Ok! Finally I've got some free time. 
I've been back from France for around a week, but something happened on my wife's family side so I've been busy helping them out til now. 
And I didn't have any free time til now and hopefully I'll be back to my usual routine from now onwards for a couple of weeks before our next flight.

So a reader sent me his current situation and I'll see if I can share some comments. 
I'm not here to tell him what to do. Just sharing some comments and opinions. He'll have to decide what's best for himself and his family. 
​

Ok, once again, I'm not telling him what to do. 
I'll just share some thoughts about his situation. 
Cos everyone has different wants in their lives, what they are ok to live with, what they aren't ok to give up. And eventually they have to live with their own decisions and consequences. 
I also cannot expect people to live like me. I hardly spend any money unless it's for the activities revolving around my wife's work. (Car & travel)
So I'll try to be balanced in my comments.

Ok, let's get down to it. 
There are 2 things that jump straight out at me when I read about the reader's situation.

1) The reader has "gotten used to" staying in the west and was looking for another place in the west. 
My experience with this is that it's quite easy to get used to live in another area. 
I stayed with my parents when I was young. It was around central/west area. Very convenient around town. They had an en-bloc and since the money couldn't buy much within the same area anymore, they decided to move far east. 
My sis didn't like the idea and said "I don't think I'll ever get used to living in the east."
For me, I didn't bother too much. I've pretty ok with moving around cos all I need is a place to stay and eat. 
My sis eventually got used to the east pretty quickly. Humans tend to adapt very quickly. 
And she even forgot her initial comment of "I don't think I'll ever get used to living in the east."
When my sis was planning on moving out after getting married, they were looking at places in the north. 
And during discussion, she once again said "I cannot imagine myself living in the north."
And my brother in law said... "That's what you said about living in the east."

The thing is, I believe, people get used to living in an area very quickly. They will likely grumble a bit at the start and after 6 months, they get used to the new operations, where to find their new groceries, doctor, food court, etc. 
That's not to say that the reader should find some place that there's NO amenities. I understand the convenience of having a doctor, food court, groceries nearby. For example some of the new estates aren't really well developed yet so there isn't many amenities nearby, but I think probably, the reader should open himself up to other areas of Singapore which is equally convenient. 

2) The 2nd thing that jumps right out at me is that he has decided that if his daughter needs it, he will provide her with an overseas education. 
This is his choice. I'm not saying that he shouldn't do it. 
For me and my sis, we grew up with the understanding that we would NEVER be sent overseas. So we knew our parameters and we played along those parameters. We knew that if need be, we would go to Polytechnic or any local private University. That's how our parents set the rules. 
In my opinion, once a child knows that their parents will "bail them out" they may not work as hard or potentially, form a sense of entitlement. 
I never blamed my parents for not sending me overseas. I knew the rules, we weren't exceptionally well off, I didn't expect my parents to scrimp and save just to send me overseas if I couldn't make it into a local Uni. 
There are many successful people from all walks of life, with or without a Uni education. In the end, I think many of us, after 10-20 years of working, realize that it's not the level of education that makes a person successful or not. 
But this is a choice for the reader to make. 

Ok so these are the first 2 things that jump out at me.

The reader is living in an old 5 room HDB. 
This is a really big HDB. As the reader gets older, he may want to get a smaller place. Cos I reckon his daughter will want to get married and move out eventually. People tend to fill the house regardless of the size. So the bigger the house, the more stuff they have. The smaller the house, the less stuff they have. People tend to just make do with what they have. 

For me, I don't like the idea that my HDB expires worthless after 99 years. I'd like to try to leave something left... (I also dunno for what... since I've no kids)
But I think that may be the same for the reader. 

And like what I've said in my previous posts, it's pretty much a zero sum game. 
Price = Lease + Location + Size
For the reader currently this means...
$470k = 66 years left, 5 room HDB in the west.

So if the reader wants to "extend" his lease without injecting more of his own capital then...
$470k = 80-99 years left, 3/4 room HDB in the further west/north/east?
Then top up another $20k-$30k for fees and renovation. 
He can choose to buy a new BTO or straight from the market. 
There are many other areas which have great amenities and also close to MRT stations. 

Also another point to highlight is the need or lack of need for space.
Depending on families... some families expect to take care of grand kids, others do not.
So as the reader gets older, he may not need such a big place with his wife. Maybe even a 3 room HDB would be good enough, cos it will take a lot less effort to keep a 3 room HDB nice and tidy. 
Unless they have a helper... which is an increased expense... really, imagine doing household chores at 60-70 years old for a large 5 room HDB. 
However, if the reader is expected to take care of grand kids, then maybe he would need a larger place? 
Personally, I think a new 4 room HDB is too small for kids to be running around. It is sufficient for living, but it's pretty cramped in my current situation. 

