Investment Moats

If you have read some finance books, you would be acquainted with the traditional asset allocation.

The traditional asset allocation model typically explains the different kind of assets. They are typically stocks, bonds, cash. The finance books will explain how you should allocate between these three asset classes, when you should allocate them and in what way.

We continue with some excerpts from an outstanding personal finance book Family Inc.

You can read my introduction to this book in this article.

This article is enlightening if you have started investing for a while, perhaps a few years, and are wondering more deeper about how your portfolio should be like if your situation is…. different.

Specifically, how do you factor in your assets and liabilities out of your investment portfolio?

In this article, Doug McCommick, the author of Family Inc tries to provide a different perspective

Doug first explains that what is an optimal strategic asset allocation for investors depends on 4 things:

1. What they can reasonably expect to earn from their investments (i.e. their “targeted return”)
2. Their present and predicted earnings
3. Their present and predictable future financial obligations
4. Their time horizon or duration in which they need to start selling these assets

Out of all these, the time horizon is the most influential in determining how best to allocate your resources.

In addition, some sound investment strategies will attempt to minimize the gyrations in the value of your portfolio (in investment speak, this is volatility).

This is usually achieved through diversification in different asset classes, industries, geographical locations that do not rise and fall together.

The financial assets that you put your money into has 3 kinds of risk:

1. volatility (fluctuation of value)
2. liquidity (how easy or hard to sell for cash)
3. impairment (loss of capital)

We are familiar with #1 but most might not be aware of #2 and #3.

If you have a higher risk, you need the investment to have a higher return to compensate for it. If not, the investment is not correctly priced, or in my term, overvalued as it does not provide a margin of safety, you are assuming more risk that you may not be compensated.

If you chase high risk, you wish for higher reward, but you might not realize that it comes with higher volatility. You will find those seemingly high reward, low volatility investments, which often turned out to be scams (because in reality, there is not many of them out there!)

Doug thinks that each of our time horizon and our ability to take risk is different.

There is no right asset allocation.

Typically, the asset allocation that financial advisers provide is based on a formula of 100 – age to determine your allocation to stocks versus bonds. Some use 120 – age.

You will have an allocation of

• 60% equities
  • 35% US Equities
  • 20% International developed country equities
  • 5% Emerging market equities
• 35% bonds
• 5% cash and near cash equivalents

Some will replace 10% of equities with property like instruments like REITs. The higher net worth individuals will deploy up to 15% in alternative assets like private equity, absolute return or hedge strategies.

The conventional asset allocation advice probably frustrate Doug because he sees some part of it that does not make a lot of sense. He explains more in this chapter.

With this, here are 8 main weakness he identified regarding the conventional allocation.

1. Utilizing your Net Worth as a Wealth Machine

The conventional allocation model focuses on the smoothing effect cash and fixed income has on portfolio volatility but fails to acknowledge that your asset management business also serves an important liquidity function: supplying cash to finance significant business or personal assets, and cash to support your consumption until you are paid for work that you have already provided or while you wait to liquidate other assets.

In this weakness, Doug points out that we do not look at the net worth for other functionality other than the traditional ones such as:

1. Retirement
2. Children’s education

We can use the net worth as an overdraft account whenever we need to manage daily cash flow needs. If you are a freelancer, you might be able to identify with this.

In that case, an absolute amount (not in percentages) should be part of the allocation.

I do agree with this somewhat. I think that the net wealth you built up, can be more useful earlier, than just putting it away for retirement. This is as long as what you are using it for is fundamentally sound.

In my article on wealth machines, I tried to explain how we can view your investments, and the cash you set aside to be invested as a machine. You consistently fund it from your work income, and as the investment manager, you deploy the cash into investments that would grow over time.

The wealth machine is a way to frame how you can look at your portfolio.

While your wealth machine might not be useful when you start off, over time, the accumulated value is useful for many things.

If you “sell” some of the assets in your wealth machine, you provide a cash flow that might tied over some short term spending crisis, or career transitions, sabbatical.

Doug emphasize on have adequate cash allocation, but in reality there are some things you would be able to anticipate there are some that you will not.

I do feel you can have an absolute amount of cash allocation. The way he is explaining, it is as if he is saying your emergency fund should be in your portfolio.

And I think there is some truth to that.

Once you are investing, you may consider the cash as an allocation in an overall portfolio.

2. The Low Correlations of your After-Tax Labor in Your Net Worth

The conventional model fails to acknowledge the holistic nature of net worth, as defined by our Family Inc. Net Worth concept, which includes the expected after-tax value of labor as the largest asset for most people.

