The Current Market Crash Pushed Our Retirement Goal Back By 3 Years, And It Might Get Worse

So the market dived another 8-10% or so yesterday. 

Every retail investors is probably mass selling and taking profit off their positions now.

There were reports that trading firms are overwhelmed and true enough, when I log into Vickers, I couldn’t even connect to my account. This truly is a once is a decade / life time event.

I wouldn’t lie, when the market crashed, it has been emotionally testing – its painful to refresh my app to see the market prices.

So earlier today, I went ahead to do a quick number crunching to see the impact of a further 20% drop of my equities towards my retirement / S$1M goal projection.

Here’s a look at the previous projection with the following assumptions:

  1. US Equity – Monthly Contribution with an overall portfolio growth rate of 8%
  2. SG Equity – Monthly Contribution with an overall portfolio growth rate of 5%
  3. Syfe – Monthly DCA with an overall portfolio growth rate of 5%
  4. Annual EPF and CPF contribution at current level.

According to the earlier projection, excluding our properties and mortgage, we should

  1. Hit a net worth (Equities, Cash, CPF) of S$1M at end 37 years old, or in December 2025
  2. Hit a liquid net worth (Equities, Cash) of S$1M at 42 years old, December 2029.

However, as the market plunged this week, we now have to add new numbers into our projection model. 
What we did was:

  1. Update our projected 2020 numbers by entering current portfolio number
  2. Add a further 20% drawdown to all our current equities position
  3. Stop our US, SG, and Syfe Investment contribution for this year

Based on the 3 new parameters, here’s the updated impact towards the 1M goal.

Based on the table, just by adding a further 20% drawdown on our equity position and stopping our investment this year, our S$1M net worth (ex property and mortgage) goal is pushed back from December 2025 37 years old to December 2026 38 Years old. 

If we exclude CPF (liquid net worth), the impact is even bigger: our S$1M goal is pushed back from December 2029 42 Years old to December 2032 45 years old, a good 3 years goal push back!

Which means now, if everything stay constant, I have to work for another 3 years just because the market crashed.

Of course, while this is bad news, we also acknowledge that the growth rate once the market recovers will hopefully be able to counteract the current decline in our portfolio and hence move our current target back on track. 

This exercise paints a good picture for us to see the impact of the current equity drawdown on our portfolio, and to really reassess our portfolio resilience. 

Currently our cash level is the highest it has been since the past 2 years as we manage to sell some stocks before the second wave of crash. Hence we will be accumulating our war chest and deploy them when situation show more signs of stabilisation. 

I feel like there will be a further 20-30% drawdown in the market because we have yet to see the domino effect of the global virus situation – ie the housing and credit crisis. 

So things will probably get worse, as we also have a significant exposure in properties.

You can also read about our horrible experience not being able to sell our stock via DBS Vickers: Earlier Today I Experienced Every Investor’s Worst Nightmare – Unable To Sell My Stock

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We Care Less About CPF Life’s Rate Of Return, More As A “Forced Savings” For The Compound Interest

Recently Mr Budget received a comment from a reader (thank you! We love reading them!) commenting on the CPF scheme.

Ronald shared his views that I should do a calculation on the CPF Life annuity scheme to see if it is a fair deal before committing so much into CPF, after all CPF contribution is a one way street – once you put in the money, you can only see it more than 25 years later.

That prompted Mr Budget to do some digging. 

Many in the financial space will be familiar with Kyith’s work from Investment Moats, and we are also big fans of his.

Kyith always use data to support his articles, and when we dug deeper into his archive of works, we found that he calculated the returns of CPF Life, which saved us the trouble of doing the calculation ourselves.

In case you are unfamiliar with the CPF Life scheme, at age 55, CPF will automatically create a new Retirement Account (RA) for you. The source of the RA account come from both your OA and SA account. For us, we foresee that we will be able to hit the full retirement sum, which is at S$181,000 now. 

Here’s the internal rate of return Kyith simulated based on the following parameter: Computed in December 2018, at age 55, a total of S$180,000 is transferred to the RA account.


