Back in January, MAS increased Singapore’s gold reserves by 30%, another 6.8 tonnes of gold, seeing a significant increase in our overall reserves to 205 tonnes. But why are they doing this? What is the reason?
Central banks are continuing to buy gold, instead of holding USD. Belief is that, now, we are a multi-currency world, so gold is a safer asset to hold than American Dollars. Although USD won’t lose its currency reserve status anytime soon, central banks want to diversify away from the dollar.
The trend of diversifying away from the US Dollar gained momentum when Western nations began putting sanctions on Russia because of the war in Ukraine; Russia was kicked out of the SWIFT system and many other sanctions caused Russia’s economy to plummet.
Not only that, the US Dollar’s recent rise has caused massive inflation problems worldwide, especially for emerging markets. This has obviously worried banks, causing a shift to gold; gold is a good hedge against inflation, and is separate from currency, so does not suffer from exchange rate risks.
During times of political and economic uncertainty, gold is a safe reserve. Gold is able to retain value much better than other forms of currency, because it is limited and cannot be diluted. So to me, it is clear that Singapore is increasing its gold reserves due to the current economic climate; Singapore will be able to whether the financial storm we are facing right now.
Gold can be a good investment option right now, as it’s a good way to hedge against inflation and recession. If you hold cash, your money can be eaten away due to the poor interest rates vs inflation. And finally, while to US Dollar is likely to be the reserve currency for a while, we do not know what will happen in future. Will you be investing in gold, like Singapore?
When I first moved to Singapore, I didn’t really know much about the landscape here in terms of living and working. I had only visited the country via transit, so Changi airport was all I knew! Of course, the reason I chose to move to Singapore was because the pay was a lot higher than what I can get in the UK. However, I wish I did understand things before I moved here so I could make more of an informed decision. So, I’ve come up with this list, hopefully I can help some newbies who are considering to move here.
Flights
Of course, if a company is willing to relocate you over here, then they should try and cover some of the moving costs. When I first accepted my job offer, my company did in fact offer to reimburse my flight ticket. However, this was not enough to cover the full flight cost. If I remember correctly, I had to book with a budget airline direct from London; there are no direct flights from Birmingham, so that was an extra hassle for me to try and travel down there. We all know they’re a lot more expensive than they were pre-Covid, so look out and make sure that your company’s reimbursement is sufficient to cover these inflated flight costs!
2. Housing Costs
I’ve written a few articles now regarding how expensive housing has gotten in Singapore. In fact, a couple of days after I broke my last article, the government raised the additional stamp duty for foreigners from 30% to 60%! Not only that, rental has skyrocketed over the past year or so; so even though your salary might be higher here than your home country, your outgoings might be a lot more too. If you are offered a package that covers some or all of your rental costs, then I think that is ideal! Rental costs are the bulk of my outgoing expenditures each month.
3. Insurance
I know I always go on about this, but it’s very important! I spend a lot of my personal insurance each month. When I first arrived in Singapore, my previous company gave me an allowance of $200 annually to cover insurance…let me tell you now, this is not enough. This only covered a fraction of the very basic hospital & accident insurance I purchased, let alone the additional life & critical illness insurance I later purchased. If a company offers an allowance to purchase insurance, make sure it’s at least in the thousand dollar range. But ideally, a company should provide you with a corporate insurance plan, that way you may have an opportunity to be covered for GP, specialist and dental, coverage that is normally not claimable on a personal insurance plan. Also, it’s good to know that it is mandatory for companies to provide foreigners on work permits and S passes with insurance coverage.
4. Annual Leave
I didn’t factor in how important this was when I accepted a job offer. In my previous company, when I was an English teacher, I enjoyed a lot of days off, because of school holidays et cetera. The tuition centre simply refused to open, meaning that we were unable to work. However, these days off went over our 14 days annual leave, meaning that we actually had to pay back the company the days that we did not work! This basically ate away into our bonuses. I wish I’d have found a better offer that didn’t absorb our days off in lieu this way!
