Rental yields are falling…will this sway Singaporean’s ‘lust’ for investment property?
In my client discussions, property investment is often one of the topics raised.
Often, when I cautioned my clients over the risks, emotions tend to override rationality. Such risk include :-
– low rental yields Vs a projected 4% yield for Endowment plans
– hassle in tenant managment Vs endowments that are hassle free
– buying at a high in the property cycle = potential losses if one is forced to sell at the wrong time
– being over leveraged
– risk of interest rate hikes and it’s adverse effect on one’s cashflow especially in an over leveraged situation
– sacrificing other more important financial priorities (child education, insurance protection and retirement planning) just to buy a property
A lesson that has always stuck in my mind was the Asian financial crisis in 1997-1999 – a very painful period in Singapore’s history. This period was marked by financial turmoil where many lost their jobs, faced investment losses as markets plunged, the property market went into a deep slump and interest rates spiked. The stars were aligned for a prolonged crisis.
I was working as a banker in the corporate lending business at that time. When the crisis hit, I become a debt collector overnight to salvage back the bank’s loan as companies we lent to became increasingly distressed. Also had the unpleasant task of winding up companies and going after the director’s personal assets.
Will this be repeated? Who knows but it’s better to play it safe than sorry especially if you don’t have deep pockets and have dependents to care for. Job security is also never a given.
With our government dead set on bringing prices down + strict loan requirements, being patient in your purchase should bring benefits.
low savings due to lifestyle choices (choosing Wants over Needs) or over commitment to home and car purchase
starting late in life on your saving/investment plan due to procrastination or fear of commitment
not sticking to the accumulation plan long enough – accumulation is a marathon, not a sprint
not contributing enough resources towards your accumulation plan – You reap what you sow.
playing it too safe by keeping too much money in the bank at low interest rates, allowing inflation to erode your spending power over time
Successful wealth accumulation requires prudent spending, starting early, contribute the best you can afford, stay the course and be prepared to take calculated risks.
More importantly, take ACTION to better your financial future…you only have One Chance to accumulated for your child’s education and your retirement! Once time has passed, it can NEVER be regained so wait no further.
To re-quote Einstein :-
“Compound interest is the eighth wonder of the world. He who understandsTAKES ACTION AND APPLIES it, earns itAchieves financial success … he who doesn’t … pays for it.”
Starting a family in Singapore and bringing up your children entails much financial responsibility and the best way forward to secure your child’s financial future without breaking the bank is by starting with making the right financial choices.
1. our govt came up with CPF, dependant protection, home protection schemes & CPF Life?
2. newborns are automatically covered upon birth under Medishield?
3. Medishield Life will be made compulsory?
4. Eldershield is an opt-out rather than an opt-in plan?
5. motor insurance is a pre-requisite to car ownership?
6. maid insurance is a pre-requisite to hiring a maid?
7. home insurance is a pre-requisite to taking up a bank loan?
The above measures are meant to provide basic protection andaccumulation of wealth for retirement so why must our govt step in to legislate these requirements? Won’t we be able to do these ourselves?
Sadly for the majority, if left to our own devices, will either not know what’s required to be done OR be in denial and refuse to do it OR understand that it has to be done but procrastinate on it.
I mean, who likes to put money into insurance or think about unfortunate events that can potentially befall on themselves and their family? or lock up significant amounts of money to save up for retirement when this money can bring immediate satisfaction and enjoyment now by buying the material things we so desire?
Well, that’s why our govt has to play the role to set the minimum basic requirements…but if you allow the govt to be your financial planner, then I’m afraid what you’ll end up with will be very basic benefits. Our Govt now has plans to raise the employment age and introduced reverse mortgages for asset rich, cash tight citizens….would you like to sign up for that?
Our Financial Attitude
By conventional wisdom, here’s most people’s financial equation
Income – Expenses (Living + House + car) = Savings, of which a small portion can be deployed for financial planning
For the financially successful, their financial equation may be
Income – amt set aside for financial planning = Expenses (Living + House + car)
The difference between both equations is in how much financial planning is prioritized (valued) over current lifestyle choices.
Which financial equation would you like to employ in your life?
Undeniably, our attitude towards financial planning is the single most facilitator or obstacle in achieving our financial goals.
Let’s examine further
At your workplace, would you prefer to work with an employer who looks after your welfare by providing you adequate employee benefits and a pension plan for your retirement? I’m sure you would.
In a similar fashion as the head of the household, how should you be taking care of your dependent’s (spouse and children) financial needs and aspirations so that they too feel loved and cared by you?
Again at the workplace, are you rewarded for anticipating problems and designing preemptive solutions to address them, meeting KPIs and deadlines on your projects? I’m sure you are.
