What I wish I knew about $$

21 Sep 2007, ST

By Chua Mui Hoong

A FEW months back, I was at a lunch with some people when the topic shifted to property and finances.

'I'm debt-free,' I said proudly. 'I know the property market is going to go up and I feel itchy to buy a place. But I don't like the idea of having another mortgage.'

The lawyer said: 'But why? Debt is good! Take up a mortgage! I love mortgages!'

I am the youngest child of immigrant parents, who imbibed the work-hard, save-money ethic of our China-born parents.

For years, a big chunk of my annual salary bonus went towards paying down my mortgage. Before I hit 35, the mortgage was paid up.

But recently, I've begun wondering if the work-hard, no-debt ethic I subscribed to in my youth is the smartest from a financial point of view.

With interest now focused on the Central Provident Fund and its rate of return, MPs this week pressed the Government to start a financial literacy programme so citizens know better how to manage their money.

There are things about finance I wish had known about when I was in my 20s, and stuff that I'm still trying to figure out today.

For starters: Is debt good, or bad?

My parents would say it's terrible. In my first 38 years, I also thought so.

Debt is what happens when you spend more than you earn and need to borrow to make up the difference. Or debt is for people with no money who need something to tide them over.

But nowadays I'm hearing that debt is good.

People talk about leverage - which is when you borrow money at a low interest rate, say 2 per cent, and you use it to buy something that gives you a higher return of, say 5 per cent.

Before you rush off to buy that Cartier watch on your credit card, I should add that there is good debt and bad debt.

Good debt is money you borrow to make more money. Bad debt is money you borrow to spend money.

The world is divided into two kinds of people: those with a high propensity to consume, and those with a propensity to save.

As the lawyer friend noted of his own propensity to consume: 'Credit card debt outlasted all the luxury goods I purchased.'

It is of course bad to get into debt for over-spending.

But the other type of people are not much better. This is the group with a high propensity to save, to whom salting away a little something from the monthly pay packet is second nature.

You would think saving is great. But the truth is, saving is pointless unless you put the money somewhere where it grows faster than inflation.

Otherwise you might as well have blown the money on that sports car and at least got psychic satisfaction from being seen at its wheel.

So, don't overspend your money, but it's okay to borrow money to make more money.

So there you are: a neat little maxim I wish someone had explained to me when I was 22.

Another maxim I wish I had known is this: When it comes to investing, never trust your feelings, your intuition, your gut feel, your 'sense of the market'.

Back in the heyday of the dot.com boom, I put $10,000 of my hard-earned savings into an Internet fund. The Internet is the trend for the future, I told myself. It is good to own stock in Net companies.

Within a year, it tanked.

'Mmm, it's cheaper, maybe I should buy some more,' I mused.

Luckily, wiser friends warned me: 'Don't throw good money after bad.'

When I finally switched out of that fund, it had sunk to about $3,000.

I consider the $7,000 I lost tuition fee for an expensive lesson: Don't invest based on 'trends' or personal sentiments.

When the biotech craze rolled around, I sniffed. No way was I going to buy into a narrowly focused sectoral fund based on 'trends' again.

The third thing I wish someone had told me is that 'investing' is not a big word.

I used to think 'investing' was what you did when you had saved up tens or hundreds of thousands of dollars. I was busy paying off my mortgage and so did not have that much surplus cash to 'invest'.

These days, I know that you can set aside as little as $100 a month and channel it into a diversified fund for investment.

The advantage of regular savings plans is that you spread out market timing risks. Some months you buy into a fund when it is high, some months when it is low. The risks average out, more or less, compared to if you plonk down thousands at one go.

If I had been smart enough to set aside just $100 a month from my 20s, and invested it in something that yielded 5 per cent, I would have nearly $45,000 20 years later, thanks to the power of compound interest.

In Singapore, financial literacy education is still in its infancy, with the Monetary Authority of Singapore and Singapore Exchange organising some programmes.

In Australia, the Financial Literacy Foundation was set up by the government in June 2005 to consolidate efforts in this area. It has a website, organises media campaigns, and supports training in this area.

Amid the plethora of pressing social issues demanding attention, it is easy to put aside the need to educate people about how to manage their own finances.

But as the debate on CPF changes shows, lack of knowledge creates misunderstanding. Ill-informed citizens make bad choices about their retirement options.

Financial literacy is an under-taught skill that will make more difference to the average Tan Ah Teck's life than learning the properties of sine and cosine.

