Finance Smiths

Personal finance apprentices-in-training

Three Day Work Week?

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It’s a public holiday tomorrow and it’s a nice feeling to have a day off after working two days. I’m writing this post on the bus home while my wife is out having drinks with her colleagues. Random thought – If she is going be out late tonight, I might drop by my parent’s place to visit them since I didn’t see them last weekend.

Anyway, this got me thinking about how great it would be not having to work a full week of five days. You just have more energy to do other stuff since you don’t feel as wiped out by mid week. In fact, the ideal arrangement is that we can work a three day week. Either Mon, Wed and Fri so we won’t have to go to work two days in a row or Mon to Wed so we always have a long weekend to go travelling.

Wouldn’t that be fantastic? Now we just have to find those jobs that allow for such an arrangement. The truth is that we like the professional and social engagement that office work offers especially when we have colleagues that we get along with. Self-employment seems to be quite isolating and I’m not sure whether we are suitable for it. But we don’t see ourselves working full-time five days a week as well and not working at all is only possible if we find something interesting to keep ourselves busy with.

Maybe the solution really is to have a three day work week. Sufficient engagement with the outside world to keep ourselves up to date and sufficient downtime to develop hobbies and enjoy leisure activities together as a couple or family if we decide to have children. The other reason for this coming up is that my manager has just returned from maternity leave and negotiated a three day work week at reduced pay. So it is possible!

The purpose of this post was really just to pen down this idea of a reduced work week while taking the bus home. At some point in time, our asset portfolio would reach what I call a critical size whereby the dividends and interest would form the investment contributions instead of savings from our monthly salaries. By then, we should be okay with a lower pay since the salary only needs to cover the expenses while the asset portfolio will keep growing by itself.

This will be the penultimate stage to financial independence because the last stage would be for the dividends and interest to cover our expenses as well. Just something for us to look forward to while having a mid week break!

Case for or against higher education

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The next post after this is likely to be an end of the month and end of the first half of the year financial update. It should be an interesting one given how Brexit has shocked the foreign currency and stock markets. Given the number of articles and commentary on the impact of Brexit, I have refrained from writing about it since there is little I can value add on the topic.

Nobody knows what’s going to happen and history will be the best judge of whether this turns out to be the right or wrong decision. In time, I would be able to better assess Brexit’s impact on our asset portfolio but I will continue to stick to our dollar cost averaging investing strategy for now. After all, I would expect the markets to get more volatile and it makes sense not to make any drastic changes to our investing strategy.

Back to the focus of this post regarding my views on higher education. As I have mentioned before, I read the blogs of personal finance bloggers in US and Canada frequently. It’s fascinating to read about the challenges, habits and lives of these personal finance bloggers because although our aims are similar, the problems we face can be very different.

What stood out for me was this issue of crushing student loan debt in US and Canada from the pursuit of higher education. To be honest, it does not appear to be as significant an issue here in Singapore and I reckon it’s due to the government’s attempts to keep higher education affordable for Singaporeans.

Given how Singapore is a small country with no natural resources, developing our human capital via education is a top priority and this has contributed to our economic success. It has never occurred to me before until I read about the student loan debt horror stories in US and Canada that made me realise how the government’s efforts to subsidise higher education and keep it affordable has benefited us.

This got me wondering about the purpose of higher education and the impact of its consumption as a public good. In short, is higher education still relevant in the modern world and has my views on it change after working?

Importance of bachelor’s degree

We have been taught in Singapore since young that it is essential we attend a university and obtain a bachelor’s degree. In fact, our bachelor’s degree should preferably be in an area that has a direct link to an occupation that pays well. As you can see, the focus is less on an area of study that interests you but one that has potential career benefits.

As Singapore is a small and young country, entrepreneurship and self-employment are only just starting to be an acceptable way of life for working adults. It’s still not encouraged because of social norms and an entrenched mindset of a fear of failure. As such, we take a practical approach to higher education and you can see how my wife and I ended up study accounting at university.

An accounting undergraduate degree is one of those degrees that has an average duration in terms of time taken to complete but offers you access to a number of entry level accounting jobs in a variety of industries. It is also less costly than the other “professional” degrees such as engineering, law and medicine.

Although accounting as an area of study is not as interesting as other fields, I have often wondered whether taking the pragmatic approach to higher education has helped us in our careers. We might not be as passionate about our jobs but we enjoy aspects of the work and the above average pay has gotten us a financial headstart.

