchase can wait, or even if its a real need. I must admit my guitar course is not a need. But I have my vices too. I dont want to earn an income and yet spend $0 on things I like. BUT I recognize that I shouldnt indulge in everything or most of it at too regular a basis. Its a give and take situation.

K think, I have finished my thoughts about personal finances for now. Subsequent posts will go back to normal unless something hits me in the head to share.

personal finances iii - phantom savings & phantom money

Quite tired now... this week a bit too hectic.

Just came back from meeting up with ex-collegue. It was rather fruitful. Its nice to chat with her and she gave me 2 contacts to use for my current search. A pleasant lady, we had helped each other out, buddy buddy when we both transferred to the same place. Now both of us are out, but since in the area, glad can meet up.

Later after that, I went to buy 2 pairs of working shoes. Basically court shoes cos my only pair of interview shoes broke yesterday after the interview. So 2 pairs cost me $74. If I am trying to max spend $25 a day. It would mean, for the rest of the month, I must make sure spend 0 or dont go out for 3 days extra. Just so until I get a stable income.
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I wanna highlight a phenomenon that is common to us all. The concept of "phantom money or phantom savings" that is encouraged in fact by all the advertisements and sales. I would use the term "phantom savings" first and then see how it transforms into "phantom money" .It seems to me to be 2 concepts but similiar.

Firstly sometimes we see a SALE sign. Say for my example, a new pair of sports shoes. At first $150, now after discount $100. The discount is 33% (50/150).

Now one would easily think that by buying now, I actually save $50 (33%). I might need it for future, so I buy now and save. Familiar?

Now is there really a saving? That is a very important matter to ascertain. There are questions to ask yourself to determine if that item is a NEED or a WANT. A need, you really might have savings, but a want, you are actually NOT saving at all.

To illustrate. For me, I already have a pair of sport shoes, perfectly fine, still rather new, another pair which is thin sole for driving. Do I really need that $100 shoe? Actually with both pairs, I could rotate and hence dont really need it.

So IF I went ahead and buy it, telling myself this is for the near future, eg use for going to gym, new shoes for new year, backup for current pairs. It may sound justifiable to you. BUT there is actually NO savings at all.

WHY?

Well firstly you didnt intend to buy a pair of sports shoes this month. You already had enough at least to last until one broke. It meant in your expenses, you didnt make conscious allowance for it, hence when you actually buy the shoes, it cost you extra $100 on top of the rest of your expenses. Is there any real savings? It appears NO to me.

Now what if it is a NEED? Eg my only pair of interview shoes broke. I need a replacement asap. I bought 2 different pairs at one go, one as back-up. You might say, I should have bought 1 pair only. BUT since I already took the time and effort to travel down (cost), if the first one broke again, I would have to make another trip down which would incur some extra cost. So 2 pairs to me is a decent number. Well for different people, maybe they need more pairs for backup. But not exceedingly. Now do I really save? Well since I really need to buy it, and I did. I am making conscious decision to cut other expenses out a bit to balance out my spending. I would be more conscious that I had spent $74 extra and will try to reduce heading out consciously. Can even compute to spending 0 for 3 days or so. Something like that, I am not asking myself to hibernate everyday and be a scrooge. It is just part of the maxim, "Earn more or spend less". Since I already spent a certain amount, if I can spend lesser on others, say eating out in restaurants/cafes for a few times, it can balance out at the end of the month. At least that is what I intend to do and adhere to.

Okay coming back to the earlier WANT. So if I went ahead to buy the $100 sport shoes. In my mind, I conveniently convince myself that I "save $50". . This is the phantom saving of $50. Then is there any harm in this? Well already it is actually an extra $100 spent this month. Next how can this go wrong then? Well as in my mind, I keep telling myself I "saved $50", so I might go and spend extra money cos I 'feel' richer by $50. (by now, one might realize, that the mind can just thrive happily on the 'feel richer' effect and spend more) So dont go too euphoric on "phantom savings". They might not actually exist but your mind thinks it is there.

Now how does "phantom savings" turn into "phantom money"? Again it has something to do with how your mind perceives the "phantom savings" as actual physical money.

Remember you spent $100. You think you saved $50. But this $50 is Not real money that you bank into a bank. Now how can this harm us again? Well in cases where money is a bit tight, you might be going through your expenses and trying to cut or reduce or justify. What manifest is this scenario...

