To Spend or Not to Spend

So the economy is in limbo. 6 weeks ago the STI drop to it's lowest close since 2003 (1600.28 on 24th Oct), light crude is now USD55/barrel (as of the 28th) and SM Goh is encouraging Singaporeans to keep indulging themselves:

Mr Goh added that although many are now concerned about costs, Singaporeans should not save excessively.

"If all of us go into a power save mode, then the economy will really go into a recession! This is what economists called the Paradox of Thrift. If you have sufficient savings and can afford to spend, you should continue to spend on life's little pleasures.

"Take your family to the movies, shop, dine out at restaurants and hawker centres, go for your regular foot massage, indulge yourself at a spa, take a taxi, donate to charity and so on.

"This way, we keep the economy going. In fact, I would say when times are a little slow, you could get the best bargain," the senior minister said.

- Channel News Asia, 6th Nov

Of course, there's the caveat of "If you have sufficient savings and can afford to spend..". I wonder how many people do actually have sufficient savings AND can afford to spend. How does one define sufficient savings, anyway? 3 months of living expenses socked away in easy to access accounts? 6 months? A year? Many Singaporeans live on credit anyway, so maybe it's not something to worry about. As long as the line of credit is there, they can still spend. But what about that impending retrenchment? As long as my job's there I'm fine, but what happens if my company decides that my "services are no longer required"?

By a conservative estimate, I've got about 8 months worth of living expenses tucked away just in case I'm given the boot at work. I've no debt and I pay my insurance premiums on a yearly basis and those are only next due in May next year. My only big recurring cost is my rent. If I were to really stretch it, I guess I could probably survive for a year on what I've got saved so far. Despite all this, I still don't consider this sufficient savings for me to be able to go out and indulge myself. Why? Because for all SM Goh's encouragement, he can't guarantee that I'll still have my job this time next year. Because Singapore's economy is highly dependent on the global economy unlike some other countries, where it's more self-contained. Because the guys I work for are in the red with no rescue or turnaround in sight. If anything, I wish I could afford to save more.

Not everyone agrees that encouraging spending is the right thing to do now, though. Came across this post on Consumerism Commentary that discusses the issue from an American perspective.

Sometimes it seems as if we’re working at cross-purposes with our best interests. We’re watching a struggle born of reduced economic activity while intentionally reducing our own spending. If you look at it on that level, it appears as if we’re intentionally punching ourselves in the gut. If you view it from a broader perspective, however, it’s clear that there is no tension between economization and a stronger economy. If anything, more responsible personal money management is exactly what our economy needs.

I think regardless of how the economy is going, we just need to be responsible for our own finances. Job security fluctuates, as do prices and economies. We just have to take care of ourselves and be prepared for anything.

Would a Recession Really be a Bad Thing? (And the Agriculture Guys Got it Right)

Came across this interesting commentary on Hong Kong's The Standard. This guy doesn't think that a recession is such a bad idea. In fact, in his opinion, it's part of life:

"Fluctuations in the economy are normal and natural. Even in the primitive, Biblical economy, "seven years of plenty were followed by seven years of famine."

Despite this, at least since the 1930s, fluctuations have been thought of as "a bad thing."

Accordingly, governments have sought to prevent them. The essential reason why fluctuations have been thought to be bad is that recessions are wasteful. As the economy dips below its maximum output, there is a loss of production compared to what could have been.

Labor and machines lie idle, and incomes and spending fall.

If you are a fully paid-up member of the anti-growth brigade, such reductions could be viewed as a good thing: less greed and consumption, less pressure on the environment, and more scope for increased importance to be attached to non-material values."

This is probably the first article I've read that takes a level-headed look at our current situation. No doubt there are people who would be ruined by a recession, and they do have my sympathies, but recessions are part of a very real economic cycle. Nothing stays the same forever and that's why we have to look at sustainability.