Ok so let's wrap this up a little bit...
The reader is 49 years old, average lifespan is around 85, so we are talking about maybe 35-40 years more.
If he stays in his current place, it will be 25-30 years of lease remaining. 
So theoretically, he doesn't really need to do anything. 

He COULD get a relatively new or BTO HDB and move to another area of Singapore with similar amenities with an increased lease. 80-99 years lease. In his later years, this would end up at around 45-60 years left.
The issue is maybe at this point in time, he might be unable to decide how big a place he needs, cos his daughter is still around.

He alternatively COULD wait 10 years before doing anything. By then, his current HDB would be left with 56 years remaining, then he could do the switch after his daughter moves out, he may also be better able to decide the size of the place he wants, or if he is planning on taking care of grandchildren. 
The issue with doing this is that his current HDB would be worth less relative to the younger HDBs, but this is to be expected due to the depreciating lease. 
But he may look at HDBs with 70-80 years lease remaining at that point in time. Then it would last him til his later years and still have excess lease/value and will not expire worthless. 

He may also consider doing it a few years after retirement. By then, he will be better able to assess his budget and retirement funds. I also find that after retiring, many people realize that they don't need so many stuff in their lives and may willingly move to a quieter area of Singapore and a smaller unit. 
It also provides the opportunity to declutter years of stuff accumulated from decades of working which might not be needed anymore after retirement. 
The mentality after retirement is also different so you may not be interested to do a lot of reno and be quite satisfied with a simple low cost renovation upon moving. 
The thing is, when you're working, you tend to keep a lot of stuff cos it's convenient and there's no real time or opportunity to clear them out, but after retiring, you may realize that you don't need a lot of stuff and you have a lot of time to slowly buy something or work around the situation if something isn't readily available at home. 

Probably the next few big ticket items the reader has to consider is his daughters further education, or some parents may want to help out with the wedding expenses of their kids or housing renovation expenses, and maybe grandchildren, and of course their own renovation if they so decide to move. 

And of course within all this is also potentially to decrease overall expenses. I think a lot of people overestimate what they require after retirement. If you live a frugal lifestyle all the time, expenses will easily drop after retirement. 

And that's about it for this post. It's really up to the reader to determine what's best for himself. 
I think at different stages in life we all want different things it would be easier to decide after key intervals in life, like when/if his daughter moves out. Cos by then he may think, the house is too big and empty and it's tough to tidy and maintain such a big place. 
Deciding now at this point in time, may not be so easy. Cos there's a lot of unknowns about what the future may bring. But of course waiting also has it's issues, cos property prices will change and all that. That's just part of life and we all have to try to make the most informed decision at any point in life, in relation to what we want and whether we are ok with any risks involved. 


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When people ask me what I do in Paris, i tell people I just walk around a little. It's been kinda boring...

And friends always give a similar reactions. "What the hell! How can you be bored in Paris!!!"

Well... You see... Central Paris is kinda smaller than Singapore. And after my first time here, I walked most of the area and saw many of the usual sights.

It's like when tourists come to Singapore, they see Orchard Road, MBS, Sentosa, USS, Merlion, Suntec, something like these...
No one is going to Cairnhill behind Orchard Road or Yishun or Tampines.
Cos there's pretty much nothing to see there.

So it's pretty much the same in central Paris. The usual, Effiel Tower, Arc de Triomphe, Moulin Rouge, Louvre, Notre Dame, some gardens, some palaces, stuff like that...
I even go to the neighborhoods and all that cos I've pretty much been here for almost 10 days if we add both the first trip and this trip.

And if you're a tourist to Singapore, 4-5 days is pretty much enough to see the sights.
Central Paris is smaller than Singapore so...

Well I could go to the outskirts, like take an hour train ride to some further out place, if we compare that to Singapore, I'd say it's like... Going to JB.
Sure it's possible... It'll take some planning though. And I'll probably do that if I ever come again... Which I think is highly possible... Although I hope we don't have to come again...

I think one of the issues with my boredom is... I don't shop, or we don't shop. I haven't been to the outlet mall, I've talked to people, they are absolutely amazed I haven't been there, but when I ask them what's there, they just say shops.. so nope, I'm not going to travel around an hour there just to see some shops.

There's really a lot of shops around here though. The LV always has a queue, no seriously. When I see the queues I wonder why... It's pretty ridiculous. But maybe the China people don't have much options back where they come from.

I think why many people are amazed that I have nothing to do in Paris, is cos usually they aren't here for long. Like they come for 3 days to sightsee and shop and they rush off to Italy to continue their journey. So they always think that there's not a lot of time to really slow down and see the place.

Whereas, for me, I've been taking it super slow and I've covered most of the sights and probably most of the sights most people don't even see, like the sports stadiums and big gardens.

