The All New DBS Multiplier Account!

Well, finally DBS is catching up with the other banks. I think for the longest time, they have such strong local foothold that they are flooded with cash (probably from the older generation who still believes that DBS is backed by the government and therefore, is the safest place to put their money), hence negating the need for them to be more aggressive in pursuing new deposits. Finally they are waking up.

Cutting to the chase, I think this is an awesome account. As long as you credit your salary with them, and transact in 1 other category, you get to earn bonus interest. The interest is even higher if you transact in 2 other categories. Take a look at their interest rates table:

What's more, there is no minimum credit card spend required, and POSB invest-saver qualifies as transaction in the "Invest" category.

More details here.

Possible Combo with DBS' Be Your Own Boss Account

I blogged about the merits of DBS' BYOB account here.

Well, I've signed up for it, and since I am already crediting my monthly salary to POSB (previously I was crediting my salary to BOC SmartSaver account), I might as well look at how else I can benefit from this arrangement right?

So the revision to the Multiplier account came just at the right time. Take a look at this table:

When I signed up for BYOB account, I'm already prepared to credit my salary with DBS, and make 5 transactions on any DBS/POSB credit/debit card. Without any additional effort on my part, I can already qualify for bonus interest with the DBS Multiplier account. That's what we call SYNERGY!

The only additional effort that I might possibly make is to sign up for POSB invest-saver, to qualify for the higher tier interest. I think I might just do that.

POSB Cashback Bonus as an Alternative

DBS Multiplier account is good for those who have savings (the bonus interest is applicable for the first S$50,000). For young adults who are just starting to build up their stash, a good alternative to the Multiplier account is the POSB Cashback Bonus.

Well, again, this can be layered with BYOB account, the only difference being that signing up for Invest-Saver is no longer an option if you want to be eligible for earning the cashbacks.

Still, I think this is a great combo with BYOB account for those who don't have much savings.

P.S. I previously blogged about how DBS Visa Debit card is a good combo with BYOB account here. Do note that spending on the debit card will not fulfill the "credit card spend" requirement for both the Multiplier account and the Cashback Bonus; You have to use a credit card. Well, my plan is to use my DBS Esso card once a month, and use the DBS Visa Debit card for an additional 4 times to hit the requirement for BYOB account.

DBS Visa Debit Card - Possible Combo with BYOB Account!

And so I signed up for the DBS Be Your Own Boss (BYOB) offer which I blogged about here.

Starting from this month, I will be making a monthly regular savings of $3000 into the account to maximise the offer, which is only valid for 2 years.

To earn the bonus 2% interest, I have to make 5 retail transactions using DBS/POSB credit/debit cards.

But I don't have any decent card from DBS/POSB.

Well, I have the DBS Esso card, but the discount is not that great compared to using UOB ONE Card at SPC.

I also have the POSB Go! debit card. Nothing much to say about this card really. It's just a plain vanilla debit/atm card.

So the hunt for a useful DBS/POSB card is on!

Because I already have to make minimum spending to earn higher interests in my other savings accounts, I don't want another card that has hurdles to jump through.

I was all ready to simply use my Go! card to make the 5 transactions, until I came across the DBS Visa Debit card!

5% cashback with no minimum spending and no annual fees!

Awesome stuff.

But nothing comes free. To qualify for this 5% cashback, you have to make less than 3 cash withdrawals across all your DBS/POSB accounts in a month. The total value of your withdrawals also must be $400 or less. Full T&C can be found here.

Sounds easy enough, as I am already going cashless whenever possible.

If you are in a similar situation, this card might work for you as well.

DBS Be Your Own Boss - A Very Attractive Offer!

I am one of those who have been waiting for the next big crash to come, opting to construct my portfolio with more than 50% cash. Well, sitting on a pile (small one for me) of cash is not the gloomiest situation, but watching them eroding away by inflation day after day is not exactly enjoyable either. For anyone who wish to grow their wealth, keeping cash that generates close to nothing is hardly a palatable proposition.

Thankfully, the banks are competing hard to get our cash parked with them. I've been parking my warchest in UOB ONE and BOC SmartSaver accounts, with the former yielding an average of 2.43% p.a. and the latter, between 1.55% to 3.55%. I was actually quite happy to continue with this arrangement until I chanced upon SGBudgetBabe's post on Be Your On Boss (BYOB) offer by DBS. More details on the product website here.