In a similar fashion as the head of the household, there could be a lack of accountability or financial reward to carry out your responsibilities. Hence, do you chose to procrastinate or deny the need to plan financially or should you take proactive steps to secure the financial plans to address your family’s protection, child education and retirement needs? If you don’t take the lead, who will?
Why not employ the same work attitude that has made you successful in your career, into your family’s financial plan as well? Then you’ll be truly successful – holistically.
The above is neither a religion that you have to believe in nor science fiction but rather realities that we face in life. The sooner we step up to the plate, the better it will be for you and your loved ones.
Hope the above was useful. To get in touch, just send me an email on the right and we’ll get in touch soon.
Till then… Live life to the Fullest, without Regrets!
Have you taken a subway in UK or the MRT in S’pore?
If you have, you would have noticed signs & floor markings cautioning you to “Mind the Gap” between the boarding platform and the arriving train to prevent any mishaps. In spite of the warnings, unfortunate incidents have occurred where individuals actually fell onto the track or had their limbs trapped in the gap. Hence, it’s best to heed the warnings or ignore them at one’s peril, wouldn’t you agree?
Not adequately addressing these financial gaps can expose one and one’s family to serious consequences.
Such examples would be:-
– financial distress caused by loss of income due to illness and accidents
– burdened by large medical bills
– not having sufficient resources to provide the best education for one’s child
– not having adequate resources to outlast your retirement or live the retirement lifestyle you desire
– leaving an inadequate estate to your loved ones (e.g loss of a breadwinner may force the surviving spouse to take a second job in order to support the family)
But how would one be able to identify where their gaps are, the size of the gaps, how best to prioritize one’s resources to address the gaps and what’s the best way to close up the gaps?
In my work with my clients, my role will be to guide them through the process and help them obtain the answers to the above questions. Finally, by implementing the financial plan recommendations, I’m confident that they will achieve greater peace of mind knowing that they have done their up most best to close up their financial gaps in order to protect theirs and their family’s long term interest.
If surplus financial resources are available, why leave things to chance?
The choice is either to pay a small price today to address one’s financial gaps or potentially face a significantly higher price later on in life due to inadequate planning
Indeed, how well we can overcome the financial hurdles in life often depends on the choices we make today….and there’s no better time to plan than Now.
To seek advise on the above or to refer a friend, just email me on the right side and we’ll get in touch soon.
Till then… Live life to the Fullest, without Regrets!
If there’s a puncture on your car tyre, will you get it fixed?
If there’s a hole in the roof of your home, will you get it patched up?
If there’s a hole in your umbrella, will you continue to use it?
In all the above situations, I’m sure you’ll do something to rectify it and with a sense of urgency as well, wouldn’t you?
In the area of protection planning for you and your family, I often charaterize it as an insurance umbrella – one that will serve and protect you and your family in the following situations:-
– premature Death
– Disability and resulting loss of income
– Critical Illnesses and resulting loss of income
Your insurance umbrella is only as strong as it’s weakest link and that I feel is in the area of disability protection due to a lack of awareness by the public. It presents a gapping hole in your insurance umbrella which most people are unaware of or not adequately addressed yet.
This is a major area of concern because it can potentially wipe out one’s lifetime savings in a short span of time if one is financially unprepared for it. Its impact on the family will be both financially and emotionally draining, so why not do something now to insure against it?
Disability protection can be addressed through a combination of the following plans:-
1. Disability income plan
– serves to replace up to 75% of your monthly salary in the event of disability and resulting loss of income
2. Medishield type hospital plans
– serves to reimburse hospitalisation and surgical expenses
3. Eldershield and Eldershield supplements
– serves to provide a steam of cash benefits in the event one is disabled and requires long term care e.g hire a maid, nurse, nursing home, rehabilitation expenses etc
Do these pictures evoke a strong emotional response or desire to own one?
If it does, you’re perfectly normal as we’re naturally attracted to things of beauty and the desire to look successful and live the ‘Good Life’.
Thus, it’s not surprising that in spite of rising cost of living, escalating home and car prices, there appears to be no shortage of buyers. Is this a reflection of the deep pockets of Singaporeans, demand/supply mismatch, foreign demand driving up prices or are people simply over leveraging themselves?
Well, it’s probably a combination of the above factors but what is probably most worrying is if individuals are overstretching themselves to purchase these material stuff before they can well afford it or acquire these at the expense of other more important financial planning objectives such as:-
Well, having seen what happened during our last Asian financial crisis in 2007-09 where interest rates rose, asset values plummet and jobs were lost (a triple whammy situation), and that we’ve still in the midst of the ongoing global crisis, some financial prudence is certainly warranted.