And this feeling is pretty interesting. Cos after a while, it's like what I experience at home... If I'm in Singapore, with no friends to entertain me, and I don't go out to see sights, cos we don't go out to see sights in Singapore right... Then all that's left to do is... Stay at home or hotel and watch TV or type a post.

I suppose... Everyone lives a pretty similar life regardless of which country we live in.
Unless it's a war torn country, but that's a different matter.


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As I walk around Paris and take the Metro...
I get reminded how fortunate Singaporeans are. And so many Singaporeans don't realize it.

Many Singaporeans own the latest phone. Not necessarily an iPhone, but a recently released phone.
In Paris, I see many people are still using iPhone 4 or 5, I see some using those old school flip phones.

I don't see many people own branded bags, LV, Gucci, etc... They just don't have the money to buy it after tax, rent, food, transport.
Whereas in Singapore, everyone's got an expensive bag. Look in the MRT, the aunties have got it, the young girls have got it, whatever...

The metros are smelly and the air conditioning doesn't work. The stations are old, the walls are dirty, they don't have escalators, it's mainly stairs.
Our MRTs are nice and clean, the stations are big and clean, trains are air-conditioned.
Yea they breakdown. And the management isn't really working very well and they even had a global search for the new CEO so maybe things will get better.
But hey...MRT really isn't that bad.

There's not much cheap food available.
Even quick eats are around €5-€10 and that's like a wrap or a sandwich it's a cold meal.
I've been buying bread to make my own sandwiches to reduce cost.
Normal restaurant food is €15-€30.
Singapore we get a variety of foods at under $5. It's a nice warm meal.

There's homeless people at every street. They come out in the late afternoon. Maybe they are refugees. Whatever. We don't have so much of that at home.
It makes the country look better.

When it rains, it's hard to get around. Cos buildings are stand alone and it's not sheltered from one building to another.
Try walking along Champs-Élysées when it rains. See how much shopping you can do.
Then try to walk down Orchard Road when it rains. Almost everywhere is connected, or you can take the MRT to the next shopping center.

The thing is... There's a lot of things good or bad about every country.
I really dislike the COE and 99 year lease on almost all our homes.
Or that I feel the current government is getting sloppy or patting each other on the back..
But there's really quite a lot of things Singaporeans can be grateful for now.
It's still a very livable city... For now at least.
At least many of us can still own iPhones and branded stuff and travel a few times a year. Not to shabby really.



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I've been busy walking around Paris.
Gotta make the trip worth it right.
But in the end. I've walked too much the first time I was here 6 months ago and there's not many places left that I'm interested to visit.

So I thought ok, just hide in the hotel for a bit and type something while waiting for my wife to finish work.

After traveling so much, I find that really, many things are relative versus something else.

Like, when we looked at the HDB issue previously, many people think they made money from their HDB transaction. Yes they made money in dollar terms. But when we look at the same value, the person likely didn't really make money.
He can't buy something in the same area with the same lease with his sales proceeds.
He will need to move further out of town to get the same size and lease period and take some money home.
So he traded some value for cash and got less total value left in his property.

So only when we compare one thing versus another, then can we understand what is value.

When I travel. I face exchange rates all the time in Malaysia and in Europe.
Sometimes I don't bring enough money so I change ad-hoc or use my credit card.

The price in ringgit or EUR is still the same, but yet I pay more or less depending on how I handle my exchange rates.
But to the Malaysian, to them, there's no difference. Cos the price is still the same.

The difference is that just cos I am a Singaporean, I don't usually use ringgit. To me Singapore dollar is more valuable cos I use it regularly. I'm only in Malaysia for a short period of time. So I always think in terms of Singapore dollars.
This happens when I buy stuff in EUR.

Cos we earn Singapore dollars.
But yet, to them, there is no change in price, but to me, everyday the price changes.

What do you think will happen if you retire in Malaysia? Would you still be thinking in Singapore dollars? Or ringgit?

When I think about Singapore money and retirement, I usually calculate with Singapore standard of living with an HDB.
But many of us know that if we move to other countries, we can live like a king just by renting out our fully paid HDB and renting a condo in maybe Malaysia or Thailand.

And of course we will have people who say, we don't speak the language, it's not safe, there's no friends and family there...

And yet... Imagine, if we were born there, Malaysia or Thailand, we come to Singapore to work, it would be so natural to just go back "home" to retire in luxury.

So strange isn't it?
We are both human.
I'm Singaporean, I work in Singapore I earn more, I know it's probably better to go retire in another country, but I am reluctant to go.
Someone else who's Thai, comes to Singapore to work, earns enough, goes back to Thailand. Lives like a king.

The only difference is where we were born.

And I think IF we go and retire in another country, we would think less of the difference in exchange rate for daily living.
Like cannot be when I buy dinner I keep dividing by 3 when I'm there for the long run right. Basically, we get used to counting in ringgit and just plan our lifestyles in ringgit terms.

