Finance Smiths

Personal finance apprentices-in-training

Starting to invest CPF-OA monies with Endowus

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As we get to the end of Aug, it seems to be a time of significant investing actions taken. With my CPF-OA and cash balances ready to pay for the remaining downpayment of my private property purchase, I have been busy adjusting my automated monthly investment plans to be effective from next month onwards. This includes increasing the cash funds transfers into our StashAway robo-advisor, OCBC Blue Chip Investment Plan (BCIP) and POSB Invest-Saver accounts. And setting up the new UOB SimpleInvest accounts. The next logical step is to look at how we can better utilise our CPF-OA monies by investing it.

We have always refrained from investing our CPF-OA monies as we wanted to keep it liquid for private property downpayment and monthly mortgage servicing payments. Given that this private property purchase is in my name only, it will wipe out my entire CPF-OA balance. Most of the monthly contribution to my CPF-OA will also be used for the mortgage payment. This means that my CPF-OA balance will take a long time to rebuild. But structuring my private property purchase transaction in such a manner means that my wife’s CPF-OA balance can continue to grow in the meantime.

I have been thinking about doing this since last year but held off until I could get clarity on our private property purchase costs. Back then, I didn’t know where and what type of private property we will be buying. I wasn’t sure how badly the ongoing Covid crisis will affect our jobs and salary income (including the monthly CPF contributions). I couldn’t gauge how much CPF-OA monies we will need for the private property and whether we will be purchasing it in 1 or 2 names. By waiting, I have lost out on potential gains that could have been made if I had invested my CPF-OA monies earlier.

But I’m not too concerned with such opportunity costs and downsides. It’s more important that I make the most suitable decision for my family at that time based on our entire situation (personal, professional and financial) then. Same reason for me buying a private property at what could be the peak of a cycle. I don’t try to time the property and stock markets when it comes to such big decisions that affect my family. I will evaluate and decide what’s the overall best decision for my family’s well-being on balance at that point in time. It may not make the most sense financially but the benefits on the personal and professional front can outweigh the financial costs.

Given the positive reviews I have been reading and hearing on Endowus, we figured it’s time for my wife to open a robo-advisor account with them to invest her CPF-OA monies. The Endowus onboarding process is smooth and links up well to the opening of the CPF Investment Account with UOB to allow for her CPF-OA monies to be invested. Both accounts should be opened by this week. While a significant portion of my wife’s CPF-OA balance is available for investing, she will be starting with an initial amount of S$1,000 and a monthly recurring amount of S$1,000 after that. Small sums that will be replenished by her monthly CPF contributions.

This means that a majority of my wife’s CPF-OA balance would still not be invested but new contributions will be invested going forward. In a way, it’s like her capital in CPF is protected but she can now take more risk with the additional funds. S$1,000 is the weekly number I try to work towards as a contribution for each component of my automated monthly investment plans. It’s not big enough to make a significant change to my monthly financial position but adds up over time to strengthen it.

That has always been my general approach to life. Make small, positive changes every week (daily changes are just too demanding and I have no capacity for this now) and I start to see their impact over months. It’s slow going and I’m usually behind the curve on lots of things. But I am consistent in my application and it gives me more time for the results to show in my performance. I’m hoping for less eventful weeks in the next few months where I don’t do much on the financial front. It’s stressful and I don’t like worrying about it.

How much CPF-OA to use for private property

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We had steak and wine for dinner tonight as a last hurrah before the Phase 2A (Heightened Alert) restrictions kick in tomorrow. And we are having the 2nd vaccine jab in the afternoon as well so we are preparing to go down for a few days. We are expecting more severe side effects this time around and will just be resting at home as much as we can. Not looking forward to it but at least we start the 2 weeks countdown to the time when we will be considered fully vaccinated. We are hoping for a relaxation of the restrictions around the National Day public holiday for the fully vaccinated but are otherwise mentally preparing ourselves to weather the storm until mid Aug.