As Kyith rightfully pointed out, the IRR and amount disbursed changed according to the age you pass away. 

For Mr Budget, I foresee I will be able to live until 65 – 70 years old, hence the IRR for the basic plan will be between 3.97% to 4.33%, with me getting back between S$275,112 to S$313,526 from the S$180,000 CPF retirement scheme.

Of course, there are a lot of moving parts in calculating the IRR and amount received as the government will raise the basic retirement sum over time and they might also adjust the payout amount, but at this point we can only hope that Singapore has our best interest in mind, and that we can only plan based on current data.

So the question is, are we happy with the returns? I’d say we are quite happy with the results as it is quite rare for us to be able to find a guaranteed annuity giving this rate of return, especially since we expect our risk profile when we are older to be significantly lower than what we have today.

Of course, knowing the payout only paints part of the picture.

The reason why we actively contribute to the CPF account is also we see this as part of a forced savings so that we can really see compound interest in the works when we are older.

Here’s Mr Budget’s projected CPF with the following parameters: constant CPF contribution from employment as well as annual S$7,000 RSTU scheme, at an annual interest of 3.5% (instead of 4%).

YearAgeStart of Year CPFCPF ContributionCPF InterestEnd of Year CPF
Mr Budget’s CPF Projection

If all things stay constant, Mr Budget should be able to hit S$1,000,000 in his CPF by age 49. That is really quite a lot, and from the table, you will see that every year, the interest received is getting higher and higher, and we earn the magical interest on interest.

To be honest, we have yet to enjoy the benefits of compound interest especially in our current bank account because we are always moving our cash around. Our cash in bank will also be depleted every time we have a new milestone in life.

Hence CPF in a way is really our “forced savings” portion of our portfolio, for us to really see the effects of compound interest. There is probably no other ways we can clearly see this manifested in our lives other than CPF because we tend to move our funds around, and that’s always the case for Mr Budget.

By age 55, after setting aside the basic retirement sum, Mr Budget can also withdraw the rest out for usage. 

We confirmed that we can withdraw the rest of our CPF based on the CPF withdrawal Q&A on the CPF website.

CPF example of withdrawal computation

Of course, this is the idealistic projection because there are many unforeseen things that could happen:

  1. Government might change certain rules with regards to CPF withdrawals or interest rates.
  2. Mr Budget might lose his job or have a pay cut
  3. Mr Budget may need money for his child expenses, hence the annual contribution will be reduced by S$7,000
  4. Mr Budget passes on before 65 years old.

If Mr Budget really passes on before 65 years old, then the S$180,000 would not be worth it. By then, money wouldnt matter anymore to me haha.

So to Mr Budget, the main reason for the annual CPF top up is basically leveraging the CPF to get an annual 4% interest rate so that we can see a compound growth over the next decade and we can enjoy the fruits in the future. The annuity portion of CPF life is really just a small reason why we actively contribute to CPF. 

And hopefully the government don’t introduce big changes to the CPF scheme over the next 30 years! 

Also one last note, this post is not to show off the CPF amount, because the truth is, the same compound interest applies to everyone, and if most people chart their CPF projection, they will most probably get similar graphs.

It’s to share our thinking behind why we contribute regularly and to visualize (in numbers) compound interest in the works. This is also not any investment advise as Mr and Mrs Budget is just 2 regular working PMET trying to make sense of our financials and to plan for the future. 🙂

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Baby Steps For Our Retirement Planning – Regular Top Up Of Our CPF Special Account

One of the many stuffs that Mr and Mrs Budget set out to do this year is to top up our Special Account via the Retirement Sum Topping Up Scheme. 

With the receipts from the wedding angpaos recently, Mr Budget has used the receipts and went ahead to top up S$7,000 to his Special Account.

The reason why I do it earlier in the year is to allow the compounding effect to start earlier this year in order to enjoy the interest rate by end of 2020. Of course, we also stand to claim a personal tax relief of the amount contributed.