Or when we eat in Paris, my wife feels pretty sad having bread all the time, and yet, the French are very happy with their bread.
Imagine if you were born in France, you'd be used to bread and pasta and that would be the normal meal for you.
You wouldn't miss rice... My wife really misses rice now.
Whereas for me, I'm pretty ok without the rice. But I do miss some warm food, cos sandwiches are the cheapest food available for us.
And yet, it's so normal for them to eat a sandwich with some filling.
And the difference is just, we weren't born in the same place and what we deem as normal is just different.

And that got me thinking...
We humans have a NEED to compare.
Cos that's normal. Without comparing, it's hard to determine anything. Cos there's no real fixed point of reference in life.
Normal is so different everywhere.
How much someone earns.
What they eat, the currency they use, etc etc..

The problem comes when we get so engrossed in comparing with others that we forget that it's just a reference point.
It's not that it's right or wrong or better.
And I think it's important to have some reference points. So as to understand what we want versus someone else. Or are we happy doing certain things. Or whether we may want what someone else has.
And that's all ok. But we can't only look at the good things. We also need to look at the bad things. Like someone owns an expensive watch, we also need to see that they have less savings.
And to recognise that if it's not something that you want, to stand your ground and say "it's ok. I prefer not to do things that way."
Only when we compare, then we can learn and see what is relative versus ourselves.
Like we see someone with a condo, keep upgrading their lives and we may see them trapped in their jobs.
Then I may look at someone who stays in an HDB but he's doing a simple job and just chilling with his life.
And I may use these 2 as a benchmark to determine where I myself would want to be.

So I think... Although we always say don't compare, I think it's natural to compare and use each other as benchmarks. And I think that's ok and maybe useful cos we learn more about the situation and what we want for ourselves.
Just that I think we all need to be aware, to use this comparison for our own knowledge and purpose and not get so grossed and take it as a race to see who can get more toys so as to compare against each other.



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It was quite interesting to have so many people coming out to comment in the last post.

A lot of people look at CPF in their own different way. 
The main thing is that most people use CPF to buy their homes and use up their free cash on hand for lifestyle purposes. Many people who follow this blog highlight that if people invest their free cash in more than 2.5%, the person would be better off. This is true. I absolutely agree with this.

However, I wonder... How many people actually actively save every month. 
Next, even if they save, how many people keep them as basic bank deposits. 
How many aunties/uncles just place their funds in fixed deposits. 
Next, how many people can put their monies into investments which will beat 2.5%, or will a bank maybe sell them some expensive unit trust with high expense ratio?
In truth, the average person would do better in overall financial management by using cash to pay down their housing loan. 
Or maybe just use CPF as their lump sum deposit and servicing their monthly mortgage using cash.

​
Anyway, here's the expense update for this month. 
Expense has really gone through the roof.

Food expense was a bit high cos of the high tea we went to which cost us $108.

We had planned a Thailand trip so that's found in the special expenses.
​Hotel plus flight plus insurance is $574.75.

Bought 3 KL flights for myself, but we only went for 2, cos her 3rd trip was cancelled. It's cheaper to just burn the ticket instead of trying to change it to another date. 

Going on a France biz trip with my wife later today. We are going to extend a bit so the expense here includes my flight plus a couple of additional days of hotel. 

Not much difference between last month and this month, general expenses are low. 
Special expenses are super high due to the frequent business trips my wife has. 
The trip to France is obviously the thing that really brings the whole expense up. 
KL doesn't even compare to this. 

Looks like in future, if we remove all of my wife work expenses, our living expenses will be pretty low when she eventually decides to retire. 
Cos we'll drop the car, and the regular biz trips. 

That's it for today. Gotta prep for my flight later.


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One of the most important points of this is the usage of CPF vs loan to pay for the house.

I'm starting to have the idea that one should as best as possible pay off the loan as soon as possible with CASH.
Using CPF to pay for the HDB MIGHT not be a great idea.

*Special thanks to Robin for highlighting this*

Think about it.
Let's say...
Every year we pay $10,000 using cash for our mortgage. We lose $200 to interest. Assuming 2% interest rate.
And if we use CASH. The story ends here.

But assume we use CPF to pay, like most of us do.
We use $10k CPF to pay our mortgage.
We lose $200 to interest.
BUT, we have to pay $10,250 BACK to CPF when we sell!!! Cos we have to pay ourselves the CPF interest.

Some may say, "Oh but your property will increase in value when you sell it."
And my response to this will be... Then where will you stay?
You'll again need to buy an expensive place to stay right?!

