With the opening of the Downtown Line 3 last year in Oct 2017, I have noticed that my train journeys on the EastWest Line from the East to the city office area on weekday mornings have become less unpleasant. The trains are less packed and I can usually get into the first train that arrives.
I wasn’t sure whether this was due to lower commuter traffic from office workers being on leave so I didn’t want to get my hopes up. But it seems like the situation on the EastWest Line has improved and I find myself less agitated going into work.
Don’t get me wrong. SMRT still screws it up now and then but I’m happy just to be able to get to the office on time. That’s what happens when you set the expectations bar low I guess. Let’s hope our transport infrastructure continues to progress forward from here. I have enough of it going backwards.
Times are generally better now. You can feel and see the impact of the economic recovery in Singapore. People are starting to move jobs, spend more on stuff and even invest more. But I understand it’s a cycle of good times and bad times. When you work in a retail bank, this becomes evident in the ebb and flow of the bank’s profits.
It’s only after I started working in regulatory compliance at a local bank that I find myself following the views and opinions of this one person – Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS). You should see the respect given to him by the heads of compliance and business units of banks when they get together to discuss banking issues and matters.
Just today, I read his speech at the UBS Wealth Insights Conference about “The Goldilocks Economy – Will the Three Bears return?“. In it, he highlighted the 3 big risks to economic growth this year of inflation, protectionism and financial instability. Have a read of it. I found myself agreeing with almost everything he said.
Especially the last part about the real world not being a fairy tale and “the best way to prepare for bad times is to avoid excesses and build up buffers during good times”. This essentially explains the meaning of personal finance de-risking, which sounds so simple but can be difficult to implement.
In Singapore, we have gone through an extended period of time benefiting from low unemployment rates and low interest rates. This has helped to prop up the property and equity markets while preventing any major crashes. We understand that this is not going to last but we also have no idea how long this can keep going on for.
Which we admit lulls us into a false sense of security. There’s no way to get around it. How do you prefer for a doomsday scenario that you have not experienced before? You can’t replicate the fear of losing everything you worked so hard to build that you are going to feel when you are under that much financial stress and pressure.
The last big economic recession we went through that had a direct impact on us was the 2007/2008 Global Financial Crisis. Even then, it was limited to negatively affecting our job prospects. But we didn’t have much to lose. We were undergraduates looking for employment with little savings and investments.
10 years later and it’s a whole different ballgame. We have jobs, savings, investments and are thinking of having kids. There’s a lot more at stake. I can better appreciate in my current situation how the next few major financial decisions we make can either put us into a hole that we spend the next decade digging out of or gets us to financial independence by the end of it.
For example, do we sell our current 2-bedroom apartment and buy a bigger 3-bedroom one in preparation for starting a family? Or do we make do with the current space we have first until the property market becomes more affordable? Which by the looks of the latest upswing in property prices might not happen this year.
In the face of such unknowns, there’s one thing I know we have to do and that’s to continue practicing de-risking. The over-reliance on a dual income is not healthy but it works for now. As long as we have our jobs, each month represents a win because we can reduce our big mortgage and increase our savings, investments and retirement funds.
Our spending may be high but this is our most effective way to de-risk for now. Nothing fancy with side business, self-employment or any other form of active income. Just purely looking for ways to be more efficient with using and growing our salary income. I reckon this strategy is either going to blow up in our face or work well for us. Just wondering what it would be.
Heh heh … good to hear things are going well on your end. As I mentioned a few months back, jobs are looking good for many people in Singapore. The wider global economy turned for the better in early-to-mid 2016 & despite advances / speed in technology & work processes, the positives on the HR scene still takes about 6 months to get baked in.
Of course sectors in cyclical bear like O&G and related M&O took longer to crawl themselves out. But it looks like the commodity sector has made a turnaround in 2017 (many international oil majors have had a stealth bull run!).
Feels like 2006 or 1999 hahaha!
Anyway having a large allocation to cash & not over-committing on large liabilities is already a good de-risking approach. Good also to have clarity on spending … essentials vs good to have vs pure discretionary i.e. high life. 🙂 Gives some idea of what can be scaled back quickly if required. A simple stress test can be halving your current household income and see what it entails.
Yup, the global economy has improved and I reckon Singapore is benefiting from it. Haha, I’m hoping the job market improves further and offers more career opportunities. I’m still working that out i.e. the split between necessity and discretionary. If I half my household income, I’m going into negative cash on hand straight away. Which I’m guessing it suggests there’s room for cuts!
The economy seems to be growing but it seems to be a ‘jobless’ kind of growth from what I see on the ground level.
Better do some stress testing. With interest rate rising, property owners on bank loan may be stressed given that most are pulled into the complacency of low interest rate.
The last big bear was 10 years ago. With the stock market being bullish now, we should be good for another 1 to 3 years. When the crash comes, is your employment stable enough for you to open your warchest to pick up bargains ?
Well, I guess it depends on which industry sector you are looking at. Jobs are still being created in the areas that are growing but are lost in those that are declining. You could argue it’s technically a jobless kind of growth since there’s not much change to the net jobs created. However, it’s already helping to keep the unemployment rate low in Singapore.
Yes, stress testing of interest rate on bank loan is important. We try to ensure we are still comfortable paying up to twice our current interest rate. But anything more than that would start to stretch us.
Ah, that’s the question for everyone. There’s no test for whether my employment would be stable enough in the next market crash and economic recession for me to open my warchest to pick up bargains. Because a major event like that would always cause structural changes to the economy that could easily hang me out to dry. I have to take the chance that at least my wife or I would not become jobless and open up that warchest regardless. If I don’t do it, my DCA and VCA strategy is going to fail miserably because that’s the crucial time that I need to average downwards on.