Mrs Budget will also be contributing to her CPF SA account in the next few weeks when we do our monthly finance reconciliation. 

With the RSTU done, what’s left for Mr Budget this year is to:

  1. Increase Singapore portfolio to S$110,000 from the current S$80,000 level.
  2. Reduction of annual expenses from current S$95,000 to a more manageable S$60,000, or even lesser since the real mandatory expenses we calculated for last year was at around S$35,000.
  3. Start renovation for Malaysia property and then rent it out for rental income to balance off the monthly mortgage payment. Will have to wait for the TOP for the project.
  4. Monthly consistent S$1,000 contribution to Syfe Roboadvisor.

If you are thinking of topping up your CPF SA account to enjoy the tax relief this year, you should probably do it earlier too. 🙂

Also, Chinese New Year is just less than 2 weeks away, if you have not exchange your new bank notes, you should probably do so soon!

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The Best Personal Finance Decision Mr Budget Made In 2019 – Expenses Tracking

Regular followers of Mr and Mrs Budget will know that we track our expenses monthly.

We have been publishing our monthly expenses since the start of this publication and if you have missed it, here’s our expenses for October, November, and December.

Many might find that tracking expenses is a tedious thing to do, especially you need to log down every single transaction that you spend on a daily basis. Mr Budget, like many many Singaporeans or Malaysians trying to sort out his life, tried to start tracking his finances long time ago, and always failed to keep to the habit. 

I remember my first attempt of daily expenses tracking was in university back in 2010, when I needed to know where I spend my money on. After tracking for a few days, life caught on and I soon stopped tracking because I didn’t understand why I need to track my finances, and told myself that since I have no control over my finances, there was no point in tracking.

After all, every month I would always end up spending everything in my bank account.

I tried again when I first entered the workforce in 2012, but because I was living pay check to pay check, with an entry salary of S$2,400, all of my salary would be used up for my rental payment, school loan payment, and my daily expenses.

To me, there was no point in tracking my expenses too because the entry would be the same – I would spend S$500 on rental, S$500 in school loan payment, S$500 on food, and the rest would either be brought over to next month, or will be spent indulging on entertainment.

It was only in mid 2018 when I finally sit down and told myself that I need to know where my money is going and only with these information can I optimise for my cashflow. 

This was also due to the fact that all financial gurus out there included expenses tracking as one of their mantras – surely all of them cant be wrong?

Here’s the first annual expenses report after I started tracking my expenses:

Expenses CategoryTotalAverage%
Transportation (mrt)$795.04$66.250.83%
Groceries / Home$9,931.37$827.6110.31%
Shopping / Cloths$1,525.40$127.121.58%
Phone Bill$687.20$57.270.71%
Income Tax$1,415.72$117.981.47%
Hair Cut$323.20$26.930.34%
Digital Subs$302.51$25.210.31%
Malaysia Mortgage 1$10,222.20$851.8510.62%
Malaysia Mortgage 2$1,308.91$109.081.36%
Singapore Mortgage & Home Renovation$16,102.11$1,341.8416.72%
Hometown Expenses$1,305.12$108.761.36%
CPF / EPF$8,000.008.31%
Mr Budget 2019 Expenses Table

Looking at Mr Budget’s 2019 annual expenses, the highest expense categories are our current Singapore home related expenses, taking up a 16.72%. This is on the high side as we just moved into our new home this year and incurred a one off renovation and move in expenses. 

This is followed by our wedding expenses, which Mr Budget spent almost S$14,000 on. This is another one off item and the cost is cushioned by a one off receipt in January from our wedding angpao received. 

Another high expenses category is the monthly mortgage payment of Mr Budget’s condo in Malaysia, which will be done soon, earmarked for investment purposes. 

Our home and groceries expenses is also another high expense category as both Mrs Budget and I are still purchasing new stuffs for our home occasionally and we are figuring out our co-living expenses. We foresee this to ease a bit this year in 2020.