I have very vague memories of science classes in school but I remember learning about crop rotation. Now, I am hopeless with plants. But the reason why this has stayed with me for so long is because the concept behind crop rotation is a universal one. It's the simple fact that nothing lasts forever. This is why companies with the most staying power are those that have managed to find ways to diversify their products and services, e.g., GE and Siemens. Not only do these companies add to their portfolio, they also constantly reassess their business directions and are not afraid of jettisoning small parcels of their companies to streamline their business model. Case in point, last year GE sold off its plastics division to SABIC and Siemens sold off Siemens VDO to Continental.

In more pressing times, some companies have also successfully reinvented themselves to pursue directions completely different from earlier paths. One of these companies is Motorola. Granted they currently suck pretty bad, Motorola used to be a Fortune 50 company (it's dropped to Fortune 100 now). This telecoms giant actually started out by making car batteries. What a segue, huh? BMW used to make airplane engines (in this case they were forced to stop making them, but hey, you can't fault where this has led them) and the name 3M Company comes from the company's original name, "Minnesota Mining and Manufacturing Company". DuPont, the chemical giant, first made gun powder.

Investing gurus always talk of diversifying. These companies prove that this sound advice. Now, if only I had enough eggs to fill many different baskets. :)

From the Buffet Table: 10 Ways to Get Rich

Came across this interesting article from PARADE Magazine. It lists 10 snippets of advice from the world's richest man, Warren Buffet. The article uses examples from Mr. Buffet's life to emphasize points, providing insightful glimpses into the life of one of the world's greatest investors.

The 10 points listed are:

1. Reinvest your profits
2. Be willing to be different
3. Never suck your thumb
4. Spell out the deal before your start
5. Watch small expenses
6. Limit what you borrow
7. Be persistent
8. Know when to quit
9. Assess the risks
10. Know what success really means

Plenty of food for thought. For me, I think #4 would be something to really keep in mind. I have a tendency to get really excited and jump head first into things before really thinking about what I'm really doing or hoping to accomplish. It probably comes from my very bad habit of figuring things out as I go along, as opposed to figuring it all out and planning properly before I start.

A couple of the points also contradict each other, e.g., being persistent vs. knowing when to quit. It's hard to tell when to quit sometimes, since it's human nature to hope that things will get better. On the flip side, when things are going badly, fighting the urge to throw in the towel is pretty hard too. The most pertinent piece of advice, in my humble opinion, would be to assess the risks. This is applicable to just about every serious decision from picking a college major to accepting/making a marriage proposal.

Creating Desire

There's this scene from the movie "The Silence of the Lambs" that's been stuck in my head for the longest time. In it, Jodie Foster's character is talking to Anthony Hopkin's Lecter, in an eerie intellectual discussion about how the human mind works.

Hannibal Lecter: First principles, Clarice. Simplicity. Read Marcus Aurelius. Of each particular thing ask: what is it in itself? What is its nature? What does he do, this man you seek?

Clarice Starling: He kills women...

Hannibal Lecter: No. That is incidental. What is the first and principal thing he does? What needs does he serve by killing?

Clarice Starling: Anger, um, social acceptance, and, huh, sexual frustrations, sir...

Hannibal Lecter: No! He covets. That is his nature. And how do we begin to covet, Clarice? Do we seek out things to covet? Make an effort to answer now.

Clarice Starling: No. We just...

Hannibal Lecter: No. We begin by coveting what we see every day. Don't you feel eyes moving over your body, Clarice? And don't your eyes seek out the things you want?

A close friend of mine just took on a 4-year loan to buy a car that he will hardly use since he travels for work a lot. The monthly installments will be eating up a big chunk of his monthly paycheck (approximately 30% of his pre-tax pay) He says it's also for his dad, but they also have another car at home that's only about 2 years old. Just last weekend, he went to a couple of car dealerships to test drive more cars. This time cars that costs twice as much as the one he just took out a loan for. He tells me it's just for fun, and I'm sure it's fun, but I worry about when he'll tell me that he's buying a new car again.

I have a theory about this. I think this is how the mechanism of want works. We go window shopping on a nice Saturday afternoon, telling ourselves that we'll just look, and end up coming home laden with shopping bags. What we see with our eyes, we desire in our hearts. That's why marketing is such an important part of doing business in our modern world. Companies fork out millions every year to convince people to buy things they don't need. Banks help by providing easy credit. Markets become overinflated and then burst.

