Investment Moats

Singapore Savings Bonds SSB February 2020 Issue Yields 1.75% for 10 Year and 1.54% for 1 Year

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Here is a higher yielding, safe way to save your money that you have no idea when you will need to use it, or your emergency fund.

The February 2020’s SSB bonds yield an interest rate of 1.75%/yr for the next 10 years. You can apply through ATM or Internet Banking via the three banks (UOB,OCBC, DBS)

However, if you only hold the SSB bonds for 1 year, with 2 semi-annual payments, your interest rate is 1.54%/yr.

$10,000 will grow to $11,772 in 10 years.

This bond is backed by the Singapore Government and its available to Singaporeans.

A single person can own not more than SG$200,000 worth of Singapore Savings Bonds. You can also use your Supplementary Retirement Scheme (SRS) account to purchase.

You can find out more information about the SSB here.

Note that every month, there will be a new issue you can subscribe to via ATM. The 1 to 10-year yield you will get will differ from this month’s ladder as shown above.

Last month’s bond yields 1.76%/yr for 10 years and 1.52%/yr for 1 year.

Here is the current historical SSB 10 Year Yield Curve with the 1 Year Yield Curve since Oct 2015 when SSB was started (Click on the chart, move over the line to see the actual yield for that month):

The Application and Redemption Schedule

You will apply for the bonds through the month. At the end of the month, you will know how much of the bond you applied was successful.

Here is the schedule for application and redemption if you wish to sell:

Click to see larger schedule

You have 02 to about 25th of the month (technically the 4th day from the last working day of the month) to apply or decide to redeem the SSB that you wish to redeem.

Your bond will be in your CDP on the 1st of the next month. You will see your cash in your bank account linked to your CDP account on the 1st of next month.

How does the Singapore Savings Bonds Compare versus SGS Bonds versus Singapore Treasury Bills?

Singapore savings bonds, is like a “unit trust” or a “fund” of SGS Bonds.

But what is the difference between you buying SGS Bonds and its sister the T-Bills directly?

Both the SGS Bonds and T-Bills are also issued by the Government and are AAA rated.

Here is an MAS detailed comparison of the three:

SGS Bonds versus Singapore T-bills versus Singapore Savings Bonds
Click to see bigger comparison table

What is this Singapore Savings Bonds? Read my past write-ups:

  1. This Singapore Savings Bonds: Liquidity, Higher Returns and Government Backing. Dream?
  2. More details of the Singapore Savings Bond. Looks like my Emergency Funds now
  3. Singapore Savings Bonds Max Holding Limit is $200,000 for now. Apply via DBS, OCBC, UOB ATM
  4. Singapore Savings Bonds’ Inflation Protection Abilities
  5. Some instructions on how to apply for the Singapore Savings Bonds

Past Issues of SSB and their Rates:

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.

I break down my resources according to these topics:

  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

Changes to the Bonus Interest of DBS Multiplier. 1 Good 2 Bad

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On the first day of 2020 and I have already got my first negative news.

Last year May 2019, I wrote about how you can have greater interest in more of your savings if you fulfill one additional criteria for your DBS Multiplier Account. (Read Why I continue to save with the Boosted DBS Multiplier)

It seems there is some bad news on the horizon, at least for myself.

So here are the changes to DBS Multiplier

Changes to the DBS Multiplier Account

Update: There were some clarifications done on DBS’s Facebook Group the Burrow. I will paste the clarifications here:

If I were to convert to English, it means that dividends from your local stocks, bonds, and Singapore Savings Bonds held in your CDP will be under the income category now.

The second thing is that if you have only fulfilled the salary credit plus 1 category of transactions, the interest is applied on only $25,000 instead of $50,000.

If you manage to satisfy 2 spending category and above, the bonus interest is applied on $50,000 still.

To make it easy, you read what I have written against this infographic in the last article.

DBS Multiplier Bonus Interest Rate 3
Ignore the “This is New”. That was in May 2019 and not valid anymore.

Here is Roughly the Impact

  1. If you just satisfy the minimum of salary credit and 1 more category of transactions, the amount you can earn interest on is halved. This is NOT GOOD.
  2. For those that previously do not qualify for salary credit, the interest from your Singapore Savings Bond Ladder (refer to my past DBS Multiplier article) or if you have consistent almost monthly dividend income, DBS Multiplier is unlocked for you. This is because, at the minimum, you have to credit salary into any DBS/POSB account. The dividends/interest income now qualifies on top of your work income. This is GOOD.
  3. If you qualify for the current Investment category because you get consistent monthly dividend income or do the Singapore Savings Bond Ladder, you lost one category. You will qualify for Investment if you purchase their product. This is NOT GOOD.
  4. Your effective interest might be reduced. This is a bit vague because they did not say what happens if you satisfy salary credit + more than 1 category of transaction? Do you earn a different bonus interest on the first $25,000 and the next $25,000 or the same bonus interest on $50,000?