K this month I spent $100 on shoes. Next 6 months, I am NOT GOING to buy any. Then I would "save some money". Yes, IF you do this, you are actually cutting out 1 expense item from your budget for the coming 6 months. BUT is there any ACTUAL MONEY saved just by deciding not to spend anymore on shoes? The answer is sadly NO. If your mind thinks that you actually save money from not spending money on shoes, the "phantom savings" becomes now "phantom money" which you think is an inflow into your bank account. But it is not. WHY?

Cos maybe in the 2nd month, I really didnt buy any shoes, but I spent the $100 on food and going out. Is there savings from not buying the shoes? No. The money is spent on another expense item.

In the 3rd month, I bought a new watch $100, no shoes. Is there savings? No I spent money on watch, another expense item.

In the 4th month, I spent $100 on bras, no shoes. Is there savings?

In the 5th month, I spent $100 on hair cut. Is there savings?

By the 6th month, I bought a $100 shirt and pants. Is there savings?

It is clear that by cutting out an Expense item from my budget is NOT going to result in SAVINGS. You might think it can, but it didnt. So assuming the rest of my expenses are somewhat fixed, like hp bills, cable tv, transport etc. I spend the $100 extra every month on something else, even though no new shoes. Nett result is that I still didnt save $100 every month.

Now when is it actual savings and not "phantom money"? There are many instances..

Example I put aside $2 physically and put it in a piggy bank. I consciously do that. After 5 months, I found I had $700 which I put into the bank. It is physical savings, partly cos it is real money and also it helped to lower my expenditure amount (look at previous 2 entries where I shared on my expenditure over this 5 months).

Another would be I actually put aside $100 for taxi ride in my purse. Then I only use this money for taxi rides, any fare or change is put back into this pocket where I keep the $100 cab fare. Maybe in the 1st month, I used up and didnt take any more rides after that. So savings = 0, extra expenditure = 0.

2nd month, I was more conscious and spent only $60 on cab rides. So I have extra $40 left over. This is a saving. Now if I choose to put it into the bank and then next month, I start over with my new $100, I actually save $40. If I decided to roll it over for next month, and start with $140, which I completely spent finish. Nett result is savings 0, extra expenditure for month 0. Cos you already budgeted $100 for taxi, you got extra $40 from last month, so this month even if you spend extra $40, it does NOT cause you to spend extra money from this month, its using last months extra.

Many more examples. Hence a related question would be HOW the hell do I know how much I spend on clothes, shoes, hp etc? And also how do I designate how much to spend per month? Well there is where knowing your own monthly expenditure patterns, habits comes in useful. Once you can get very accurate figures of your expenditure, NOT AGAR AGAR, you can actually sit down and look at your monthly income and your monthly expenditure. Then you cand designate how much to set aside. IF there is not enough to set aside, which ones to lower not cut. I think I mentioned about binge spending which might happen. AND most importantly, you have to arrive at an amount of money, you put aside in your bank. So maybe after all your designation, you only have $400. To really manifest this, draw out $400 and put in your savings bank, every time your salary comes in. If you are more discplined, monitor your bank account nett changes after a month, to see if it increased by $400. Either way, you are actually forcing out a $400 from your salary to stay in your bank account permanently.

So for expenses, even if this month, I set aside $50 for clothes. To help the less disciplined, might really need to draw out that money and put it in a particular pocket and desiginate as clothes, another $50 for taxi, another $50 for shoes. So if you had accounted for all your expenses and finished designating amount of money for them,

IF that month, you spent $80 on shoes. $50 taxi, $50 clothes. So next month, you can only put $30 (50x2 - 80) for shoes, $50 taxi, $50 clothes.

If in 3rd month, you spend $30 shoes, $50 taxi, 0 clothes. You actually have a surplus. So if u didnt bank in that extra $50, you can let it roll over. You have $50 shoes, $50 taxi, $100 clothes.

Similiarly if u spent $200 on clothes. Then next month, you have $0 for clothes. Until you paid it off.

All these might sound kiddish, give it a try, if you have problems reigning in certain expenses.

I am also working to reign in my expenses. OF course I am human too, also overspend at times in a month but my overall is that I have monthly surpluses during the entire period of time I was working. Except now when I have $0 income. So no matter how I lower, overall is negative. But no excuse to let it run away. I have to reign in still. Guess let's all work towards saving up, cutting down.