As with the first Family Inc article on career, the conventional model didn’t recognize that your income, bonus, stock options, as well as your CPF contributions are annuity like.

So you have an annuity that decays over time.

The significance Doug feels is that this is a major assets and it is less correlated with the equity markets.

The volatility of your income will depend on whether you are in a bond/ annuity like job like the one I used to be at, or one with a lot of call option like investment banking.

Whichever way, Doug wants us to see our entire net wealth together. And in that picture, maybe you can have a higher equity allocation when you are working.

For example, when Kyith is working now, if the market goes through a 30% draw down, it is very different from when Kyith is NOT working and the market goes through the same draw down.

In the latter case, Kyith will need to spend down the net wealth systematically. When I spend the net wealth, there are less wealth to return to the level before the 30% draw down. This is essentially the negative sequence of return risk.

However, if I am working, I do not have to touch the equity that has gone down in value. I am still spending the cash flow from work income.

Thus, this might be what Doug is talking about.

3. Framing Your Live-in Residence in your Net Wealth

This allocation fails to acknowledge in addition to labor and investment securities, many families own their primary residence, which generally represent their single largest asset other than labor.

It is not just Singaporeans who have a love affair with properties. In US, they do love it enough, more so in the early 2000s and many got burnt by it.

Doug explains that if you look at the live-in residence as part of your portfolio, then if you get a few more, essentially you are concentrating in a single country, single asset class, single sector.

And your net wealth will face tremendous volatility, liquidity risks that some may not have considered.

4. You need to Consider the Leverage Factor in Your Investments with your Other Debts

The allocation model fails to acknowledge the debt that exists in most family balance sheets related to real estate, education and consumption items such as vehicles and credit cards.

As an investments person, Doug does not shy away from using leverage in his investments in a controlled and sound manner.

Here, he points out not to forget understanding how levered you are in your other assets.

Based on the latest survey, Singaporeans do have a fair amount of

1. Mortgage loan
2. Unsecured personal loan
3. Credit card debt
4. Student loans

Before you use leverage as a tool, do view your net wealth holistically.

5. Conventional Planners takes less into consideration CPF

The allocation model does not account for assets a family may have at the time of retirement from Social Security or a defined benefit pension plan, both of which act like bonds.

Doug makes a short comment here in that many planning was done by not considering the social security. In Singapore’s case this will be the CPF.

He does not elaborate much, but I am thinking that a lot of pension system will eventually convert these to an annuity like instruments (CPF Life is an annuity)

Due to the way the annuity is backed, this class of financial asset tends to be bond like, which affects the amount you allocate to equity before you received your pension and when you start drawing down the annuity.

6. Over-allocation to Lower Risk Assets

Asset-allocation models frequently under-estimate how long you will hold the investments before you cash them in, if ever.

Doug thinks that there is an over-emphasis of mechanically de-risking to safer instruments such as bonds.

Again, we are going back to the 100/120 – Age Stock allocation formula.

I think planners use that rule of thumb too much, but that rule of thumb in general have serve the majority of the people well. There is however, an idea that you should increase your stock allocation in retirement to ensure your money last longer.

We came to this conclusion because of more research. This also shows that we cannot just be static and take what we know in the past as forever true.

7. Risk Tolerance need not go down as Our Age Increases

In most traditional asset-allocation models, age is the primary variable that influences risk tolerance – as age increases, risk tolerance decreases.

Doug questions whether our ability to take risk really needs to decrease over time.

He explains his 79 year old dad and his situation.

Doug’s dad is a 79 year old retired educator. He is on a defined benefit pension plan that he paid into for over 50 years, and he funds substantially all his consumption from his pension and Social security.

In addition, he owns multiple homes and real estate holdings, with minimal debt on these property.

His dad accumulates less than 20 percent of his Family Inc Net Worth in stocks, bonds and mutual funds.

Doug’s situation is different.

He has more financial risks in his life:

1. 46 years old so younger
2. Business owner without regular paycheck
3. Income heavily influenced by performance of the business investments. The earnings can fluctuate over 500% between a good year and bad year, with negative cash flow expected in bad years
4. Owns two homes, with mortgages
5. Two kids that will be college eligible in 5 years

Given the normal age profile, Doug should be heavy in stocks, his dad should be heavy in bonds.

However, given this explanation, it would not be wrong to recommend more equity exposure for Doug’s dad and since Doug’s income is so tied to the stock market, his allocation should be more tilted towards lower volatile instrument.

