Budgeting 101 - Tips & Tricks to begin!

Hey Everyone,

It's definitely been a while! I have been caught up with some school-related matters and hence it took me a while to write up this post. Anyways, polling day just passed and as a first-time voter there was a sense of nervousness and excitement as I placed my vote. Nevertheless, I hope all of you managed to use this long weekend to take a good break and recharge!

I want to share a little bit about budgeting in this post. I would say that budgeting is the single most important aspect of personal finance management. A simple example to elaborate the importance of budgeting: Person A earns a salary of $8000 a month, but spends $7000 monthly. Person B earns a monthly salary of $3000, and has a monthly spending of $1500. Even though  B earns less than half of A's salary, he has more left in his bank account at the end of the month, to be either kept as savings or put into different investments. That is the power of budgeting.

The first step to budgeting is for one to understand where their money is going to. I strongly recommend that you take down every single single cent that you spend for at least one month, before budgeting, to get a clearer picture of your spending habits. Without this step, I find it hard to create a budgeting strategy as I would have no benchmark to gauge by, and no way to understand where I'm overspending in. 

In order to track your spending, I would recommend either getting a money-tracking app on your phone, which would make it much tracking much more convenient, or setting up your own tracking list either on Microsoft Excel or Google Sheets (there are plenty of guides for this available on Youtube!). Personally, I use a Google Sheet as my main tracker as I found it difficult to keep up a habit tracking using mobile app, for one reason or another. Ideally though, both works fine, as long as you manage to achieve the objective of tracking your spending.

Once you've got that part down, you can then plan for your 'budget cuts' accordingly. I personally like to break down my budgets into several smaller parts, such as 'food', 'transport', 'essentials' etc. I will then find out if I am overspending in any of these categories, and try to cut down accordingly on unnecessary splurges. This includes taxi rides and food deliveries, which I often found to be the biggest budget killers for me (I really do need to be managing my time better....). One thing I would advise based on my past experiences though, is to be gradual and patient with your budget cuts. If done too abruptly and harshly, you could lose interest as you keep missing your own budget cuts. By cutting your spending gradually, you allow yourself to build confidence in your own finance management along the way, and cultivate healthy spending habits. 

Another advise I have is to be frugal 'healthily', in the sense that one should not completely obliterate any form of enjoyment from your budget. It is important to understand that it is completely healthy for one to let loose every once in a while, and it is important for you to continue pursuing your hobby, but you just need to do so in a financially responsible manner. I never turn down a good night out with my friends if my budget allows for it!

Importantly, budgeting should not be seen as sacrificing your own happiness for financial gains, but seen as a process for you enjoy in a responsible and healthy manner. There are many models out there for budgeting (such as the 50/30/20 rule; look it up!), but ultimately you should tweak each model carefully to suit your own situation and needs. It is definitely not easy to start as I myself still find it an hassle to have to record every transaction that I make, but believe me, that little bit of sacrifice can go a long way and nowadays I am recording them subconsciously... 

Stay safe and healthy,

T

US ETF Portfolio Update - June 2020

Hello everyone,

As the US market closes for the weekend one day earlier to commemorate Independence Day, I thought I will do an  update on the US ETF Portfolio that I started last month. With a better than expected jobs report out on Thursday, the portfolio saw some nice gains overall. Also, I decided to increase the proportion of VOO in the portfolio and hence bought another share of it at the same price.

ETF	Quantity	Total Cost	Market Value
VOO	2	562.00	573.62
VHT	1	195.00	195.65
XLP	4	239.16	237.12
XLK	2	196.00	210.54
ARKK	3	199.27	224.82
Total		1391.43	1441.75
		Gain	3.62%

Only the consumer staples (XLP) is seeing a slight red. XLP, XLK and VOO also paid dividends in the month of June. I did not take into account the dividends into my calculation as my focus for this portfolio is not dividends. I am happy with the overall performance of this portfolio, with an unrealised 3.62% gain in just a month. I look to average my cost price down should the market see a slight pullback. 

Till then,

P

3 Financial Tips in Preparation for University

Hey guys,

Hope everyone is still healthy and socialising with certain measures in place! Though the weather hasn't been the best recently, I was glad to be able to catch glimpses of the outdoor sun and breathe some fresh air! Anyways, as I begin my preparations for my University life, I thought I would share some tips that I received from my seniors as well as information obtained from hours of research on the net. These tips are rather related to a proper management of my finances.