Don't believe me?
Let's do a simple simulation of 1 year.
You have
Cash : $10,000
CPF : $10,000
House Equity : $0
Total asset : $20,000

You use your CPF to pay your 2% loan, 1 year later this is the asset profile.
Cash : $10,000
CPF : -$250
House Equity : $9,800
Total asset : $19,550

You use your CASH to pay your 2% loan, 1 year later this is the asset profile.
Cash : $0
CPF : $10,250
House Equity : $9,800
Total asset : $20,050

That's a $500 difference in the above example.
Sure you can say you use CPF to pay and invest the $10k cash. Although I wonder how many people do that on a regular basis.

For me, I don't think about the home equity. Cos I'm still going to need a place to stay and even if I sell, I'll need to buy another place at current market prices.

The whole idea is... Even though you are paying 2.5% interest to yourself, it still needs to come from somewhere. Usually, for most people, it comes from their salaries. Not from other alternative investments.
By leaving the money in CPF, the government pays the 2.5%.

That's not to say my wife and I didn't use CPF to pay for our place. We did. But recently we've been trying to pay off the loan sooner using cash.
Although I still have a lot of concerns about the government changing CPF policies as the years go along.

IF someone has fully paid their HDB using a lot of cash, then they won't be "owing" CPF large sums of money usually this has been compounded for decades!!!
The loan to the bank is over but the loan to yourself is not!!!
And there may be trouble on the horizon for people who used their CPF to upgrade their homes when they were younger.

Imagine. A typical Singaporean changes homes 1-2 times in their lifetime. So by 50 years old, they may have fully paid for their HDB using their CPF, but their CPF is empty AND they owe themselves a whole load of interest.

Remember, most Singaporeans borrow at 2.6% using HDB loan.
Which also means they lose 2.6% of their CPF paying interest to the loan.
And they need to repay themselves 2.5%.
And so the question becomes...
Has HDB been appreciating at 5.1% year on year for the past 30 years.

In the early years of Singapore, I would probably say the returns probably far exceed 5.1%, but in recent years, I do wonder, after transaction costs and renovation, the returns of HDB year on year might not be very high.

Cos the true opportunity cost of buying a property using CPF is pretty much around 5.1%. maybe less if you using a floating rate loan, then it would be a bit lower.
The 2.5% you need to return yourself is real. And it needs to come from somewhere. Most people don't think about this. MOST not all.
More often than not, people ignore this and they don't use their free cash as investments, cos if you don't use the free cash to make up the 2.5%, means to return the 2.5% you will need to use your salary to "top" this up when retirement comes along.
Selling your home doesn't really work cos as mentioned in the previous few articles, you still need to buy another place to stay.
2.5% compounded over 30 years is A LOT of money.

There's a few ways to solve this
1. Use cash to pay for the HDB
2. Use CPF funds, and invest the cash on hand with more than 2.5% return.
3. Don't ever sell the HDB and rent it out to monetize the money.
4. Use your salary to "pay yourself" the 2.5%

Simply put. If you use your CPF funds, you need to pay yourself the interest, and that 2.5% needs to come from somewhere.


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So as I wrote my previous post.
And it slowly came to light that my HDB isn't really an asset. It doesn't grow in value. It's always depreciating due to the lease. If I want to extend the lease by moving to another area of Singapore, I will have to give up size and location.

Eventually as time passes, assuming I can live forever and keep trying to extend my lease by downgrading, I will end up in a super small place maybe just enough for a bed in the far ends of Singapore.

If it's a house for self stay, it's hard on convince myself that it's an asset that grows in value.

So this got me thinking.
In that case, what is value? What can I consider an asset?

And this really brought me down to a very simple line...
It's something bag creates value.
It needs to provide a service or product.

This is something close to what Warren Buffet said.
To him, gold is not an asset. Cos it provides no service, it doesn't do anything, except sit around acting pretty.
Just that over the years, people just use it as a medium of exchange.
But that's hardly an asset, cos eventually, you will finish spending the gold. You will need to use gold to buy food.

A freehold farm could be an asset.
If managed well, you can hire people to tend to the land and sell the products and with the revenue, you can use it to pay off taxes and salary and expenses, and this will last forever.

This is absolutely different from an HDB, where it cannot be used forever, and if you try to extend the lease, you have to give something else up.

Cash is pretty much used as a medium of exchange. But it in itself doesn't CREATE value.
Gold is used traditionally as a medium of exchange and store of value, but if you use it, you lose some of it.

So if I buy a 99 year leasehold property and rent it out, do I create value. I think I can consider it as creating value, cos I "bulk purchase" a 99 year lease, and rent it out in shorter term leases.
And this is considered a service to people. Cos it allows people to rent for short term.

It's a depreciating asset but it generates a cashflow.
Same as an oil field. As they keep pumping oil out, there will be less oil, but as they sell the oil, it provides a service and product and it generates a cashflow.

And if you look at your HDB in this way. Then you are "bulk buying" a long term lease. And instead of getting a cashflow on it, we are basically just spending the cashflow by staying in it.