8. The Wealth Effect and How it Disrupts Conventional Asset Allocation

Doug gave a few more examples when the conventional asset allocation breaks down.

A lot of the frailties are seen when the wealth increases.

Doug commented that most family businesses are overallocated toward labor assets.

We cannot often diversify away the labor assets except to deplete them.

The above allocation is when someone holding a conventional bond and stock portfolio considers the non-conventional assets. We observe how little the equity allocation is.

If you are afraid of having too much equity, if we frame things this way, you will realize you have too low of an allocation.

Doug then gives the example of a 67 year old woman who retires with the following profile:

1. No debt
2. $500,000 in cash and short term securities
3. $500,000 in bonds
4. $500,000 in real estate
5. $ 3 million in equities
6. Requires an annual after tax consumption of $150,000 a year

The conventional advice will be to re-allocate a significantly over allocation of equities to bonds.

Doug says this conclusion is wrong because

1. if she keeps this consumption pattern, this woman will never deplete her net worth
2. given her rate of consumption relative to her anticipated asset growth, the expected duration on her investments is actually very long in spite of her age. Re-balancing a significant proportion of equities to bonds robs her of compounding ability
3. the re-balancing is tax inefficient. Bond interest is taxable and capital gains of the equities sold is taxable

I am for one befuddled whether I would agree that this amount will not deplete. In my opinion, Doug is factoring in some really high equity rate they are able to achieve.

Conclusion

I think what Doug talked about is not rocket science.

If you have invested for a while, developed some critical thinking, you will start asking yourself these questions.

Something….. does not feel right about these kind of conventional advice.

There is a reason they are given.

As rule of thumb in investment planning or financial planning they work well for a large mass of people.

However, in order for them to work for you, you need to fully understand portfolio allocation, what is the objective of it, and what you are trying to achieve in financial planning.

With this knowledge, then you can push the boundaries and tailor a plan for yourself.

Financial planning and investment planning are both very personal.

For someone like myself, the situation is very different from conventional. I should have a good plan for myself that is different than you.

For most of you, you would own real estate. You might be 28 years old and your human capital asset annuity present value might be much higher than mine. Your allocation will look very different from me.

Family Inc is a Good Book. You can pick them up in your book store or the library.

My Family Inc Series of Articles are:

1. Viewing Your Career as Investments
2. 8 Weaknesses of Conventional Family Asset Allocation
3. Measures of Family Wealth

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often. You can also choose to subscribe to my content via email below.

Here are My Topical Resources on:

1. Building Your Wealth Foundation – If you know and apply these simple financial concepts, your long term wealth should be pretty well managed. Find out what they are
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free
7. Providend – Where I work doing research. Fee-Only Advisory. No Commissions. Financial Independence Advisers and Retirement Specialists. No charge for first meeting to understand how it works

My colleague Jia Ling is leaving us mainly because she is leaving Singapore for a period of time.

I spent some of my lunch and work time with her and found that her energy, enthusiasm have rubbed off on a lot of us. Not just that, as I need to make sense of the financial planning process, I turned to her a lot.

So now we have a tough job to replace her.

As my readers, I guess you tend to be a more financial savvy bunch. 

1. You understand why we need to manage our money well and managed to create a good wealth foundation for yourself
2. You have started accumulating your wealth
3. You like diving deeper into the topic of wealth management, protection and accumulation
4. You are the resource for your friends whenever the topic of money comes up 
5. You communicate well with your friends, colleagues and present your thoughts and subjects well

Basically, you drank from the same money juice as myself, but you are better with people, and communicate better.

Some of you might see yourself leaving your current job, which you are

1. less enthusiastic about
2. or going nowhere, for a job that matches your interest better. 

If this is the case, then this position might be suitable for you.

The Adviser Associate Role

For those who are not familiar with my firm, Providend is the first fee-only financial advisory firm and possibly still the only one (there are a few fee-based one around though).

We serve high net worth clients by being effective stewards of their wealth, serving with integrity.

Some of the nature of the position:

1. The position is a salaried position
2. You do not need to generate your own leads
3. You will assist the Senior Client Advisers in preparing various financial reports and financial plans for the clients
4. Meet potential clients with Senior Client Advisers
5. To eventually get certified, and work towards becoming a full fledged Client Adviser
6. Our office is in Duxton Hill in Tanjong Pagar

Here are some of the requirements:

1. What I mentioned above at the start (#1 to #6) and like to do that for your career
2. Diploma / Bachelor Degree in Finance & Banking / Commerce / Economics
3. 1 year relevant experience in some ways of financial planning is preferred
4. If you do not have the relevant degree or experience, show us your passion for financial planning and how passionate to do this

If this associate adviser role fits what you are looking for, you can email your cover letter, portfolio and resume to them at [email protected].