The simpler life

8 Sep 2007, ST

By Valerie Tay

SOME have wondered how my family of six manages on the single income that my husband, the sole breadwinner, brings home. Guess I could share a few tips that have been serving us well.

I'm well qualified to do so as, like some of our ministers, I handle several portfolios too. In addition to being the Minister of Home Affairs, I'm also the Minister of Education and the Minister of Finance at home. Besides juggling four kids, I also juggle the family budget and make sure I do just as good a job as Prime Minister Lee Hsien Loong does with the national budget, if not better.

Even if you do not find the tips I'm about to share enlightening, who knows, you might find our money-saving ways worth-a-laugh ridiculous. I know I'm still laughing at how I can put $17,000 worth of Further Tax Rebate to use since I'm not working and my spouse isn't allowed to use it.

As sure as ERP rates will keep going up, this rebate will go up in smoke too, when it expires in 2009. I'm reminded of some of the gifts I used to get during the annual office Christmas gift exchange when I was working - people do give you things you're unable to use.

Let's forget that ridiculous bit for now and focus on some really helpful tips.

First of all, the easiest thing to do is increase the size of the pie - I write freelance (and I enjoy it). It pays peanuts but, hey, it's better than nothing.

Second, we drum it into our kids that money doesn't grow on trees, nor does it pop out from the wall after pressing a few buttons. Dad has to go to work just so there's money in the bank. And besides all the new things that we buy for our kids, they also use their cousins' handed-down clothes, bikes, toys and textbooks.

Next, it helps tremendously that we've always lived on one income even when I was working and we enjoyed dual incomes in the past. We believe in living within our means by living simply. Better still, preferably slightly beneath our means, as it means that we will have a little more to put aside.

The best thing we had going for us has always been achieving zero debt - consciously and conscientiously. We drive an old car. I still remember the used-car agent's surprise when we declined a loan and wrote him a cheque for the entire sum, which wasn't much really, given that the car was a decade old.

We've entertained the idea of condo living but eventually dropped it. The thought of shouldering the burden of a long-term commitment to a new home loan put us off, and so we stayed on in contentment in an HDB flat that's fully paid for.

We use only one credit card as our brain tends to ignore the total expenditure when the figures look deceptively smaller spread out in several card statements. Our credit card bill is paid promptly by Giro. Never roll over any balance.

Another advantage of using just one credit card is in pooling the reward points earned. Always use the card instead of Nets where possible, to chalk up more points.

Direct as many bills, such as phone, Internet and newspaper subscriptions, to be paid through the card as possible.

Our no-annual-fee Maybank credit card has rewarded us with vouchers to purchase groceries at NTUC Fairprice. When shopping at Fairprice, consolidate purchases so that it hits at least S$20, at which point you earn Linkpoints which can be redeemed for Fairprice vouchers. In a year, we redeem over $100 worth of vouchers to offset our grocery bill. A family of six does eat a lot!

We don't have cable TV. Less TV means more time for kids to play imaginatively (with Lego, for example) and read voraciously.

For holidays, we travel at most twice a year to nearby destinations. We certainly can't afford to fly a family of six long-haul on one income now. In March, we drove up to Desaru for a weekend break. This December, we're heading for Krabi as we took advantage of Tiger Air's early-bird promotion. I can already smell the opportunity to make some extra bucks for the travel story that I could write on our return.

I'm not into trust funds or Reits. Being ignorant of the jargon, I just go for blue chip stocks, the ones they call dividend stocks. I can already hear the hyena-like laughter of the savvy ones out there, but who cares? I love the fact that I have pocketed thousands of dollars from dividends.

After all is said, there are always inherent risks in whatever stocks one picks (this line is to cover myself in case someone out there takes what I say seriously, only I don't put it in fine print like all those product pamphlets). Don't listen to me. I'm just a housewife - what do I know about investing?

That said, you shouldn't listen to your financial adviser or other 'experts' either. Take whatever they say with a dose of salt.

Forget about booking courts. When we feel like playing tennis or badminton, my son pops his head out to check if the public multi-purpose court across the street is being used. Often, it is available and we grab the sports bag and hightail there.

Four times a year, we make our pilgrimage to Johor Baru during the school holidays. The advantage of driving an old car like ours is that no car thief is interested.

When in JB, we eat and shop and eat, in between paying a visit to the hairdressing salon, sports shop, hardware store, pharmacy, dentist, bakery, Carrefour, mooncake shops, roadside cobbler, car workshop and, of course, the petrol station.

