Networth Update

Taking stock of what you own and owe.

WHAT IS THIS POST ABOUT

To chart my progression towards financial independence, I will (try to) take stock of my net worth every half-yearly. The last time I did a review was in May 2017.

I am going to use the same structure and format for this series of posts for consistency.

WHAT I HAVE

Growing your networth bit by bit.

I've been staying with my parents-in-law and renting out my DBSS flat since Apr 2016, as detailed here. The monthly rental income of $2500 was used to offset the mortgage payment of $2665. Since Apr 2018, our waiver to rent out the flat expired, and the rental income dried up. We are now digging into our cash savings to pay for the mortgage. If interest rates should go up further, we might consider using our CPF savings to maintain the mortgage.

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 - $140,000 [an increase of $30k]
2. Joint Savings with Spouse - $45,000 [$5k has been used for mortgage payments in Apr and May]
3. Daughter's Savings - $19,000 [this amount will slowly start to deplete as we use this to fund her childcare fees]
4. Son's Savings - $20,000

FD and Equivalents:

1. Dad's CPF - $26,000 (Can be withdrawn with short advance notice as my Dad is past 55 years old.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 in Oct 16 and another $6k in Jan 18. I treat it as a 10 year FD yielding 2.5 - 4% p.a.)
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. I am planning to contribute a further $7k this year. She will receive monthly payout from CPF LIFE when she reaches around age 65 to help offset her living expenses.) [contributions made in Sep 16; Jan 17]

Personal CPF:

1. Ordinary Account - $68,000 [an increase of $26,000]
2. Special Account - $49,500 [an increase of $13,500]
3. Medisave Account - $54,500 [an increase of $8,500]

Investments:

1. Common Stocks - $120,000 (market value on 31 May 18) [an increase of $33,000, mainly due to capital injection]
2. 331 Oz of Silver -  $7,282 (331 x $22)
3. Bonds - $1,010 (market value on 31 May 18)

TOTAL OWNED: ~$564,000 [previously: $444,100]

WHAT I OWE

The burden of debt.

I took on a car loan in Dec 2017. Yes I know, bad move, but with 1 infant and 1 toddler to lug along wherever we go, the car adds a lot more value to our lives.

1. Outstanding Housing Loan - $584,500 [a decrease of $17,000]
2. Car Loan - $57,000

TOTAL OWED: $641,500

MY GOALS FOR 2018

My networth has been on a steady increase ever since I started working about 6 years back. Even with the birth of my two lovely children, we were still able to keep our expenses lower than our income. 

However, I've made a decision for a career-switch. Though I hate my current job, I struggled with leaving because from Jul 18 onwards, if I'd accepted the promotion, I will be paid in excess of $150k p.a. 

I will likely take on quite a big pay cut, but for my long term happiness and sanity, short term pain is necessary.

I am happy to simply maintain my current level of savings for the next 1-2 years. Hopefully my paycheck will recover to its current level soon.

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.

Networth Update

Taking stock of what you own and owe.

 WHAT IS THIS POST ABOUT

2016 is coming to an end, and I thought it might be useful to take stock of where I am now financially. I've stayed prudent and thrifty for the last 4.5 years since I started working, but I've never taken stock of my financial position. Instead of setting aside fixed budget every month, I view every spending opportunity independently, and rely on my principles (more on this in a separate post) to guide my spending decisions. While I can be sure that every cent I spend is well worth it, and that there are no more "fats to be cut" without inflicting much discomfort on myself or on people around me, I won't be able to say with certainty how much I've been adding to my net-worth annually. By putting down in details my financial status year after year, I hope to better quantify my progression. This is the first stock-take I will be doing, so wherever I am now today will set the baseline. I aim to do a review bi-annually.

WHAT I HAVE

Growing your networth bit by bit.

Let me first detail what I have. 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
2. Joint Savings with Spouse - $50,000
3. Daughter's Savings - $19,000 ($13,000 in her CDA; $6,000 in cash)
4. (Unborn) Son's Savings - $10,000 (Part of this will be used to pay for the delivery expenses in Mar 17)

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.)
2. Mum's CPF - $7,000 (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.)

Personal CPF:

1. Ordinary Account - $31,000
2. Special Account - $31,000
3. Medisave Account - $45,000

Investments:

1. Common Stocks - $42,000 (market value on 23 Dec 16)
2. 1 Oz Canadian Silver Maple -  $1,177.50 (50 coins x $23.55)
3. Bonds - $1,000 (market value on 23 Dec 16)

TOTAL OWNED: $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 $2,680. Very substantial in relations to our income.

1. Outstanding Housing Loan - $610,000

TOTAL OWED: $610,000

MY GOALS FOR 2017

So where am I going next? For 2017, I am targeting to sock away $30,000 (inclusive of the $7,000 I will be contributing to my mum's SA) from my salary, and joint savings of $25,000 from our rental income. We are expecting our son in Mar 17, and I hope that the additional expenses will not set me back too far from my target.