You can also email me at [email protected] or Telegram me @kyith to ask questions for more information.

I used to say “I don’t get anything out of this”.

Now, it is I get to work with you!

If you are already a commissioned adviser, with a list of clients, but would like to transitioned to become one on a fee-only framework, you can also contact me directly.

I may be able to put you through to my boss Chris or Evelyn to discuss the nuances whether that is possible at all.

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often. You can also choose to subscribe to my content via email below.

Here are My Topical Resources on:

1. Building Your Wealth Foundation – If you know and apply these simple financial concepts, your long term wealth should be pretty well managed. Find out what they are
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free
7. Providend – Where I work doing research. Fee-Only Advisory. No Commissions. Financial Independence Advisers and Retirement Specialists. No charge for first meeting to understand how it works

Yesterday, OCBC put out what they called the “first time such a comprehensive study of Singaporeans’ state of financial health has been conducted”.

They call it the Financial Wellness Index.

I thought a few companies have done studies like this, but I could be wrong. I do have poor memory at this age.

Nevertheless I do appreciate data like this, especially now that I am in a job that needs to look at things like this.

I wanna see whether there are more interesting data points and the more detailed report (my boss was surprised 37 slides is a detailed report)

Here are some interesting things picked out:

1. Majority of us are still behind in terms of the financial wellness index
2. Our savings rate looks high at 26%
3. 70% have a budget set and stuck to it
4. 18% do not invest yet have passive income (how is this possible?)
5. 52% have passive income
6. 37% of the people do not know how to build wealth
7. 51% on track in funding their emergency fund
8. 20% of those in their 30s spend a large extend above their means to keep up with their peers
9. The debt problem
   1. 18% of Singaporeans are worried not able to pay off unsecured debt
   2. 30% of those with credit holders pay the minimum
   3. 30% of 40 to 54 year old singles have problems paying for the mortgage loans
   4. 20% of 40 to 54 year old married have problem paying mortgage loans

Let us go through it in more detail.

If you take care of your health, what about your wealth?

Based on OCBC’s observation, Singaporeans seem to be taking care of their health. However, they are not sure if they are trying to excel in their wealth or not.

I have also observe this trend. We organize talks in the past. I have been savaging food from buffets as part of my Freegan lifestyle.

And we do know that organizers tend to give less of the good stuff and more of the carbs. However, I think that if Singaporean’s like carbs, they could have taken more of it.

But most of the time, there are just so much left over. I think it is also an increased awareness among Singaporeans they should control their carbs, and thus they are placing more emphasis on their health.

So they decide to create their first OCBC Wellness Index.

OCBC’s financial experts list 10 pillars that help them define how financially well someone is. A lot of pillars are rather new to me.

To a certain extent, it feels like me judging people.

Thought the questions asked was interesting.

The sample of people surveyed was sizable, and spread among a wide spectrum of Singaporeans.

OCBC tries to zoom in on 3 different segments of the population. The most customized was the Sandwiched generation.

This was the generation that on top of taking care of their primary family, they also had to take care of their parents.

Data shows that Most are Behind

Overall on a spectrum of 100 points, Singaporeans scored an average of 63. This is not so good because to be considered on track, they would have to score 75 and above.

In this chart, we can see how these 2000 participants are distributed. There are a good number of people that are doing well, but the majority are deemed behind on most indicators.

And it is good that I do find the distribution skewed to the on track side. (This means that more are getting better instead of getting worse.

We have Good Savings Rate and 70% of Us have a budget

It seems as a cohort the people saved on average 26%.

This looks very good until we wonder does this include the mandatory 20% CPF contribution. If it does than the savings rate from take-home pay is only 6%. Then it is not so good.

82% of the population have gotten medical insurance, but we are not sure whether the coverage is adequate.

I was wowed that 69% set a budget and managed to stick to it!

This is because almost all the people around me:

1. don’t track their expenses (which is different from budgeting)
2. are seldom tough on how much they can scan in a single category. You do not see them reference them breaking their limits. They either have very lax budget limits or that they are failing at this game

Overall, this report shows that Singaporeans are not in a good position.

So if you budget well, then how come there is this dislocation?