Trying not to go out to the local shopping complex on weekends is difficult. Let's face it. There's not that much to do in Singapore. We look for air-conditioned places where we'll have easy access to public transportation and probably 80% of these places are somewhat related to shopping and/or spending money. At the same time, everywhere we go, we're bombarded with images that encourage us to spend more money. Working to cut down on expenses is like fighting a loosing battle. The harder I try the more conscious I am of all the avenues for forking out cash. Unless I become a hermit I think I'm going to need a really really big dose of will power to keep going.

Finally, Some Good News!

Haruhiko Kuroda, the head of Asian Development Bank, said on Wednesday that Asian inflation will be dropping in the months ahead. Seems like this is related to the drop in oil prices to below the USD100/barrel mark. Maybe cab companies will finally lift that SGD0.30 surcharge off its rates too.

Is Japan Leading the Way into Recession?

Japan has been the benchmark for the health of Asian economies for a considerable amount of time. The BBC reports that Japan's economy shrunk by 2% in Q2 of this year:

The world's second largest economy contracted at an annualised rate of 3% in the April to June quarter, as both domestic demand and exports weakened.

It was the first decline in more than a year, and the biggest since the third quarter of 2001.

Most economist consider 2 consecutive shrinking quarters to be the definition of a country being in recession. We'll find out next month if it shrinks anymore. If yes, Singapore and the rest of Asia can't be very far behind. While the past couple of years of growth have been incredible, I did think the economy was a bit over-inflated. So a market correction was due. It just looks like there's going to be more than just a correction. The job market is slowing, but prices are still going up. My company's cutting a few hundred people off its staff list and if things get any worse I might even see myself among those being given boot.

It's not only Asia that's tottering on the edge of recession, European economies are starting to flag too. I guess our only consolation at this time is that slower growth is still growth.

Watching Your Nest Egg Grow

Photo by: dasroofless

These past couple of months have been incredibly busy for me. So much so I've had to put aside blogging for a while. Things have slowed down a little bit so I'm trying to get back into the groove of doing stuff that matters to me.

Was reviewing my accounts and updating my records earlier tonight. Since I've started watching my bank balances more carefully sometime towards the end of last year I've seen my nest egg grow by about SGD10 000. Not bad for a novice. I'm feeling really proud of myself but at the same time, I'm wondering how tight a grip I need to keep on these funds.

With the Hari Raya holiday coming up, I was planning to take a holiday. To take a few days off from work and disappear somewhere for about a week. My earlier estimates added up to about SGD5000 for the week off that I was planning and, all things considered, isn't really all that bad a price. However, when it came to actually making the go/no-go decision, I couldn't do it. Taking SGD5000 off my current balances was too much for me. Could I afford it? Yes. So why is it so difficult to just fork out the cash?

Sometimes I ask myself what I'm really saving all this money for. A few ideas come to mind:
1. To go back to school full-time
2. To quit my job and go vagabonding for a year
3. To start my own business
4. Retirement (by this I mean quitting a full time job to focus on stuff that I love)

None of the above ideas are concrete. They're just possibilities to be considered. So since I'm not seriously aiming for anything (at least not yet, anyway), what's stopping me from going for a much-deserved holiday? I really don't know. It's just the thought of seeing my bank balances shrinking by so much at one go that's got me running scared. Is this what happens when you start to get serious about your finances?

Maybe I'll just spend the Raya holidays at home on a low-budget "stay-cation" and console myself with thoughts of going home for Christmas. :)

Up, Up and Away

The price of oil per barrel has dropped to below the USD130 mark from a peak of USD147 about a week ago. USD128 is still pretty high, though, and cab companies are hedging themselves off from further losses in profit by charging a"diesel surcharge" which is just a round about way of saying that they're increasing fares. Comfort taxis implemented this SGD0.30 per trip surcharge last Thursday and SMRT taxis will start charging the same extra amount on the 26th. Like Comfort, SMRT says that they will remove this surcharge with the price of diesel drops to December's price of USD1.19/L. Premier, Smart and Trans-cab will also be following suit with a diesel surcharge soon. So besides the peak hour, CBD, midnight and airport surcharges along with ERP charges, we'll also have to pay for the fact that cabs need fuel. Hmm....