On first look, BYOB offers interest rates of up to 4% for the next two years if you do the following:

That's simple enough, but do scroll to the bottom of the product page and read through the terms and conditions. Of note, to qualify for this offer, you must be between 18 to 30 years old, and with no salary credit arrangement with POSB/DBS between 1 Sep 2016 and 28 Feb 2017.

Interest Calculation

Being slightly more mathematically-inclined, I was wondering how the interests are calculated. Below is an illustration provided by POSB/DBS on interests calculation:

On first look, it does seem like the interest are not credited and compounded monthly. Upon further investigation, I found out that the "Additional 2% interest" only applies to the original amount credited + interest earned in the preceding month. The "Bonus 2% interest" only applies to the original amount credited into SAYE. This all sounds very confusing, so I tried to reverse engineer the whole calculation process:

I tried various methods of calculating, but I simply couldn't get the exact figures provided by the bank. The above table shows the closest attempt I managed.

If I changed the monthly saving amount to $3000, this is what I get:

A total interest of just over $3000 over 2 years. Neat.

Just to satisfy my curiousity, I wanted to find out what's the equivalent rates if interests are credited and compounded monthly, instead of the convoluted way of calculation that POSB/DBS has decided to use. I've learnt not to trust headline numbers so readily. This is what I found:

An equivalent interest rate of approximately 3.9%. Not too different from the headline numbers, fortunately.

To Sign Up or Not to Sign Up?

Numbers don't lie, and I think this is one of the best places to park your excess cash at the moment. You might lose some liquidity though, since to qualify for 4% (or 3.9%) promotional rate, you are not allowed to make any withdrawals.

On the flipside, at least you know for certain the amount of interest you will get at the end of the 24 months. Neither UOB ONE nor BOC SmartSaver can give you this certainty, since the terms for those accounts can be changed overnight.

Oh oh oh....and if you sign up before 31st Oct, you get an additional $88 as a welcome gift =)

P.S. This is not a sponsored post. My blog is not popular enough for that, so you can be assured that all opinions contained herein are those of mine and mine alone.

On Child-Raising

I just had a minor exchange with my spouse. Though unrelated to personal finance, I felt that the episode and the resulting realizations are worth sharing.

Background

With the arrival of my second child, we moved in to my parents' place as we felt that the maid alone cannot handle both children. We were staying with my in-laws previously, but my mum-in-law didn't want to be at home to help out with the children - she has her own retirement activities. Hence, other than having my wife becoming a stay-home-mum, our only other option is to move in to my parents' place for my mum to help out with the children.

Not-So-Good Relationship Between the Two Dowagers

As with almost all other cases I've heard, my spouse's relationship with my mum leaves much to be desired. The cohabitation started off rather badly, but over time, they learnt to stay out of each other's way and the situation improved - but not quite enough.

The unpleasant exchanges between the two ladies stoked my wife's desire to move back to our own place. We are fortunate to have a trustworthy and capable helper, hence my wife felt that we could leave the kiddos with her at our own home. I don't agree.

Potential Risks of Leaving Our Children with Only the Helper

While I don't proclaim to fully empathize with the unhappiness my wife has to put up with, I feel that the potential downside for moving out is far too great to be worth risking.

First, young children's capacity to learn is beyond the realm of our imagination. By putting them in an environment where there is only one adult (the helper) for most parts of the day, we might be, albeit unintentionally, artificially limiting their learning and growth. There is so much that a growing toddler needs and is able to learn, and nature has helped facilitated this by making them extremely curious and observant. Toddlers are further endowed with the ability to take in information from multiple sources - so many that they themselves might not even be conscious of. Even in the absence of planned, deliberate "teaching", young children are constantly learning, picking up new knowledge and making sense of the world around them. When my wife said she doesn't feel like my mum is teaching the children anything, hence justifying why there is no added value in staying with my parents, I knew she has massively and mistakenly underestimated the amount of learning done by the children through casual interactions with, and observations of the people and happenings around them. The immersive experience of listening in to conversations between adults, observing how adults behave and interact with each other, and sensing emotions under different situations is hard to replicate in a household consisting of only the helper and the two children. a tiny household is more "sterile" and provides less stimulus and learning opportunities for toddlers.