There is some good news for you, and yet for some, this is not good news.

If you have a home loan mortgage with DBS, insurance or investment, plus credit card spend with them but do not have salary credit, you could have a way to engineer the income with the Singapore Savings Bond ladder.

You can now earn higher interest on $25,000 to $100,000 of your money.

However, if you are like me, who qualifies for the Investment category due to dividends and interest income, you just lost one category. This means that DBS Multiplier will still work but the interest is applied only on $50,000 instead of $100,000.

My sensing is that this move would push me to try and qualify for one more category that is tougher.

These categories would either be home loans, investment (the Manulife products kind) and insurance (the Manulife products kind). It pushes us to their higher-value products.

If this is too much for you, its time to look for some alternatives. Personally I am disappointed with the change in my situation and the timing of it.

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.

I break down my resources according to these topics:

  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 Annual Spending for 2019: $23,186 a Year

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Every year, I will review how much I spend for the year.

I will carry on the tradition for this year.

There is a difference between budgeting and tracking your expenses. Tracking your expenses tell a person or an entity what they spend in the past. If you do not review it and have no aim for it, then tracking your expenses does not do much.

Thus, tracking your expenses serves more to be conscious about the past so that you can set some goals, form some good habits to change your spending pattern along the way.

To effectively plan for your financial independence, you would need to know how much you spend.

Many find it a chore to track their expenses. It is an indication they probably value their time now more than having some money security. What is conscious gets managed.

It is also normal for your expenses to go up and down. And that is normal. As you track it through the years, you will have a better sensing of what expenses that your family definitely cannot lift without, cannot reduce and what are the expenses you are spending extravagantly.

Given the choice, you could cut them down. Or you have tried but you could not.

Here are My Past Expenses Reviews

It’s pretty surreal that I managed to have a 6-year record of this stuff.

Here are my past write-ups:

You can see a progressive trend where the expenses gets lower and lower. Would this year be any surprise? Let us see.

Expenses Rose Back to 2014 High

Click to view larger table

Like the past years, I have tabulated my expenses month by month, in various broad categories in the table above.

The expenses were separated either my Mandatory Expenses or Rich Life Expenses. Most of the time, I cannot reduce the mandatory expenses. They are needed for the household and myself to function well.

The Rich Life expenses are good to have. I could go crazy in certain years but by right, I should be able to cut them when I need to.

This year’s expenses come up to $23,186 a year.

This will rank as the third-highest annual expense in the past six years.

Click to see larger pie chart

If we were to break down the average expenses to a monthly amount, it will look like this. The bigger categories are food for the family, mortgage, insurance, taxes.

This year gifting has become rather substantial.

In the change in expenses chart above, we can observe better the change in each category versus the spending in the category last year.

I think I am not comfortable with higher gifting and entertainment expenses but it is something I would need to get used to. You cannot bring all the money to the grave. If you have the ability, learn how to spread the money around to bring more joy to the others. If not why they fx#k do you go through all the trouble accumulating so much?

I see taxes as a result of earning more. If I earn less then I pay less taxes. Taxes are a bigger issue if you work so much, suffer so much dread, and you get a much-reduced share of your salary. In that scenario, you actually paid out more to the government than yourself.

Transport went down because there were fewer emergencies that require me to take a taxi and that Providend’s office needs less bus transits.

I cannot believe I could reduce my grocery bill even lower. Perhaps, this is because my dad and I ate less this year.

The washing machine gave way this year. I change it to a 9KG Samsung WA90F5S5QWA washing machine for $480 to replace the old one. I heard the washing machine today do not last very long. Then again, I heard the same thing when we bought the old one a long time ago. I do expect that this machine last me 3 years. That will be an annual cost of $160.

Due to wear and tear, I do think that we need a sinking fund for our household furnishings. We need to contribute to it consistently annually.

Here is how each category of expenses transition over the years:

Click to see a larger image

Inflation Trend During This Period

We always project a 2 to 3% inflation in our retirement planning. In the past few years, inflation and growth have been rather low. It seems like we might have buffer too much in our financial planning on first glance.