As I prepare to raise more cash funds within these 3 months for the purchase completion of my resale condo, I have also been thinking about how much CPF-OA to use for the downpayment and for the monthly housing loan instalment payment. Buying a private property at such a high price involves a large downpayment and I don’t have sufficient cash on hand. I have been asked whether it’s better for me to wait for the property market to fall before making a resale condo purchase. Probably true if I have the luxury of having a big enough place to house my family without having to pay rent. But I don’t and renting is not a long term solution to my family’s need for a home.

I could rent somewhere cheaper or find a way to squeeze my family into my parents-in-law’s house in the meantime to time the property market. But I refuse to compromise on my family’s lifestyle and rather spend the money to maintain it. I have also been asked whether I considered buying newer condos with well-maintained facilities. I’m not touching any new or recent condo launches at the current price level and I don’t think the 3 bedroom apartments are big enough to house my family. I can make do with older facilities and renovate a resale condo to refresh the apartment. But I can’t create more space and change the layout so these are important considerations for me.

Anyway, I plan to wipe out most of my S$120k worth of CPF-OA for the private property purchase to reduce my cash outlay at the start. But keep a small portion of it leftover as a building block. For my monthly housing loan repayments, I plan to pay about S$1k from my CPF-OA each month and keep the few hundred dollars of contributions remaining to stack on top of that building block. The interest accrued on CPF-OA used for private property is a difficult problem to manage. Overusing my CPF-OA means eating into my sale cash proceeds if I ever decide to sell the apartment. Because I have to pay back both the CPF-OA used and interest accrued. I saw that happen to my wife when selling our previous private property. Unless the price has appreciated significantly, chances are I will be left with little sale cash proceeds.

Extending leave and CPF Newborn Medisave Grant of $4,000

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Everyone is sleeping now – my wife, baby and nanny. But I’m up squeezing in some time to blog before I go to sleep. It’s time for another work week and I should get some rest before starting it. Having a purpose is important in ensuring you don’t dread Mondays.

If anything, my wife having our baby sharpened my focus and objective at my job. It’s time for me to step up in these 2 years and gun for my promotion and pay raise. Got to know when to go into the next gear and make things happen. And when to maintain the gear to rest and relax. Have to close the wage gap between my wife and I.

We went out for coffee and waffles with ice-cream today afternoon at a nearby cafe. We try to find some time for ourselves every weekend just to chat and catch up with each other without any distractions. It was nice and I miss just talking to my wife without having stuff happening in the background or things to do at the back of our minds.

We asked about each other’s lives, how we are feeling and dealing with the ongoing massive change in our lives (having a baby). And what’s the plan going forward as well as the upcoming transition of the secondary caregiver of the baby from the nanny to our helper/parents. Plus my wife is thinking of taking a month of unpaid leave to spend more time with the baby.

This would stretch my wife’s existing 5 months of maternity & annual leave to 6 months with the additional month of unpaid leave. Extending her time away from the office. It’s a tricky time to be absent because her bank is likely to go through another restructure in the next few months.

My wife knows this from catching up with a good friend/colleague visiting from overseas during lunch. Once again, the importance of maintaining a professional and personal network in the corporate world should not be underestimated. Make the effort because it could save your job.

Which leaves my wife in an interesting position. Would taking the additional 1 month of unpaid leave make a big difference to the outcome? It’s not like she can influence the decisions of senior management. Though she can fight for the interests of her team and herself if she’s in the office.

But my wife is weighing this up against being there for the baby when he needs her the most. It’s a difficult decision and I can already start to see the challenges that face her as a working mum. My ability to help her in this case is limited because it’s a personal decision.

My wife has to choose what’s important to her and I will support her decision. There is no right and wrong here. The only thing that matters is making sure what she chooses works out. And I’m on standby for her call to action. Otherwise, I have to keep focused on my goals as well to achieve them so we can both get what we want.

Anyway, I had a nice surprise in my letterbox this weekend when I opened it. Another baby benefit provided by the Government. A notification letter saying the CPF Medisave Grant for Newborns of S$4,000 has been credited into our baby’s CPF Medisave Account. This is going to be useful for his medical expenses.

I think the next baby benefit from the Government is the 2nd instalment of the Baby Bonus Cash Gift of S$1,500. When he turns 6 months old, which is in May 2020. Something to look forward to. Small wins should be celebrated after all to keep ourselves happy.