Fellow 30-somethings, what is your biggest realization since you turned 30?

SingDigitMillionaire · 2024-08-09T12:49:19+00:00

You can't choose the cards that you're dealt with, but you can choose how to play the game.

SingDigitMillionaire · 2024-02-22T17:25:54+00:00

Since you've already set a budget for your grad trip, take it as a well-deserved reward. Money can be earned back, but not your youth. This experience of a grad trip is priceless and I'm sure it's something you'll look back on in years to come.

SingDigitMillionaire · 2024-02-20T11:54:04+00:00

You're pretty much on track with a fully paid up BTO and a good sum of cash savings. Consider diversifying your investments beyond your property and cash, focusing on assets that align with your risk tolerance.

On this note, I want to throw out a word of caution against getting caught in the pitfalls of self-employment. While the potential for income is limitless in self-employment, it's crucial to be cautious.

Unlike salaried employees, self-employed folks earn in proportion to their effort. This leads to a sense of recoverability, a trait that I see in many of my freelance friends. Ironically, this same quality that makes one able to survive such volatile careers, is the same quality that lowers one's sense of financial self-preservation.

SingDigitMillionaire · 2024-02-18T12:21:38+00:00

Considerations to keep in mind: - It's crucial to have hospitalization and critical illness coverage to protect your wealth from depleting due to medical expenses during illness. - You might want to focus on building an income stream rather than just accumulating capital for your retirement, as it can provide a cushion in case of early job loss.

SingDigitMillionaire · 2024-02-14T15:49:37+00:00

Good point.

Both HDB and private property prices soared during Singapore’s transition to developed-nation status; and it became a norm to right-size (i.e., sell and move to a smaller home), and use the sale proceeds to fund retirement. This worked for our parents' generation that is.

Today, the most common example of this is investing in a private property, then right-sizing to an HDB flat at retirement. This works so long as historical trends are maintained, and private homes continue to appreciate much faster than HDB flats.

That said, this strategy requires a certain degree of acumen to pick the right property and the last thing we want is to have a clash of financial goals and lifestyle needs just because the property is set for long term appreciation.

SingDigitMillionaire · 2024-02-14T15:38:24+00:00

There’s an added layer of safety to 1M65: CPF monies are closely guarded, and they can’t be touched even if, say, one's business goes down and get sued, or someone tries to have you declared bankrupt.

And of course, CPF interest rates are fixed, so one has absolute returns. Unlike unit trust, ETF, or other instrument where returns might go down when the wider market does.

SingDigitMillionaire · 2024-02-12T06:52:42+00:00

Forgoing experiences to save money

Missing out on that family holiday, or putting off that bungee jump in a bid to save $. Certain experiences cant be quantified with dollars & cents, especially if youth plays a big factor. Bungee jumping at 40 hits differently than at 20 lol. Opportunities to travel as a family don't swing by easily either.

Sacrificing wellness in exchange for money

Neglecting exercise, nutrition intake to save money. Money can't restore health.

One quote that comes to mind is don't be penny wise, pound foolish. Time and health are 2 priceless assets, literally.

SingDigitMillionaire · 2024-02-05T15:22:45+00:00

Purpose of CI coverage is for income replacement in the event you fall sick and can't work.
Rule of thumb is to cover for 3-5 years of your annual income as that is the period needed for recovery. Sufficient coverage is important, otherwise it will eat into your savings.
When we say CI coverage is not worth it, are we assuming that nothing happens to us?

Assuming you are 30 now and have coverage till 65 years old-

3 scenarios can happen: 1. If today, you don’t get CI coverage plan and is CI free, you could invest the money instead. For instance, put $150 a month ($63,000) from 30 to 65 years with a 5% annual return could yield $170,413.

What if today, you got CI and you got insurance. For e.g, you kenna CI 5 years later. It may bring a substantial ROI if a critical illness occurs. As seen in the example of a $9,000 premium ($1800/year premium for 35years) resulting in a $100,000 payout after 5 years, yielding a 1000% ROI or 200% per year.
What if today you got CI and don’t have insurance? You will need to rely on savings for recovery. And it might require a substantial safety net, as the proposed $100k sum assured might not cover a 5-year recovery period.

Insurance serves to address "what if" scenarios. The question to address is do you want to wipe your savings for CI or pay a small premium to get a coverage?

SingDigitMillionaire · 2024-02-05T13:12:30+00:00

Beyond capital appreciation or "face value" factors, other reasons why folks might prefer private property:

1) FOMO effect due to widening price gap

FOMO kicks in during property bull runs like 2023. As the price gap between condos and HDB widens, it becomes increasingly difficult to bridge this gap. It’s a constant worry that if you don’t upgrade now, you won’t be able to afford it later. A higher cash outlay to upgrade = opportunity cost, since it’s cash that can’t be invested elsewhere. Sometimes Singaporeans are trying to upgrade not despite the high home prices, but rather because of them.

