Monday, December 30, 2013

We should treat the $300,000 oath as relationship advice instead of financial advice.

Over the holiday season, a lot folks asked me how I derived the $300,000 as a target asset value a single Singaporean male should accumulate before he makes the decision to get married.

The primary idea behind $300,000 is that this amount that could generate a minimalist lifestyle to sustain a single male such that he can attempt to switch to a better job without having a ready job offer in hand. As a portfolio of REITs, Business trusts and dividend yielding stocks can be designed to yield about 8% in the current market, the $300,000 portfolio is expected to generate about $2,000 in monthly income. I estimate that a single male who has the discipline to generate $2,000 in passive income in his mid-thirties probably would not need more than $1,500 a month to live on and can even save about $500 a month to keep his portfolio growing.

After a discussion with other folks, perhaps you might think that 8% is too much of a stretch for a portfolio. As it turns out SGX has a decent number of stocks which yield about 6% but have a lot more potential for dividend growth. So with a different portfolio mix, our happy single bachelor can expect $1,500 a month which grows at the inflation rate without a need for reinvestment.

After some further thought over the holidays, I came to the conclusion that the $300,000 oath is good financial advice but works better as relationship advice.

Tyler Cowen of the Marginal Revolution fame wrote an article on Singapore's low birth rate which you can find here :

In this article, Tyler explains that ethnic Chinese birth rates are low in Singapore compared to Singaporean ethnic Malay birth rates or even ethnic Chinese birth rates in Malaysia. He attributes it largely to a combination of the successful education system in Singapore which gave women more opportunities in the workforce but the persistence of traditional values which makes ethnic Chinese women still want to marry up. This creates an oversupply of educated single women and uneducated single men who will never marry each other.

Tyler's epic conclusion is that Singaporean Chinese men simply need to be more confident about themselves.

So this is where the $300,000 oath comes into the picture :

a) Dating a Singaporean Chinese women in your 20s is challenging.

I have experienced this myself along with the tons of single men in my clique.

Dating a Singaporean Chinese woman while  in your 20s is exhausting and extremely damaging to your ego.

Some women keep a running list of priorities in their head and will cancel dates with you if a better candidate calls them out. Others who know that they are young and pretty will act like a princess and expect you to bend over backwards to accommodate them in most engagements. Most are not playing for keeps and will want to shop around until they have built their own careers.

By taking the $300,000 oath, you spend your 20s doing what you should be doing in the first place - accumulating wealth, clawing up the corporate ladder, and getting advanced degrees.

b) $300,000 in your pocket puts you higher up on her priority list.

There is something different about men in their mid-30s with $2,000 passive income every month. They are passionate at work and have the worldly experience to back it up. They are conversant in the world economy and have a proven track record in investments.

For lack of a better term, they ooze sex appeal and their star is expected to rise further.

A financially independent man in their mid-30s, ceteris paribus, better than a Gen-Y or Millenial boyfriend and can not only act as a companion to a woman, but also a wise mentor to the 20-something career woman.

So expect to be upgraded to the top of her list when you start opening up to better dating ideas.

This means fewer cancelled dates and less ruined movie tickets in the future.

c) You become God's gift to women at your 30s age group.

At this point,we need to be realistic, not every 30-something with $300,000 is going to attract a women in her 20s. Singaporean women in their 20s look great and have standards and some of you guys may be intensely introverted, lack facial symmetry, devoid of a sense of humor or not "evolutionarily-advantaged".

At this stage, have no fear, for there are legions of successful, clever and capable women in their mid-30s who are waiting to receive you with open arms !

It takes a very wise and capable man to accept a highly educated woman in her mid-30s. They generally won't fight with you over trivial affairs and are very pragmatic and realistic when planning a wedding. They are good dates and make supportive spouses.

So there you have it.

The $300,000 oath for a Singaporean Single male makes decent financial sense but in actual fact, it forms the foundation to having more confidence when engaging with members of the opposite sex.

Tyler Cowen talks about the need for confidence.