There's really no escaping the increase in transport costs since public transport fares will also be revised soon.

Postcards from Around the World

Food prices are really going up. A meal that would typically cost SGD2.70 at my office cafeteria a month ago now costs SGD3.35. A whopping 65 cents increase! With oil costing over USD130 per barrel, pushing transport and power generation costs up, everything else is following suit, which makes the immediate future look really, really gloomy.

So it's a refreshing perspective to read about what's happening in other parts of the world and how other communities are coping with the price increases. It's particularly interesting to note how the families from Guatemala, China, Kenya and Egypt can't afford to eat meat everyday.

I am an agronomic engineer and my family has six members.

I spend approximately $250 a month buying meat, milk, fruit and vegetables, bread and tortillas, which is around 40% of our income.

The rise in the prices of all the basic food products here is alarming, and it is even worse for the families who live in extreme poverty, because they don't have enough food to live with dignity.

I have noticed the rise as well. We used to eat meat five times a week, and we can only do it twice now. The children don't drink milk three times a day but once for breakfast, and we don't buy some fruits that get too expensive depending on the season.

I like reading about what's happening around the world. It kinda gives me perspective to how my life fits into the larger scheme of things. And it helps to know that I'm not alone in the struggles that I face. It's also great to learn how others are coping and using their examples and tips in my own life.

World's Richest Man Says the US Economy is in Recession (& Times Bookstore's 30th Anniversary)

Warren Buffet thinks the US is in for a "long and deep" recession which has already started. Excerpt from Reuters' website below:

He said the United States was "already in recession" and added: "Perhaps not in the sense that economists would define it" with two consecutive quarters of negative growth.

"But the people are already feeling the effects," said Buffett, the world's richest man. "It will be deeper and last longer than many think."

Well, the rest of the world can't be far behind.

On a different note: Times Bookstore is celebrating it's 30th birthday by giving it's members 30% off regular-priced items. Check out the full details here.

Doesn't Matter If You Don't Own a Car...

... the rising petrol prices will get to you too. Don't be surprised if your utilities bill is a little higher than usual this month. This Business Times article tells you why.

There was tighter electricity supply - arising from cogeneration plant shutdowns for maintenance and exacerbated by the supply outages of Indonesian gas.

There was also increased demand for electricity 'which hit a high this month,' the source said. This was brought about by the high temperatures (which means increased use of air-conditioners) and also higher industrial output.

Already, average monthly electricity tariff had increased by some 25 per cent between December, when it was S$140 a megawatt hour, and April, when it hit S$173, latest Energy Market Company (EMC) figures show.

And the further climb expected in electricity tariffs this month - due to the ever-rising oil prices - reinforce EMC's expectations that electricity rates will face more upward pressure in coming months especially as electricity demand in the second and third quarters is traditionally higher.

With the price of food, housing and utilities going up everywhere I doubt if a recession is far away. After last year's phenomenal success and this year's looming recession, I wonder how this year's up-coming GSS is going to fare.

Time to Whip Out The Pots and Pans

Photo by: jslander

AsiaOne reported today that food operators are upping their delivery charges. I'm a big fan of Sarpino's and I just love their "2nd pizza at 50% off" deal so reading that they're increasing their prices is a big disappointment. But with food costs rising everywhere, this was bound to happen sometime.

So, what's a girl to do? Well, reduce the frequency of having friends over for pizza to start with. The next would be to cook more often. Besides being cheaper, it's also more healthy. Most of my friends have developed the habit of picking up something for dinner on their way home from work from the numerous food courts dotting the island and typically, food from food courts are poorly balanced (probably with the exception of economy rice, but this depends on what you pick) and high in MSG content. Other friends really like instant noodles. The most common reasons for not cooking (instant noodles with only the condiments that come in the packet don't count here) are:

1. I live alone and it's too difficult to cook for one person.
2. I'm half dead by the time I get home from work.
   
3. It's too time consuming. I'd rather spend my time doing other things.
4. I don't know how.

The solution to problems #1, #2 and #3: batch cooking
Now some people would find this disturbing, but even though I live alone, every time I do stove top cooking (as opposed to microwave), I'll make at least 4 portions. I usually have one portion the day that I cook, which is usually either a Saturday or Sunday, and then refrigerate or freeze the other portions for later. So on weekdays, all I have to do is to pop the food into the microwave to warm it up and 2 minutes later I'm enjoying a warm, home-cooked meal. That's 1 hour of work for 4 decent meals.