5. Shares & Taxes
A lot of companies offer shares as part of their incentive. I think this is a great idea, as you basically have access to stocks (maybe even blue chips) that you wouldn’t normally have access to. However, a word of caution- and this has happened a few times with my clients; IRAS will tax you on these shares even if you haven’t cashed them out. Quite often, you are taxed when the shares are doing well and price high, then, the shares may plummet, especially during this economic uncertainty. So, you may be taxed on assets that are actually a lot higher than their current value! This could push you into different tax brackets altogether, meaning that your tax for that year will be quite costly!
6. Education Costs
As a foreigner, it is often incredibly difficult to get your child into a local school, they have to take several exams on a syllabus that they probably are not familiar with. So, for most expats in Singapore, their kids have to go to international schools. The fees for these schools can be very pricey, easily $50,000 or even more a year for some! So, factor this in before you make the move. Ideally, you can find a package that will cover some of these educational costs for you.
7. Dependent’s Pass
A lot of foreigners here are in fact trailing spouses, following their husband or wife for work. In the past, this was not so much of an issue, but over Covid, the government made it a rule that those on a dependent pass could not get a letter of consent to work. This means that if you are on a dependent pass, you may have to work remotely for your previous company overseas, or simply not at all. I do know some who have set up their own company to bypass this, but then another problem arises in having to hire a local and pay their CPF, regardless of how well your business is doing.
Some argue that Singapore is becoming less attractive for foreigners to live and work. I don’t necessarily agree with this statement, however, I think it’s key that you know all of these things to look out for and make an informed decision.
I think about this question a lot, as we all know the rental rates in Singapore have skyrocketed recently, and it pains me to pay more for rent than what some of my local colleagues pay for their monthly mortgage instalments. So I often think whether it is worth buying a property as a foreigner. However, there are many restrictions and extra costs involved are often put expat off buying property. Or, we can only buy private condominiums or landed property if it is in Sentosa. HDBs are completely out of the question, which, of course the more affordable option.
So let’s take a deep dive into whether it is worth an expat buying a property here.
One thing that does bring some foreign investors into buying property. Here is how stable and strongly Singapore dollar is. Even during the pandemic, the Singapore dollar continues to be stable, unlike some currencies in Europe and the US. Last year, in 2022, foreign buyers made up 22.4% of all condominium sales in Singapore. This was quite a shock to me when I found this out, because Additional Buyer’s Stamp Duty (ABSD) for foreigners is at a staggering 30%!
For example if I was buying a condo, as an expat, at S$1M my total Buyer’s Stamp Duty would be $24,600. Then my ABSD would be $50,000. So in total my costs for this condo would be $1,074,600! That’s a lot of extra cash to put down. And this isn’t even taking into account legal fees and other admin costs!
(Note that if you’re from the States, Iceland, Liechtenstein, Norway, or Switzerland, you don’t have to pay ABSD!)
In a lot of other countries, it’s very popular to flip your properties as a form of side income, or to do as a full-time business i.e., buying a property and selling it very quickly for a profit.
But in Singapore, if you plan to sell your home within the first three years of purchase, you will have to pay Seller Stamp Duty (SSD), which is 12% in the first year, 8% in the second and 4% in the third, so I think twice if you want to start being a home, flipper in Singapore! Your business may not be as lucrative as you think.
Now, I think that a lot of expats don’t know in Singapore, is that we can actually apply for mortgages, normally with no issues. Usually the ratio is 75%, but can be as low as 55%. Do take note that the cash down payment is usually anywhere between 5% to 10%. However, although it doesn’t sound too bad, remember that interests are not exactly in our favour right now; you’re looking at our interest rate of about 3.65% – 4.25%, which means that if you are wanting to purchase $1 million property, your mortgage repayments could easily be around $7000 a month.
Looking at these numbers, I can look at it from both sides of the coin; this mortgage repayment is what a lot of people are paying as their monthly rental in Singapore. So if you are planning to stay in Singapore long-term, it’s actually a good investment because the property belongs to you, it’s not like you’re lining the pockets of a landlord by paying this in rent. But, if you’re only here short-term, perhaps it’s best just to suck up the large rental amount!