But there's little choice besides doing this, the alternative is to rent out the HDB and rent a small room for yourself.
But we aren't here to suffer so that's just ridiculous.

So... What are we talking about today?
Well... Assets. What is value? How do we retain our value across time?
And not end up in the HDB trap.

So we need to look for good assets which will retain their value and keep creating value. And can continue growing.

Now do you understand why Warren Buffet loves Coca Cola? Or tobacco companies?
Cos they create continuous services for a cheap rate.
These companies create addictive products cheaply and sell to the rest of the world.
They are bad for consumers. But nonetheless, they ARE providing a service and a product.

So another way to get around the HDB lease issue is to buy long term assets and rent instead of leasing the 99 year HDB. Except that you can't get a loan on it.
So for example one could invest $500k at @5% and get $25k per annum and use that to rent a place forever.
I assume that the capital increased by inflation so the dividends get pushed up yearly as well.

This MIGHT actually be better than buying an HDB which will depreciate over time.

Probably the way to best capitalize on your HDB will be to, once again, create value. One can rent out 2 rooms of their HDB and generate a positive cashflow. In this way, after 20-50 years, the cashflow would be able to fund more investments into other value creating services.

This can also be seen like car COEs which is extremely similar. A car is not counted as an asset. Cos we are usually consuming the car. However, if we are able to somehow monetize the car, then it becomes an asset.

As I keep typing, this idea of assets and value get clearer.

And so comes the next idea...
Would it make better sense to put all investments into equity or other investments? And treat housing as a regular consumable, meaning to rent/lease, whilst freeing up funds to make long term investments.

Cos that's what it is. HDB is a bulk purchase of rent. And maybe, just maybe, putting money into financial assets might be a better plan for long term preservation of assets/value.

For example. Since I stay in Queenstown, I am consuming a 4 room HDB at a centralized location.
I could sell the "value" of the centralized location by renting out my HDB and renting another 4 room HDB in a less convenient place.
And in between, I should have monetized some of the value of the location of my place.

This train of thought is actually quite scary cos basically it means anything with an expiry date is not really an asset unless it is monetized. You really can't afford to "squander" the validity period. Cos it's limited for only a period of time.

And I think it might be useful for my future investment ideas, cos it really does make me think a bit more about what I deem an asset and what I want to do with my HDB in future.

​
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A request from a reader who's concerned about the 99yr HDB lease problem.

There's a couple of ways to look at this problem, so

I'll cover a few scenarios.
I won't cover the situation where one can buy a freehold property. Cos if one has money, then this isn't a problem. The issue most of us will have is that we aren't really rich enough and are pretty stuck in the middle.

The simplest scenario is a situation like me and my wife.
We are a young couple. And we bought the HDB directly from HDB. We bought it at a discounted rate and after 5 years we are able to sell it.
Although we aren't really planning on having kids. The idea that the HDB will expire worthless doesn't sit well with me. So no matter what, I will try to preserve the "asset" if possible.

This would mean that after 15-20 years, we will likely have to move.
Why not move earlier? You may ask...
The thing is, we will only be able to sell our HDB after 5 years. We can also only buy an HDB from the market after 5 years.
Optimally, we should buy a 5 year old resale HDB and live in it for 10 years.
And sell it off when it is around 15 year old and repeat.
So similarly, we should sell our new HDB at 15 years old.

Basically we can only buy a 5 year old HDB, and we need to live in it for 10 years to make the cost of moving worth it.

For many middle aged Singaporeans, they may be starting to think about retirement at 50 years old.
They may be sitting on an HDB which is 30+ years old.
And they are thinking... "Ok now what do I do?"
I'm going to think about it as, we don't want to have the HDB expire worthless.

So the options really come down to having to move.
Value of property is always a function of a few things.
1) Location
2) Lease remaining
3) Size

Even when my parents had an en-bloc, they had to move to the outskirts of SG to extend the lease and had a slight upgrade in size, but they lost a centralized location.

En-bloc doesn't allow the family to really have much additional benefit. They just get a price premium over the market rate.

So if you want to move house but stay in the same location, but you want to extend the lease, then you have to downgrade the size.

If you want to keep the size but extend the lease, then you have to move to a not so prime location.
If you want to "win" in any of the aspects, then you just have to top it up with cash.

So if you want to keep the size and location, but still want to extend the lease, then you need to "top up with cash".

There's pretty much no way to win in this game. It's just trading around.
Cos the lease is always depreciating.

So if I'm looking at myself, I'm currently staying in Queenstown, maybe in the next decade I might move to Punggol to extend my lease.
But by doing so, I lose the convenience of the centralized location. And I will further lose out on transactions costs.

And that's the end of the story. There's no way to win this game. All the lease hold properties are depreciating.

