Tag: t_w1r1

BurnRate=only half %%stressor profile

Posted on by tiger40490

Once upon a time, I had a hope that, for most men and women, nonwork income would relieve bulk of the pressure of this modern life, perhaps thanks to globalization reduc`min cost@basicHealthy Food.

This hope was based on a universal observation — cash flow is the primary source of pressure in modern life. FIRE discussions reinforce this common notion. I think it is only slightly exaggerated, like by 0.1%

See 3stressors PIP^FOMO^burnRate. Family harmony, wellness … can become more serious stressors than cash flow.

In my case, My non-work income is rising slowly but steadily to “close the gap” with burn rate, thanks to the contribution of other burn-rate relieves such as shield plans, stable inflation and currency, well-managed healthcare cost, robust rental demand, high-payout CPF-life,,,) This rise has given me a precious lens that’s rare among my peers. Through this lens I find peer comparison as a chronic, pervasive source of pressure. You can call it exclub or keeping up with the Joneses.

Now in my 40’s I feel burn rate is (slightly more than) half the “stressor profile” in me and my peers ! HaiFeng is not a best case study as I don’t know him well. Consider fellow techies like Raymond — if I had a consistent $6k nonwork income + zero salary, I would still feel low-income (not impoverished), mostly due to peer comparison and FOMO.

(Note non-work income does cushion the impact of PIP and job loss… Fairly effective ! See covid19$$handout reflect`Realistic burn rate)

Advice — Better accept a simpler lifestyle than the so-called “peers” lifestyle:

  • without vacations to Europe, Japan
  • smaller home, in an average school district. Remember Ms Cheng in Bayonne.
  • small cars
  • without latest smartphones
  • fewer yoga classes

Look ! The tunnel vision of FOMO doesn’t pay enough attention to a few fundamental factors such as

  1. lifetime income, in addition to peak income
  2. wellness, long-term vitality
  3. family harmony
  4. career longevity
  5. long-term peace of mind, deep and sustained sense of security and protection (by some God, a government etc)

##[19] big discretionary spends 4中产华裔

Posted on by tiger40490

Original title “big discretionary spends4Chinese middle-class]US”

Trigger: If I benchmark with those earning 200k, my wife and kids would want vacations to Japan, Europe… When I tell them “not necessary”, they might feel impoverished, right? (It’s again the struggle between FOMO and livelihood.)

Not sure. Useful to zoom into the biggest discretionary spends. Figures below are monthly outlays.

Deepak CM pointed out that the immigrants middle class leave their home countries and come to the U.S. to live a “better” life. “Better” means discretionary spends.

I arrange the monthly amounts from big to small. This analysis is similar to Melvin3, and different from the “amortized” calculations.
[M=part of Melvin3 US^sg]

— [M] USD 3k->5k-7k/M : mortgage P/I + pTax.
They would want a bigger home. I can accept a small home, but prime location!
Wife may want a top school district.

— USD 5K/M/child (60k/Y) for a branded college
CSY’s son has a 60k/Y college fee (similar to Ivy League). 50% paid by parents i.e. 2500/M. With such additional burn rate, my idea of “lower stress, lower pay” easy job is impractical.

— [M] USD 1k/M (minimum) luxury car. Figure is TCO including amortization and depends on usage.
They might want a brand new car, not pre-owned.
In Singapore, I have debates about the need for a private car. In U.S., the debate is about how many cars and how big.

— USD 1k/M/child enrichment, special training? Not sure how prevalent. Figure varies a lot.
— USD 0~2k/M/child private school? Not prevalent.
— smaller items.. lifestyle creeps:

  •  vacations? Not sure how prevalent
  • family outings, dining out
  • sportswear? very much discretionary.
  • electronic gadgets
  • musical instruments
  • photography
  • toys

$1k NNIA=more meaningful2ME than others

Posted on by tiger40490

Be it SGD 1k for a Singapore family, or USD 1k for a U.S. family, this amount of nonwork income ..

  • is not exciting for my cohort. U.S. cohort’s family burn rate is like 9k.
  • is far from enough to someone without passive income , because this amount is way below burn rate
  • but is a significant addition when my passive income is already close to family burn rate.

##eg@higher-return lower-risk

Posted on by tiger40490

Contrary to conventional wisdom, I have come across a tiny number of assets featuring higher return, lower risk than the standard assets, but not obvious so insight or due diligence are required.