The last thing I want to talk about, is the longevity of your home in Singapore. Unlike many other countries, whereby when you buy the property, it is yours forever, and you can use it as an ancestral property to pass down to your children et cetera, this may not be the case in Singapore. Most properties here are 99 year lease, including a lot of condos. Looking at PropertyGuru, it’s very difficult to find condos nowadays that are freehold. What I mean by this, is that it is owned by the buyer for life; it can be passed down generation to generation. If the property is a 99 year lease, then in theory, it has to be given back to the government after the 99 years is up. Not only does this mean that the property cannot be passed down multiple generations, but it also means that as a property becomes older, it can often lose its value, because buyers in the market know that at some point, it will have to be returned to the government. In my opinion, this is one of the reasons why a lot of expats are put off buying in Singapore. But now we see a lot more countries adopting this concept, especially with over population. And to be honest, I don’t think I would want to give my future generations an old dilapidated apartment, anyway. The buildings here are not like back at home, where they can last for hundreds of years, so to me, this is not much of an issue. If anything, I think it encourages the property market. It means that once the three years & SSD is up, you can sell your property and get a new one and upgrade.
So it’s kind of like a long-term flipping process. Instead of staying in one property that may become very rundown.
If I were to conclude on my thoughts as to whether it’s worth a foreigner buying a property here in Singapore, there are a few things. I do think it is worthwhile if they are planning on staying long time in Singapore, also because in future this could look good on their PR application as they are already rooted in Singapore. Moreover, I always think it’s good to be paying for your own asset, instead of paying rent to a landlord! And with rentals being crazy prices right now, it works out to be more cost-effective if you are going to be staying here in the long run, even with the additional taxes and stamp duty. However, if you’re wanting to use it as an investment property, and don’t really have intentions of staying long-term in Singapore, then it may be a better idea to look for properties elsewhere. Nearby Southeast Asian countries have less regulations in terms of the costing for foreigners, and the properties are larger and much more affordable, meaning you can turn that into a nice passive income for rental.
These are just my opinion is but what do you think about buying a property in Singapore as a foreigner?
It’s been all over the news over the past couple of weeks that it’s not good news for certain banks in America, particularly Silicon Valley Bank, which announced its bankruptcy last Friday. Well this may not affect us directly, it’s very good to know what happened and of course why.
Silicon Valley Bank catered to many tech investors in the US, hence the name. It was taken over by federal regulators on Friday, leading to the largest bank sale in the US since the global financial crisis of 2008. Following this bank’s collapse, was New York’s Signature Bank on Sunday also collapsing, for different reasons due to its exposure to the crypto market. As you can imagine, the news of these led to a bank run last week, where depositors rushed to withdraw all their deposits from the bank. This inevitably led to the bond market swinging wildly, but why did this happen in the first place?
Like the age old saying, what must go up, must come down, and this is true in this situation. Catering to mainly tech developers and companies, Silicon Valley Bank boomed during Covid, deposits totaling over US$100 billion. Then, in 2021, when interest rates hit a record low, this bank invested billions of dollars into US Treasury bonds. Whilst bonds are generally safer investments, with steady gains, they only pay out in full if held to the maturity date. This poses a risk to bond investors if interest rates rise.
Lo and behold, we all know what happened-interest rates went up. This meant that Silicon Valley Bank had to sell at a loss. Not only was this a problem but it happened to come along with the whole tech sector bubble apparently bursting! We’ve all heard in the news and experienced friends, colleagues and family members possibly losing their jobs in the tech sector. Tech companies have been increasingly withdrawing their money from the bank. In order to comply with these withdrawals, SVB had to sell its bond holdings, at the loss of US$1.8 billion. Not only that, SVB also announced that it would be selling more of its shares, a hint that they require more cash! This shook its customers, causing even more people to withdraw from the bank.
On Thursday, customers at this bank try to withdraw 42 billion USD in deposits and the banks shares dropped more than 60%. By Friday, it was all over the Silicon Valley Bank.
While not all banks are in this niche of only catering to tech companies, this did spark concern about the banking sector, especially when the second bank, New York’s Signature Bank, collapsed on Sunday. This actually has had a knock on effect to more traditional banks; JP Morgan is down more than 7%, with Wells Fargo and Bank of America down more than 15%. Many bank analysts have stressed that there is no liquidity crunch facing the banking industry and that, it is more so a human fear that has gripped the market, and a self-fulfilling prophecy has been played out.
Luckily, those that had ties with the banks that have gone bankrupt, will have full access to their deposits, even those that exceed the limit of FDIC insurance. So at least there is some relief there for their customers.
