Finance Smiths

Personal finance apprentices-in-training

Birthday Celebration

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Celebrated my wife’s 28th birthday over the weekend by having a nice dinner at Whitegrass. What caught our eye when choosing the restaurant was that the chef/owner Sam Aisbett trained in Quay and Tetsuya’s, which are our favourite fine dining restaurants in Sydney. The service & food were excellent and we even got to drop by the kitchen to speak to Sam himself!

It’s not that this personal finance blog is about to become a food blog. It’s just more interesting for me to mention our other interests as well. Yes, we like to eat at fine dining restaurants for special occasions and this is one of our main spending areas. It’s something that we have been doing since working & living in Australia and we have continued to do it here in Singapore even though it is more expensive.

I know how personal finance bloggers like me keep going on about reducing expenses and fine dining is definitely something we can cut back on. Makes you wonder why we continue to budget for this? Because it’s one of the core things that make up who we are as a couple. The pursuit of more savings, more investments, financial freedom etc can be never ending. But you must never forget what makes you happy. Sometimes, we become so focused on the goal of financial independence that we ignore and sacrifice many things to achieve it.

This post is not about encouraging one to spend freely on everything that makes you happy. It is about you figuring out what you should spend on that is important in making you happy. For us, we have worked hard to get to a point where we can budget for such fine dining expenses. More importantly, this is how we take the time and make the effort to dress up, date each other again and celebrate the many milestones we have achieved together. Here’s to thanking my wife for staying on this journey with me and to us for striving together!

Why you should use credit cards

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I was thinking about writing a series of posts on analysing why and how we invest into the specific stocks in our Share portfolio. Given that we intend to focus much more on building up our ETF portfolio from now, it didn’t make much sense to do that any more. Besides, there’s also not much point in me dedicating a series of posts on our strategy of buying ETFs every month – more in bad months and less in good months.

I decided to go out on a limb and write about something more controversial – Why I think working adults should use credit cards especially in Singapore. I know this topic is more specific than the actual title of my blog post, which just sounds more catchy. I’m actually going to use my family and the credit cards we have as examples for the points I will make on the reasons for using credit cards. Hopefully this makes the post more personal and relatable!

Pay less for petrol

My brother doesn’t believe in credit cards to the point he actually cancelled the one and only credit card he had (which I applied for him soon after he started work because I thought it would be useful for him to have at least one credit card). When my brother drives the family car to the petrol station, he pays for the petrol using Nets, which does not qualify for the many cash rebates you can get by paying for the petrol using certain credit cards at certain petrol stations. For example, the use of Citibank credit cards at Shell stations gets you at least 4% cash rebate. Can you imagine paying full price for petrol in Singapore?

Pay less for utilities

Many households in Singapore have utilities bills from SP Services. My mother used to pay her SP Services utilities bill via GIRO until we realised it’s possible to get 1% cash rebate from paying the SP Services recurring utilities bill using her POSB Everyday Card.

Pay less for public transport

We use our POSB Everyday Cards as EZ-Link Cards when taking the bus and MRT. There is an auto top-up function by using EZ-Reload and we get 2% cash rebate.

Pay less for mobile/broadband/cable TV

Most people have some form of telco bills in Singapore. My sister used to pay for her Singtel mobile bill and the family Starhub broadband & cable TV bills via GIRO until we realised it’s possible to pay for these bills online using a credit card. For example, you get 3% cash rebate from paying these recurring telco bills by using the OCBC 365 Credit Card.

Pay less for groceries

My mother used to pay for the groceries using cash. It took some time but I finally convinced her to start paying for the groceries using a credit card. You can actually get 3% cash rebate from paying for groceries using the OCBC 365 Credit Card!

Pay less for dining at restaurants

Okay, my family does pay for restaurant dining bills using credit cards but they were using rewards cards i.e. earn points from spending and redeem for stuff. Personally, I’m not a big fan of rewards credit cards since I find the items you redeem for actually encourage you to spend more. The OCBC 365 Credit Card offers 3% cash rebate for weekday dining and 6% cash rebate for weekend dining.

Earn more interest

In Singapore, spending on certain credit cards allows for higher interest to be earned on certain bank accounts. For example, the link between the UOB One Card and the UOB One Account or the link between the OCBC 365 Credit Card and the OCBC 360 Account.

Why use credit cards?

The cash rebates accummulate and work by reducing the credit card bills in the next billing month. Granted, most credit cards have minimum monthly spending amounts before you qualify for the above generous cash rebates. It’s S$600 for the OCBC 365 Credit Card and there is a cap of S$80 on the cashback amount per month.

A good way to meet the minimum monthly spending amounts is to combine the spending of related parties. For example, I am the main card holder of the OCBC 365 Credit Card but my wife and mum are supplementary card holders. That way, I combine our separate telco, groceries and dining expenses to meet the minimum monthly spending amount of S$600 without each party having to spend more.

A credit card is a financial tool and a working adult should develop the discipline and learn the skills to utilise it. If you find yourself overspending and incurring large credit card debts, you have a much bigger problem than learning how to invest. I’m not saying you can’t be an investor without having a credit card. What I am saying is that the discipline and skills one needs to learn to be an investor is similar to that one needs to learn to use a credit card.

One of the many reasons above should be good enough to motivate you to start using credit cards effectively and efficiently. Don’t underestimate the cash benefits from doing so because a working adult in Singapore is actually spending on many of the items I have mentioned above and the cash rebates you are missing out on can really add up. The additional interest you can earn from linking the credit card to the bank account is also significant. More importantly, don’t overlook the discipline and skills you will develop from using credit cards well.

Mar 2016 Financial Update – BS

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As mentioned in my previous post on the Mar 2016 Financial Update – P&L, this post will focus on the Balance Sheet (BS) – Assets and Liabilities. Again, I will summarise the main points of consideration for each item.

Assets

We have been building up our investment portfolio more aggressively since 2015. This is especially so for the ETF and Share portfolios due to the volatility in the stock markets in the past several months. However, the buying activity of ETFs and Shares have slowed down considerably given the recent rally in the stock markets. Our strategy is to continue to be vested, invest every month but only increase our ETF and Share portfolios aggressively in months that the stock markets are doing very badly. The growth in the Other portfolio has been more consistent.

We have started holding more cash due to the increased risk of retrenchment and this is expected to be the case for the next few months. It helps to know that we have sufficient cash to manage all of our expenses for as long as necessary in the event of job loss.

In fact, we have started building up our Central Provident Fund (CPF) Ordinary Account (OA) as well so it’s possible to pay the entire monthly mortgage amount from the OA for several months to reduce any cash drain if required.

Liabilities

Our biggest liability is the mortgage i.e. housing loan. The monthly loan repayment amount is about 30% of our combined monthly income so you can imagine the size of the mortgage that is causing it. I have always wondered what it will be like to pay less than 30% of our monthly income for accommodation since we have always been paying about 30%. It was for rent when we were in Australia and now it is for mortgage when we are in Singapore. This is what happens when we try to retain aspects of our life in Australia here in Singapore.

The only other liability we have is credit card debts. Although we pay them off in full every month, we count each credit card bill as a liability since we will have to pay the full amount in cash via GIRO on the payment date. Monitoring our credit card bills is actually how we manage our expenses since we try to charge most of them to our credit cards. We only spend cash on certain items (e.g. food at coffee shops or hawker centres) or in places that do not accept credit cards (e.g. shop houses). This makes it easier to track our cash expenses.