Would it have been better for us to pursue an area of study and work that we are more passionate about? Then again, what do we know about our passions at such a young age when making such an important decision?

Professional accreditation

When you work in accounting, there is arguably a need to obtain professional accreditations to be promoted to manager level and above. In this case, it’s not as much of a grey area especially when your firm is willing to sponsor the costs of these professional accreditations.

Our professional accounting accreditations were sponsored by our respective firms and the benefits of higher remuneration and career level are more obvious against the minimal costs that were incurred. However, studying while working was one of the most challenging things we have done and it really turned us off higher education. Unless we are being paid to study, is the pursuit of higher education worth it at this stage of our careers?

Relevance of Master’s degree

Because of our experience, our view is that a full-time master’s degree is now of little relevance to our career and personal development. It is a good way to increase your professional and social networks but offers little in terms of career advancement when compared to the costs of study.

Unless we are planning to change careers, a full-time master’s degree is more of an opportunity to take a break from work and experience the life of a student again. It’s less about the pursuit of knowledge but more about having another life experience elsewhere. We don’t expect a full-time master’s degree to change our life but to enhance it now that we will appreciate the experience more.

Ultimately, it’s important to weigh the costs of higher education versus its benefits. It’s not sufficient for you to just study what interests you without considering the payoff because you might end up paying a steep price for your decision.

Hopes and plans after turning 30

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After looking back at my life on turning 30, this post will be about my hopes and plans after turning 30. This is the start of my next decade and 10 years is a good time frame to set long-term goals and come up with ways to achieve them.

Career path

I used to do mostly tax compliance work when I was at accounting firms in Melbourne and Sydney. Now in Singapore, I’m doing mostly tax advisory work and much less tax compliance work. My wife has navigated herself to a projects role within the bank that utilises more of her strengths and allows her to have greater engagement with other teams.

Although our current jobs are more interesting, we have become more vulnerable to job cuts due to the nature of these roles. In a recession, there is less of a need for tax advice by firms and banks are more likely to reduce budgets for projects. Our higher job satisfaction has come at a cost of increased retrenchment risk.

We do think about how our careers would develop over the next several years and what we would like to work in. If I continue to stay in the tax field, I might consider moving in-house and work in the financial industry or another industry that interests me. My wife would most likely stay in the banking industry but move to other projects or technical roles.

Having children

We are starting to get asked by our families and relatives when we are planning to have children. This question is inevitable given the number of years we have been together. It could be because my wife and I have gotten used to living by ourselves over the years but we don’t see the rush to have children.

It’s a big life decision and the timing of it will have a significant impact on every aspect of our life. Financially, we would have to budget for the high costs of having and raising children. Socially, we would no longer have the flexibility to go for gatherings and holidays on a whim. Professionally, we would have a greater need for work-life balance in our jobs.

It would not just be the both of us anymore and I must admit that this scares us. Given how a big part of our relationship was built on us moving cities and travelling around the world to look for new experiences, you can see how the impact of having children worries us.

Although we know that having children in itself will be one of the most amazing experience we will have and these may seem like trivial considerations in comparison, we will never know what it will be like until we take that step.

Investments

Our ETF, Share and Other Portfolios have been growing at a decent pace but we should be looking to accelerate the growth of the ETF Portfolio. ETFs are really starting to become our preferred choice of equity investment the more volatile the markets get and the shorter the industry lifecyles become.

Interest and dividend income have been increasing with each year but I reckon we are holding too much cash in our asset portfolio for interest income to be greater than dividend income. This might not be a bad thing in view of recent events but definitely not a good thing in the long run. We are looking to utilise more of our cash for equity investments and expect a higher proportion of dividend income going forward.

We still think it’s important to have exposure to USD, GBP and EUR in our ETF Portfolio again in view of recent events and will continue to invest in the ETFs listed on the London Stock Exchange. This might change if even more significant events occur down the road but we shall have to wait and see.

Retirement

At this stage, our goal is to grow our investments to a point where the monthly passive income equals or exceeds the monthly expenses. This allows us to achieve financial independence and we aim to do this by the end of the next decade. As such, retirement funding is not as high a priority for the next 10 years.

Granted, financial independence does translate to a form of early retirement but as I have mentioned in previous posts, we tend to view our retirement funds separately. We try to ensure that our CPF account balances grow consistently with each month from employer and our contributions despite using our CPF-OA for housing expenses and CPF-MA for medical expenses at times. Other than that, we don’t intend to invest our CPF monies or do much else in this space.