In Singapore, you can have 3 different kind of inflation measurement:

  1. Consumer Price Index – All In. We have data dating back to 1961
  2. Consumer Price Index – Less Accommodation. We have data going back to 1990
  3. MAS Core Inflation. This measurement-do not factor in private vehicle prices and residential housing prices

For a person that has less housing costs and private transport cost, The MAS Core Inflation is the most suitable measurement.

The chart above shows all three of these measurements between 2014 and 2019. Inflation is rather low during this period.

MAS Core Inflation is the highest at 1.21% a year, follow by CPI less Accommodation at 0.87% a year with the CPI-All In be at 0.25% a year.

I have always said that you have your own inflation rate which may be very different from the general public. In this case, taking out accommodation, perhaps it shows very well that daily food, services cost have gone up.

This year, my annual expenses are up 17% versus last year. You could say… my expenses are higher than inflation.

However, if we look at it from a higher level, what impacted my spending was more of conscious and unconscious spending through the years.

In most categories, my spending does not just go up by inflation. In various categories, it does go down and for some, it went up massively.

I think that maybe a challenge in retirement planning for retirees. Most would plan with a fixed set of expenses, thinking their expenses won’t change much through the years.

In reality, our expenses will just fluctuate. Could we keep to a fix $2000 a month schedule? I think that will be challenging.

How this Annual Expense Affects Financial Security and Financial Independence

If you have a sensing of your expenses, you can take the first steps to knowing what is your financial security or independence number.

In my past reports, I have always compute this.

Including Some Rich Life Expenses into Financial Security Expenses

For this year, I reviewed my spending and I decide to add more expenses in some categories to the annual expenses that I estimate I would need to be financially secure.

The main reason is that while I can survive on the bare minimum, that might not be something that I can do for a long time. It would not be psychologically in the modern-day not to have some rich life living that you are comfortable with.

You do not need everything or the highest grade of eating out, but even some form of eating out, some lower grade of entertainment can do your morale a world of good.

Reviewing How Much I need for Financial Independence and Financial Security

In the following table, it shows the amount of wealth in my portfolio if I were to generate a stream of cash flow to replace my expenses, or a stream of cash flow so that I can be financially independent or secure in 2018:

2018 Portfolio Required to Replace Current Income and be Financially Independent or Secure

This is this year’s figures (2019):

2019 Portfolio Required to Replace Current Income and be Financially Independent or Secure

Instead of $564,956, I need $662,457 this year, which is almost $100,000 more! The price to pay for my “indiscipline”!

The wealth required to spend at 3.5% initial withdrawal rate is higher to secure my financial security and independence as well. However, they are much in control at roughly $50,000 to $60,000 higher.

It is quite interesting that back in 2016 when I first start going down this rabbit hole to figure out the financial independence number, my net wealth was around $556,000. That figure still looks quite functional for financial security and independence today.

Your Expenses is Going to Fluctuate and then it Should Crossover

The journey to financial independence should be somewhat like this:

FI: When Cash Flow from Portfolio cross over your Annual Expenses
  1. You may not have reached it, and your expenses will fluctuate
  2. If you work on it, your expenses will maintain, or come down
  3. If you earn more, your accumulation will be better
  4. Your expenses and your net worth will be volatile but if you do everything correctly, they should trend upwards
  5. One day, the cash flow from your wealth will cross over to higher than your expenses.

Would Recurring Expenses Be a Significant Metric?

Being in the financial planning space, I am constantly interested if there are some metric that is important enough to add to what we will review with clients on a consistent basis.

One friend of ours over at my Financial Independence Telegram group shared with us financial tracking. And it is damn comprehensive.

But what stuck to my mind was the metrics that involve recurring expenses:

  1. Passive income / Recurring expenses: How many times
  2. Net wealth / Recurring expenses: How many years
  3. Cash and Equivalents / Recurring expenses: How many years

I am leaning towards how useful this metric is but I will not write much on this as it will make this post really long.

What is recurring versus my total expenses.

For some of you, you might be wondering what is considered recurring. I removed rich food/entertainment, gifts, and hobbies.

The way to determine this is to wargame in your head in what circumstances you will need to know your recurring expenses. That will be when things go to shit. For those with families, I believe you cannot cut all these to zero.

For the rest in Mandatory, you cannot really cut down. I could cut my mortgage and some insurance because there is a limited duration to them, and I could pay them off or set aside a lump sum for them.

