Saving your first $100,000 could be easier than you think!

After I graduated and started on my first job, I did some calculation in a spreadsheet to extrapolate my salary after 5 years. All was rosy until I actually received my increment letter - $144 or  6% of my then $2,400 salary. Bonus was 1.5 months, which was considered relatively good in the company. I typed the numbers into the spreadsheet and I decided to find another job after looking at the projected number after 5 and 10 years.

Working backwards, I calculated how much increment I would need year on year to achieve a salary of an arbitrary $7,000 after 10 years. $7,000 was the 90th percentile from the Department of Statistics Income distribution curve then. 10% year on year increment was needed to achieve that from a $2,400 starting pay.

Every year I calculated how far I was away from my required increment. When the "extrapolation" numbers looked unfavourable, with a heavy heart each time, I make my move.

Every year, every day, every hour, every second, I make sure that every single action I did was contributing towards building relevant skill sets to increase my market value.

I would not recommend this approach of job hopping as its detrimental to the economy, but I thought I should share some ideal examples for the fresh grads jumping into the market. The starting pay is VERY important. It is your bargaining power for the next hop and future hops. I regretted not bargaining for more.

More importantly, saving your first $100,000 could be easier than you think! Once you hit that milestone, I am sure you are all set for more milestones.

Poly Grad (F) 5% Inc

Poly Grad (F) 10% Inc

As you can see, a 5% increment and 10% increment will result in 50% difference in pay after 10 years.

In this example, you can see that the amount one can save is also a lot, just based on a 5% increment, which is closer to the market average, provided your company pays you 3 months bonus a year. What this means is that if your company pays you less than 3 months bonus, and you think you are capable of getting more, then you are probably better off hunting for a more generous employer.

I had also put a very reasonable monthly expense of $900. If you save less than what the spreadsheet says, it is CERTAIN that you will not save the projected amounts. Simple.

I had also done up the same tables for different starting average pays for poly grad M, uni grad F and M just for completeness. Make the right step!

Poly Grad (M) 5% Inc

Poly Grad (M) 10% Inc

Uni Grad (F) 5% Inc

Uni Grad (F) 10% Inc

Uni Grad (M) 5% Inc

Uni Grad (M) 10% Inc

How much have I earned and lost?

How much have I earned and lost from shares?

This lady is a few years younger than I am and she asked me this question over a casual lunch.

Hmm... I probably earned $50,000 and lost $30,000, so a $20,000 nett profit could be a close estimate over the past 10 years. These are realised profits and losses. The unrealised losses were much more during the 2007 and 2009 "crashes".

After that, I decided to compile a year-on-year income "report" to track how much I had earned and lost over the years. It took me quite a few days to dig through my archives of spreadsheets that I had used to track my income and expenses and reading them reminded me of how I evolved my spreadsheet format and investment "strategy" if I could borrow that term to represent my exploratory journey.

We all love visuals, so I decided to make one too.

Year-on-Year income breakdown

I cannot remember when I exactly started buying shares, but it was probably in 2001 or 2002 when I was school and I remembered it was after getting my first exam results. I realised that I was in the bottom half of the bell curve and will need to look for alternative sources of income to make up for my shortfall in income compared with my peers with much better grades (who will likely get a head start). I am a pessimist, and still am. I did work hard for my four years in school but I was still below the curve when I graduated.

Shares appeared to be an "easy" option because there was an online platform, you spend a few seconds to click to buy and sell, and then you make money. It sounded like the perfect early retirement plan. That was the nirvana I was seeking. That drove me. On hindsight, it was no where close to easy. It is sheer hard work learning, cash flow management, and patience.

In 2002, China Initial Public Offering (IPO) stocks were the "hottest". Every IPO was a 100% hit. It is a definite 10% gain and sometimes as high as 300%. I made quite a bit of what the industry calls "kopi lui" or coffee money. I profited $10 to $100 each trade. I use the term trade because I bought and sold usually within a few days.