The solution to problem #4: learn (and it ain't as difficult as you think)
Some of my friends had the privilege of growing up in homes where their moms would make everything from scratch and shudder at the thought of using canned/frozen ingredients. That's all well and good and I love food made from scratch just as much as the next person but if you haven't the time or expertise, making food from scratch can be difficult. And then there's the argument that preprocessed food is unhealthy too. BUT, there are different degrees of unhealthy and there are ways to minimize this.

Take for example, the humble packet of instant noodles. It's fast and efficient. Everything goes into a bowl, pop the bowl into the microwave and you're all set. What I usually do for microwaved noodles is to buy dried noodles without the seasoning. There's a great variety of dried noodles out there so it's basically up to your own preferences what to use. Here's a hint, though: don't use any type of noodle that needs washing after being cooked, e.g. "mee sua". Instead of the seasoning that comes with the typical instant noodles packet, I use chicken or vegetable broth that comes in 1L cartons. Any type will do and some broths do have added MSG but very little. If you're really health conscious, you can get the organic vegetable broth that has all-natural ingredients only and no MSG. To make it a more well balanced meal, I add frozen vegetables. Now most people think of frozen vegetables as being limited to the generic mixed vegetables of peas, carrots and corn but there are other types of frozen vegetables out there. My preference is for frozen spinach, frozen cauliflower and Watties' Winter Vegetables which has broccoli, cauliflower, carrots, potatoes and baby onions. I'm also a big fan of frozen shrimp dumplings so I'll throw a couple of these into the mix as well though I never never use the "soup" powder that comes with the frozen dumplings. This is just sugar, MSG and artificial flavouring. I'm sure, of course that the frozen dumplings have some of this artificial flavouring added to them too but at least it's kept at a minimum. So, with a prep time of about 5 minutes and microwave cooking time of about 7 minutes, it is possible to make a half-way decent bowl of noodles. Other quick and easy dishes are omelets (or scrambled eggs) and pasta.

I don't really enjoy cooking but I do enjoy a good meal. So if that means that I have to give up a little time then I'd rather cook than to consume crappy poorly balanced hawker food. It's bad enough that I have this for lunch pretty much every work day so at least I come home to some decent food. And on top of that, the money I save by cooking allows me to have better food if and when I eat out for dinner.

TV on the Cheap (or for Free)

OK. So watching the ad-sponsored Mediacorp channels is relatively cheap. But what if you don't like waiting for the programmes' scheduled times? Or if it's just more convenient to watch movies or videos on your computer? Is there an alternative? Well the founders of Skype and Kazaa have the solution for you: Joost.

Joost is a couple of years old and downloads of the application that run it used to be by invitation only but it's been made freely available to the masses since October 2007. The user interface of the application is easy to navigate and user friendly. Users select a channel (just like TV) and then the programme they want to watch. The content is ad-supported so this keeps it free. I really like this because it's TV on demand. I don't have to worry about missing segments of a programme if I'm late and if I need to step away from my computer, the pause button is available.

Joost also has an excellent variety and number of channels available, the only problem being that many of these channels are only available to people living the USA. Check out OnTheToob for lists of channels, programmes and their availability. In a nutshell: great control over the programmes, excellent picture quality (sound is a bit dodgy), excellent mix of channels and programmes. All you need is a fast internet connection.

Another source of free movies I found is MovieFlix. They have a subscription based service as well and this opens up their entire library for USD9.99/mo. The problem with MovieFlix is that all of their movies are old. And by old, I mean before I was born kind of old. The ones that are available for free are the oldest ones, so we're talking black and white old. Picture quality is another issue. MovieFlix provides streams with 2 different bit-rates but even the higher-resolution stream isn't all that high. Other than that, MovieFlix is great in that users do not have to download any additional software to watch their movies (I'm assuming everyone has either RealPlayer or WMP) and they have movies available for free. In a nutshell: this is for the desperate and lovers of old black and white movies.