We had the boys' room repainted recently using paint picked up from JB. Forget about getting painters - we do the walls ourselves, one wall a time. The hubby and I do the Tom Sawyer on the kids. Heh, heh... they can't wait for their turn with the roller.

Before you run off and buy everything you see in JB, do note that not everything is cheaper over there. Arm yourself first with the knowledge of prices of stuff you need. Let's run that by again - stuff you 'need', not 'want'. There's, um, quite a difference.

Lastly, let me share with you this wonderful phrase I read in the papers, spouted by a Caucasian Zen monk (if I remember correctly): Our life is clouded by obsessions and desires. These desires distract us from the path of light. Om.

Okay, that last word didn't come from the monk. My life is a little simpler compared to some people I know. I don't have a lot of desires, so I am largely contented and happy. Still, it is not as simple as I would like it to be.

Far from it. I'm still working on fighting the little desires.

I haven't yet got to the utopia that is truly where living a simple life is. And I don't mean the place that Paris and Nicole put up at.

Though I know I'll probably never really get to that true utopia, but even if I should inch just a little closer with each passing year, I'm happy to keep on working on simplifying my life further. Wish me luck.

No, better still, why not have a go at it, too?

The writer is a full-time mother who has just started to do freelance writing.

Buck$ for Blog$

22 Jul 2007, ST

Thanks to Singapore firm Nuffnang, bloggers can turn their popularity into ad dollars

By Jamie Ee Wen Wei

BLOGS were once the domain of daily musings, inconsequential chatter and random rantings.

But now, a local company wants to change that by bringing in advertising money for local bloggers.

Founded by Singaporean Cheo Ming Shen and his Malaysian counterpart, Timothy Tiah, Nuffnang provides an online platform to match bloggers with advertisers.

All bloggers need to do is to join its blog advertising community and fill up an online form, which provides details of their blogs and readerships that are used to match them with advertisers.

Launched in Malaysia in February, the blog advertising community - the first of its kind in Asia - was an instant hit, attracting 300 bloggers in just three days.

'We were only expecting 300 blogs in three months,' said Mr Cheo, 24, a graduate of the London School of Economics.

Two months later, the company started its Singapore community, and 1,800 bloggers have already joined.

Despite competition from similar online ad services such as Google AdSense, local bloggers are attracted to Nuffnang because it focuses on promoting local products and businesses, which means bloggers have a greater chance of clinching ads on their web space.

'There is no point showing somebody in Singapore an ad from the US, right? So if you sign up with Google Adsense, the ads appearing will be public service announcements, which pay zero dollars,' said local blogger Cowboy Caleb, who earned $200 in two weeks from Nike Singapore ads on his blog.

Depending on the number of unique visitors to their blogs, bloggers can earn from $2 to as much as $2,000 a week for ads placed on their blogs.

Big-time bloggers such as Wendy Cheng, also known as Xiaxue, can easily earn about $1,000 a week, said Mr Cheo.

But personal blogs with a smaller readership are benefiting from this service too.

Final-year psychology student Estee Teo, who keeps a personal blog that has up to 150 hits a day, said she earned about $7 a week from ads for Hitchoo.com, a dating website. The money, though meagre, stokes the ego.

'It feels good that someone actually wants to put their ad on my blog,' said Ms Teo.

For advertisers, the playing field seems huge.

A study by media agency Universal McCann said that Singapore's community of bloggers and blog-readers has increased dramatically in the last six months. About 75 per cent of Singapore's netizens - about 2.5 million people - have read at least one blog in the past six months. By March, 36 per cent of them had blogs of their own.

So far, at least five companies, including Nike Singapore and Hitchoo.com, have run ads on blogs under Nuffnang.

But local advertisers remain conservative. According to a report by Nielsen Media Research, Singapore's online advertising expenditure accounted for only 2 per cent of the market's total advertising spending in March this year. The total advertising expenditure was almost $2 billion last year.

Still, Mr Cheo is confident that blog advertising will pick up among advertisers.

'They have waited a long time for this, and they are very happy to explore this new medium,' he said.

And there is always the dream of becoming the next big thing on the Internet.

'Who doesn't want to be the next Google?' Mr Cheo said.

Becoming a millionaire

01 Jul 2007, ST

I want to be a millionaire, too, but the odds are stacked against me. Still, hope springs eternal in the bosom

By Chua Mui Hoong

DO YOU feel it, this frenzy in the air, this mad rush to wealth?

