Jan Expenses

I'm always too lazy to tabulate my expenses, but this time round I had some time to do it.

Food	180
Meals at home (est.)	200
Entertainment	14.5
Transport	50.25
Gadgets	1.15
Housing	69.5
Property tax (est.)	10
Total	525.4

I didn;t include insurance costs this time. Anyway for non-saving insurance, my cash expenses are only < $80 for AVIVA term and PruShield + Extra -- more than enough to cover any terminal illness. 

Food & Groceries

This is the amount spent on meals outside on working and non-working days, including restaurants. I hardly eat at restaurants nowadays, so I just go have a drink and chill. I sometimes go coffeeshops to chill as well -- get a cheap beer or tea like a true "uncle". I hate noisy places so I don't go to crowded bars, clubs, etc. You can hardly talk over there. I enjoy quality conversations as a form of bonding rather than superficial enjoyment.

I regularly buy groceries such as milk and snacks. I always buy soya milk (with the 2 cartons for $3.xx promo).

Meals at home

This is just pure estimation. My mother does all the cooking and she often cooks salmon and other good stuff, so I put it at a higher estimate. Sometimes she gets salmon fish head for free or at a very low price and it's yummy when pan-fried!

I don't pay her directly for this expense but it is paid as the monthly allowance.

Entertainment

This is for one movie on Tues at GV for 2 pax. $6.50/pax + $1.50 for booking fee.

Transport

One ez-link topup with a convenience fee of $0.25. This happens once every few months as I sometimes take bus from my workplace to other places for lunch.

Gadgets

One 2m iPhone charging cable bought from Qoo10. Yes only $1.xx including delivery by mail. Better than Challenger which sells for $5. The factory price is probably only $0.10 haha .. imagine the margin!

Housing & Property tax

Help my mum pay for the town council fee and property tax as part of the allowance.

Car-related expenses

Car	432.44
Parking	86.88
Cash Card	20
Parking (work)	110
total	649.32

These include petrol, car washes, regular polishing package (instalment) and insurance. The insurance is on the high side as my license is quite new.
The parking is for outdoor season parking at home and at work as well as adhoc parking paid using the Parking@SG app.
Cash card cost is for adhoc parking outside (estimated).


Looking at my expenses, it is quite hard to reduce further. Food is easily the largest category (non-car) but it is hard to reduce without resorting to eating economical rice or sandwich every day (although I do eat them quite often).



When I move out and have my own housing, the expenses will go up due to utilities. I intend to use fans to save $.

Why I do not buy festive goodies

I have become more and more frugal over the years since the days of splurging on excesses that I did not really need. In fact on hindsight I regretted my financial choices and wondered what's the point of spending money on moments that do not last. For example, I had once splurged $80 on a crab buffet -- it was only enjoyable at that moment. I'm pretty sure I couldn't and didn't consume $80 worth of crabs and hence I would be better off achieving the same economic utility or satisfaction somewhere else with a much smaller budget. Satisfaction only increases marginally on increasing expenditure beyond a certain point, so why not save most of the money and spend somewhere else?

Sometimes I do spend slightly more depending on the situation, for e.g., outing with strangers and "important people", as I do not want to convey an impression of stinginess. But when I'm with familiar friends and family, I always go for the cheapest. I find that most often, I can go with the cheapest options without compromising much on quality, if at all.



It's the same with over-priced festive goodies. It's Chinese New Year again and I did not buy a single goodie although my family did. I wouldn't buy even if they didn't. Festive goodies used to be my favorites but not anymore as I realised I could derive the same satisfaction with a smaller budget. As I have reached a third of my expected lifespan, I need to start taking care of my health by avoiding such foods.

I also did not celebrate Valentines' Day as I think it is really just another ordinary day. If you wish, any day could be Valentines' Day. It seems to me it is a trap designed to rip off consumers with over-priced flowers and goodies.

How to save on income taxes

My philosophy of managing wealth is to maximise the income and investment returns while aggressively cutting costs. Always go for the cheapest while not compromising on quality if possible. In this case, taxes contribute to nation building which has little direct visible impact on myself.

This page is your best friend on how to reduce taxes: https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals--Reliefs--Expenses--Donations-/#title7

Parent Relief

The most common I can think of is the Parent Relief since many of us still stay with parents here in Singapore. Yes as long as your parents are no longer working (< $4,000 annual income) and staying with you, you can claim relief for it. See the page for the exact criteria. You'd have to manually submit this claim in your annual income assessment as the government won't know automatically you fulfill the criteria or not (although technically they have the means to do it).

I realised it only after a few years of working which fortunately wasn't too late as I was able to retro-claim the relief up to a few years back (i.e. IRAS giving you back your $$, rare isn't it?)

SRS Relief

You can contribute to SRS and do investment for the long-term while saving taxes. SRS contribution cannot be backdated, i.e., contribute beyond the limit now and claim back the relief retroactively. The max contribution for Singaporean Citizens and PR is $15,300.

CPF Cash Top up Relief

Instead of giving allowance to your parents as cash, you can consider topping up the SA (below 55 yrs old) or RA (above 55 yrs old). You can get tax relief for up to $7,000 contributed.  There is a way to do this sustainably I can think of but I shan't share it here.