I am showing you how to buy it.

Thursday, December 19, 2013

The hogwash that is 成家立业.

You don't need to spend 4 years in ACS to know that most Chinese proverbs are hogwash.

After failing every Chinese paper since leaving Secondary school, I have developed a natural tendency to be skeptical when someone tosses a mysterious proverb at me.

Today I will discuss the proverb 成家立业 or to settle down and establish a career. A variant of this proverb, duly expanded to six characters, interprets this as an act of settling down before establishing a career.

Chinese culture and language has a history spanning thousands of years. If we really think about the context for the creation of these proverbs, it does not take a lot of thought to know that they probably came about when China was still an agrarian economy.

In such a situation, a farmer should prioritise family before career because children act as extra pairs of hands in a farm. Having children earlier provides more cheap labour to be able to harvest more crops and earn enough to expand the farm or even have more children.

Fast forward to this modern day, Modern Chinese balk at the idea of starting families before they are ready to do so. Children requires more than 2 decades of nurturing before they can contribute to a knowledge-based economy.

But because folks naturally like the idea of starting a family and having children, they don't really spend a lot of time to think about the concept of readiness when it comes to having a family.

Yes, you can get married in your early thirties, the Government even wants you to do this. There are many banks who want you to get a mortgage along with that car. You are young, fabulous and upwardly mobile. You are worth it. YOLO !

Early marriages with a house, children and a car means financial liabilities in your 40s.

You would'nt feel it in your thirties because you are open-minded, sharp, dynamic and paid relatively lowly in the workforce so managers will tend to leave you alone.

When you get to your forties, your actions will bite you the ass. You need a high income to sustain your liabilities. As you have school-going kids, you hunker down and take whatever the corporate world tosses at you but you are no longer as fast as the younger guys in their 30s or as cheap as foreign talent.

A society with debt laden men in their 40s who willingly take anything the corporate world tosses at them will only create a management caste that would not relent on the workforce. Managers will be able to commit wanton acts of abuse as they know that for your salary, you will accept any terms the company has to offer. Don't believe me ? If your office as mid-life workers, go have lunch with them and find out how many actually feel that they are prisoners in the current job roles that they have ?

One of the ideas that Authorities would like to spread in Singapore is that car ownership should not be an aspiration. Hence COEs inflate the value of a car to about $150,000 or more. Cars are a luxury and have no place in the 5 Cs. You need to be very exceptional to be a car owner.

If you follow this train of thought and agree with the Authorities, then you will be able to accept my bitter realization and come upon this conclusion:

a) A wife, who has a right to co-own a flat with you and can potentially have your child, is not an aspiration.
b) A child, which cost upward of $1,000,000 to raise,  is also not an aspiration.

Like cars, a family is a luxury. You need to be very exceptional to be a family man.


Based on my opinion, this should be the Mantra moving forward. Put career first, resolve all your mandatory expenses by land/equity ownership before moving on to start a family. If you can secure your family's basic survival by capital ownership and passive investment income, no company or abusive manager can put you in chains.

If you are a young male who wants to take on the world based on your own terms, start by imposing a Certificate of Marriage Entitlement (COME) of $300,000 on yourself. Work hard until this target is reached, then determine if you are willing to delay financial freedom by starting a family.

You'll never know where this approach to life will take you in the future.

Sunday, December 15, 2013

Relationship advice for the Single, Young and Male Investor (SYMI).

Conventional wisdom on love and marriage would be as follows :

a) Date while you are in University.
b) Get your degree.
c) Work for a few years.
d) Get married.
e) Get a home mortgage.
f) Get a car.
e) Work together towards kids and retirement.

This pre-packaged plan comes as part of the Singapore Dream.

If you had followed the plan earlier, you will become like the hundreds of colleagues I know who feel stuck in their jobs, their companies becoming prisons which they live in. These employees have mouths to feed at home and mortgages to pay and if they do not have the relevant career agility to move on, they fall prey to poor management.

