Finance Smiths

Personal finance apprentices-in-training

Condition of Anonymity and Stealth Wealth

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Went out for dinner yesterday at Bar-Roque Grill on Tanjong Pagar Road with my wife’s family to celebrate birthdays and Father’s Day. Good fine and wine makes for a nice celebration. My wife and I should also be going out by ourselves for a Japanese lunch tomorrow on our day off. Always important to have couple time no matter how busy we get.

Random topic that just popped into my head. Have you heard of the concept of stealth wealth? The idea that the wealthier you become, the more hidden in society you get. I first read about it on Financial Samurai – The Rise Of Stealth Wealth: Ways To Stay Invisible From Society If You Have Money. It talks about how to practise stealth wealth and its benefits. Fascinating read!

Not that it is easy to do in real life. My wife’s family is a good example of this. You can consider them upper middle class in the Singapore society. They live in a freehold terrace house in the East Coast that is fully paid off and renovated with the works several years ago and own 2 nice cars that are also fully paid off. Their monthly spending on dining, shopping, travel and entertainment is equivalent to ours despite not having any more loans to deal with. However, this may change now that my mother-in-law just retired.

Although my parents-in-law don’t say it, the perception that they have more than enough money to spend on what they want is important to them. I reckon the circle of people they meet and interact with contributes to this as well. After all, you are going to attract people who think and behave in a similar manner as you over time.

When I first met my wife, you could tell the same tendency in her. But the biggest benefit of meeting your partner young is that there is time for you to change for the better for each other’s sake. Studying, working and living overseas in Australia where the society is more laidback about wealth also helped to ingrain in us a more grounded approach to money.

I wouldn’t say stealth wealth is easy to practise in Singapore. Even we have taken advantage and made use of my parents-in-law’s financial status. It takes conscious effort and constant reminder that we are fortunate to be in such a position. Humility is an attribute we consistently try to forge in ourselves. But we have heard people that we are not close to talk about us in a negative light. There are critics everywhere no matter what you do.

Which brings me to my next point about the power of anonymity. I enjoy writing about our personal and financial pursuits in the public space because I can debate the internal and external challenges, difficulties and doubts without hindrance. Of course, this is only possible without the fear of getting judged based on the sole condition that we remain anonymous.

I have no interest in revealing my identity, bringing more traffic to my blog or passing my knowledge on to more people in the public space. Readers can takeaway the parts that are relevant and discard the rest that are not. With this polarising approach, monetising the blog becomes almost impossible. Which is fine with me for now. Maybe one day, I might do something personal finance related that actually generates income. But it wouldn’t have anything to do with Finance Smiths. This is my personal space that I hope to maintain for a long time. Well, as long as people don’t figure out who we are.

Aiming for S$1 million in Total Assets

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It’s my 31st birthday weekend and I’m taking next Mon off with my wife to celebrate it. Maybe a nice steak dinner since the last time we had it was during the US trip. As work is picking up pace again for both of us due to our respective project delivery timelines, it’s good to have 2 consecutive long weekends to look forward to.

June is always the time to do a half-year review of how the first half of the year has gone so far. It helps to work out the points for improvement you can take forward for the second half of the year. Since my birthday is in June, I get especially reflective during this period of time. What with becoming another year older and all the successes, failures and doubts that come with it.

If you haven’t noticed, the title of this post sets out our main target for the next year – to hit S$1 million in total assets (excluding the market value of our apartment). I refuse to include the value of real property in our total assets calculation. Not until our apartment becomes income-producing in some way or I become a real estate investor.

As you can see from our net worth page, we calculate our total assets as the sum of the following:

  • SG and AUS Cash
  • SG and AUS Equities – ETF and Stock
  • SG Corporate bonds
  • Surrender value of our SG wholelife insurance policies
  • Retirement funds (CPF in SG and Superannuation in AUS)

Why a specific number of S$1 million?

I have been watching our total assets climb slowly in Australia before increasing at a faster rate in Singapore. S$500k was the first major milestone for our total assets and we reached this a few years ago in Dec 2014 after 5 years of working. S$1 million was the second major milestone and after 2.5 more years of working, we are probably still a year away from reaching it.

S$1 million is significant because my belief is that it’s only after that point that you really start to accumulate some financial wealth. The kind that makes inter-generational wealth transfer possible if we decide to have kids. It’s also the level that gives you the real possibility of reaching early retirement and financial independence.

This is the number that represents the decision we will have to make upon attaining it that will shape our life philosophy and approach for the next decade. Assuming we will have kids by then. Should we start to seriously explore transitioning out of full-employment and into self-employment to free up more time for the family? Or should we push for greater heights in our careers just to see how far we can go but at the risk of spending less time with the family?

What does this mean for us?

Given that it might take us another year to achieve S$1 million of total assets, I don’t consider us within striking distance of this goal. Especially when a lot can change in the next year. But it does mean that 2018 – the year my wife hits 30 and when we hope to have our first kid becomes a crucial year.

The fact that this financial target coincides with possible parenthood can’t be a coincidence. When you look back at your life, there are certain points or moments in time when something happened or a decision was made that changed the entire course of your life. The power of hindsight to identify them that does so little to help you prepare for similar events in the future.