The first tip I would like to share is to scout around for good textbook deals. Throughout your 4 years in University, there will inevitably be some modules that you would need textbooks for, either at your lecturer's request or for ease of studying. Instead of buying the textbooks directly from the bookstore (which often comes at a hefty price), you should consider either purchasing from your seniors, or from online platforms such as Carousell. Another tip would be to double check with your lecturers if you actually need the latest edition of the textbook, as older editions of the textbooks could be available at much lower prices. Furthermore, you can always sell them to your junior after you are done with them. You help to play a part in conserving the environment too! If you are planning to sell it, you should keep the books clean as much as possible. 

Secondly, I was recommended that you should be willing to spend a little bit more, to get a good quality laptop that could last you throughout your university life. Your laptop will be the device that you spend the most hours working with as a student, be it to attend lectures, prepare for presentations or to write your research papers. The laptop will most likely be on for more than half the day. Having a good quality laptop thus saves you from the worry of it breaking down on you right before your submission deadlines, or the need for you to purchase and switch to another new laptop(in the case of a breakdown) in the midst of your academic semester. By being willing to spend a little more on your laptop, you could be giving yourself a peace of mind. Taking a $2000 laptop in consideration, it only costs $500 a year to use it. There are installment plans provided at some retailers at 0% interest. Personally, I would rather spend more on a good laptop than to spend TWICE to get 2 laptops in the event the first one breaks down.

The last tip is one with a rather longer horizon. I challenge all of you who are entering university or in university to set a financial goal that you would want to achieve at the end of your university life. Everyone's goal is relative to our lifestyles and habits, but I believe it is important that we give ourselves a comfortable sum of savings to kickstart our career with. The source of savings can come from many places, such as allowances, internship and part time jobs. In addition, you should then break it down into smaller, annual goals, that you can review at the end of each year. To take it one step further, this amount do not have to be cash sitting in the bank, it can already be put into investments, reaping the power of compounding. I will also be setting such goals for myself, and reviewing them periodically on this blog to keep myself on track on my progress. 

Our time in university is often the last gate that we will step through before reaching the stage of adulthood, hence we should take this opportunity to develop healthy financial habits, especially since we will be managing our own salaries after we graduate. University may be the last chance for us to have fun as students, but it is important for us to also remember to set and achieve some personal goals!

Stay safe,

T

Is it a good time to buy? - Elevator Pitch on TSMC

Hello everyone,

I hope everyone spent some time catching up with friends and families in small groups with the phase 2 reopening. As the stock market is still relatively uncertain about the direction it wants to go, I rather adopt the mentality of looking at companies that I do not minding holding for a long term, probably 5-10 years. I have decided to look at Taiwan Semiconductor Manufacturing Company Limited (TSMC) (NYSE: TSM) (TWSE: 2330), and will share 3 main fundamental points that I think will propel this company forward.

Background: Established in 1987 and headquartered in Hsinchu Science Park, Taiwan, TSMC pioneered the pure-play foundry business model by focusing solely on manufacturing customers' products. By choosing not to design, manufacture or market any semiconductor products under its own name, the Company ensures that it never competes directly with its customers.

Notable clients: Apple, AMD, Nvidia, Qualcomm, Sony, (Huawei)

Leading Edge Technology

TSMC has set plans for a very sound logic node progression. As of now, TSMC have started the production for 5nm chips and plans are in place to ramp up the production capacity. In terms of the chips advancements, TSMC has also started to assemble a R&D specially for the development of the 3nm chips. I like this move a lot as it shows that the management has lots of hindsight and do not forgo the future development just because the current clients do not demand it. In terms of its competitors wise, the main competitor would be Samsung who also has acquired the expertise for 5nm production. The rest of its competitors are rather back dated due to the fact that the capital expenditure for developing the chips are extremely high, going into billions of dollars. Another competitor, Global Foundries abandoned its 7nm efforts due to the sheer complexity and costs involved. I see a first mover advantage here for TSMC.

Dominant Market Position

TSMC runs on a pure-play foundry business model, which means that they do not have any semiconductor products under its name. Because of this, clients are more willing to engage TSMC. For instance, it is unlikely for Apple to approach Samsung to manufacture its chips as they are direct competitors in the smartphones industry. Hence, there is really no clear or direct competitors that TSMC needs to be wary of as of now. Barriers to entry is also high given the high CAPEX.

Seen below, TSMC has been in a dominant position in the industry, with more than half of the market share.

                Market share in 2019 (%)

It might be worthy to note that one of TSMC's key clients was Huawei in 2019. However, with the ongoing trade war between China and USA, TSMC have since stopped taking orders from Huawei. Huawei made up about 10-15% of TSMC's revenue in FY2019.