Second, our children will start going to pre-school very soon, and that is when they will start getting exposure to many other things - both good and bad. As toddlers, they will no doubt be excited to talk about their experiences and learning in schools. Staying with my parents means that they will be able to talk to them while my spouse and I are at work. This interaction provides my parents with "teaching moments" to impart correct life values, demystify/clarify misconceptions/misinformation, nudge them in the correct direction if they are going off-course, and finally, discipline them when required. The helper cannot be expected to do the same, and we risk our children becoming self-entitled if their needs and wants are always pandered to by the helper.

Permanent, Irreparable Consequences VS Fleeting, Temporary Unhappiness

The two potential consequences of leaving the children with only the helper are irreversible and permanent. Contrast this with the fleeting and temporary unhappiness that my wife has to put up with for perhaps 2 more years, and the sensible choice to make becomes obvious. Now, I am not saying that our moving out will definitely turn our children into delinquent, self-entitled teenagers - child-raising is never this straightforward - but as parents, we should strive to provide the best environment (not materially) that gives the best chance of nurturing our children into independent, confident, and healthy adults.

Passive Income Update

It has been a while since I last consolidated my passive income. Instead of waiting for the new year, I shall attempt to do a mid- (or more like three-quarter) year review.

The journey towards financial freedom is a long and arduous one, which makes it really easy for me to lose steam and lose sight. I hope that this stock-take of my achievement thus far will put me back on track and provide me with the motivation to push on.

Let's cut to the chase:

9M interest income = $3135.17

9M dividend income = $2839.24

Total passive income for first 9 months of 2017 = $5974.41

This works out to be $663.82 per month.

I need to caveat that the interest income is expense-driven, i.e. by fulfilling credit card spend requirement to qualify for higher interest rates on saving accounts like UOB ONE and BOC SmartSaver. This source of income is not foolhardy. In the event that I lose my job, I will have problem hitting these minimum credit card spend requirements, thus drying up this income stream. 

For dividend income, I must say I haven't been exactly building up my portfolio with high-quality, high-yielding counters. Often, I am tempted to trade, taking profits and trying to buy back lower. Not being able to do this well means that my overall portfolio yield hasn't been fantastic, as oftentimes I will miss the chance to buy-back lower as the counter continues to scale higher prices. Though I am trading much, much lesser now, my self-discipline still has rooms for improvements.

More than 50% of my holdings are in cash now. I will lose sleep and make more emotionally-driven buy/sell decisions if I allocate more to stocks. Holding more cash while markets continue to break new highs gives me peace of mind. 

Networth Update

Taking stock of what you own and owe.

WHAT IS THIS POST ABOUT

This post is a continuation to my previous one, in which I proclaimed that I will do a review of my financial status every half yearly. I might be 1 month too early to do a review now, but with two young children to take care of, it makes sense to start working on this whenever I get some pockets of free time to do so.

I am going to use the same structure and format as the earlier post for consistency.

WHAT I HAVE

Growing your networth bit by bit.

Let me first start off by detailing what I have. As before, I'm going to exclude the DBSS that my wife and I bought because we still have a big mortgage to service, which makes our flat more of a liability than an asset.

Cash and Equivalents:

1. Personal Savings - $110,000 [no change]
2. Joint Savings with Spouse - $50,000 [no change]
3. Daughter's Savings - $20,000 [an increase of $1,000]
4. Son's Savings - $16,000

FD and Equivalents:

1. Dad's CPF - $20,000 (Can be withdrawn with short advance notice as my Dad is past 55 years old. Basically, instead of him withdrawing from his CPF at age 55, I gave him $20k cash. I treat it as a 10 year FD yielding 2.5% p.a.) [Since Oct 16]
2. Mum's CPF - $14,000 (My mum has minimal CPF balances, hence I've decided to contribute to her SA and getting some tax relief in the process. She will receive monthly payout from CPF LIFE when she reaches around age 65 to help offset her living expenses.) [Sep 16; Jan 17]

Personal CPF:

1. Ordinary Account - $42,000 [an increase of $11,000]
2. Special Account - $36,000 [an increase of $5,000]
3. Medisave Account - $46,000 [an increase of $1,000]

Investments:

1. Common Stocks - $87,000 (market value on 23 Dec 16) [an increase of $45,000, mainly due to capital injection]
2. 87 Oz of Silver -  $2,087.13 (87 x $23.99)
3. Bonds - $1,015 (market value on 26 May 17)

TOTAL OWNED: $444,100 [previously: $367,000]

WHAT I OWE

The burden of debt.