Personal finances ii?

This will be a short post. I am kinda feeling the 'toll' of this week. 2 days working flexi job, 2 days of interview, with yesterday being reallly bad with me puking out phelgme cake 3 times, cramping in gym and driving and stayed out until 10pm++, same for today - interview, then hang around out until near 10pm. Feeling very stoned and tired.

Tomorrow no interviews but arranged to meet up with an ex-collegue partly cos I got her help to put down as referee, partly she is on no-pay so not in former workplace and also to catch up with her, since she is quite nearby. So tonight I try to sleep earlier, tom wake up a bit later. Then just take it easy...

RUNAWAY BALLOONING TIME BOMBS
Coming back from the previous entry, where $1.2k, 12mths instalment plan, would balloon up to $1366, with $166 interest ONLY IF it is paid off in full in Dec with a once-off lump sum of $766.

What else can happen? Well now going to look at pro-longing the payment for another 1 year, just to see how the numbers play out.

Remember there is assumed to be NO extra purchases/instalment plans. Hence every month, there is no more additional $100-$50 in terms of nett increase in debt due to increase in principal sum.

Outstanding debt %766, still paying minimum of $50. NO extra purchses.

Yr 2,
1st mth=> $766(debt) + $15.32(interest) -$50(min) = $731.32

2nd mth=> $731.32(debt) +$14.63(int) -$50(min) = $695.95

3rd mth=> $695.95(debt) +$13.92(int) -$50(min) = $659.87

4th mth=> $659.87(debt) +$13.20(int) -$50(min) = $623.07

5th mth=> $623.07(debt) +$12.46(int) -$50(min) = $585.53

6th mth=> $585.53(debt) +$11.71(int) -$50(min) = $547.24

7th mth=> $547.24(debt) +$10.95(int) -$50(min) = $508.18

8th mth=> $508.18(debt) +$10.16(int) -$50(min) = $468.34

9th mth=> $468.34(debt) +$9.37(int) -$50(min) = $427.71

10th mth=> $427.71(debt) +$8.55(int) -$50(min) = $386.26

11th mth=> $386.26(debt) +$7.73(int) -$50(min) = $343.99

12th mth=> $343.99(debt) +$6.88(int) -$50(min) = $300.87

There are a few observations of what happens when minimum payment continues.

After 2nd year. You actually owed $766. You paid up $600 in total again. BUT in Dec when you see the statement, instead of owing just (766-600= $166 more, you actually now still owe $300.87 (300.87-166= 134.87 extra)

Maybe u realised it by now, the extra amount came from the compounded interest. So after 2 years of paying minimum. You owed 1.2k initially, you paid $1.2k already, but you still owe $300.87 extra. That is the accumulated interest in 2 years, compounded at 2% per month.

Another observation is that as the outstanding sum is small, less than $800, the $50 minimum payment actually helped to reduce the interest cos a part of it went towards repaying the principal sum. BUT it is slow-acting effect cos the interest is high.

Now another important note is that THIS interest-reducing aspect DOES NOT come with every and any loan amount outstanding in a credit card. Lets blow up the numbers a bit bigger to $3k. Assuming no extra purchase on this $3k rolling. Maybe a scenario of an outstanding amount on a card not closely monitored. Monitored in the sense, didnt notice how it grows like a balloon. But of course every month, pay minimum.

Yr 1, debt $3000, 0 extra purchase, monthly minimum $50.

Mth 1 $3000(debt) +$60(int) -$50(min) = $3010

Mth 2 $3010(debt) +$60.20(int) -$50(min) = $3020.02

Mth 3 $3020.02(debt) +$60.40(int) -$50(min) = $3030.42

Mth 4 $3030.42(debt) +$60.61(int) -$50(min) = $3041.03

Mth 5 $3041.03(debt) +$60.82(int) -$50(min) = $3051.85

Mth 6 $3051.85(debt) +$61.04(int) -$50(min) = $3062.89

Mth 7 $3062.89(debt) +$61.26(int) -$50(min) = $3074.15

Mth 8 $3074.15(debt) +$61.48(int) -$50(min) = $3085.63

Mth 9 $3085.63(debt) +$61.71(int) -$50(min) = $3097.34

Mth 10 $3097.34(debt) +$61.95(int) -$50(min) = $3109.29

Mth 11 $3109.29(debt) +$62.19(int) -$50(min) = $3121.48

Mth 12 $3121.48(debt) +$62.43(int) -$50(min) = $3133.91

Now its clear enough to see that in ANY loan, so long as amount repaid cannot exceed interest amount, then 0 principal repayment occurs. Which meant that interest compounded on interest is happening and that explains why the interest is increasing still despite payments.