Surprisingly, Mr Budget’s food expenses only makes up 5% of his total expenditure in 2019. We will be using this as a barometer to compare against our projected expenses for our retirement planning. 

While the overall expenses is high, eclipsing almost $100,000 of cash outflow in 2019, Mr Budget draw comfort in the fact that the high expenses categories are either one off items or are for asset building purpose.

These are the expenses paid in 2019 for asset building:

Asset Building ExpensesTotal%
Malaysia Mortgage 1$10,222.2010.62%
Malaysia Mortgage 2$1,308.911.36%
Singapore Mortgage & Home Renovation$16,102.1116.72%
CPF / EPF$8,000.008.31%
One Off ExpensesTotal%

Minusing these, the actual day to day expenses such as meals, insurance, commute, groceries et cetera only makes up 32% of my total expenses in 2019.

With these data points, Mr Budget looks forward to comparing them with my 2020 expenses to see if there will be any improvements. I foresee that while bulk of the one off expenses this year will be channeled towards the asset building expenses this year, especially to continue servicing my mortgage responsibilities, we will see an overall reduction in expenses this year. 

For those of you who have not been tracking your cashflow, Mrs Budget and I really encourage you to start doing that. Once you get into a monthly habit of collating your expenses, you will continue to do that to find your spending patterns and with that, you are able to better optimise your personal finance and make data driven decisions. 

Happy tracking! 

Side note, do you track your expenses? What do you use to track them?

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Our Portfolio Is Probably Lacking A Roboadvisor Component – Here’s Why

Earlier last week, after reading our post on the ideal minimum salary range and the thoughts on retirement, Syfe reached out to us to have a chat with us on our financials.

We subsequently agree and met up earlier today. 

If you didn’t know, Syfe is a roboadvisor which adopts a hybrid model – there is the automated monthly investment portion and it is complemented with a human financial advisor.

From a methodology point of view, compared to the other roboadvisors in Singapore, Syfe believes that your investment should be more about managing its risk and if that is properly defined, you are able to see what your potential returns (and subsequently your portfolio allocation) are based on your acceptable risk.

This approach is in line with Mr Budget’s view towards investment – the first step to investing is to know what is your risk profile.

For Mr Budget, I am a rather impatient guy, and has a relatively high risk profile. 

Hence when I first dabbled into investment, my first stocks that I bought were all US stocks. US stocks is probably one of the investment product with the highest risk (daily fluctuation of 1-5%). With an understanding that my investment journey will be at least 10 to 20 years old, I am more focused on building my capital now. 

US stocks also fits me the best because it can provide a decent capital gain in a short period of time (although this can go both ways). I can also accept the higher risk that comes with this.

For other products like ETFs, local REITS et cetera, you can only see the return in 5-10years for the compounding interest to kick in. 

So this forms the fundamentals of my investment strategy: 

  1. For the first 2-3 years, aim for capital gain via higher risk instruments
  2. With the capital gain, invest them into relatively safer instruments such as REITs and subsequently fixed income or bonds.
  3. Rinse and repeat, and at year 5 – 10, I should have built up a strong portfolio of REITs as well as holding on to some of my US stocks which hopefully have become multi baggers by now

For Syfe, the process is largely similar, you identify your risk profile, and then you will be allocated a recommended portfolio based on the maximum drawdown you are able to take. 

So for example, taking the self assessment test on Syfe, my risk profile will be the highest, and I am recommended the high risk portfolio with a potential drawdown of 25%.

This portfolio has a 100% equity allocation.

One of the pointers brought up by Syfe’s head of investments was that, for DIY investors (like us), how often do we beat the index?

More often than not, we can’t, because there are just too much information out there, and that we might miss out on some opportunities because we are caught up with other aspects of life. 

And that is true, if I look at the returns I generated for my portfolio over the past few years, I have not beaten the index at all. So perhaps, our portfolio has been lacking a roboadvisor component which serves as a “professional managed” portion of our overall portfolio.