  • (As I told ZongYang) SPY compared to the majority of familiar stocks. SPY DYOC is about 1%. Somehow, a higher DYOC would feel safer.
  • S27 .. stocks are supposed to be higher risk than bonds but I feel my s27 is higher-reward-lower-risk than bonds or most long-term investments
  • high-dividend stable (not all blue-chip) stocks, with consistent track record… See solid div stocks=hard to miss@@. However, return and volatility is often lower than hot growth stocks.
  • [b] IPO stocks .. compared to other stocks
  • [b] my Cambodia shops — many risk factors at decision time, but lower risk in hind-sight
  • my hdb + PEK properties
  • [b=bargains]

how is CPF int guaranteed while GIC return=uncertain

Posted on by tiger40490

I’m 99% confident that the actual interest accrual on my CPF money is either 2.5% or 4%, except the additiona 1% on the first $x portion. The return is predictible and guaranteed, without any time-variable element as in commercial annuity/endowment policies.

If we have doubts over banks and insurers long term rate of return and their guaranteed interest payout, then why is the CPF interest rate so much more /dependable/ and beyond-doubt?

— “backed by the government”
U.S. treasuries are backed by the full faith of the federal government, which can borrow from international investors (via new bond issues) to meet existing obligations. SG is different.

Your and my CPF money is actually invested (GIC as AMgr) in risky long-term assets. The capital and interest guarantee is backed by SG government, not due to bond issuance (a form of money-printing) but due to superior long-term investment returns achieved by GIC. About 6%+ annualized … see other blogposts.

If long-term return is below 4% but SG government relies on bond issuance, then we are borrowing from the future, and the system becomes unsustainable.

As an interesting comparison, U.S. municipal bonds are backed by local governments, which can and did default. Therefore, these issuers lack the credit rating of national governments.

Q: in a multi-year down turn, how confidently can the CPFB (cpf board) meet its obligation to its members? Answer below is based on MOF | Is our CPF money safe? Can the Government pay all its debt obligations? esp. Q28.

A: SG Government bears the risk of GIC’s investment returns over any particular period falling below the interest rates GIC is committed to pay on SSGS. Investment returns can fluctuate widely, depending on global market cycles and shocks. This is, for example, what happened during the Global Financial Crisis (GFC) and its aftermath. The GIC experienced losses in investment value during the GFC, and low average returns for five years, before recovering (see GIC’s annual report).

— Q: Why can’t the CPFB leave the cpf members’ aggregate balance in some passive account and pay out the annual interest amount?
That way, the CPFB would run a deficit every year. The interest paid to members must come from some productive asset, which must have income to sustain the payout. This is the sustainability argument.

The optimization argument .. The cpf balance is not going to be withdrawn any time soon, so it should be deployed for long-term growth assets, rather than sitting idle.

— in 2024, there was rumor that goverment has difficulty generating 4 ppa return on a huge balance of CPF SA/RA/MA, so they will close the cpfSA after you turn 55.

[17]2phase: relieve rental burden #steps

Posted on by tiger40490

All my life, I have felt very uncomfortable with big rental burden (debt too .. another topic), so I always find ways to reduce it.

  • in Newport, I was paying $2000, then increased to $2200 ! (I just hated the hike) So I quickly subleased the big room for $800 and felt much better.
  • In Fort Hamilton and Bushwick, I had to sublet one room to /reach/ an affordable rental cost level.

When my family finally comes over, I will need to find quick relief. A questionable relief is buying a home as it will further aggravate the cash-flow burden, and sink me to cash flow lower ground ! My default plan:

  1. Try to save up USD 100k (discussed below) in advance. Convert SGD if needed.
  2. give family a feel for the different parts of Bayonne. Bayonne is low-rental town. Hopefully we narrow down to 2 or 3 locations.
  3. locate the best rental home. There should be many reasonable choices so won’t take too long.
  4. Get family prepared for downsizing, potentially challenging.
  5. Pick a place up to $1500-2000/M. If too many rooms and too expensive, I will consider sublease part of it.
  6. construct a div stock (Reit) portfolio.. low volatility, to be liquidated in the next step
  7. Within 2 years (hopefully 12 months) buy a first rental property 200k-350k like 43R, with NRY to help defray my rental expense
    • It could be a pure rental property but I can still use the basement for storage.
    • If acceptable, my family could use it, reducing various risks

In the long horizon (no timeframe), I could buy a 2FH for family use, and sublet one unit. However, 2FH creates heavier cash flow burden including pTax

Q: USD 300k war chest for rental relief? How would it change my life?

  • I could stay in SG forever
  • I could target JC jobs, and spend $1.5k/M net rental in Bayonne/JSq forever. Or $2k in JC/Hob.