End result is this. You owe $3000. You paid $600. And you now owe $3133.91. No dent in the debt amount. It in fact increased due to interest on interest.

This has implications.

Firstly it is left long enough with just minimum payments, it can ballon up really fast.

Next to reduce this effect, it means the payments should be higher than the interest, keep it higher by a more than just $10 cos the amount you pay over and above interest helps to reduce principal amount. Hence instead of paying $50 minimum as reflected in the statement, pay $100 if can. Next month, pay $90 if cash is tight. Try to go above the minimum sum and dont miss any or even revert back to minimum later on. Just have to bite the bullet lower down the amount until it is like the earlier example, where the overall amount is reduced.

Of course, the price in both examples, the credit card company wins. You lose more in 2nd example than 1st example cos you just might manage to repay and clear off the debt eventually say 1 more year. But in example 2, you can never seek to clear that at all, unless a big enough amount is repaid either once-off or monthly.

These scenarios can happen in any loans so long as there is interest. But the credit card has one of the highest interest out there, hence is much more severe.

So anybody who signs on credit cards have to keep these at the back of the mind, whether financial savvy or not, whether high income or lower. Its a matter of being aware, vigilant and also NOT overspending.

Credit card instalment plans help those without the entire lump sum to purchase something over a period of time, gradually repaying. Definitely the monthly repayment was part of your budget and definitely affordable to you then while you were making the decision to sign on. BUT dont let your guard down over this repayment period. You have to be dilligent and remind yourself that every month, you actually ALREADY spent that instalment amount, cos you have to pay for it at the end of that month. Hence guard against overspending. Cos you have to pay for all your this month purchases and also add in this instalment together. Instalment plans have its good but if you are complacent, it might grow into semething else altogether. Make good on your monthly instalment, make sure you have set aside part of your salary every month for that amount, before spending on others.

Next entry, phantom money and others.

Inspired Post, part about action and proscrastination, part about finances.

Drawing-down and Personal expenses

As I am heading into my 5th month of unemployment, looking at how my 30k reserve living expense account has gone down quite a bit, about $9k so far. I do know that NOT all of the $9k is pure consumption. I know I have courses going on, bought some new clothes, did hair and stuff. But cos I did lag behind in my daily expense tracking which I did for about 2.5months dilligently, hence I can retrace back and get some figures to work out an average.

Lemme show ya how I work backwards,
To get the exact amount I spent, I took my recent current amount. Take $30k minus current amount = $8819.34

Then I worked to get the big expenses that I can remember in this 4 & 3/4 months, so
Driving course => $1160.62
Guitar => $680
Jap course => $357
Clothing (bra, cosplay jacket, 2 x 3/4 pants, contact lens, new basic makeup, epillator) => $501
2 Hair cuts and 1 dye => 152.50
Wedding ang baos => $296
Mom (last pocket money until i get perm job) => $800
HP (monthly x 5 mths, $90 hp upgrade => $255
Internet => $150
Cable tv (sub and installation) => $ 110
Others RO machine repair => $80

K now with these figures,
I can approximate that I spent $4541.62 on all these.
Then $8819.34 - $4541.62 = $4277.72 on transport and mainly food and other misc expenses.
Which works out to $4277.72/5 = $855.55.
So if transport is about $100 per mth, it means on average about $755.55.
Which can work out to be $755.55/30 = $25 on food and misc.

Now cos I have been saving $2 notes in my piggy bank to help squirrel away and ensure I 'save' what I have drawn out for spending. Saved $700. WHICH I banked into the other bank account that is for shares and investment, not in my spending/reserve account.

The actual draw-down is $8819.34 - $700 = $8119.34
I also realized that among the bigger categories, there are some which are really ONCE-OFF, not a constant expenditure, eg driving, jap, clothings, wedding, mom final allowance, and RO repair. SO to get a truer picture of my expenses, I would only subtract these categories. Cos some course might end soon and is rather short-term, not something I would do longer term.

therefore => $8119.35 - $3194.12 = $4925.23 for my usual expenses and outings.
per month => $4925.23 / 5 = $$985.05
per day => $985.05 / 30 = $32.85

This amount is a bit too high for my current $0 income status. Hence I have decided to draw it down further into $20 per day region. If I can do that, my monthly would roughly reach $600, which is more comfortable.