To seek a second opinion on your financial plan, just end me an email on the right and we’ll get in touch soon
Till then… Live life to the Fullest, without Regrets!
Should health fails and your income ceases, how much are you willing to drain your reserves to fund your healthcare cost? how will you continue to care for your family and fund your financial commitments?
Do you have disability insurance? Do you realize that many disability situations will not satisfy a Death, TPD or Critical Illness claim? i.e none of your existing policies will offer a payout. Hence, not having one is akin to trying to shield you and your family with an umbrella with gaping holes or caring for them in a house with a leaking roof.
Would you do that to your family?
To seek advise on the above, just send me an email on the right and we’ll get in touch soon.
It’s a sad week as we mourn the passing of Mr Lee Kuan Yew – the man who dedicated his life to build this nation of ours, a visionary leader with the tenacity to make difficult decisions so as to better our lives. Let’s celebrate his life and the wonderful achievements he has made…his legacy will live in our hearts forever.
It’s nothing short of a miracle on how he has transformed a tiny sleepy island lacking in natural resources to the first world nation we are beneficiaries of. After having travelled to many countries, it has strengthen my appreciation of what our country offers such as
– equal opportunity that transcends across gender, race or religion. Ours is a meritocratic society
– low corruption and crime rates
– portable drinking water straight from the tap (further strengthen by NEWwater and desalination)
– an effective and efficient civil service
– an excellent transportation & healthcare system
– affordable public housing
– a garden city
All in all, a really attractive place to live and work (if only we can build a forcefield dome to house Singapore like our Gardens by the Bay and aircon the whole country would be….PERFECT!)
Examining how Mr Lee transformed our nation, we can perhaps draw some parallels to our own personal financial planning.
1. It takes vision and tenacity
– He saw that in order for S’pore to survive, it needed a hinterland like Malaysia but when that option failed, he did not succumb to defeat and went ahead to forge a nation that will be relevant to the world and one that will better the lives of it’s people. He loved us as a people.
– similarly, as the head of the household, I believe you strive in the workplace so as to better the lives of your family. You love them dearly I know but do look forward and anticipate the financial needs of your family such as child education, your retirement and protecting your income being your most valuable asset. Your family’s future well being truly depends on the financial decisions you make today. I understand that making financial commitments is not easy as with most of life’s important decisions…but with your family’s interest at heart, you know deep down that it’s the right thing to do.
“Doing something costs something. Doing nothing costs something. And, quite often, doing nothing costs a lot more!” – Ben Feldman
2. He did not procrastinate and made hard decisions
– He had great urgency to transform Singapore into a first world nation in just one generation…that’s remarkable! If he procrastinated or made populist decisions, I don’t think we’ll see the Singapore we know today. Some of the decisions that impacted us were instituting national service, forming HDB for public housing, creating CPF for our retirement, our ever evolving education system etc. While some still bemoan some of these things he instituted, I must say that he knew better on what was in our best interest as a people and as a nation.
– similarly, our circumstances can change in a heartbeat. Things like our health is never certain. Should we take a chance and not insure ourselves adequately or have a “tomorrow will take care of itself” mentality? I believe that will be detrimental to your family.
Challenges are best anticipated well ahead of time and tackled head on. Challenges don’t get overcome by sweeping them under a carpet.
3. Singapore is a city in constant transformation and improvement
– when we progressed from a developing to a developed nation, Mr Lee did not sit on his laurels, bask in self glory and coast along. By doing so would have been a fatal mistake. Instead, he strived to improve Singapore continually to keep Singapore relevant to the world.
– similarly, as you move through different stages in life – from being single, to marriage, to being a parent and caregiver to your ageing parents, your financial needs will evolve and change. Have you reviewed your family’s financial needs as you enter each life stage to ensure that you equipped your family with the necessary financial tools to overcome the challenges life may bring?
4. Continuity and Creating a legacy
– when Mr Lee was at ‘the top of his game’, he chose to step down for the sake of leadership renewal and continuity and handed the reins to Mr Goh Chok Tong, and thereafter to PM Lee Hsien Loong. Meantime, he served as an advisor and mentor.
That I feel took great foresight, selflessness and humility. Most leaders would have held on to leadership and power for life if they could….and when they couldn’t lead anymore, a vacuum (and possibly chaos) will be left behind.
“Do you know anyone who has a lease on life? It isn’t a question of if; it’s a question of when.” – Ben Feldman
– like all mortals, the day will come when we have to leave this earth. For some, they will live to a ripe old age, for others, it might come a tad bit early. What matters is how we live our lives and the lives of people whom we touch daily. Plan well today so that you and your family’s future will be secure. How would you like to be remembered by your loved ones?