President Biden remarked that the banking system is safe, but the markets did react strongly on Monday; we saw the US stock exchange go up and down with immense volatility over the course of the day. Not only that, government bonds yielded lower than expected. But the main thing that we must look out for is whether this will have any effect to the Fed’s decision next week…
The Federal reserve will meet next week to discuss whether it will raise its benchmark interest rates yet again. The rising interest rates have helped to slow inflation, but it has also devalued bonds and has somewhat led to the collapse of banks such as SVB. Hopefully, the Fed realises that if it continues to rise interest rates, more banks could fall victim. This might put the Fed under some pressure to ease the increases.
What does this mean for us in Asia? Well, luckily we may not be directly affected. For me personally, I see this as an opportunity to go into bonds when they are at a low. Generally, when equities are down, bonds are up. We have seen equities go down for Long time in the market now, which I hope means that bonds, after this little blip, will continue to go up. Of course, I cannot predict the market but I always see these kinds of situations as a great opportunity!
I didn’t want to start of the year with a depressing post, and I assure you it isn’t going to be one, but I thought it would be useful to people to be informed on the changes that are coming to Singapore that will directly affect us this year.
GST Increase
As everyone knows, GST has now increased from 7% to 8%, meaning that things are generally more expensive. Not only does this apply for small things like going out for drinks or doing the grocery shopping, but I think people, particularly expats, will feel the pinch when it comes to paying for their child’s education. International school is already incredibly expensive, and with it being very difficult to get into the state schools, it is pretty much the only option for most people with families over here.That one percent extra makes all the difference, actually. I have Heard of a few international schools allowing the parents to pay for their 2023 bills in December, meaning that they are still paying at the 7% rate, but of course of December is over and moving forward it will be 8% across-the-board.
2. Rental
I’ve been talking about this topic a lot because it directly affects me and is most expats in Singapore, because most of us do not own a property here. Unlike the UK, which I’m used to very good laws that protect the tenants, Singapore does not seem to have this. There seems to be no glass ceiling when it comes to rental prices over here, and actually, a lot of expats when considering relocating to Singapore, should take into consideration how much of their salary is going to go on paying for rent! I do wonder when the rental prices will stop increasing, and I’m hoping that in 2023 it will stop, but there is no way to be sure.
3. Means Testing For Medical
From the end of 2022, the Ministry of health have decided to implement a subsidy framework across healthcare. This of course is to help those from lower income households, who may find medical bills too expensive. This method calculates the subsidies that people will receive based on their household income, so that the government can give assistance to those that need it most. While this is great for those who really need it, there are some factors to consider that will affect all of us. The first is opting for government hospitals instead of private.
Generally, going to a government hospital means that it is a lot cheaper than going private, but of course, this is more appropriate and best saved for people who really need it, on lower income households who qualify for the mains testing. Expats in particular are rarely included in these kind of schemes, which means that generally our healthcare will still stay as expensive. And don’t forget, the Ministry of health have also implemented a drug list, which means that if you are on medication that is not on this list, you may not be able to claim it on your insurance!
4. Inflation
This seems like a really scary word now, last year Singapore reached an all-time high with its inflation rate. While the Monetary Authority of Singapore has tried to curb this, by appreciating the currency and tightening policies to try and curb the upward prices, I still think that inflation will affect us in 2023. We can already see that things such as groceries and Energy bills have increased, what will this be like in 2023? I do think that the government has done a very good job at plateauing the inflation rate, but it has plateaued at a very high point. I am looking forward to seeing it decrease in the future.
5. Recession
While the unemployment rate was very low last year in Singapore, there is something that us as expats must think about; retrenchment. Due to the recent recession, we’ve seen a lot of companies cutting people on Employment passes and S passes, and employing more locals who they don’t have to fork out large levees or salaries for. Of course, this is great for the locals, and I do think that it’s wonderful to see a country put so much effort into supporting its local citizens, but this could greatly affect expatriates living and working in Singapore. Reshuffling of large organisations could mean relocation or retrenchment.
Not only that, I have seen a real competition for S passes due to the quota system. An S pass has changed a lot over the years, with its salary for some even being comparable to those on an Employment pass, but there is strict criteria and quota that each company needs to be able to employ someone on an S pass. Leading to shortages in some companies. Not only that, as we get older and we gain more work experience, our work passes become more and more expensive to renew for the employer. This could spike the increase in unemployment rates in the expat community.