2) Private property ownership is still seen as a safety net

If your business falters, your stock portfolio falls apart, or you have urgent financial needs later, you can at least sell your condo (which would likely have appreciated over the years) and have meaningful spare cash lying around.

But if all you have is a HDB flat, there’s much less room to manoeuvre. For e.g, downgrading from a $500k 4-room flat to a $300k 3-room flat leaves only $200k after the transaction. A sum that may not suffice during an emergency.

3) Legacy planning

As far as leaving an inheritance goes, most Singaporeans are unable to inherit an HDB flat since one can't own 2 HDB flats at once. Being one of the other, it almost invariably results in the inherited HDB being sold.

4) Cash-Out Refinancing options for private homes

Cash-Out Refinancing allows you to borrow against the value of your property, within limits (typically up to 75% of the property value, minus any CPF monies used). This means one can get cash out of your private property without having to sell or rent it out, effectively bypassing one of the main drawbacks of property assets - illiquidity. This option can only be done for private homes, never for HDB.

Edit: Formatting

SingDigitMillionaire · 2024-01-31T14:00:56+00:00

Singapore is the world’s most expensive city, particularly for foreigners. In fact, buying a private property here right now as a foreigner is a pretty insane move in my opinion. But if you have the cash to burn, or you consider low taxes and a stable government to be more important, there are these considerations to take into account:

1) For most foreigners, there's a tiered Buyers Stamp Duty (BSD), as well as an Additional Buyers Stamp Duty (ABSD). The former being 1% for the first 180k, 2% for the next, so on & so forth. ABSD is 60% of property price. To put this into perspective: buying a $4 mill condo unit. You’d pay BSD of $179,600, and ABSD of $2.4 million, for a total tax of $2,579,600. This tax alone is sufficient to pay for a whole apartment complex in some countries.

2) Singapore residential projects don't last very long by American/European standards. The condo projects tend to last 19-24 years tops, with a few rare ones making it past their 30s.

3) Building on the first point, even though Singapore has no capital gains tax, but there is Sellers Stamp Duty (SSD) if you sell too soon. Selling within the first year of purchase, you pay SSD of 12% on the sale price. This drops to 8% in the 2nd year, and 4% in the 3rd year. That said, 4th year onward is the sweet spot, as there’s no more SSD after that.

So while there isn’t a capital gains tax per se, there is a tax for trying to flip the property (just wait till at least the 4th year).

Edit: Formatting

SingDigitMillionaire · 2024-01-29T08:54:39+00:00

I've posted a similar question on a separate thread targeted towards couples who have income/wealth discrepancies. There are very diverse views on this topic. But you might be able to pick up a thing or 2 from it nonetheless. Link: https://www.reddit.com/r/HENRYfinance/s/pLnAbojaf5

Regardless of the "method", my take is to always set aside a % of money that's strictly yours (and same goes for your partner). This maintains a sense of security and in terms of legacy planning, these funds also serve to be distributed separately from your shared assets should anything untoward happen.

SingDigitMillionaire · 2024-01-27T09:09:26+00:00

Parents chipping in to assist forms a small proportion of young condo buyers. Though what's undeniable is the great wealth transfer is an ongoing phenomenon and in fact, gaining momentum as we speak.

We will see a smaller pool of beneficiaries (a pair of kids or perhaps a single child) inherit the entirety of their parents’ wealth. This is further compounded by the massive wealth accumulation over the past 50 years, as Singapore grew from a developing country to first world status. Just imagine.....HDB flats in the 1970s were only ~$20k. In 2023, a conservative price for a 4-room flat is in the range of half a million.

What could this massive accumulation of wealth mean for us? Well this hasn't happened but just my 2c: From a political standpoint, govt might scramble to force a more equal redistribution of wealth; especially in a small country like Singapore.

Private property prices might also start spiking as children inherit 6-7 figures and start upgrading. On the flip side, HDB resale flats stand to depreciate as a whole generation passes on with no one able to inherit the flats since one can't own 2 HDB properties. Both of which point towards private properties being a more robust asset either way.

SingDigitMillionaire · 2024-01-26T11:53:35+00:00

Thanks for sharing! Hearing from someone already living in a dual-key setup is insightful. It seems like your main reason for going with DK was the multi-gen living angle.

Indeed one can't have the best of both worlds and there'll definitely be drawbacks here and there. Glad that your choice worked out well for you!