When US waged war against Iraq in 2003, stock markets rallied. Oil companies stood to benefit from higher oil prices because it was perceived that the Iraqis will have to stop digging and selling oil to fight the war. It sounds comical, but that was how it was perceived. The actual supply shortage from Iraq to cause a supply crunch is debatable.

When SARS hit in 2003, the market "semi-crashed" and IPO fever died down. As I was riding on speculation fever, many of these China stocks fell and I clocked my losses. That could be said to be my first burn -- speculation.

The market started to pick up in 2005 when HDB changed their housing policy to allow PRs to buy flats, and foreigners to buy condominiums (condos). That created the demand for HDB upgraders to mass market condos. Previously, foreigners were only allowed to buy certain walk up apartments, or high-end luxury condos. In Singapore, people called the phenomenon "Boom Town Charlie".

In China, there was a construction boom, and all property stocks were hot and speculative. Those shares that were hot in pre-SARS era had mostly been delisted by then, and new batches of China IPO shares flooded the market. I made kopi lui again.

My second burn happened in 2007 -- over-exposure. Warren Buffett launched his war chest to buy out the US banks while I sucked my thumb with no war chest. I started to build my war chest.  I counted my blessings to be able to live to watch the Lehman Brothers trickle unprecedented impact across all stock markets. To be honest, I still feel that the Lehman Brothers was not that big a deal, but it was the sensation it caused that trickled fear into every household worldwide -- who will be next?

Ben Bernanke became an overnight celebrity. There was a cartoon drawn about him sitting in his airplane and flinging out wads of cash. Quantitative Easing (QE) made it into case studies of many Economics textbooks. To date, I think QE is the most daring invention, after fractional banking. In those days, I call QE a damping function. In physics, a damping function is one that gradually slows you down to a halt instead of an sudden stop.

In 2009, there was another "semi-crash" because of fear of QE money disappearing and that markets were inflated by invisible demand created by QE. Round 2 of QE came in to save the day. This time round, I launched my war chest and made handsome profits. I will forego a short-term profitable stock than spend my war chest in peace times. This milestone also marked my recovery of past losses, and I decided that I need to change my strategy to increasing the proportion of income from dividends.

So the high-level strategy was (and still is):

1. Buy shares that give at least 4% dividend yield. For riskier shares, I give myself higher margins of at least 6% yield. Every share must have at least 4%, so that I don't need to track every share to the last $1 of income.
2. Buy IPO shares and sell on target price. Generic target price is at least 20% above cost price to get a return of 4 years dividend income to hedge against the risk of another market downturn. Not all IPO shares can yield such capital gain, hence #1 applies as well.
3. Build up war chest of at least $100,000, which is also to be used to apply for IPO shares as well to get higher allotment.
4. Track shares with consistent and good dividend income and wait for the "right" price -- which is the price that gives me at least 4% yield (inclusive of forecast performance).

With this strategy, it also meant that I had to adjust my portfolio to dump those that have met the target price and I don't intend to hold, in order to free up cash to fulfill #4.

I am still adopting this strategy, but I introduced some "governance" of apportionment to "manage risks". At peace time, shares should not exceed 50% of my portfolio (which includes cash, fixed deposits, future income for the next 3 months). For me (a pessimist), a comfortable proportion is 25% shares, to allow for gradual build up when opportunities in #3 or #4 arise. In addition, condition #3 is triggered when the market index drops by at least 30% in a week.

The thrill from kopi lui doesn't excite me anymore. Dividend income is taxed at source and exempted from personal income tax, at least while one remains a Singaporean.

In the spirit of knowledge sharing and learning, I don't mind sharing how much I had earned and lost, and you can even work backwards to calculate how small/big (relatively) my portfolio is, just as long as you don't ask me for money or free meals. :P.

Maximising benefits from cashless payments - OCBC 360 and NETS FlashPay

Disclaimer: I am not paid by any companies mentioned here to write this. I am writing this purely because it is really a productivity improvement to maximise benefits from cashless payments. All computations are in S$.