For a while now, we have been looking to try out roboadvisors, and do monthly regular investments into these platforms and let professionals manage a small portion of our portfolio for us. 

Who knows, with the addition of roboadvisors in our portfolio, our overall portfolio might enjoy higher returns.

The outreach by Syfe is timely since this has been in our mind for a while now, and we will most probably be starting a regular investment into Syfe.

This post is not sponsored, and nor was there at any point did Syfe ask us to help promote the brand, but here are some personal thoughts which I like about Syfe:

  1. Relatively low fees (0.4% – 0.65%) + 0.15% ETF fees, with no withdrawal fees, no trading fees and no entry or exit charges
  2. The investment methodology is in line with my belief
  3. Investment team is definitely more experience than I am
  4. Aggressive portfolio allocation is investment in not just companies that I am similarly following (US high growth equities), but also in other industries I am not familiar in: utilities, consumers, energy etc. Would love to have some exposure to these areas which I am not familiar in.
  5. Access to financial advisors to periodically check in on any gaps that we may have in our financial planning process

To me, the last question I ask myself is, what is the risk for this other than market risk, which I am also exposed to. The biggest risk is that Syfe closes down, and that we will lose all of our capital. But that is minimised by the fact that they are regulated by MAS, and that they have several high profile backers. Hopefully that doesn’t happen.

So for Mr and Mrs Budget, we will most probably start to park a monthly amount to Syfe and use that as our emergency + retirement hybrid fund.

When we start doing that, we will be tracking the monthly investment gain from the portfolio and share it with you guys. 🙂For now, Mr Budget will have to go back to number crunching mode to see how much we can invest and what will the impact be towards our financials projection before committing an amount.

If you are looking to sign up for Syfe, here’s a referral code for you: SRP6X8B8Y

If this referral code, you can get $50 when you invest S$10,000.

Are you investing in any roboadvisors? 

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A Look At Our 2020 Investment Goals

With the new year coming, Mrs Budget and myself have started to plan and budget out our finances for the upcoming new year. 

One of the spreadsheet that we have is that we have a portfolio projection sheet on our personal finance sheet. This is probably one of the most important spreadsheet for us as it serves as a guiding principle as to how much we will have at the end of every year, and with that amount, we are able to plan for our future life milestones.

It looks something like this:

Mr Budget’s portfolio projection

To arrive at this table, what we did was to create individual projection tables for each of our asset classes.

For example, for our Singapore portfolio, every year we project to have a capital injection and gain of S$30,000, along with a 5% dividend yield. With those assumptions, we are able to project our annual future value for our Singapore portfolio. 

We then do the same for our US portfolio along with our CPF funds, and when you add up the individual line items, you will be able to see your projected annual net worth. 

Of course, these are just guidelines and when we do our annual reconciliation, we will see if we can hit the targets which we set out for ourselves. 

So for 2020, what we’ve set as target for ourselves is to:

  1. Capital injection / capital gain of S$30,000 into Mr Budget’s Singapore portfolio, with a 5% dividend yield
  2. Capital injection / capital gain of S$10,000 into Mrs Budget’s Singapore portfolio, with a 5% dividend yield
  3. Capital injection / capital gain of S$20,000 into Mr Budget’s US portfolio
  4. Capital injection / capital gain of S$10,000 into Mrs Budget’s US portfolio
  5. Continue our annual S$7,000 CPF contribution for tax relief and retirement purpose

The sources of these capital injection and our CPF contribution will of course be from our monthly salary. If we follow the plan, we will be able to hit our mid term goal of having a S$300,000 joint equity portfolio by 2021. 

However, as previously noted, for Mr Budget, his cash holdings is a bit on the low side for now, and that for next year, he might just be holding on to his cash and put it into a high yield savings account. 

For Mrs Budget, hopefully we are able to add more quality REITs or Trust as well as US stocks in her portfolio to balance out the portfolio composition.

While we have earmarked a certain % of investment cash ready to be deployed in the new year, whether or not we will hit our portfolio targets will largely depend on whether are there any attractive opportunities in the market.