I do and I also want.

I want a share of the $1.3 billion record-breaking collective sale proceeds for Farrer Court.

I want to make a bundle in stock investments so I can afford one of those properties costing $5,000 per sq ft in Orchard Road.

I want to be one of the 66,660 millionaires in Singapore. After all, Singapore saw the highest increase in the number of millionaires last year, at about 11,000, or 21 per cent.

As a journalist who feels the pulse of the land (aka being susceptible to herd mentalities) I find myself increasingly caught in this frenzy.

Hope springs eternal in the female breast.

I begin to tote up my bank balances. Alas, it will be many years, if ever, before I can aspire to be one of the 66,660 people with US$1 million (S$1.53 million), over and above their primary home.

By that time, maybe US$1 million will just about buy you a five-room HDB flat to retire in.

I look at my modest investment portfolio. It isn't making record profits. Maybe I should find another financial adviser.

Or maybe I can get a piece of the action by getting a mortgage to buy a property. Isn't this a sure-win market?

First, try to spot potential en bloc developments, the way students try to spot questions for exams. But then, National Development Minister Mah Bow Tan says plot ratios aren't going to head north just because the master plan is being revised next year.

Okay, stick to good old Districts 9, 10 and 11.

I wouldn't mind living in one of those chic apartments facing the river (just wipe away memories of the smelly waters from days of yore and remember the river has been cleaned up). More to the point, rental yields are not bad.

Or maybe get a nice landed house in a suburban area. After all, everyone is saying it's just a matter of time before the Government liberalises rules allowing foreigners to purchase landed homes.

Indeed, a Goldman Sachs report argued for it last week - but the Government was quick to say there were no such plans.

But market watchers figure, if not now, perhaps next year, or the next, or the next decade.

In the meantime, prices are still soaring. Quick, buy before prices go up, as many classified advertisements now exhort buyers.

But I would have to take up a big fat mortgage.

Players in the market tell me not to be daunted by debt. Debt is good, they say.

Say you get a $1 million loan at 4 per cent. Rent out your property at $4,000 a month or $48,000 a year and that's a yield of 4.8 per cent.

You sit pretty and end up with rental income - and when prices go up next year, as surely they will, you get the capital gains, too.

There's an expectation of prices heading north for at least the next 18 months. Just make sure you're out of the market before things sour, is the advice.

But then other voices urge caution. Remember the property bust days of falling asset prices, negative equity and fire sales from those caught in the cycle?

Some people point out: A rising market is a good time to sell your property, not buy. Let the suckers buy in at such prices. Let others take the risk, not you.

Some savvy financial people are cashing out to take advantage of rising asset prices and holding cash, ready to swoop in on undervalued assets at the first sign of a shift in market sentiment.

With conflicting advice, what's a poor girl to do? Maybe it's not so easy to become a millionaire. Maybe you need to just plunge in, not think too much.

The book Retire Young, Retire Rich by Rich Dad Poor Dad best-selling writer Robert T. Kiyosaki deals with the importance of changing one's sense of reality if one wants to become rich.

Think poor, say 'I can't afford it', think 'Humans can never fly' and your life is limited accordingly.

Think rich, say 'I can afford it', think 'Humans - and pigs - can fly' and your mind, expectations and actions will find a way to bring those axioms into reality.

So try changing my reality. Mmm. Think: 'I can afford it.'

Except I want to afford the wrong kinds of things. Not investment items but consumption ones. Things that make me poorer, not richer.

I step into a branded handbag or watch boutique or a Tiffany store. I like bling, the brighter the better. 'You can afford it,' the temptress whispers. The interest-free instalment credit cards yell: Use me, use me!

Not being a fan of Oscar Wilde, I decide the best way to deal with temptation is to flee it.

I think that maybe trying to get rich by thinking too much isn't the way to go.

Maybe I'm not cut out to be one of those millionaires.

I open the papers and there it is, confirmation of that thesis that you don't have to work hard to get rich.

6904 was the first and second prizes in the 4-D draw last Wednesday. Having the same number come up is very rare: a chance of one in 100 million. That's a figure which has eight zeroes.

When the God of Fortune is distributing such largesse against the odds, why work so hard to try to make money?

Let the God of Fortune sprinkle some of that gold dust on me.

Put $666 on 6666, and maybe there'll be 66,660 + 1 millionaires next year.

Remember, you read that hot tip here first. And if you make a bundle, at least do the decent thing and send me some kopi money.