Despite all of this, of course, I still love living in Singapore and consider it my home.
I’m sure that these things are just challenges that we will have to overcome, and will not continue forever. There have been worse economic periods in the past, this is not the worst that could happen! I’m still incredibly grateful to live in such a wonderful country. Here’s to a wonderful 2023 ahead!
Moving to university is an exciting time- meeting new friends, experiencing new things and for most, living on your own for the first time. Whilst this may seem like a dauting new venture, it doesn’t have to be! Living away from home is an incredibly rewarding experience, when you can be your own self and learn life skills and become responsible. However, living away from your family comes with a lot of challenges; particularly money. If you’re wondering how to cope on your own handling your own finances, here’s my Top 5 Money Hacks For Students!
Create A Budget
I’ll get the boring one (but the most important one) out the way first. Calculate your income for the year (or term if this is easier to calculate). This means adding up all your student loans, grants, bursaries and part-time job salary (if you have one). Then estimate your fixed expenses, like your rent or student housing, books, bills and groceries.
Try and estimate what you have leftover. If you have a surplus, set aside a portion of this (maybe 20%) for entertainment & travel (university trips and holidays are a great way to bond with uni friends!) and the rest you can save for future needs.
2. Join The Student Union
The Student Union (SU) is a great place to have fun on a budget! Join a club or society for a small fee and these clubs will organise events all throughout the year. Most of these clubs have a budget set aside for these members’ events…minimising the cost for you! They’ll be movie nights, sports events, quizzes and maybe even meals at the SU for you to attend! *Bonus tip- food at the SU tends to be a lot lot cheaper than going to other pubs or restaurants.
3. Do A Big Shop
Studies have shown that doing a grocery shop once or twice a month is a lot more cost-efficient than once a week. But, how do you do this effectively, without over buying? First, write a list; try to include a lot of dry items that you can use for multiple meals, such as rice and pasta. I’d also recommend including tinned ingredients to your list, such as tinned tomatoes and different pulses and beans. These can be the base for many meals, such as pasta sauces, chilli or curry. Secondly, buy frozen vegetables or items that can be kept for a long time in the fridge or freezer. This minimises the chance of your food going off and you wasting good raw ingredients. Check your cupboards and fridges before your shop, whilst making your list, to avoid duplicating anything. And of course, shopping in large supermarkets is a lot cheaper than shopping at corner shops or convenience stores. Try and shop at these places as little as possible, unless you run out of milk or loo roll!
4. Be Conscious Of Your Electricity & Gas
I wish someone would have told me how expensive gas and electricity was! To minimise my bills, I seldom turned on the heating (blankets in student accommodation and cosy pyjamas are a must!), and make sure that lights are switched off when you’re not using them. It sounds like a pain but it really does help keep your energy bills down.
5. Second-Hand Is Awesome!
Especially for books! I remember my first week of university, I was told I needed to buy a specific biology textbook. I went straight to my local bookstore and bought a brand new one for a whopping £60! I used the textbook twice my whole university studies…a lot of my classmates bought the textbook second-hand for about 20 quid! From then on, I stuck to buying all my textbooks on eBay; it really saved me a lot of money.
These five tips are simple, but if implemented well, can save you a lot of money at university! Remember, having fun doesn’t mean having to spend a lot of money!
Every year, Mercer rank the world’s most expensive cities to live in; the criterium is based off of things like rent, transportation costs and food. This year we’ve had a lot of volatility in the economy, exacerbated by the war, inflation rate and interest rate hikes. So, how did this affect the listings this year? Let’s take a closer look:
10. Beijing
Beijing is still a lot more affordable than the other cities on this list, but the main reason it has become increasingly more expensive is due to its population size. The city’s increasing population has caused rental prices to double over the past ten years.
9. Tokyo
Tokyo is in this list year after year. Japan in general is a country with high cost of living expenses, such as rent, owning a car and transport in general.
8. Singapore
Here we are, Singapore. No one is shocked to this here- over the past year rental prices have shot up astronomically and the lack of land will always mean that property purchase is expensive in comparison to other countries. Speaking from personal experience, going out for food and drinks can be particularly expensive, taxis, whilst cheaper than the UK, have increased over the past year and we all know owning a car is pricey in Singapore.