A budget (check out my comprehensive budgeting article) when done right, should map your spending close to what you value in life.

So either what they value is really not what they are concerned about, or that they are not doing things right.

One Third of Them do Not Invest

When it comes to investing, 34% do not invest. I expected as much.

OCBC said 48% do not have passive income but I chose to read the opposite.

Does that mean that 52% of the Singapore population DO HAVE passive income? That is pretty good!

Out of the 66% who invest, 36% of them say their investment is not performing to their targets. 27% of the 66% who invest also said their speculators.

So almost 1/3 of investors are under-performing (they think) and are speculators. These 2 groups are not the same.

I think under-performance data might not mean much because most people have a hard time judging what is under-performance. It is likely they mean psychologically, the amount they accumulated is unsatisfactory.

Investing to Us, is still Gambling

33% of Singaporeans think investing is gambling. 37% of Singaporeans don’t know the best way to grow their money.

You can see that the percentage of people who do not know the best way to grow their money is almost similar to the percentage of people who do not invest.

If you do not know what to do, you tend to procrastinate and not do anything about it.

The opinion on investing as a form of gambling is not all surprising as this is what I thought about stock investing before I started in university.

Back then, I have secret thoughts that my friends are going to lose their pants by gambling their money this way.

Now I am gambling my money on a very frequent basis!

Emergency Fund: Half of us are on track to have well funded emergency fund

42% are on track to accumulate enough funds for an emergency. That means 58% is not on track! 51% can stretch their savings to last 6 months.

How much is enough emergency funds? (you can read my comprehensive emergency fund guide here)

The standard is 3 to 6 months.

This is befuddling. If 51% can stretch their savings to last 6 months, then how come only 42% are on track to have enough for one emergency?

Does that mean an emergency to those survey, is of an amount greater than 6 months of their expenses?

The surprising for me was that there are 42% of Singaporeans who know what is an emergency fund!

They probably did not know it, but the question introduce this concept to them. If that is the case, it is not so surprising because Singaporeans tend to be cash heavy.

Retirement Plans: Conflicting Conclusion

Only 27% of Singaporeans are on track for their retirement plans. Most are not.

65% are behind with accumulating enough funds for maintain their lifestyle after retirement.

That means there are 8% who are not on track but are on track to accumulate enough funds to maintain their lifestyle after retirement.

How is this possible?

In general it looks like the participants think they are not ready and do not have enough.

The question is: How do Singaporeans know how much is enough for their retirement?

I have a hard time determining this. So for a long time, my rough retirement goal was really rough. I think for most people, they are likely to have over or under estimate how much they need.

Of Course We are Worried about Money!

Due to these gaps, 40% of us are worried about money the week we surveyed them.

I think the idea of worrying is whether you have enough time to think about money, or that your income to expense ratio is so low that you need to constantly think about budgeting your money on a daily basis.

These participants were given enough free time to think about this subject and I was surprised 60% do not worried about money the week we surveyed them.

This means that

1. Their experiencing self do not worry so much about money
2. Their remembering self do not recall incidents where they worry about money

Women tend to be Less Sophisticated in Building Wealth

In general, women, versus the men, have less investment, less aware of how to build wealth well and no passive income.

I read that probably 60% of Singaporeans have investments, 60% know the best way to grow wealth and 45% have passive income.

This more or less is consistent with the figures presented before this slide.

The Sandwiched Generation

Surprised that only 51% of this sandwiched generation find it tough to support both.

I infer that 50% of Singaporean’s annual household income is pretty well to fund allowances for both children and parents BUT they think they have a problem hitting their retirement targets.

31% of them have unsecured debt (which are usually personal loans, credit card debt.)

29% are investors who speculate excessively for quick gains. This is largely consistent with the gambling mentality data in the investing section.

41% of them worried about money over the previous 7 days.

This is consistent with the previous slide, but it is the way this is worded that got me worried.

If you think about your situation in the past 7 days, it means your financial situation is not so good that it bubbled up to a high point in your priority list.

So they are doing more to get them to a financial stable state.

They are

1. Reviewing their financial plans yearly more
2. Arranged for finances to be taken care of after their death
3. Making sure themselves are able to sustain 6 months if they are jobless

This is befuddling.

How do you come to this conclusion and I wonder how was the questions asked.

If I want to put myself in a better position, I try to put away more money! Period!

The furthest thing on my mind is think about who I leave my money to and reviewing my plans. Yes they are important, but….

This seemed weird in that OCBC recently offered a free will service. Is that why there is this weird conclusion?

