Finance Smiths

Personal finance apprentices-in-training

Dec 2017 Net Worth Update and Wrap Up

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This is my last net worth update for the year 2017 in Dec. Just updated the figures in our Net Worth Google Sheet and we now officially have 2 years worth of accurate data to look back on starting from Dec 2015. Yearly patterns in behaviour when it comes to our expenses, savings, investments and retirement funds are starting to emerge.

The data tracking for the past 2 years has been beneficial and I would most likely continue with it. However, I have to say it takes a long time for daily and weekly actions to take effect. There are plans that we put in place 1 to 2 years ago that are only just beginning to show results. And it would take the same amount of time for the outcome of any changes to these plans to be reflected.

Patience and the understanding that some things cannot be rushed is an important personality trait we are still trying to develop. Anyway, I enjoyed reading the 2017 annual reviews of various bloggers. Generally, I reckon 2017 has been a good year for most of us financially and even personally. It would be nice to have more years like that where we are happier with what we have achieved.

I considered changing the format of this final monthly Dec net worth update into a yearly one for 2017. Just so I can do it together with a review of our successes and failures for the year. But I might do a wrap-up instead because I’m not sure how much I want to write on the year-to-year comparison and our reflections. I get it’s essential for goal-setting in 2018 so I will see how it goes.

Cash: +S$27,736 and +5.90%

It’s a strong performance for our cash holdings in Dec 2017. My wife’s annual performance bonus and salary was credited into her bank account and my salary was credited into my bank account on the same day. And the sale proceeds from selling my wife’s employee shares in Australia was credited around the same time. It’s the biggest injection of cash funds we have experienced in one week so far.

I have set aside a portion of it to pay for our upcoming ski trip to Austria in Feb 2018 and our credit card bills from all the recent wedding anniversary and Christmas spending. I only input the net cash amount in our Google Sheet to be conservative.

Investments: -S$305 and -0.15%

This is largely due to the sale transaction of my wife’s employee shares in Australia. The investing cash inflows for our monthly investment plans and robo-advisors were not enough to offset the decline in our portfolio. Flat equity markets didn’t help much as well. Disappointing to say the least. Regular capital injections are crucial to the long-term success of our ETF strategy and they have to be of sufficient size to make it work. Which is why I increased the monthly investing cash inflows even more from Jan 2018.

Retirement & Medical: +S$4,151 and +1.58%

Central Provident Fund (CPF) Ordinary Account (OA), Special Account (SA) and Medisave Account (MA) mandatory contributions are behind this increase. A portion of my wife’s annual performance bonus is to be contributed to her CPF but this should happen in Jan 2018. Coupled with the end of year interest to be credited for our CPF then, we are expecting a bigger increase in our Retirement & Medical funds when doing the Jan 2018 Net Worth Update.

Total Assets: S$31,582 and +3.35%

Net Worth: +S$33,974 and +11.36%

A big jump in our total assets and net worth (difference comes from paying down our mortgage with the housing loan monthly instalment payment). I have continued to exclude our owner-occupied property from the total assets calculation because it’s going to unnecessarily inflate the numbers. Which will do more harm than good when we are still at the wealth-building stage.

We are getting closer to our S$1 million total assets target. By my calculations, we are likely to reach it before my wife’s 30th birthday in April 2018. It would be a great financial achievement to cap off our first decade together as a couple. Theoretically, the snowball and compounding effect suggests that we should reach our next target in a shorter time. But I wonder whether it accounts for exhaustion and kids. Because it’s easy to get tired in a financial pursuit for wealth while trying to build a family.

Wrap Up

I’m too lazy to do a full on review of what we did well and what we did poorly for the year 2017. Our health has improved in the last few months as we strived to increase our exercise/gym sessions each week. We travelled to Bali & US in the first half of the year and went to France in the second half. We are comfortable with the extent of our current social & professional circles and work got busier but we managed. We have grown financially stronger from the back of higher salary & bonus income and bull markets driving our investments upward.

This has come at a cost of less personal time for my wife and I. As you can imagine, the more time we schedule for everything else we are trying to accomplish, the less time we have for each other. But after 10 years together, we understand our relationship will just keep evolving as we pursue our personal and joint goals. Things will never remain the same as long as we both keep moving forward. Simply put, we just have to keep finding reasons to stay together with mutual and self love as our underlying motivating factor. I wonder what’s next for us.