Yet, I do not have much worries about this. Recent news have seen Apple's desire to cut orders from Intel for its Mac chips and to start designing its own chips. Reports have stated that the chips will be manufactured by TSMC, and are said to be more advanced than the current chips provided by Intel. You can refer to this link for more information.

https://fortune.com/2020/06/22/taiwan-semiconductors-apple-contract-huawei/

The only worry I then have is that TSMC might be overly reliant on Apple and its performance. But I do see a very high potential for it to tap on Apple's growth.

Speaking of Intel, the shortage of CPUs supplies by Intel have given AMD a chance to acquire market share in the industry. I see the partnership between AMD and TSMC to significantly benefit the latter as AMD continues to ramp up its production to meet the demand that Intel failed to meet.

Incoming Gaming Cycle

With the ongoing pandemic, stay home entertainment such as gaming has been on the rise. Nvidia, one of TSMC's clients will launch their 7nm GPUs this year. They have also locked down TSMC's capacity for 5nm production in 2021. 

Furthermore, the highly raved and anticipated launch of PS5 has also been confirmed by Sony. PS5 will be utilising the 7nm chips from TSMC. It has been 7 years since the PS4 was launched and I believe that demand for PS5 will be extremely high at the launch.

Perhaps only drawback here is the rise of mobile phone gaming, which will result in lower than expected demand in this aspect. 

On a final note, TSMC's production line has not been as badly affected by the pandemic as its closest competitor, Samsung. The former's manufacturing plants in Taiwan did not face any stringent regulations while Samsung's plants in South Korea met with lock down orders. There are also news of an incoming second wave of infection that might further hinder Samsung's plans to resume production. We might see some clients shift here should Samsung failed to meet the orders.

I might do a financial highlights review of TSMC, but for now, I continue to keep it in my watchlist. I have no holdings in TSMC as of now. 

Stay safe and healthy,

P

A review of DBS's Invest-Saver!

Hey all readers out there,

hope you guys have been staying safe out there! As Singapore enters the much awaited Phase 2 of our post-circuit breaker life, it is important for us to remember that Covid-19 is still out there, and to take the necessary precautions when heading out! Anyways, in today's post, I will be talking more about DBS's Invest-Saver plan that I used to start investing when I first started to take proper care of my personal finances.

DBS's Invest-Saver plan is a Regular Savings Plan(RSP) that allows you to invest a fixed sum monthly, into your choice of Exchange Traded Funds (ETFs) or Unit Trusts (UTs) (The list of ETFs and UTs available for the RSP is on DBS's website). It allows you to start with as little as $100 per month (which was what I started with!) and only charges a mere 0.5% - 0.82% of sales charge. This makes the plan really suitable for those who are interested to start investing, but do not really have the know-how yet, as this plan allows you to start with a relatively small amount, and does not require a CDP account, thus making it less complicated. It is important to note that you do have to be at 18 years of age to start this plan though.

The Invest-Saver could also be interesting for those of you looking for a way to practice some discipline in your savings. When I first started managing my own finances, this plan really helped me in building my savings as the money was automatically deducted from my bank account on the 15th of every month, and I wasn't able to use it even if I start running low on cash towards the end of month, and hence I learnt to work my spending around this constraint every month. 

Creating and using the Invest-Saver offered by DBS was a seamless experience for me. Starting the Invest-Saver was really easy, taking only a few clicks on DBS's website to set-up. Also, in case you're worried that you might lose track of your investments since you are investing on a monthly basis, DBS allows you to look up your investments on their website easily. Once you log-in, you are able to look up your average investment price, the last known indicative price of the fund and your unrealized profit/loss. This allows you to assess how your investments are doing anytime, anywhere conveniently, which I felt was a really neat feature from DBS. 

To my knowledge, there are other RSPs offered by the other banks out there as well. However, the costs they charge may defer and there are already websites out there that have done the comparisons, and hence I encourage you to do your own due diligence.

In all, the combination of a low-starting cost and low fees makes DBS's RSP Invest-Saver an excellent savings plan suitable for most youths out there who are looking to start their investing journey somewhere. However, I think it is important for the youths who are looking to start this plan to have a healthy amount of savings set aside before starting on this RSP, since after all this is a form of investment which ultimately carries a certain amount of risk. Hence, it wouldn't be the financially sound decision to put all of your eggs in this basket (or in any basket, to be fair).