Q: USD 100k war chest for rental relief?

  • This amount means a lot to rental home comfort [size..]. $1k/M additional rental will exhaust this amount in 8 years !
  • This amount is insignificant for branded colleges .. not worthwhile
  • This amount is insignificant for a SDXQ home .. not worthwhile
  • This amount is easy to squirrel away, esp. in SG
  • This amount as a target bonus, is brutal and unforgiving. I won’t accept such a target. I will reject such a target.
  • To relieve work stress, I can realistic consider giving up $30k/Y salary over 10Y. USD 300k lost_pretax_income is no big deal to me. (After-tax, it would become a 200 lost income.)

[18]invest salary{high earn`phase #plowback

Posted on by tiger40490

See also 20% savings rate^lifestyle creep

There’s another blogpost on plowback of spare time.

Opening example: professional NBA athletes (and some entertainment stars) — most of them earned huge salary but ended up in poverty, because they didn’t /squirrel away/ their high income during their peak years. Contrast them against my friend JackZ, who lost his MS in early 2020 but could survive as family of four without any salary.

U.S. job market is more age friendly (among other advantages), but U.S. healthcare, social support,, are not great. When I get older I may have to return to SG and Live with the challenges in SG. (For a similar example in my family, look at grandparents — they rely on their home country healthcare because SG healthcare is too expensive.) When I am forced to return to SG, I would appreciate the savings habit during my peak earning years. 

By the way, In addition to the savings habit, my healthy living habits will be greatly appreciated, too.

Critical review .. How have I done so far in my saving “project”?

  • (My peak earning years are not completely over yet 🙂
  • Overall, I had high savings rate and most of my savings went into properties (and other) investments
  • My Singapore home is not an investment, but I was wise to pay off the mortgage quickly, during my peak earning years. Xia Rong did the same.
  • As of 2020, I continue to resist lifestyle creep, and “save” (excluding allowance transfers) at least half my salary.

In conclusion, I feel I have done well to put aside a good portion of my peak-time salaries to prepare for my declining years + rainy days.

— plowback is tricky. My only (arguably)successful plowback was investment.

[16]scenario plann`: asset devalue over50-100Y

Posted on by tiger40490

Here I’m talking about gradual/progressive decline, beyond normal inflation.

In contrast, a sharp decline (discussed in the black-swan blogpost) may precede a V-shape recovery, and is more common at least in my simplistic view not based on any reliable data.

Actually, the protections in the black-swan blogpost also apply here.

A complete and objective assessment would probably rank my asset allocations as

#1 property – SG
#2 property – BJ
#3 property – Cambodia, BGC
#4 SGD or USD cash including CPF
… See also [20]current portfolio4 family livelihood protection, but those other allocations (eg: stocks) are smaller and less prone to long-term gradual devaluation.

So what about a 50% decline in one of these? Some of these assets have the potential to decline even worse, but 50% is a reasonably bad scenario to target. Based on my observations over the last 10-20 years, I feel U.S. and Singapore are fairly resilient, so a 50% decline in my lifetime sounds like low probabilities, but we still need to prepare.

The black-swan blogpost listed top 3 (or more) non-financial protections such as career longevity. However, I need some financial hedges, too.

  • Hedge – gold — probably the best hedges against inflation over 100Y
  • Hedge – USD or SGD cash and bonds — least volatile, more reliable but susceptible to inflation
  • Hedge – US stocks

— legacy planning in the face of lont-term gradual devaluation

If I only leave, say, $1M to my children and grandchildren, then I feel a 50% decline is tolerable. The decline would be gradual and I would have time to liquidate some assets and spend or reallocate elsewhere.

What’s the chance of me leaving more than $1M? Rather low.

— devaluation is always measured against some benchmark, usually against a currency. I suspect that with one exception [3], long-term devaluation is always a local devaluaiton relative to some global benchmark. If this is the case, and if you hold properties or stocks in several locations, you are unlikely to experience devaluation across the board.

What if those locations are heavily correlated (the black thinking hat)? Well, putting on my blue thinking hat, I think yes SEAsia locations might be correlated.  According to this theory, it’s worthwhile to hold some U.S. rental property, but beware the high running cost.

[3] The exception is inflation, not a focus of this blogpost.

[19]OC survey: 70%SGrn can’t last past6M if jobless

Posted on by tiger40490

 

See also 39%Americans have enough savings for $1k emergency

Listening to the BBC Business Daily [[dealing with mass unemployment]], I now believe many people have really limited savings. This OCBC survey is another evidence. A real world example of “cashflow low ground”

Colin Lim believe this survey result. His stash is 12M worth of income.