So what’s our investment goals for 2020?

  1. Keep our eyes peeled for investment opportunities. Here are our criteria:
    • High dividend stocks
    • Companies with increasing yoy annual revenue, profit
    • Companies with net asset > current liabilities + high cash reserves
    • Companies in high growth industries 
  2. Replenish and stock up our cash holdings
  3. Keep our savings rate up since the only big ticket item soon will be when we are ready to have our Budget Baby
  4. Be a more sophisticated investor and to start looking into bonds and individual companies in a deeper level.

With our wedding soon to be over, hopefully we will be able to hit our financial targets we set for ourselves in 2020. 🙂

What are your 2020 investment goals?

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Civil Servant’s 0.1 Month Bonus – What It Means And What Are We Doing About It

So one of the biggest news yesterday was the announcement of the annual bonus for civil servants.

If you have not read it, basically, according to the Public Service Division, most civil servants will get a year-end bonus of 0.1 month this year, with a one-off lump sum payment of S$250 to S$1,500.

Of course, there were a lot of unhappiness aired by Singaporeans, especially those in the civil sector. Mrs Budget is also part of the civil service. 

Is 0.1 month bonus very low? Well yes, if you look at the historical annual bonuses for civil servants over the past few years.

Dr Wealth did a very handy bar graph to help visualise this:


Here’s what the graph show:

  1. 2019 bonus of 0.55 months has been the second lowest payout in the last 14 years.
  2. The lowest payout was in 2009, in the aftermath of the financial crisis, at 0.25. It was the only time in the last 14 years that no mid-year bonus was given.
  3. The highest bonus given is 1.7 months. 
  4. Following a low annual bonus, the year after will usually see at least a 1.5 months of annual bonus (year 2010, 2013, 2017).

According to an internal note to public officers that was made available to the media, Trade and Industry Minister Chan Chun Sing said that the economic performance this year has been weak, and the economic outlook remains uncertain and challenging with downside risks.

What that means is that, going into 2020, economy will continue to be sluggish and with the global trade war still ongoing, things are not going to go up anytime soon.

What Can And Should We Do

So instead of complaining, or after we complain about the decrease in bonus, what we should be doing is to make sure we prepare adequately in case of a recession mid late next year.

For Mr and Mrs Budget, we will be looking to trim down on our monthly expenses, as well as revoking into our financial commitments. This means that we should cut down on food delivery, and cook more often at home. Entertainment cost is also an area we need to cut down on.

Also Read: November 2019 Monthly Expenses Update

Mr Budget also has a high monthly mortgage commitment, and that is something that is constantly weighing him down. So we will have to see if there are ways to go around that. 

Other than relooking our finances and be more prudent, perhaps more importantly, is to make sure that we increase our cash holdings which serves as our war chest to be deployed when there are any stock opportunities. 

Currently for Mr Budget, his cash holdings is a bit on the low side, as most of it is invested out into the market. What he will be doing for the next year is to increase his cash and cash equivalent, and continue to contribute to his CPF.

Based on a simple projection, if he did not put any more stocks and just save up his cash from his salary, by end of next year, his cash holding should be between 30% – 35%. His pension fund should swell to 38%. 

Note to self: Please don’t buy anymore stocks in 2020 unless they are absolutely attractive. 

For Mrs Budget, she is currently overweight in her CPF, with half of her current net worth (minus properties) consisting of her CPF. What she will be doing next year is to continue to pile up on the cash and can be slightly more aggressive in scouting for investments to spread out her portfolio more. 

Based on a simple projection, if she buy S$6000 of stocks and save the rest of her salary, by end of next year, her cash holding should be around 30%, while maintaining a 48% CPF portfolio and a 12% SG stock portfolio.

Hopefully we can stay on this path towards increasing our cash % holding. 

For those getting more than 0.1 month of bonus, please save up, because winter might be coming! The government usually knows more than we do!

If you are in the private sector, how much bonus are you expecting to receive?

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