The only liability that I have is the $650,000 housing loan that my spouse and I took from HDB. Monthly mortgage is about $2,668. Very substantial in relations to our income.

1. Outstanding Housing Loan - $601,000 [a decrease of $9,000]

TOTAL OWED: $601,000

MY GOALS FOR 2017

The goal I set for 2017 is to sock away $30k, including the $7k I am putting into my mum's CPF SA. I've already exceeded that target in the first 5 months of 2017, as seen in the (more than $70k) increase in my total networth. Even if I take out the increase in CPF balances, I am still way above my initial target.

To be fair, the baby bonus (received $3k thus far) and CDA contributions/matching by the government ($6k in total) helped to bump up the figure a fair bit too. All my children's money are in their respective CDA accounts, earning 2% p.a. Not too shabby to be honest. =)

Addition of New Family Member!

And so I just received my second bundle of joy about 2 months ago. After experiencing having two young children at home (my elder one is 18 months older), my wife and I sort of agreed to "stop at two".

"Maintenance" cost of children is really high, not only in monetary terms, but emotionally as well. While they are a joy to have, their insatiable thirst for attention sometimes make my wife and I wonder if it's a fair trade afterall. Only when they are taking naps (at the same time) will we get some breathing space.

Anyway, since this is a financial blog, I will briefly share the cost of my wife's pregnancy.

From the first consultation up till delivery via cesarean at Thomson Medical Centre, the total amount that we've spent is about $11,000. Below are some brief details on the pregnancy for reference:

1. Total number of consultation with private gynae: 8 (each session costing around $160)
2. No complications - smooth pregnancy
3. Took the basic test for Down Syndrome [I think it's OSCAR test. The cheaper one]
4. 3-nights stay in single ward in TMC
5. Cesarean delivery

While I have the exact breakdown of the expenses, I don't think it's useful to share it here as everyone's situation will likely be minimally, slightly different. A ballpark figure should be useful enough for aspiring parents.

The cost of raising a kid is not to be underestimated. As much as we try to cut down on our expenses, there are many expenditures that simply can't be avoided. For instance, while we try to source around for free baby clothes and shoes and what-nots, and buy from carousell as much as we can, we can't use second-hand diapers and milk powder. Also, even if we don't believe in sending our children to "branded" pre-schools, we would be hard-pressed not to even send them to PCF or MyFirstSkool when they are about 3 years old. If anything at all, they will need to pick up important social skills. School fees itself will set a family back by about $500/month/child. 

And these just form the tip of an iceberg. Compound that over 20 years, the amount is phenomenal for a middle-class household.

Well...suffice to say that I just took 10 steps backwards in my journey towards Financial Freedom. Haha. 

Update on Progress / Key Financial Moves Taken

The last time I took stock of my financial position was about 2 months ago, towards the end of 2016 here. I was actually planning to take stock every 6-monthly, but because I did quite a couple of things in the first 2 months of 2017, I thought it might be useful for me to keep track of them in my blog.

1. Top up my mum's CPF

As a promise I made to myself, I contributed yet another $7000 to my mum's CPF Special Account sometime in Jan this year. As CPF interests are computed monthly, I made a deliberate decision to put in the entire sum right at the beginning of the year to maximise the amount of interest I (or rather, my mum) can receive. It wasn't as hard this time round since I've very much prepared myself emotionally for it.

2. Made multiple investments in stocks.

I built up my stocks portfolio quite substantially in the last few months, taking advantage of price weakness whenever they surface. I am just starting out on this journey of investing for the long term, and the hardest part is controlling my own emotions. I used to trade a lot with very bad results. Lost a sizeable amount of my savings. Hopefully I will learn to be become a more skillful master of my own emotions.

Specifically, I bought the following:

a. Asian Pay Tv @ $0.38
b. FIRST REIT @ $1.255
c. AA REIT @ $1.275
d. DBS @ $15 [But I sold it off too early at 16.35. Another hard reminder to myself not to meddle with my positions unnecessarily.]
e. M1 @ $2.39 and $2.16

I made a deliberate decision to divert some of my funds for foreign stocks to reduce geographical risk. I didn't like US because of the high taxes, choosing Hong Kong instead. I bought the following:

f. TVB @ $25.70 and $26.90
g. SJM @ $6.02

3. Made a partial capital repayment of $2665 for my HDB mortgage loan (by mistake).

I am receiving about $2500 monthly from renting out my HDB. For the first 8 months, the cash just goes straight into my savings account. However, the amount of cash I am holding has reached a point where I find it hard to generate decent returns. I've used up all my options already: UOB ONE, OCBC 360, and BOC SmartSaver. Any additional cash that I continue to accumulate will have to go straight to CIMB Fastsaver, which only earns 1% p.a. To be fair, it's a good rate given that there are no hurdles to jump through. However, as compared to the 2.6% which I am paying for my mortgage, earning 1% on my cash will mean that the cost of holding that amount of cash is actually 1.6%, which to me, is rather high.