Even if you buy a freehold property, there's also no way to trade upwards.
If you want a better location, then be prepared to give up your freehold status.

That's pretty much the problem with properties for self stay. You can't really try to time the market. The only way is to sell and rent, then buy again IF the market goes down. But how many people are willing to do this?

So that's it... It's a messed up game. If you only have 1 property and you are staying in it. It's not an investment.
You're basically stuck with it.
Cos you will stay in it, if you want to trade it off, you will have to give up something to get something else.

The only way to escape the 99 year time bomb is really to buy freehold. BUT in Singapore, I wonder if that's possible in the long run. Cos eventually, freehold properties will also go en-bloc and you'll just have to move out and trade into another place. Furthermore, developers will just sell newly developed place as 99 year leases.

So if we look at this in the super long run, assuming the property gets handed over to the next generation, the property will keep trading smaller and smaller, further and further away from a centralized location. Cos there's no way to beat a depreciating "asset".
​
As I'm writing this list, it inspired my next post on...
So what IS an asset??? What is value?


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It's Monday and I felt like writing a simple post, since Mondays have the least traffic anyway. 
So I'll just chat a bit on what's been happening recently.

I've been out of town in KL as usual for the past week. I'm sure regular readers may have noticed, the usual links at the bottom of my post was missing cos it's hard to input links using my phone. 
It's Ramadan period, so many of the people in Malaysia are fasting. It gets a bit awkward cos my wife gets off work at 6pm and we start looking for dinner cos she tends to have to go back to hotel to work after dinner. And as we walk around, we see a lot of shops have people waiting to eat but they can't start eating yet. And it would be totally insensitive for us to go in and order and just start eating, so we decided to, either go to a non-halal restaurant, or just buy back to our hotel room to eat. 
We bought satay at MYR1 per stick, it's quite amazing, they use chicken breast meat to make their satay and they give around 50% more meat per stick. 

I'm going to Paris again later this week, barely 6 months since I last came back from Paris... 
My expense this month is going to go through the roof. Cos we bought our tickets quite last minute and it's the June holidays so it's quite pricey. We are extending a couple of days, so we need to cover a bit of our own hotel. Food is also expensive in Paris. 
A normal set meal for lunch is EUR15, which is around S$25.
Or I could just eat a sandwich at EUR5 which is around S$8. 
I'll probably have to make do with a sandwich on the days I'm alone. 

There's a high chance that once we get back from Paris we'll be going Malaysia again. 

It was quite ironic, cos my wife planned a short trip for us to Bangkok in July cos she wanted a break, and after we paid for the flight and hotel early this month, within the week she was asked to go Paris. 
And I told her... "Eh... we shouldn't have bought the Thailand trip, we are really spending too much time overseas, we need a break." 
Cos there's a high chance in June and July we're going to fly for her work again. 
We thought that we could catch a break this month and have a short BKK trip for ourselves in July. But now that we aren't getting any break, I hardly want to go to BKK. Oh well, still gotta go, money's been paid. 

It's quite a challenge every time I come back from overseas, cos I don't have much food left in the fridge, cos I try to use up my food before I go, then after I come back, I need to quickly find food sources to beef up my food inventory again. Of course the easy way is to use money to buy the food, but that just defeats the purpose. It's like a bad habit. Buying food is the easy way out when I can think of ways to obtain free food. The challenge is that I don't have much time when I just get back from overseas. 
For folks who don't understand why I bother to obtain free food, since spending money is easier, why bother right? It's the same idea as... why I bother to maintain my $4 phone plan, or why anyone wants to reduce their electricity bill, or any other ways to save money. 
The thing is... "Why bother" can be used on almost anything. 

Moving on...

I found 2 coffee machines recently. They were sitting beside my lift lobby asking to be taken. 
One is the Dolche Gusto machine where I can put in capsules, I found capsules previously so I can use it for a few days/weeks. Then I'll need to see if I can get/find more capsules. No, I have no intention of buying capsules.
Second coffee machine I found on a different day is those which you put in roasted beans and the machine will grind the beans and drip the coffee... it works, but I don't have beans to put into the machine... So I'll have to find a way to get free beans. 

CirclesLife has an interesting phone plan. It's a $0 flexi plan.
Sign up for free and get a SIM card sent to you. I already signed up. 
For $0 per month, I will get 1GB of data, 30 minutes of talk time and 10 SMS. 
This will add on to my $4 phone plan very well. Cos my data SIM has been reduced to 500MB and this 1GB offered by CirclesLife is totally awesome for me. 
Apparently, there's no catch, and it's here to stay. Oh well, why not right...
It works like a pre-paid plan. 
So at $0, you can get the 1GB +30mins of talk +10SMS.
Then if you run out, you can buy a short term 1 month plan to top it up. 
So for example you can top up +2GB for $12, +1GB for $8, or +30mins for $5.