I'm still looking for more sources of free TV-on-demand where access isn't limited to specific geographic locations, but haven't had much success. For people in the UK, BBC has 4oD with free access to repeat programmes from channel 4 so you might want to check this out if you haven't yet.

Music on the Cheap (or for Free)

Photo by: rodbegbie

Doing a quick poll with my friends, I discovered that a good portion of our monthly expenditure goes to spending money on entertainment. Movies, music, books and magazines, bowling, pool, etc. So I've been looking for ways to reduce entertainment costs without becoming a complete hermit. I'm going to try to do a series of posts on saving money on different types of entertainment starting with this one on music (only because I've got the most info for this one).

Considering the amount of time I spend connected to the internet, it made perfect sense for me to look for sources of music online. At first, I started with purchasing tracks online from the likes of, the now defunct, AllOfMusic.com. Then I decided that I preferred having a regular rotation of songs instead of listening to my purchased tracks over and over again, so I started scouring the internet for streaming radio. The first streaming radio service I used was Spinner radio (now Netscape radio). One thing I've never tried is the subscription service radio so this is definitely something to try out in the near future.

Internet Radio: If you're like me and spend most of your time in front of a computer then this is for you. There are many providers that provide ad-supported streams for free and some that charge a monthly subscription for ad-free listening. Some providers (like Yahoo! Music) provide both options. Listed are some of the sites I frequent for free/cheap music.

Recession Career Tips and Scarcity Value

Penelope Trunk posted a list of tips for career management in hard times on her blog earlier this week. I think her tip on specializing is especially true. If you're really good at something, and that something is rare, you're going to be in demand. It's the universal law of scarcity value.

So what's scarcity value? It's an economic factor that allows an item to be priced well above it's actual cost. E.g., the current real estate situation in Singapore. It takes a whole lot less than SGD250, 000 to build a tiny 3 bedroom flat but the lack of available housing and the en bloc craze has pushed prices above what one would consider to be normal. It's a great time to be selling off your investment properties but if you've been saving for a few years to finally buy a place of your own, well, I hope for your sake that you've got an exit plan and take comfort in knowing that the prices seem to have leveled off.

About this Blog

Why this blog?

I’ve been journaling – off and on – since my high school years and have always found that it’s a useful tool to help me put my thoughts in order and to help me remember things. Well, a few months ago I started getting serious about my finances and wanted to rein them in and figure out how it’s going to grow in the coming years. No, I didn’t suffer any financial catastrophe or experience an epiphany. But the GST% did go up, as did transport costs, utility costs, food costs, rents, etc.

So this blog is for me, to help me keep track of the things I’m going to be learning over time, the goals I’m setting for myself (and why) and the things I’m doing. It’s my way of being accountable to me.

I’m also hoping to learn from the people who visit this blog. One of the best ways to learn is to have open exchanges and to leverage off what the people around you already know. So please comment if you’ve anything relevant to share or any questions to ask. Thanks in advance!

What does it contain?

This blog will mainly contain views on personal finance from the perspective of a twenty-something with no formal finance training.

What this is not

I am not a CFP. I do not sell any MLM products, unit trusts or any other investment products. There are no hot stock tips here. There are no get-rich-quick schemes here.

Who I am

A twenty-something Malaysian working and living in Singapore. Engineer by day and most nights, trying to figure out how to stretch her dollars while maintaining a decent standard of living.

What's Banana Money?

Banana money was the currency issued by the Japanese occupiers of Malaya and Borneo during WWII. Due to how easy it was to re-produce these bills, counterfeiting was rampant, driving up inflation and pushing down the value of the currency during the Japanese occupation. After the Japanese surrendered at the end of the war, banana notes became worthless and only remain today as a collectors item. Sometimes I feel like my money is becoming like banana money, prices going up and a dollar buying less and less. That's why I picked this name for the blog.

See Wikipedia entry for banana money