There were 4 of them in the past decade for me:

  1. Going to Australia instead of London for undergraduate study and meeting my wife in 2007
  2. My wife landing a graduate position in a local bank in 2009 that convinced us to stay in Melbourne
  3. We moved to Sydney in 2012 after my wife couldn’t find a permanent position in Melbourne
  4. We returned to Singapore in 2014 because we wanted a change in our lifestyle after spending 7 years in Australia

I can’t emphasize how important it is when you are choosing a partner to spend the rest of your life with. Just look at the 4 key events for me. It all started with meeting my wife in the first year of university. And the direction we were headed in shifted significantly every few years because of our circumstances. Don’t underestimate the effect and influence your partner can have on you.

What did it take for us to get here?

There is no blueprint or roadmap for this. But I can share with you our real-life combination of factors that got us here:

  • Both of our families are middle-class to upper middle-class. Our parents funded our overseas tertiary education and gave us the opportunity to develop ourselves in a different environment. We changed so much because of this experience and most of it was positive.
  • We had little financial burden and few things to worry about with our families. Our parents and siblings are generally self-sufficient and got along with each other. This meant we could just focus on ourselves the entire time. And none of us had major health issues.
  • Huge doses of luck at just the right time. Studied commerce degrees that facilitated obtaining PRs, which in turn made it easier to be professionally employed full-time, at a time in Australia and subsequently Singapore when they were booming, with jobs in firms/industries whereby the skill sets are transferable across cities and countries. Just look at the number of things that had to line up.
  • Being average but be engaged and consistent. People constantly talk about being exceptional, high-flying, etc. It’s as though being average is the worst thing that can happen to you. Look at us. If you knew what we are like at our jobs, we are the most average employees you will find in terms of performance, especially in Singapore. We don’t over-plan our career trajectories but go with the flow where opportunities arise. We don’t like working long hours and don’t enjoy high-pressure/stress environments.
  • Be patient and don’t over-think stuff. So many people are in a rush to get somewhere in their careers that they either take on too many responsibilities, too much risk or funnily enough, too little risk. And there’s a tendency to over-think every step of the way. More often than not, it’s better to just take that step and see how it goes instead of waiting for everything else to happen first. Most importantly, stop looking at what everyone else is doing because you are the one that has to walk the path you choose.

 

Self-interest and tuning out on pay day

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It’s pay day today. Which is always an exciting time for me. In some months, I have so many plans for what to spend my pay on that I’m quite conscious of counting down to the day itself. E.g. Clearing the credit card bills, mortgage, investments, savings etc. In other months, the day just creeps up without me being aware of it.

This usually has to do with how busy I am at work. I like both types of months and it’s good to have a mix of them. It means my workflow is consistent but goes up and down depending on the timelines of the project. Having this ebb and flow makes work more interesting and less monotonous.

The problem with this particular pay day for the month is that all of it will be used to pay the credit card bills we racked up from the trip to US last month. Which now makes the whole thing a non-event. Sigh, would have been nice to have some savings this month. Good news is that my wife gets to keep most of her pay this month since her pay day is next  week. But she doesn’t get excited about such stuff.

Anyway, I realised I’m getting better at ignoring all the financial news and commentary that’s happening every day. I used to think it’s important that I follow them on a daily basis to keep myself in the loop. Now, I only track major financial events and tune everything else out.

It got annoying trying to understand and make sense of all the financial information and opinions out there. Maybe if I start becoming more financially ignorant, I might actually stick to my index ETF investing strategy more closely. Less likely to meddle with the approach.

Yes, I know there is quite a bit of criticism out there on investing in ETFs. Honestly, it just seems more suitable to me as I get lazier in my own financial research and analysis. I have better things to do outside of work and the job already soaks up most of my work day. Which brings me to my next point about self-interest.

Everyone out there is predicting all sorts of stuff that can happen to the economy, jobs, stock and property markets. These are some of the things on my wishlist for the next year until Jun 2018 and I want to revisit them then to see if they materialised:

  1. Keep both our jobs and still receive annual pay raise & performance bonus after the divisional restructuring. Would be nice not to get retrenched and lose our salary income.
  2. Stable property market with gradually decreasing property prices. We already own one private condominium and are not yet in a position to invest in a second private condominium.
  3. Low housing loan interest rate below 2%. With a S$600,000+ mortgage, any spike in the housing loan interest rate has a significant impact on our monthly expenses.
  4. Stable equity market with gradually decreasing stock prices. We Dollar-Cost Average (DCA) every month into Singapore ETFs and it’s better to average downwards than upwards.
  5. On our way to having a kid. Since we are planning to start a family eventually, having our first kid when my wife is 30 seems about right. It might already be considered late for some people but it’s early enough for us. I reckon it will be a bigger adjustment for my wife than me but we are both going to have to work through it together.

I know the last point is non-financial but it’s important enough to be put in. You could be wishing for an entire different list altogether depending on your personal and financial circumstances. After all, we want what’s best for ourselves. I wonder whether hoping for these things to happen is a strategy. Just waiting patiently can be a skill in itself. Keeping my fingers crossed!