1 Year NSF Milestone – Finance Report Card

1 year has passed, I do not expect myself to have come so far since I surrendered my IC. For the past one year, I feel my National Service experience has been very eventful, having been vocationalised twice. My initial vocation was Transport Operator (Service) but that vocation was short-lived as I OOC-ed in the end due to medical condition. As a PES E personnel, I have never expected myself to be a Transport Operator and the experience I had was really quite pleasant less those nasty instructors. 

I have been in my current unit since October 2019. I really like my stay in the unit as my superior recognises and appreciates my contribution to the office, in which I receive my promotion on time. In addition, I have made great friends with my unit’s personnel, this makes NS more bearable. I won’t really say that I enjoy National Service or that I hate it. I am treating it as if it is a real job to earn back my IC in one year’s time

In this post, I will share with you everything about Personal Finance, Investments over the past 1 year and an interesting product that I have ventured into recently.

Personal Finance – Cashflow Allocation

You may have seen articles on how to allocate your inflow into different purposes. Seedly recommends the 50/30/20 allocation for your inflow of cash, where 50%, 30% and the remaining 20% should be meant for expenses, investment and savings respectively. The allocation rule suggested for Seedly is for Working Adults and since I am still a teenager with essential needs being provided for my parents, I have my own allocation rules which I have been following since I was 16. For other youths, I recommend them to allocate more of their cash inflow to savings than expenses to build up their wealth. 

The above screenshot shows an example of how my cash inflows are allocated into different categories each month. I will receive my allowance and bank interests every month while there are some months where I will receive dividends from stocks. 

Once I gathered all my cash inflow, I will allocate them into different purposes in their respective allocation percentages. 60% of my inflow will be flowed to my Warchest (Investing) account, 22% of my inflow will be flowed to my Savings account while the remaining 18% will be in my Expenses account. You can say that my budget for expenses is 18% of my total cash inflow. I will top up from my savings if the expenses for the month are more than allocated. 

For those who are on the extreme end of the spectrum, leading the YOLO life, they might want to allocate more to savings and reduce their expenses. On the other hand, those who lead a frugal life, might want to allocate more to spending so that their teenage life will not be miserable. My point is, at the end of the month, we would like to see our savings grow. So it is important to check on your past expenses and to set your allocation and make some adjustments based on historical expenses data.

I have provided two waterfall charts on how much I have saved since my enlistment in July 2019. The chart above shows the overall cashflow (ie actual savings) I have amassed since then. I only recorded negative cashflow in November when I bought a tablet for reading and watching Netflix. In this case, I had to draw down from my savings to fulfill my purchase. As my unit practised alternate work shift because of Circuit Breaker, my expenses for the past three months had been incredibly low as I saved on transport fees and monies to go out with friends. 

As cheeky as it sounds, I decided to rename the chart above from Net Cashflow to Free Cash Flow. From what we understand, Free Cash Flow is calculated by deducting Capital Expenditures from Cash from Operations. In my case, the Cash from Operations refers to the summation of Savings and Expenses while the Capital Expenditures refer to the total cash outflow for the month. So my Free Cash Flow is actually my net savings (excluding Investment) for the month. When there’s negative Free Cash Flow, it means that I am drawing down from my reserves (savings) to fulfill such purchases. As you can see from the chart, I have two months where I recorded negative Free Cash Flow due to the purchase of electronic gadgets such as wireless earpiece and tablet. I am expecting two more months of negative Free Cash Flow as I will be changing my phone and laptop in the months leading to ORD to prepare for University. 

The difference between Overall Cashflow and Free Cash Flow is the amount accumulated for Investments. As I have recently topped up a significant amount of cash from my savings and expenses for investments, I will be transferring the remainder of my warchest after ETF RSP purchase back to savings and expenses. Therefore, you can see that I have recorded a larger FCF in June 2020. This trend will continue until I ORD as I start to focus on my savings and expenses to prepare for my big ticket purchases in the coming months.

Personal Finance – High Yield Savings Account

Now that we know more of our own budget allocation, we can now look out for a high yield savings account to earn better interest. I opened a CIMB FastSaver account in 2016 and transferred all of my monies from my POSB Savings account to start earning 20 times more interest. I have been using CIMB FastSaver since then until Jumpstart account was introduced in September 2019 where I transferred all of my money to the latter. I was happily earning 2% interest on my monies in the account until the recent reduction in interest rate to be effective from July onwards.  