NOW the NEXT step is to actually JUST DO IT and adhere as much as I can, on as many days I can to hit this target. Cos only concrete action in small steps can help me achieve this target. No one is going to give me money. Though my shares might give me some gains BUT when I dont sell, there is STILL 0 income. So I need to really reduce the drawings on my reserve. Previously I thought I could keep expenditure to about $600 a month. But this little exercise showed me very concretly I need to cut my eating out in cafes/restaurants and eat more hawker, food court, reduce outings to a more manageable number, not like 3-5 times a week, everytime eating out with a meal about $17 - $20. Ya so I would like to eat in less expensive areas and also find cheaper ways of hanging out IF I have to.

So dont be surprised IF I suggest food court lunch/dinner, or something below $10 but filling.

(Now I wish to clarify that I reveal ACTUAL expenditure amounts NOT to show I am better at saving, better at money, have low expenditure etc etc, but to help those who are interested, to see HOW exactly to work out monthly expense, daily, etc)
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Proscratination and Action

After JLPT and Melaka trip, I actually proscrastinated quite a bit in my job search. So by the time I finally looked through the Sat and Sun Recruits which I had put ON my table, some jobs (including teaching abroad, teaching at a tuition centre quite near my place) were CLOSED. Shit!!!!!!!!!!!!!!!

Plus prior to Christmas and New Year, there was one week, I sent out resumes on Sunday, by mon/tue, I got interviews. Well though in the end, I screwed up some, some were too low offers and etc... I saw how some extra action on my part yielded something.

So after New Year, I promptly collected the Recruits, looked through, cut out, customise and send resume by Sunday evening. On monday still didnt hear anything, so I headed to work. By monday evening, got one email. On Tue, I went to flexi-work and got 2 calls for interviews. Just checked mail, got one more interview next week. One is supposed to call back for another interview. Hence though I havent scored any offers yet, I have gone for one interview today. Tomorrow there's one. Next wed, there's one. So more chances of interviews, more for me to polish up and hope to score better offer.

Plans broken into steps and Action in SMALL do-able steps do yield results.

Just like making sure I exercise 2-3 times a week also yielded weight loss, at least up until before the christmas and new year eating and drinking binge.

I want to maintain and build up this spirit of actually DOING things in steps gradually than to just think about or wait. It somewhat works for me, whether success or not, but its still better than doing nothing and waiting.
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Tab was asking me about credit card payment for interest-free plans. Hmm.. I really have no idea HOW and WHEN exactly I know so much, but I shared what I know with her.

Its interest-free cos if Kenko package $1.2k over 12 months,

using credit card instalment meant $100 a month. If you pay promptly in full every month, you will end up paying $1.2k in 12 months. U get a loan of $1.2k and u paid $1.2k. HENCE interest-free in essence.

NOW what can go wrong with this picture?
Pls remember that credit card companies, unlike HDB loans, WANTS you NOT to pay fully.

How does it do this?
Simple. Your credit card bill monthly allows u to pay minimum and/or any amount u want. It is easy to just pay minimum. Eg $50 minimum (but $0 is paid to reduce principal amount owed)

Compare this to a statement from HDB loan which states eg $550 for 60 months (which a portion actually pays off the principal sum and part of it is interest) so IF I dilligently pay $550 for 60 months, I can actually reduce my debt to $0.

BUT for the case of the credit card, what happens is the 2 things.

FIRST thing, I paid $50 instead of $100 for 1st month.
It meant the debt start accumulating interest of 2% per month.
It meant on 2nd month, I owe now $100 + $50(debt) + $1(charge) = $151
If I still pay minimum $50 in 2nd month,
It meant on 3rd month, I owe $50 + $151(debt) + $3(charge) = $204.

Now up until now, it seems rather low cos its still in the hundreds. Watch what happens next.