Investments for Dec 2017

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Automated Investing for Dec 2017

Maybank Kim Eng Monthly Investment Plan (Maybank KE MIP)

  • Buy 28 units of SPDR STI ETF (SGX: ES3) at S$3.467 per unit on 8 Dec 2017
  • Buy 85 units of Nikko AM REIT ETF (SGX: CFA) at S$1.139 per unit on 8 Dec 2017
  • Transaction costs of S$2

POSB Invest-Saver

  • Buy 27 units of Nikko AM STI ETF (SGX: G3B) at S$3.55 per unit on 18 Dec 2017
  • Buy 85 units of ABF SG Bond ETF (SGX: A35) at S$1.17 per unit on 18 Dec 2017
  • Transaction cost of S$1.50

OCBC Blue Chip Investment Plan

  • Buy 423 units of Nikko AM STI ETF (SGX: G3B) at S$3.53 per unit on 22 Dec 2017
  • Transaction cost of S$5

Amount invested in ETFs is S$1,900 using Automated Investing for Dec 2017 with transaction costs of S$8.50.

Manual Investing for Dec 2017

Nil.

Robo-Advisor Investing for Dec 2017

StashAway

  • Funds transfer of S$600 invested in US-listed ETFs

Smartly

  • Funds transfer of S$600 invested in US-listed ETFs

Amount invested with Robo-Advisors is S$1,200 for Dec 2017.

Total invested amount is S$3,100 for Dec 2017.

Reviewing our CPF strategy and approach

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Merry Christmas everyone! I will be busy with gatherings and celebrations over the next 2 days so I might as well send my well wishes earlier. We have finished our Christmas presents shopping and are ready for the gifts exchange tomorrow evening after dinner. The shopping areas have been really crowded during the weekends and I’m glad I no longer have to jostle with people for now.

Anyway, I logged into my mum’s Central Provident Fund (CPF) Online Services today afternoon after having lunch with my family. I was helping my mum transfer her Ordinary Account (OA) and Special Account (SA) balances to her Retirement Account (RA). She still does part-time work every week to occupy her time and receives some CPF contributions.

My mum’s CPF Life Payout Eligibility Age is 65. With every passing year, she gets closer to the day she starts receiving her CPF Life monthly payouts. At the end of each year, I help her do the OA and SA to RA transfer. My dad has already starting receiving his CPF Life monthly payouts and it has been a useful additional source of income in retirement. Hence, the importance of increasing my mum’s RA as much as possible up to the point when the withdrawal starts.

Reviewing our CPF strategy and approach is an annual exercise that my wife and I go through as well. We also do it at the end of each year because that’s when we have a good idea of our current and projected financial positions. We look at how we have performed in terms of our cash savings, investments, expenses for the year. And we think about the likelihood of us maintaining, increasing or decreasing their level in the next year while considering the possibility of major life events. Then we consider these 4 big questions and our answers to them when reviewing our CPF balances.

Should we invest our OA and SA?

As long as we remain employed, we have no incentive to pursue higher returns with our OA and SA. The 2.5% and 4% with additional 1% interest rates are decent if you take into account the current low interest rate environment in Singapore. They are relatively risk-free as long as the country does not collapse. We have taken enough risk with our jobs, savings and investments. Not keen to take any risk with our retirement funds.

Should we contribute cash to our SA for tax relief?

This is a more difficult question to answer. We have contributed cash to our SA for tax relief before but that was a while ago. We did that mainly to accelerate the growth of our SA to make up for the first years of our career when we were not working in Singapore. By now, we have mostly caught up to where we think we should be compared to our peers.

Which makes this a tax relief versus loss of liquidity argument for us. With our plan to be more aggressive financially for the next decade, access to liquidity is important for us to make it work. It’s not worth us paying less taxes in the short term if we can generate higher returns with the cash contributions in the long term. And I would like to be able to access and use my money after 10 years.

Should we transfer balances from our OA to SA?

Another tough question. We build up our OA balances as an emergency buffer for housing loan repayments in case of retrenchments or as a new deposit for a bigger apartment if we don’t lose our jobs. Our OA is more flexible in its usage options compared to the SA. But our cash holdings are increasing to the point where it can act as the emergency buffer or new deposit.

Which means it’s time to reassess the purpose of the OA. I reckon it has an additional objective now, to serve as a pipe for excess balances to flow into the SA as retirement funds. This grows our SA more quickly but without using our cash holdings. So we transferred about S$3,000 from our OA to SA. It’s not much but represents a significant step in widening the scope of how we use our OA.

Should we contribute more to our Medisave Account (MA)?

As our families and us get older, we are likely to face more medical emergencies and hospitalisations. Although the main purpose of our MA is to pay for our medical insurance premium for now, we expect this to change going forward and may even start using it for hospital bills.

Until then, we might rely on the mandatory contributions to fund our MA. It’s not a lot and can be easily wiped out in a medical emergency. Hence, the importance of not losing our jobs so that we retain our corporate medical insurance cover for our dependents and us. This is on top of our own personal medical insurance cover. When the first major drawdown of our MA happens, that’s when we would consider contributing more.