Possibly the best savings rates in 2014 -- OCBC 360 Savings Account

I had signed up the OCBC 360 account 6 months ago and had been reaping the full benefits from the account - 3.05% p.a. interest paid monthly on account balances up to $50,000 when you satisfy 3 conditions, which essentially are promoting cashless payments.

1. Your employer credits your salary into the OCBC 360 savings account through GIRO. (1%)
2. You perform 3 online bill payments a month. (1%) 
3. You spend at least S$400 on your OCBC credit cards (combined). (1%)

#2: These bill payments include your own OCBC credit card(s) or non-OCBC bank credit card(s) payments. If you sign up for GIRO payment of bills (e.g. credit card, utilities, town council, income tax, property tax, etc.) you literally can ignore the tracking of payment status of these bills.

#3: If you charge your recurring bills from utilities, handphone, internet, town council, etc. to your OCBC credit card, these amounts will still count towards the spending requirement.

Why am I sold?

There are certain expenses that I will definitely incur, so I should maximise my benefits from these expenses.

Assuming you have these monthly recurring bills:

• Utilities ($100)
• Handphone ($30)
• Internet ($40)
• Town Countil ($50)

Total: $220

What this means is that out of the $400 minimum spend, I will need to spend another $180 to qualify for the bonus.

This is where we start to look at NETS FlashPay

Other potential monthly expenses:

• Public transport - Train/bus ($80)
• Food court
• Medical 

Depending on our consumption, the amount varies, but the important thing here is the Auto Top-Up facility by GIRO or Credit Card. 

By linking to the top-up to your OCBC 360 account, every top-up will count as 1 bill payment.

By linking to the top-up to your OCBC Credit card, every top-up will count towards the $400 spending requirement.

Most optimised approach is to top-up with an OCBC credit card because it is very easy to get 3 bill payments if you have 3 credit cards.

Caveat: Top-up service fee is $0.25 per top-up, but waived until 31 Dec 2015. If you sign up now, you even get $5 cashback, which means you are paid to sign up. $5 will cover 20 top-ups. Just choose to top-up the maximum of $50 each time, and $1000 (20 x $50) cashless payments through FlashPay will probably last a year.

Note 1: OCBC Frank credit card has auto top-up activated before they send the card to you, so if you try to set up the auto top-up, it will fail. I learnt it the hard way.

Note 2: Auto Top-up only works at tap points at MRT and buses only, not at NETS merchants.

Which 3 credit cards?

1. NTUC Plus card for Link Points
2. Frank card for 6% rebates for online purchases if you spend $500 on the card, capped at $60/month. (particularly useful when you buy air tickets)
3. Titanium card for the NETS FlashPay top-up because currently only Mastercard is supported, except UOB Visa.

More perks for NETS FlashPay

1. 5% for Comfort cab expenses (min $30 a month), suitable if you take cab a lot. There is a transaction fee of $0.30, so to breakeven and benefit, you use FlashPay when $0.30 is less than 5% of your cab fare, i.e. $6, inclusive of booking fees and ERP charges. Unless your cab ride is less than 5 minutes, I am quite sure you will have to pay at least $6. You can also sign up for CAB rewards to get points everytime you use EZ-link or FlashPay to pay cab fares. Get $5 voucher when you accumulate 1000 points. If you sign up now, you get 800 bonus points, which is worth $4.
2. Some food court stall with NETS terminals accept NETS FlashPay too. Even hawker centres has a pilot set up! Beo Crescent and Clementi 448.
3. General Practitioner (GP) Clinics that have NETS terminals accept NETS FlashPay too. For me, I visit Ma Kuang (TCM) and they accept NETS FlashPay.

Lucky Draws:

1. $5000 cash until 31 Dec 2014.
2. Win a unit at Stratum Condo and 20 winners get $1000 cash.

Conclusion:

• I benefit from OCBC 360, which is a maximum of $1525 a year ($127/month), based on 3.05% of $50000.
• I benefit from NETS FlashPay by charging my previous cash expenses to the credit card by choosing to auto-up my FlashPay card by Credit Card.
• Saves time topping up cards, payment bills, etc. 
• My time savings are spent on personal development, researching for investment opportunities, and sleep.