On even higher ground, Raymond, Jack Z… can survive for years, due to burn rate discipline and high savings.

— Survey sample description:
OCBC bank surveyed 1,000 Singapore citizens and PR working adults between the ages of 21 and 65 across different age groups and income levels representative of the Singapore population. I feel the sample is small but unbiased. The percentage figures are possibly over-pessimistic due to question wording, as are similar surveys.

I suspect, perhaps, the wording might be something like “at your current burn rate, how long …”. Instead, if you ask people to imagine then estimate their bare-bones burn rate, then for most laymen the estimate would be less pessimistic but wholly unreliable, and therefore highly questionable in terms of survey methodology.

Note migrant workers, foreign maids, WorkPermit holders, and a lot of my colleagues are excluded because they are not PRs.

Note margin of error is quite high due to the sample size.

— OCBC official site: https://www.ocbc.com/group/media/release/2020/ocbc_surveys_1000_singaporeans_to_assess_financial_impact_of_covid_19.html

Many charts

— StraitsTimes https://www.straitstimes.com/business/banking/2-in-3-here-dont-have-savings-to-last-past-6-months-survey title says “2 in 3 here don’t have savings to last past 6 months”

— TheNewPaper https://www.tnp.sg/news/singapore/many-singaporeans-dont-have-savings-last-beyond-6-months-survey

First paragraph says “… two-thirds of working Singaporeans and permanent residents indicated they did not have enough savings to last them beyond six months.”

— https://mustsharenews.com/savings-job-ocbc/ title says “Majority Of S’poreans’ Savings Can Only Last Them 6 Months Without A Job”

There’s a histogram bar chart

[18] 20 unbelievable bargains

Posted on by tiger40490

Lookalike? Unlike ##G5 personal winn`bets: long-term impact@livelihood, this blogpost is not about big bets.

  • [u=unbelievable. I would not have entertained such a suggestion a few years earlier; unbelievable bargain; too good to be true.]
    • Defying my common-sense, becuase our intuition is completely unreliable in these cases.
    • These are often unexpected successes, and deserve in-depth analysis
  • [v= “undervalued” in terms of my subconscious valuation or market valuation, when I bought]
  • [h= top 5 heavy hitter]
  • —
  • [hh v] I “bought”SG early, when it was undervalued
  • — education
  • [h v] UChicago — the Nobel prize count lent prestige on my degree. My $cost and tcost was very high, but in 2013 the prestige was undervalued.
  • [h vv] Singapore universities — charge a fraction of the U.S. private universities but offer comparable quality.
  • — ccost (calorie cost)
  • [u] rice pudding
  • nonfat ice cream
  • [u] washed and heated baby carrot — tasty like starchy foods but very low calorie and high fiber
  • my lentils — whole box is 600 cal, extremely filling, whereas 100 gram of peanuts (1/4 of my 小金生 packet) has the same calories. Why the hell do I worry about my lentils?
  • — $cost (prices)
  • [uv] Malaysia (retirement) — offers decent healthcare and rental homes at a fraction of the U.S. costs. You would think quality must be questionable but reality could be completely different.
  • yoga classes — are SGD30 each or SGD 155/M. In the U.S. it’s $32×12+50 below USD36/M
  • fruits in Chinatown — sell at a fraction of supermarket price… You would think rotten, but mostly good.
  • —salaries
  • [u] According to my chat with the Macquarie support chap, a bright engineering fresh graduate like him in Singapore earns SGD3500/M or SGD 40k/Y but USD 120K pretax in NY
  • a 8Y+ programmer earns SGD 70k/Y but USD 150k pretax in NY
  • java job pays 20% higher than perl jobs and offer far more opportunities.
  • [u] Front office trading IT jobs pay higher than PWM jobs, sometimes less stress and many more opportunities. Unthinkable  in 2007.
  • — workload and stress
  • Qz job — pays no higher than MS job but 5 times higher stress partly due to perm job and limited job market in SG.
  • GS job — pays about half the 95G, Barc or citi jobs, but 3 times higher stress
  • — investments
  • [u] Some properties don’t appreciate much, with GRY 4%, but my BridgeRetail has guaranteed NRY of 7%. Too good to be true.
  • [h] My Blk 177 — property yields current rental income every year until 2010 and then gave a windfall.
  • [h] CPF-life — a real bargain compared to other annuities.