This result in my recurring to me $9760 a year. I could then paste this next to my liquid net wealth and see how many years is that.

I think this is a hard and fast rule to determine how secure you are when things go to shit. This is pretty close to having financial security.

If you have 5 to 10 years of your recurring expenses, that is pretty good.

Helpful Articles on Tracking Expenses and Budgeting

In the past, I have written some pretty useful articles on budgeting and tracking expenses. It might prove useful to you.

Here they are:

  1. The Complete Personal Budgeting Guide
  2. Don’t Track Your Expenses or Budget First. Track Your Net Worth First Instead
  3. How to budget with envelope budgeting to save money easily
  4. Some More Advanced Personal Cash Flow Management
  5. How to Manage your Investment Portfolio with YNAB or Financier.io
  6. You don’t really need to budget but…..

Summary

My current tracking application is You Need a Budget 4 or YNAB4 for short. It looks like support for this older version of YNAB is going to end someday.

This means that I have to find a good alternative application that does almost the same thing to replace this.

I am still on the fence whether it is worth it to spend like $50 to $80 USD to keep track of my expenses. I will definitely need a way to track my expenses, but it is not a deal-breaker.

Right now, I have historical expenses spread between a Quicken file, a Financier.io file and YNAB file.

I stared at my monthly financial security expenses $1,190 a month for a while. This is up from $990 a month last year. It is still a very low sum in my opinion. This is after factoring in taking out some insurance premium payment, taxes, paying off mortgage.

The difference is almost $650 a month.

I tried to work out a friend’s financial security figure and for her, it is about $750 a month. When you discount housing and some meals, the minimum sum that you need to keep life going can be rather low.

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.

I break down my resources according to these topics:

  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

Singapore Savings Bonds SSB January 2020 Issue Yields 1.76% for 10 Year and 1.52% for 1 Year

by 2 Comments

Here is a higher yielding, safe way to save your money that you have no idea when you will need to use it, or your emergency fund.

The January 2020’s SSB bonds yield an interest rate of 1.76%/yr for the next 10 years. You can apply through ATM or Internet Banking via the three banks (UOB,OCBC, DBS)

However, if you only hold the SSB bonds for 1 year, with 2 semi-annual payments, your interest rate is 1.52%/yr.

$10,000 will grow to $11,772 in 10 years.

This bond is backed by the Singapore Government and its available to Singaporeans.

A single person can own not more than SG$200,000 worth of Singapore Savings Bonds. You can also use your Supplementary Retirement Scheme (SRS) account to purchase.

You can find out more information about the SSB here.

Note that every month, there will be a new issue you can subscribe to via ATM. The 1 to 10 year yield you will get will differ from this month’s ladder as shown above.

Last month’s bond yields 1.71%/yr for 10 years and 1.56%/yr for 1 year.

Here is the current historical SSB 10 Year Yield Curve with the 1 Year Yield Curve since Oct 2015 when SSB was started (Click on the chart, move over the line to see the actual yield for that month):

The Application and Redemption Schedule

You will apply for the bonds through the month. At the end of the month, you will know how much of the bond you applied was successful.

Here is the schedule for application and redemption if you wish to sell:

Click to see larger schedule

You have 02 to about 25th of the month (technically the 4th day from the last working day of the month) to apply or decide to redeem the SSB that you wish to redeem.

Your bond will be in your CDP on the 1st of the next month. You will see your cash in your bank account linked to your CDP account on the 1st of next month.

How does the Singapore Savings Bonds Compare versus SGS Bonds versus Singapore Treasury Bills?

Singapore savings bonds, is like a “unit trust” or a “fund” of SGS Bonds.

But what is the difference between you buying SGS Bonds and its sister the T-Bills directly?

Both the SGS Bonds and T-Bills are also issued by the Government and are AAA rated.

Here is an MAS detailed comparison of the three:

SGS Bonds versus Singapore T-bills versus Singapore Savings Bonds
Click to see bigger comparison table

What is this Singapore Savings Bonds? Read my past write ups:

  1. This Singapore Savings Bonds: Liquidity, Higher Returns and Government Backing. Dream?
  2. More details of the Singapore Savings Bond. Looks like my Emergency Funds now
  3. Singapore Savings Bonds Max Holding Limit is $200,000 for now. Apply via DBS, OCBC, UOB ATM
  4. Singapore Savings Bonds’ Inflation Protection Abilities
  5. Some instructions how to apply for the Singapore Savings Bonds

Past Issues of SSB and their Rates:

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.

I break down my resources according to these topics:

  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