Late last year, I was alerted of a new insurance savings account by Singlife on Seedly Facebook group where it offers 2.5% returns per annum for the first $10k and I was eager to sign up to show interest as I was about to max out my Jumpstart account in a few months time. 

I started using Singlife account in March though the amount I deposited initially was small as I do not really understand how the product works. Therefore, I kept $100 in the account, which is the minimum to maintain the policy. I practised this strategy as I am planning for the future to continue to chase for higher-yield interest for my savings. It was only last month when I started to transfer out of my Jumpstart to max out my monies in Singlife to earn the extra interest. As of now, I am still receiving about $0.67-$0.68 of interest everyday. 

Source: Singlife

Singlife also provided a debit card for contactless payment. I rarely use the card as there’s no cashback for any purchase. Instead, I use MCO Visa Debit Card which offers me 2% cashback and 100% Spotify rebate. I can top up SGD into MCO Visa Debit Card using a debit card at zero fees. I will cover this later in another section.  

One thing to take note is that Singlife is not as liquid as an ordinary savings account as it takes some time for withdrawal to be credited into a normal bank account, it is advisable to keep some money in an ordinary savings account. However, compared to putting in your spare monies in Stashaway Simple where you can only receive in your proceeds in 3 to 4 business days upon your withdrawal, stashing your spare monies in Singlife will be recommended. 

I understand that there are some who are concerned about returns not guaranteed. In view of the low interest rate environment, I questioned the CSO on why returns are not guaranteed, the CSO was not provided any explanation by its management but explained that their intention is to pay up to 2.5% on the first year for the first $10,000. Singlife will notify customers if there’s any changes in the future.

I am a simple guy, so long that I am still receiving about 2.5% p.a returns, I will continue to use Singlife as a savings account. There is nothing to lose because capital is guaranteed and withdrawal is effortless and easy. To me, the longer you hesitate, the greater the opportunity costs.

Personal Finance – Insurance

Insurance is important but I think it is best to discuss with your parents on whether they bought insurance plans when you were young. Insurance is essential but we need to know what’s the essential insurance policies to get and what should be avoided. Seedly has a pretty illustration on the essential insurance policies to get in which I am definitely going to get when I am much older once I am in the working life. For myself, I will be reviewing the insurance products that my parents got for me and to start to take over them when the time comes. 

Source: Seedly

One key point to take note is NOT to mix insurance with investments. Recently, there is a rise in Financial Advisor going to Instagram to share with their followers on why one should start investing when young. Well, it is great for them to share but they are actually trying to sell investment linked insurance policies to their followers. For instance, one came forward and shared with me how his Financial Advisor pitched ILP to him. The FA was selling to him how ILPs are beneficial in the long term as it has the ability to fund switch to strive to maximise market returns. He also shared how it might be daunting to be investing alone, not knowing the returns or growth potential compared to the reassurances if he were to invest in ILP. Luckily, he did not sign up for ILP and decided to go for index investing while learning the ropes to stock pick. 

In addition, a Finance Planner shared in a youth investing telegram group about his thoughts on ILP. He shared that as a FP, he wouldn’t get ILP for himself. This is opposed to some FA whose first investment is ILP. He mentioned that ILP is a better than nothing plan. As it is a mix of investment with insurance, it doesn’t seem to be a worthy plan after comparing it with other products. He shared that ILP has high distribution cost or commission, where the majority of the premiums paid for investment are meant for commission for the first few years. He gave an example where his friend’s ILP will take up to 10 years to breakeven on the assumption that the annual returns are 8%. One cannot imagine the opportunity cost if they were to sign up for ILP compared to doing passive investing. 

Therefore, for a FP to share the above, speaks volume on why ILP is not recommended and to be avoided.

Investments

Ever since the last investment update in January, I initiated a new position in DBS for my long term core portfolio. Initially, the reason to purchase is for dividend play as it recently raised and maintained its dividend to 33 cents per quarter. I have to acknowledge that my initial price was a bit on the high side at $24, which is 5.5% dividend yield based on $1.32 per share. However, I did not all in at once so it gave me the flexibility to average down when price dropped as much as 30% after my initial purchase. My first average down was done in late May and I have set aside another batch to average down in the coming months. DBS will be my dividend and capital gain play for my portfolio. On the other hand, the performance of Lendlease Reit was extremely disappointing where at one point it was down as much as 54% and it has been a huge drag to my portfolio performance. 