7. New York City
NY has always been more expensive than other places in the US, particularly rent. If you haven’t read my article, ‘Sex and The City, and Broke’, please do! I have always been baffled by how people on low to mid salaries can live comfortably in this city
8. Tel Aviv
A common theme on this list is rental; this seems to be the main reason cities land here, and the same goes for Tel Aviv. Whilst the city has a tonne of stuff to do for tourists, including bars and restaurants, this comes with a price tag. This means that rent for a one-bed, on average, is about 1725 USD a month!
5. Bern
We’re getting to the part of the list now where most of the cities are in Switzerland. A week-long holiday to the capital city would cost a family of four approximately $6000!
4. Basel
This city has a great art and history scene; Switzerland’s oldest university city is home to beautiful modern architecture and the world’s biggest art fair. This comes with a whopping price tag of living expenses of approximately $3000 a month.
3. Geneva
Similar to the previous Swiss city on this list, living in the luxury city of Geneva would cost you approximately $3500 a month. Very pricey!
2. Zurich
The financial capital of Switzerland sits at the second spot. It’s the most expensive Swiss city to rent, and the city itself is choc a block full of high shopping and decadent restaurants, so it’s very difficult to escape the high cost of living in Zurich.
1. Hong Kong
Are we shocked? HK has over 7 million people living in the city, meaning that the demand for housing is incredibly high. Not only that, food, transport and nightlife is also very expensive in Hong Kong. One thing I will always remember is watching a documentary showing people in HK living in literal cages, with a bed, TV and all their stuff. These types of housing have a shared bathroom and small kitchenette and can cost about 500 USD a month! That’s so expensive for such a small, cramped space.
In my opinion, I’m not shocked that the vast majority of these cities are European (40% of this list are in Switzerland!) and I’m actually surprised that London wasn’t now in the top 10 (it’s 15th). I did think that where we live, Singapore, would be higher because of the high cost of alcohol & rental, but I guess our lower taxes and the fact that the government are able to stop inflation and utility bills from getting out of control helps. All in all, this list is very useful when it comes to someone making a decision to move overseas.
Did this list shock you? Is your city an expensive place to live?
The term ‘FIRE’ seems to be all over the news lately, what is the hype and what does it mean?
FIRE stands for ‘Financial Independence, Retire Early’, and this is a movement that we’re seeing as of late, whereby people are leaving the workforce as early as they possibly can. They do this by focusing on scrimping and savings as much as they can now, in order to save the maximum amount for their retirement. This means cutting down on all unnecessary expenses; eating out less or almost never, not taking any holidays, even working a part-time job on top of full-time employment to earn extra income, and using all of the surplus cash to stringently invest and save. This can be quite extreme; leaving the workforce early is maybe one of the biggest financial decisions of your life, so you need to make sure you have planned correctly.
There are actually a few kinds of FIRE, which I will delve into in this article.
Fat FIRE
If you like the idea of retiring early, but don’t want to drastically alter your lifestyle to the point where you never go out or do anything fun, then Fat FIRE might be a method that interests you. Fat FIRE appeals to those who cannot keep their expenses low; if you have a family you need to pay for education, schooling, groceries, school uniforms etc., which are often difficult or impossible to trim (you can’t ask your kid’s school to lower their fees, for example). So how do you achieve FIRE with higher expenses? The answer, a higher income. Fat FIRE only works for higher income earners that choose not to fully embrace frugality. You can see this may not be for everyone- getting a higher income is easier said than done as may require certain experience, knowledge, education and so on, that might not be applicable to all.
Barista FIRE
This FIRE movement does just what it sounds like; working part time (in a café or otherwise) to supplement your retirement income. This might work for a lot of people; even I myself don’t want to do nothing during my retirement. Getting paid to do a passion-project as a free-lancer sounds like an awesome way to spend my time. This method of FIRE means that you don’t have to completely cut out all lifestyle expenses during your working years, as you know that there will be a part-time income rolling in throughout retirement. This is contrary to the next FIRE method…
Lean FIRE
Lean FIRE Method is really the extreme, hardcore or by-the-book method. Lean FIRE means you really live that minimal lifestyle right into retirement. This includes tactics like bringing your own water bottle and packed lunch with you when you’re out, taking public transport or walking from point A to point B and downgrading your rent by renting out a single room instead of a whole unit. Even someone on a lower income can practice Lean Fire, and put their monthly surplus into savings and investments. This method of FIRE really reminds me of the show ‘Extreme Cheapskates’.