Why I am forced to buy Unit Trusts

As a Singaporean, a large part of our cash (about 37%) from income will be locked away in the CPF.
Most of the money in the Ordinary Account (OA) will be earning a guaranteed and meagre 2.5% interest rate which barely beats inflation. The first $60,000 in aggregate across your CPF sub accounts also earns an extra 1%.

The first $20,000 in your OA and $40,000 in your Special Account (SA) are NOT investible. (Source: https://www.cpf.gov.sg/Members/Schemes/schemes/optimising-my-cpf/cpf-investment-schemes )

According to https://www.cpf.gov.sg/Assets/members/Documents/CPFISInvestmentProducts.pdf , CPF-OA money can be used to invest in :

1. Insurance (e.g. ILPs, Annuities, Endowments)
2. Government bonds and T-bills
3. Fixed deposits 
• I can't be bothered to find out which banks offer this
4. "Safe" ETFs with limited choices
• Straits Times Index (SPDR and Nikko)
• SPDR Gold ETF (GLD) 
• ABF Singapore Bond Fund (A35)
5. Stocks and other ETFs 
• listed in SGX mainboard and traded in SGD only
6. Unit Trusts with limited choices
7. HDB flat 
8. ...and others

and CPF-SA:

1. Insurance (e.g. ILPs, Annuities, Endowments)
2. Government bonds and T-bills
3. Unit trusts with even more limited choices

At one glance, the CPF Investment Scheme (CPFIS) seems to be designed to lock our money away in the local markets.

100% of the investible amount can be used for Unit Trusts and the 4 "safe" ETFs.  However, only 35% of the investible amount can be used for stocks and other ETFs.

I think it is very weird that high-risk Unit Trusts are considered "safe" (as 100% can be invested in them), when other local stocks are not. Perhaps they think unit trusts are actively managed by professionals hence "safe" and yet often they cannot beat the benchmark despite being paid hefty fees. 

Of course, to beat the 2.5%, I would like to invest in instruments with the highest potential gains. Only equities can yield the highest returns (which come along with the highest risk as well).

We all know about the high management fees of Unit Trusts. In fact, on average, the total expense ratio for many high-performing Unit Trusts is about 1.7% (based on my observation from Fundsupermart's fund selector) which eats into your returns.

Even though there are Unit Trusts with high returns of at least 10% per annum,  I want to avoid them due to the high expense ratio.

Unfortunately, the 4 ETFs are not exactly good alternatives since they will probably yield less returns than Unit Trusts even after taking into account the high expenses, based on the ETFs' historical performance.

In summary, constrained by CPF policies and the lack of better alternatives, I have to reluctantly put 65% of the investible amount in Unit Trusts.

I also invest in Unit Trusts using cash ($300 / month) via Maybank as I want to get the 3% p.a. interest rate under its SaveUp programme. Again, I am compelled to do so as I do not have any better way to fulfill the SaveUp programme criteria. Much of the criteria involve taking up loans (i.e. spending more money rather than saving)

How I choose the Unit Trusts to invest in?

Due to their high-cost nature, I'd want to buy those with the highest potential returns (often comes with the highest risk). I use Fundsupermart's fund selector (for free even though I am not its customer), to find funds with the following in mind: 

1. Consistency: check the 3-yr, 5-yr and 10-yr returns for consistency. I generally ignore funds with very high 1 or 3-yr returns but low 10-yr return. 
2. Underlying portfolio: look at the equity holdings to ensure the fund is investing in trustworthy and high-growth companies preferably ones which control a large market share of their respective industries.
• avoid those so-called "high-yield bonds" as those are usually non-investment-grade bonds. I think only our CPF-SA is an exception.
3. Fees: check that there is no redemption charge so you can sell without any sale charge. 
• There is a risk that the redemption charge may change anytime at the fund manager's discretion.

Many people lost money because they entered at the wrong time, chose the wrong funds or their so-called advisors recommended the wrong funds (usually to line their pockets).

I wonder why there are people buying crappy funds that have been going sideways for years. Such funds still exist today probably because many people are gullible, not financial savvy, and/or they lack the courage to sell to realise their losses. 

Regular Savings Plan?

Many platforms offer some form of regular investment plan that I have since terminated and will avoid for now as I prefer to have more control over the price to buy and sell at (not 100% control though).

Downside

The biggest disadvantages of unit trusts are they don't offer limit orders and the settlement is extremely slow compared to instantaneous buying and selling over exchanges.

Avoiding more fees

I use POEMS as there is no sale charge, no platform fee and no switching cost. It is also a CPFIS administrator meaning you won't incur the $2 / counter / quarter fee from the CPFIS agent bank. FSMOne is also a good alternative with a better user interface and same offering as POEMS.

CPF-SA

I do not invest the SA money as I consider it a 30-year almost-risk-free high-yield "bond". The only risk comes from any CPF policy changes and economy instability.

Anyway there's nothing good to invest in. The only way to beat a guaranteed 4% is to buy unit trusts as CPF-SA cannot be used for stocks and ETFs. There is a limited set of unit trusts for CPF-SA that is different from that for CPF-OA. In this set, there are very few unit trusts with consistent performance over 4%. The best performing, First State Bridge, only had a 5.4% p.a. ROI for the past 10 years. I think the risk-reward ratio is not worth it.