So I am left with 2 choices. First, I can use those accumulated rental income to make a one-off partial capital repayment of my loan, hence saving me on interest. However, this will mean that my income tax will increase as my rental income less interest paid will increase. Or, second, I can use the monthly income to pay the mortgage installments, so the money in my CPF will be left untouched and can start to build up and earn the 2.5% interest. When I eventually stop renting, I can then have the option of using the entire sum in my OA to pay down my loan. The cost of holding "cash" in OA as compared to paying off the loan straight off is only a mere 0.1% (ignoring the additional 1% to be earned on the first $20k in OA for simplicity).

Mathematically, the second option is better, as money in OA is a form of buffer to continue servicing the mortgage loan should I lose my job. I will also be better off as the amount of additional tax I would have needed to pay is more than the 0.1% holding cost. Hence, given all these reasons, I tried to find ways to pay my outstanding monthly mortgage in cash before deductions are made from my CPF accounts. To cut the long story short, I made the cash payment, but the CPF deduction still happened. I emailed HDB to ask them how can I change the default payment method from CPF to bank GIRO. Waiting eagerly to hear from them.

Conclusion

So that's it! These are the few things I've done in the last few months. My personal cash savings is still at $110k, and joint savings with my wife is still $50k. Nothing else has changed much besides the above.

Using the Law of Diminishing Marginal Return to Guide Our Spending

"Pay yourself first", "Have a budget" - these are financial advice all of us hear too often. I started off heeding these advice as well, setting aside money to be saved and money to be spent every month. While I am not about to write in detail the pros and cons of each of these systems, I would like to suggest an alternative method to guide our spending. 

Let me illustrate the method with a story.

An eatery serving local traditional fare like bak chor mee and laksa.

There is this eatery called EAT near my workplace. Every time I stand in queue waiting for my turn to place my order, I will be running through this thinking process to decide what I will eat:

1. One bowl of fishball noodles cost $4.20. One bowl of minced meat noodles cost $5.00. I am paying $0.80 more to change my fishballs for minced meat, some tiny pieces of mushroom, and one fried wanton skin. Is it worth it? Though I would very much prefer the latter option, I almost always choose to order fishball noodles instead.
2. The price quoted above is inclusive of a hot drink, either hot tea or hot coffee. On my first visit, not knowing better, I opted for a glass of iced water chestnut instead of the standard hot tea/coffee. I was expecting to top-up $0.50 for the change. But no. I was made to top-up $1.50. And then I asked: "How much does it cost to buy the cold drink on its own?". "$1.50" was the reply I got. WHAT?!?!?! My mind was blown. Since then, I will always take the default hot drink, no matter how warm the weather is.

So what went through my head?

First, I have to decide what's the marginal utility I gain from eating minced meat instead of fishball. For the benefit of those who does not know what that means, just answer these 2 questions:

On a scale of 1 to 10, what level of enjoyment do you derive from eating minced meat?

On the same scale, rate your enjoyment level from eating fishballs.

The difference between the two scores is the marginal utility you gain from eating minced meat instead of fishball.

Now, would you pay $0.80 more for that marginal utility?

I won't. I like minced meat more than fishball, but I don't like it that much more.

Next, apply the same principle to your choice of drink.

If I have a cup of hot tea/coffee, I am definitely not going to trade my cup of tea/coffee PLUS $1.50 for your glass of cold water chestnut. It's not a fair trade. You are taking advantage of me.

What blows my mind is that almost all my colleagues will go for the minced meat noodles and the cold drink!

And they tell me "don't need to save until like that lah!"

I suppose they have a budget for every meal, so as long as they do not exceed that budget, they are good with it.

But that's hardly the point.

Don't buy something just cause you can; Buy it because the utility gained exceeds the pain associated with parting with the money used (or the utility preserved by not parting with that money).

That, I guess to me, is the point.