4th month, $50 + $204(debt) + $4.10(charge) = $258

5th month, $50 + $258(debt) + $5.16(charge) = $343.16

6th month, $50 + $343.16(debt) + $6.86(charge) = $400

7th month, $50 + $400(debt) + $8(charge) = $458

8th month, $50 + $458(debt) + $9.16(charge) = $517.16

9th month, $50 + $517.16(debt) + $10.34(charge) = $577.50

10th month, $50 + $577.50(debt) + $11.55(charge) = $639.05

11th month, $50 + $639.05(debt) + $12.78(charge) = $701.83

12th month, $50 + $701.83(debt) + $14.03(charge) = $765.87

Which now got to a rather BIG sum that you are suddenly faced with in Dec when you see your statement.

Remember u had paid $50x12 = $600 already but you still owe $765.87 which meant, instead of paying interest-free(which u had initially wanted/planned when U signed up) u end up paying $600 + $765.87 = $1365.87, an extra $166. Now THIS is assuming you pay off the lump sum of $765.87 in full in Dec. BUT if you didnt, then it continues to roll and as u can see, it can get bigger, exactly because NO PRINCIPAL REPAYMENT and it rolls over due to HIGH INTEREST COMPOUNDING.

SECOND thing that happens, if u start paying minimum. You forget that you had actually PLANNED to put aside $100 a month to pay off. So now cos you only paid $50, you somehow 'forget' that you had spent $100 a month effectively. Then u might go and sign up other stuff... Its like u 'feel' $50 richer cos u paid for something that is worth $100 but u only pay $50. So u might go out and spend extra $50. Effectively, it meant u spent $150, not on the same thing, but it meant u spend more overall.

Last thing, it requires quite clear monitoring of monthly statements (but just have to) to ensure that u pay dilligently and not let it roll. Can be easy to forget given we receive so many statements from bills, bank accs, credit cards, insurance, etc etc etc. Its easy to lose track even for me, given all the bills and stuff. A trick for me is to put all the envelops addressed to me at a part of my table. YES I have a messy table but on it, there is a part where I put my envelopes and open it at a go once or twice a month. I even open, put bills together, then pay at one go when all the bills are in. But at times its easy to overwhelm,

so more so for credit cards. The fewer cards the better, the fewer statements, fewer overdue, fewer compounding on outstanding debt, fewer chance of missing payments. Yes, definitely fewer points. BUT if you ask me about points which maybe redeem something $100 worth or interest charge of $166(above example), I take fewer points ANYTIME.

Dunno about the rest. I get overwhelm even monitoring my bank accs in passbook, insurances, poems statment. And this is me WITHOUT a credit card. Now if I have 1-2, it meant additional statements, but at least not that many more to monitor.

Hope this helps. I still have many thoughts about personal finances that I want to blog about. But today is really a LOOOONNNNGGGG day. Really battery flat. Next post, I will discuss 'phantom' money, overspending or not, and maybe some pointers/ or small action steps that can be done to help out.

Stoned

That's how I feel currently, after finished a long day at work.

Heading out for Jap test, meant more stoned.

During dinner with Tab, was discussing aspects of budgeting and financial planning in regards to her intending to save up for a flat plus wedding etc. The main topic was about creating a detailed budget.

Lemme revisit budgeting, which was a fundamental and crucial first step I had embarked upon once I started working since Temp days. Given that I have actual experience in this, maybe listen and try it out for yourself.
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101 of Budgeting by Hellbound

The financial maxim of Money and savings. "开源节流" => earn more or spend less.

The steps that I had taken, followed by an explanation of the uses, applications of the steps. Of course carrying out is a must, otherwise what's the use of planning?

1)Record all expenditure in a day, with some details for every amount recorded eg lunch, CD, book, concert, dinner, Friday drinking.

Rationale: To get a realistic idea of where all your money are going, to what categories of expenses, you need concrete data, not just aga aga. Not if you want to be able to reduce your spending and thereby without getting extra income, effectively increase your savings.

2) Looking through 1-3 months of your recorded amounts. Only then at the end of 1 month each, tallied up the amounts into Sub-categories by lumping together the relevent amounts from the details of the entries.

Why I choose to only lump up the amounts at the end of 1 month instead of just broadly indentifying sub-categories eg Food straight away? Its because I want a finer details of my expenditure pattern. I want to identify Food for normal meals which are inevitable and Food for weekend outings, money for public transport, money spent on Taxi rides. Occasional expenditure versus monthly expenditure. Basically money spent on neccessities versus money spent on specific indulgences. I want to separate out them from the start to have more strategies to deal with them.