I think if I wanted to, I could just switch over to this plan and cancel my pre-paid card. 
Then I could effectively reduce my phone bill to $0 per month!
I think the 1GB +30mins of talk +10SMS should be enough for my purposes. 
But... like what I said above... "Why bother"... see, it's so easy to use this excuse. 
I need to tell all my friends about my change in number, and my prepaid plan is already so cheap at $3-$4 per month, and I probably can bring it even lower than $3 at times. 

(If I top up my prepaid card online, I can buy $10 which lasts for 4 months, means it's $2.50 per month. IF I don't use up ALL the credits to make calls, I can extend the validity for another 6 months at $2.60, this means that potentially, I can use $10 to buy me phone usage for 10 months, which results in $1 per month at best. It's highly unlikely I'd still have credits to extend the expiry one more time after 10 months.)

BUT, I could potentially reduce all that to $0 per month if I switch 100% to CirclesLife, but here, I use the excuse, "Why bother", I would need to inform all my friends about the changes, and inform the banks about my changes and maybe even have to update my email accounts, cos these days you can use your handphone to recover forgotten email passwords... 
So I use the excuse, "Why bother" when I could potentially save $10-$20 per year if I really bothered. 
There is a catch though, IF I ever needed up use more talk time on CirclesLife, I MUST pay $5 for 30 minutes and it only lasts til the end of the month. 

Anyway... moving on...

DBS Visa Debit card, the "So called" awesome card which USED to give 5% rebate for Paywave transactions without any minimum spend has updated it's Terms & Conditions. 

The NEW T&C is unforgiving. 
They removed the limit of 3 ATM withdrawals, but now there is a $400 minimum spend. Which is just sad. 
I used this as my secondary card if I overuse my UOB One card, but now, this card is rendered pretty useless. Cos it's going to be hard to clock $400 worth of paywave transactions. And to use this card to pay for any other purchase without paywave is pointless.
​(The alternative will be to use DBS Live Fresh since that one also has minimum spend anyway.)

Whilst I was typing this post, my wife called and said we will be going to Malaysia again tomorrow, and it's supposed to be a public holiday...
Then we'll be back in a couple of days and then flying off to Paris again for her work. 

Anyway, that's it for today's post, I'll be talking about the 99 year lease time bomb for HDBs tomorrow or Wed, depending if I have the time tomorrow after the flight and everything...


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​​

When I visited my parents last week, my dad asked me if I still cut my own hair.
And of course I replied... Yea of course I still cut my own hair.

And he again marveled at how amazing it was and wondered how I did it and expressed his amazement.

And I told him...
I didn't start cutting my own hair cos I can't afford it. It's around $10. That's not much. And now that I go Malaysia often, I could get a haircut for even less. It's not about how much it is...
I started cutting my own hair cos I thought it would be fun to try. Why not? Most people believe it can't be done. I believe it can be done. So I decided to try... Around 5 years back...

And like everything else... First time wasn't so nice. Second time got better and took less time and now after around 50 times. I'm a lot better and faster.
And now... Why would I pay money to cut my own hair? It's free.

That's how we all learn new things. We all aren't very good at the start. Then we get better. Then we get a bit better then we reach a level of "fair enough" competency. Not great but good enough. And we more or less hang around that level of competency unless we want to pursue the new skill further.

I've been trying to get my mom to get off her cable subscription. It's expensive and useless in the current age. We can get everything online and on demand as long as we have an internet connection. But she wouldn't hear of it.
She likes the "convenience". She wants to go home and turn on the TV and watch her HK drama at a particular time... And rush home cos she's afraid of missing it.
Whereas online the whole serial is already completed and she can watch it anytime she feels like it.

Never once did she ask me HOW to do it. She just wouldn't hear of it and brushes it off as inconvenient. And she continues to give herself excuses not to learn something new. Well, her money so I can't force her to change.
I think I would have felt better if at least she asked me to show her how it was done before deciding that it was too difficult for her.

This manifests in a lot of our lives. There are many things that we can put in a little effort and we can reap the rewards for many years into the future.
Like learning about financial education, learn about ETF, dividends or interest rates. Or the different types of insurance.
Or learning how to cook. There's really little excuse not to learn a bunch of these skills. The internet is full of information.

Oh... Then again... We also need to learn how to use the internet. And I suspect my mum may not be interested to learn even that part.

I am pretty amazed by some 40-50 yr old aunties. They are pretty proficient in using their phones and internet. They can find their own dramas online, download them and watch them on the train. It's really cool to see that some of the older generation are embracing new things. They understand that it's good for them and they learn to use it.

I'm not even talking about high levels of proficiency. Just some good enough workable knowledge which is useful and beneficial. Especially if it is used regularly.

​Unfortunately, many of us aren't too interested in venturing out of our comfort zones. So we just pay for the "convenience".


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