Coast FIRE
In my opinion, Coast FIRE is the most realistic and less extreme method; it’s actually quite similar to the advice I give my clients; invest early and as much as you can, and enjoy the compound interest later in life. The earlier you start investing, the better; you have a longer runway and more time for that interest to accumulate. Holding your investments longer also means that you are able to tolerate volatility in the stock market.
FIRE can be studied in depth and is an interesting movement. Later on, I will explore further as to whether this method is sustainable. But, what do you think? Will you be practising FIRE any time soon?
If you’re struggling to figure out a way to save money effectively, or you find yourself always waiting for your payday to come in, here’s a great challenge you can set yourself and see how much you can save!
This challenge is very simple; during the first week, try to save $1, $2 during the second week and so on and so forth, all the way up to week 52 where, you guessed it, try to save $52!
You can create a savings chart or tracker so that you can ensure that you’re saving every week, and I would recommend putting these savings into a different bank account, so that you’re not tempted to spend it!
This challenge instils great saving habits, starting off small and working up towards a big goal, and by the end of the challenge you’ll have saved a whopping $1378! You can put this money towards a big-ticket item, or save it for when you graduate or any other life stage. And if that was too easy, try the 52 Week Saving Challenge, followed by doing it in reverse, doubling your money!
We’re all been hearing about how bad inflation is and that it’s increasing etc. But what does this actually mean and how does it have a lasting affect on our money planning?
What Is Inflation?
Simply put, inflation is when the cost of goods and living increases. Whilst some see this as a bad thing, slight inflation is good as it is a sign of a growing economy; meaning more employment, higher profits and an increase in production. But, right now, we are seeing a significant rise in inflation. In December of 2021, Singapore saw inflation hit a 9 year high of 4%.
How It Affects Us Now
This increase directly affects us, and you may have even felt a bit of a pinch. Food is a bit more expenses and energy prices seem to have gone through the roof. All of this means that your cold hard-earned cash has less spending power, essentially meaning that you cannot buy as many things with the same amount of money as you used to. What further exacerbates this problem is bank interest rates; most current accounts in Singapore have an annual interest rate of 0.05%, meaning the bank gives you that much extra each year (not a lot at all). If current inflation rate is at 4%, you are losing 3.95% of your money every year by just leaving it in your bank account! This means that whilst you are earning money, not only are things getting more expensive but you’re losing money in your bank account too!
How It Affects Our Future
As you can imagine, this situation has a massive knock-on effect for our futures. If inflation increases, or even plateaus at say about 2%, you are still losing money in your bank account. Food, housing, medicine and energy will continue to go up in price, meaning each year you will either be able to afford less, or have to spend more to keep up. Not only that, your savings will not be as powerful as it once was…so you can see how this is a problem two-fold!
How Can We Stop This?
But fear not! If we prepare now ahead of time, we can manage inflation so that it doesn’t eat away at our savings. There are a few things you can do in preparation: first, include inflation in any planning you do. Want to save up for a holiday in 5 years’ time? Inflate your ticket and hotel prices by at least 2% per annum (3% if you want to be safe). Secondly, consider using vehicles and instruments that will offer you higher returns than your current bank account- any % higher than current inflation rate will give you a positive yield, and will ensure that your savings don’t run dry. I also think it’s best to create multiple avenues for growing your money, so that if one option is not doing well, at least you have money in different areas that you can withdraw from. Lastly, do not underestimate how much different sectors will increase. Food, healthcare, housing etc. do not always follow the same trend or inflation rate. Ensure you have medical expenses covered and calculated into your long-term planning, as well as remembering that your income will not go as far in future unless you ensure there are increases.
Essentially, it is best to start planning now instead of panicking later on in life, realising that you could have prepared for inflation but didn’t. As always, it’s best to stay in-the-know, and consult a professional when it comes to your financial planning.
Investing for Singapore Expats 