Some Worries of the Sandwiched Generation

I think largely they want to show the sandwich generation worry more than normal.

I urge readers to reset your brain to the baseline.

The data for the sandwich is not too far off from the Singapore average. They might worry more but what is important is that

• 26% worry about teaching their children the value of money
• 70% worry about economy not improving next 12 months
• 18% worry about not being on target to pay off unsecured debt

18% of Singaporeans are worried not able to pay off unsecured debt is something to take note.

For the sandwiched generation, 2 problems stands out versus the average:

1. They don’t know the best way to grow their money
2. They are worried about not able to spend comfortably on their basic needs

Married versus Single

OCBC seem to think those married have made more plans for the future.

The data seem to think so.

I guess it is because as a couple, there are more responsibilities. You need to think more. Singles tend to be less conscientious there.

The Financial Wellness Index gets better with Age

OCBC showed some data point on the average financial wellness index score. They tend to get better with age.

It does seem to show that we do not think about money so much when we are younger, so we are behind.

We get better with age. But we are only slightly better.

The interesting data point is on when each cohort wants to retire at and how much

1. 20s: 56 years old and $1 million
2. 30s: 59 years old and $900k
3. 40-55: 62 years old and $800k
4. > 55: 67 years old and $500k

Those that are young wanted to retire early!

But notice those that have their CPF transferred to retirement account (age > 55 years old), they wanted to retire later.

The sum they need also go down.

Those that progress to 30 year old actually think they need less than in their 20s!

Why is that the case?

Shouldn’t they have higher expenses that they should want more retirement savings? Shouldn’t they want to retire early as well?

My inference is that expenses do go up, but they cannot save as much.

So they actually lowered their expectations.

We will see more of this later.

20s: Higher Savings Rate

Younger ladies do show more lack of awareness how to best grow their money. They tend not to invest compared to men as well.

Majority of their investing do not meet their target or below their target. Only a slight handful meet the target.

Again, I find it questionable how Singaporeans judge it.

30s: A Group is Struggling with their Mortgage Loans

In the 30s, we start seeing people with more unsecured debt versus the average. 38% of them is made up of personal loan and credit card debt, but curious what about the rest.

The huge data point is that out of the 51% servicing their mortgage loan, 30% have trouble paying their monthly loans. This means they missed paying on time, able to pay but with some problems, and may be forced to downgrade!

Another Worrying Slide

This slide shows a lot of problems.

What is new to me here is

1. 30% of those with credit holders pay the minimum (!)
2. 20% spend a large extend above their means to keep up with their peers
3. 12% of them borrow money from friends/relatives
4. 17% can only spend on the basic and cannot spend above that

40 to 54:

Here we see that those that is edging every closer to retirement:

• 30% of singles have problems paying for the mortgage loans
• 20% of married have problem paying mortgage loans

This loan situation is a big problem.

Some Average Personal and Household Income for the 40 to 54 year olds

This slide is suppose to show that 1 in 2 have problems supporting both parents and children. This is largely consistent.

What is interest is the income data points:

1. 15 out of 30 person earns average $8,600/mth and as a household earns $12,600/mth
2. 2 out of 30 people struggle to pay for both children and family. Their monthly income is $5,200/mth and as a household $7,700/mth
3. Almost all of them are middle management. Those who did better are in senior management, those who are struggling tend to be office workers

Note the sample is only 30 people. When sample size is small you get some extreme results often.

Just read. I pick up nothing special.

If you do not have enough to meet daily needs, of course you do not think about retirement plans!

Notice that ladies tend to be more into insurance savings plan.

OK that is a wrap!

The interesting thing is OCBC will conduct this research every year, so we can see how the figures change.

Here are some things I find it challenging to resolve:

1. If so many of us budget, how come we are still behind in the financial index?
2. 20% of those with mortgage loans in their 40s and 50s have a problem paying their mortgage loans
3. A household income of $12,000/mth would struggle to meet the modern living needs

I might think deeper about some of the ramifications from this data, but I suspect I cannot trust all the data. It really depends on how the survey was done.

You can check out the slide deck here.

I want to hear which of the data stands out to you.

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1. Building Your Wealth Foundation – If you know and apply these simple financial concepts, your long term wealth should be pretty well managed. Find out what they are
2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
5. Free Stock Portfolio Tracking Google Sheets that many love
6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free
7. Providend – Where I work doing research. Fee-Only Advisory. No Commissions. Financial Independence Advisers and Retirement Specialists. No charge for first meeting to understand how it works