3) By looking at the sub-categories derived from Step 2. I can now see exactly how much money goes into Normal meals, Outside meals for weekends, Hp,internet bills, hobbies eg books, cds, Drinking sessions, Shopping which can be further sub-divided into shoes, tops, bottoms, working clothes, casual clothes, bags and many more.

Where to get this finer details? They all come from your details in your monthly daily expenditure record. Why do I need to do this Ma Fan thing? Just aga aga I know I spend on clothes $300 can liao. BUT if you want to really identify areas that you can reduce, I would advise having finer details of categories. SO THAT you dont have to say things like I cant shop for this month, or I have to stay home for this entire month. It could just be, I need to cut down on my shoes alone, the rest can maintain and eventually you save more. Its that powerful IF you really get through to this stage.

Another aspect is that NOT only can you derive a figure for your general expenditure, your specific expenditure in each sub categories, you can also see the number of times you carry out a particular purchase. Eg Oh I didnt know I buy 6 tops this month, go to movies 6 times, bought 7 pairs of shoes. You maybe surprised by the number of purchases per month for certain sub-categories.

4) Now is the time for analyzing your expenditure pattern which is now finely divided into sub-categories representing your true expenditure pattern which is specific to you (my expenditure would include external courses fees but friends may have differing sub-categories eg car maintainence, car petrol, car parking)

i) What is your total expenditure in a month, including and excluding once-off items eg Holiday, which can also be budgeted into.

ii) How much do you exactly save in this month, putting in your nett pay, less of all your actual purchases for the month? Are you happy with this figure? If you are, game over, no need to continue. If not, then go onto next question.

iii) Which is your top 3 sub categories? And how much is it relative to your income?

iv) In this 2-3 categories, which ones are necessities, which means usually very very hard to reduce without affecting your standard of living and material comfort. Which ones are more of indulgences? You may have more than 3 indulgences. If that is the case, then identify which 1-2 are seriously over limit. A gauge is the total amount spent for it.

v) Set out to reduce the total amount spent for that 1-2 indulgences by smaller amounts initially eg reduce $350 spent on working clothes to $300. But $50 is not much you say, but remember savings is cumulative. Its not only $50 a month extra saved, its $600 a year. Why such small reduction? BECAUSE it is punishing and difficult psychologically to suddenly stop buying things especially indulgences, just like smoking. What is effective is to slowly reduce a bit, so that you can still buy, still have indulgences, but over some time, effectively reduce that total amount.

vi) With the figures decided, now you can do simple averaging and obtain figures like Target amount for spending eg $50 a day max, Shopping is 4 tims a month instead of 3 times, each time budget about $70 instead of uncontrollable bursts of spending, if I already bought 4 pairs of shoes, immediately no more buying of shoes, Weekend outings maximum is $100 per weekend etc

There are then many many more strategies and figures can be derived for the sub-categories.

The very very important last step is to actually CARRY OUT the planned reduction for the identified sub-categories. It requies you to make a conscious decision during purhase to remember certain limits, amount YOU have set to achieve and try as much as possible to stick to.

Hopefully by the next month, through your continued record of your purchases, you can (1) see if you have effectively reduced that amount in that indulgences, (2) see if you had instead spent more in other areas, (3) see if you have been effective in raising your saving amount. And then continue to review and monitor a bit until you are satisified with your new saving amount. By then, it becomes so ingrained, you will make unconscious decisions to save more and every month have surplus and a high surplus.

These are based upon my own experience at least for the earlier years of working, which was how I set about building up my reserve and investment capital eventually by last year.
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Later on I had moved onto other ways of tracking monthly expenditure and savings which I can share if you are interested.

But even I am now currently doing this monthly long, daily record of expenditure. I have just started for 3 days. Cos I want to have a clear idea of where are my money going and see if I can PUSH up my saving rate to a much higher level. Why? Cos I somewhat wanna quit so I wanna make the next few months savings much higher to build up the reserve faster. I was rather lax in the last year or so.

For friends who do not know how to carry out Step 2. After you have finished writing up a 1 month long daily expenditure list with details, can pass to me, I can help you sub-divide into categories, identify indulgences for you etc provided you write more details of each purchase first.

Hopefully some aspects can be put to use and help you on your path to saving more for your home, investment, build up reserve and eventually investment.