Stay safe and healthy,

T

Finally picked this stock up!

Hi everyone,

It is finally phase 2!! We are one step nearer to full recovery hopefully. But this week, due to uncertainties regarding a second wave of coronavirus hitting the world, the markets saw a slight pull back. I took the opportunity to purchase a stock that I have placed in my watchlist for quite some time: Chip Eng Seng (SGX:C29) at 55 cents per share.

Chip Eng Seng Corporation Ltd (CES) is a construction and property group. Notably, CES was the main contractor for HDB's Pinnacle @ Duxton, the only public housing in the CBD area. Another notable one is perhaps Bishan Loft. In March 2020, they secured a $98.7m contract with HDB for building works at Tampines, lasting around 30 months. As Singapore start to ease the restrictions again, the construction industry will also be allowed to resume operations. Following so, housing needs and property development will start to gain traction as well. 

CES has been paying a solid 4 cents per share in dividends for the past 10 years. That translates to a dividend yield of 7.27% for me! From the annual report, CES takes pride in their ability to maintain the dividend payout. Financials wise, I do not foresee any significant cut in their dividends policy. The company's EPS is consistently more than 5 cents. 

My main motive of purchasing this stock is to enjoy the dividends payout. I particularly like the fact that they are paying a fairly modest payout ratio. Maintaining at 4 cents per share every year allows them to draw on previous years' retained earnings should they not perform well in the year. 

This stock has been on my watchlist for sometime and I am glad that I will be able to ride the recovery wave (hopefully) up with it. CES closed today at 56.5 cents.

O

Saving then Spending during National Service

Hey guys, T here. 

I hope everyone have been staying safe out there recently. Since I have been stuck at home and had a little time on my hand, I decided to write a little continuation from my previous post, and elaborate on how I started building up my savings when I was serving my national service.

As a preface, I would like to add that I did not assume a leadership role as an NSF, and my vocation was non-combat as well, hence my pay was the lowest one would get as an NSF. I believe being discipline with my spending gave allowed me to emerge with a rather healthy amount of savings. I also did managed to travel twice (albeit in Southeast Asia) and ordered food into camp occasionally.

This is budget that I have been sticking with for quite a while:

Spendings (incl. Transport, Food etc.) : $260

Savings: $200

POSB InvestSaver: $100

*Stashaway: $100

*I only begin my contribution to Stashaway recently after the allowance of NSFs was recently increased.

Before I enlisted, there were many people, including friends and insurance agents, who told me it was really difficult to save up after BMT, with the temptations of ordering in and eating at canteens etc. 

Hence, I realised that I had to make it work by making my savings ‘disappear’ at the start of every month. Whenever I receive my allowance, I would transfer my savings immediately into my savings account (CIMB Fastsaver), and I also made an arrangement for my bank to automatically transfer the $100 to Stashaway every month on my payday. Thus, leaving only my budget for spendings and the $100 I have allocated for my POSB InvestSaver(which will automatically be withdrawn on the 15th of every month) in my bank account. For my POSB InvestSaver, I put in $100 every month to buy the STI on a dollar cost-averaging basis.

Furthermore, I was able to save up more as I was a stay-in personnel, hence my spendings on food and transport were really low. Even so, I was not perfect with my savings and have needed to transfer money over from my savings account to my spending account a couple of times, but this method of allocating my money serves as a good visual reminder whenever I was running low on money towards the end of the month, that I was possibly overspending beyond my means.

Another tip I would offer those of you who are just starting out on your journey, would be to meticulously take down every one of your spendings for the first few months. While this was really tedious for me, it was important for me to find out exactly where my money was going to, so I could find out where I should cut down my spendings. Without this knowledge, I would be doing so blindly, cutting down on my expenses with no real plan. 

While I was never perfect with my savings, these tips managed to allowed me to save up to a healthy amount during NS, even after going on 2 overseas trips in between.

O: As a side note on top of T's account of saving during NS. I also used the POSB SaveAsYouServe to enjoy a higher interest rate. They offer interest rate up till 2% on the account. However, one is not able to take the money saved inside for the period of 2 years. You can experiment the interest earned with the calculator that they provided: https://www.posb.com.sg/personal/deposits/savings-accounts/says

You can also change the amount of savings to be put in as your allowance increases through your NS.

Furthermore, the SAFRA DBS Debit Card also offer rebates of up to 2% (contactless spending), with no minimum spending (specially for NSFs). You can redeem the cashback by converting the SAFRA points to cash on the DBS ibanking website.