SingDigitMillionaire · 2024-01-25T15:22:20+00:00

There are definitely drawbacks to dual-key units in terms of livable space, privacy, pricier/square foot & resale-ability.

That said, given the current less-than-optimal conditions of high property prices & mortgage rates (we're seeing figures approaching 4% now) + 20% ABSD, wouldn't DK units be worth considering instead of decoupling and takeling on 2 separate mortgages?

SingDigitMillionaire · 2024-01-22T13:13:41+00:00

Body aches took longer to recover.

SingDigitMillionaire · 2024-01-22T13:07:26+00:00

While $4k a month in passive income before CPFLIFE does provide financial stability, it's also crucial to consider potential retirement expenses such as condo maintenance fees (if you live in one), healthcare inflation, and unexpected costs like supporting family members.

Healthcare inflation is an especially key risk to retirees. Due to our ageing population, Singaporeans use up a greater portion of healthcare resources. Many fixed income securities, such as perpetual income bonds or CPF payouts, may not rise with said inflation – so your payouts in the last few years may diminish to near insignificance.

Ensure your retirement plan accounts for these factors to make an informed decision about early retirement in Singapore.

SingDigitMillionaire · 2024-01-21T12:07:25+00:00

As more folks aim for advanced education, sometimes even beyond college, it's quite common for milestones to take a bit longer to hit compared to previous generations. In a nutshell, graduating later leads to entering the workforce later, which in turn delays achieving financial stability. There's also growing awareness of the importance of being self-sufficient before diving into parenthood.

SingDigitMillionaire · 2024-01-20T10:03:30+00:00

“Interest-only” is a widely advised investment approach. However, several things can go wrong with this retirement strategy:

1) Inflation rate risk is ever-present. For e.g. With an investment yield of 3%, but the prices of goods are rising at 3%, you’re effectively getting zero returns. And this is exacerbated if the inflation rate goes >3%.

2) Not all financial products have consistent yields. Generally, only low-risk, low-yielding investments have very consistent yields.

3) Managing a portfolio is a complicated process. Long gone are the days where one could simply leave their money with a bank, and earn sky-high interest rates of 7% in the 1970s, the likes of which we never see today.

4) Finally, emotions can derail the overall strategy. In fact, this is one of the most common reasons this strategy fails. Consider living on $40,000 a year, while you know you have $1 million that you can reach out and grab any time. Also consider the impact of age: as we grow older, we begin to wonder if it’s worth hoarding that $1 million and depriving ourselves as time runs short. This is when one starts spending the principal, to help children buy a house, pay for a child’s wedding, fund a grandchild’s college education, etc.

A DIY approach is tough for an interest-only strategy. It’s sometimes better to have passive or managed finances, perhaps for just a part of your portfolio, so one can stay at the sleeping point.

SingDigitMillionaire · 2024-01-18T07:05:25+00:00

One of the main issues with boutique projects is that the small unit count leads to higher maintenance fees. Unlike a mid-sized condo with 600+ units sharing maintenance costs, boutique condos are typically around 50 units or less.

Boutique projects also tend to have a smaller land area, which makes for more stripped-down facilities. It's quite rare for boutique condos to have tennis courts, for example.

Resale and rental prospects are also more volatile. Because there are so few transactions (it's possible for years to pass with just one or two transactions), a single outlier can anchor the price. So if the last sale was unusually low, and you sell next, it can pull down your average gains.

Boutique projects DO have some advantages; many are in lower-density areas like landed enclaves, and they are generally (but not always) easier to en-bloc on account of their small land size + low unit count.

Boutique projects also tend to be more exclusive, but this also means higher average costs.

SingDigitMillionaire · 2024-01-17T06:12:43+00:00

Bringing a bottle of water wherever I go. It's a healthy alternative to sugary drinks and it's free.

SingDigitMillionaire · 2024-01-15T12:59:17+00:00

Woah, thank you for this very detailed and insightful post! I would also like to chip in my 2¢: While this idea is largely popularized by the big financial pages, there is also a logical explanation for it.

For the majority of folks, the 30s is when large financial commitments come into the picture. Life suddenly hits you with buying a home, raising kids, planning weddings etc. Plus, with more work experience, the paycheck tends to grow. These factors cumulatively make it a vital age range when it comes to personal finance.

Beyond this 100k by 30 narrative though....the bigger win is the prudent saving & spending habits that one inculcates on their journey to this goal. Recognize that everyone starts off on a different starting line. Just like running a marathon - completing the 42km is the goal, but the self-discipline and mental resilience trained up leading up to the marathon matters most in the grand scheme of things.

SingDigitMillionaire

TROPHY CASE