You may refer to the above image on my asset allocation. I have decided to top up additional funds into investments in view of the current situation. This move was done in an extremely cautious manner as I do not want to jeopardize my own finances. As I still have a predictable cash inflow for the next 1 year, I am now focusing on building up my savings and expenses which is 23.4% of my total asset. This percentage is something that I am comfortable working with for the foreseeable future. 

The image above shows my core portfolio’s time weighted returns since inception in 2018. Stocks.Cafe recently introduced multiple baseline stocks to compare against the portfolio performance. I have therefore decided to choose STI ETF, VOO and VT for comparison. Based on the graph, the performance of STI underperform major indices, it is not sensible to concentrate my portfolio in Singapore, thus I have started to explore the US market recently for growth.

I have come to a decision to diversify my portfolio to US stocks to reduce my exposure to Singapore. As I am still young, I will like to focus more on capital appreciation than dividend investing. Even though I started early, I have missed out on a lot of growth opportunity in the US. It is never too late to venture out of Singapore. Although I will be looking at individual US stocks, I will still be continuing doing RSP on IVV every month. At this stage, I will not be initiating any position in the US as the valuation is overstretched in this situation as if Covid does not affect the earnings at all. 

MCO Visa Debit Card

Source: Crypto.com

I have seen the rise and fall of cryptocurrency in late 2017 and early 2018, I told myself that I will not touch cryptocurrency at all. The interesting question comes, why did I buy MCO and stake it? 

My friend was sharing to me how this card offers 2% cashback on all purchases and 100% spotify rebate in CRO coins. I had doubts about the Debit Card too, is it that when I top up SGD it will straight convert to CRO? Anyway the answer is, when you top up in fiat currency, it remains in fiat currency. The rebates and cashbacks come in the form of CRO coins only. 

I wasn’t convinced at all until I went to calculate on my own. My effective cost for being a member of Spotify Family is $2.50 but with MCO Visa Debit Card’s Spotify Rebate, I will get back $14.98 each time in CRO coins. At the end of each month, I gained $12.48 or $12.10 (after setting aside the spread when selling). You may refer to the table below on how I calculated the ROI. As my stake price was higher, the months to breakeven will be higher. For myself, the ROI that I am getting is 57% every year. Can you believe that if you were to stake at the current price, your ROI is 117%! It just took a few hours for me to convince myself that the Debit Card was amazing and I am loving it! 

Update: MCO is giving 10% rebate for essential purchases (capped at $50 monthly) till 30 September. Supported Brands include Deliveroo, FoodPanda, GrabFood, Fairprice, Sheng Siong, McDonalds.

Item	Cost
Upfront Cost @ $0.2231 per CRO coin	$222.31
Referral Bonus	$68.64 ($50 USD)
Remaining to breakeven	$153.67
Profit from Spotify Rebate every month	$14.98
Months to breakeven	~10 months
ROI @ $0.2231 per CRO coin	117%

You might have seen articles on MCO Visa Debit Card recently by a few bloggers, I won’t really dive deep into it again but I will try to explain in the simplest form. 

• You will receive US$50 when you apply this card once you successfully bought and staked 1000 CRO coins.
• Sign up for xfers.io account, this will be your fiat wallet in crypto.com app. You can use this to buy and stake CRO coins and sell them into fiat currency (ie SGD). There’s no fees when you buy but you will incur 0.4% fees when you sell crypto coins on crypto.com app. You can use xfers wallet to withdraw to your bank account after selling. 
• Do enable International Usage option on the app so that you can enjoy 100% Spotify rebate as shown above. 
• All the rebates and cashback come in the form of CRO coins. Because of this, the value of your CRO coins will fluctuate. If you believe the price of CRO will appreciate, you may hold for long. For myself, I will lock in the bonus by selling immediately because I do not like price fluctuations when I am trying to earn back from my upfront cost.

If you are still unsure of how this card works, you may contact me below and I can clarify your doubts and enquiries!

Closing Thoughts

I am a person who does not like change. I was actually dreading National Service way before registering for it. I stopped having such thoughts when I’m older because everyone has to serve no matter what, so make the best out of it.

In terms of Personal Finance, I believe that I am on the right foot to build wealth while for Investing, I still have a lot to learn from others but I think I am on the right track to escalate the building of wealth. I will not post such updates until the day I ORD. In the meanwhile, I will continue to create content during my free time that is relevant to Personal Finance and Investing.

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