The savvy, young investing male, replete with market knowledge, can play a better game.

The playbook I propose should be as follows :

a) While in University aggressive play for the best grades. This is the Hunger Games, may the odds be ever in your favour.

b) Take on as many management roles in your CCAs you participate in. This is the most consistent way to score a big Bank or MNC position. You only want a bank, consulting firm, prestigious tech firm like Apple or Google or a DJIA counter business. ( This gives the best odds of 10% increments for first 10 years. )

c) Work overtime and aggressively save and invest with a target of $300,000 to ensure that you can live within your investment income. This may require a savings rate of 75%. ( Too bad, live as a undergraduate for the next 10 years. If you are lonely, sign up for a MOOC. My date in my late 20s was the CFA exams.  )

d) Date casually in your 20s, but start playing for keeps in your 30s. You are likely to hit your target in your mid-30s. Find someone who shares the same values as you.

e) Don't make a commitment to someone until you hit $300,000 in portfolio size. Odds are you will only get married around mid-thirties.

g) Start building your spouse's financial independence by channelling three incomes into her portfolio. ( Your's, her's and your portfolio's )

h) Once you are both free, have a kid and take on a mortgage. (This is starting to sound like a strategy for Starcraft II )

i) Work to clear your mortgage, kid expenses are not too large and you should be able to get the investment income to sustain a child before the kid gets into play-school on two incomes. ( Actually 4 incomes by now. )

j) Thanks to the power of compounding, you two will be able to reach the point where every expense can be paid via your investment income sometime before 45.

h) If you and your spouse feel like it, retire. Otherwise, enjoy your career.

The consequence of this alternative play-book is harsh - Don't accumulate $300,000, don't get married so naturally this is not something you'll see in government ads.

The problem is not so much being stuck with a lousy spouse but do you want to spend 10+ hours in a workplace and be miserable for 50% of your life ? $300,000 portfolio let's a single guy choose the workplace he wants.

The other advantage of this playbook is that many young males do not realize how attractive they become once they hit financial independence in their mid-30s. You are worldly and you've proven yourself in the corporate market.  Grabbing a young 27 year-old wife from a Gen-Y herbivore hipster is like grabbing a lollipop from a baby - Just remember to shout YOLO! while you are at it.

Old age and treachery will always overcome youth and speed.

Monday, December 09, 2013

Mechanics of Early Retirement.

It's amazing how your identity changes as you get older.

My pals used to introduce me to other people by describing me in certain ways as I was growing up, at some stage I was...

... The Dungeons and Dragons guy
... T$R Chris
...The Toastmaster.
... Chicken Man ( Urgggh... Long Story )
...The Troll.
..The Crazy Guy.
...Guai Peh Peh ( Strange uncle )

And my personal favourite...

...The dude who played with his cats testicles and has the scars to show for it.

These days, people introduce as the guy who's retiring next year and he's only 38 !

...and it's so challenging trying to explain myself because some folks would have all sorts of questions on what my secret is, or whether am I some variant of a phony attention seeker.

Anyway explaining what I did to have scars on my hands was a lot easier.

I thought maybe if I written a short article on my version of 'retirement', things may clear itself up.

The simplest way to look at retirement is from the point of view of a single dude who lives with his parents, has no debt, and manages to save $300,000 before 35.

This $300,000 is saved by earning a regular income at a day job. This dude works overtime and minimises his expenses by eating at food courts and taking public transport. He has no expensive hobbies and only has time to read about taking his career further or making more money by making a few investments.

Now, suppose this dude discovers a way to create a portfolio that generates a dividend yield of 8% a year. It's a combination of business trusts, REITs and mid cap equities which return high yields ( Please refer to other awesome local financial bloggers for actual investment ideas. )

8% of $300,000 is a dividend income of $24,000 a year or $2,000 a month. If this dude can keep his expenses within $2,000 a month, this dude can keep running forever without an earned income and can be considered to be financially independent way before 35 years of age.

But like all dudes, this dude may want to get married and have kids some day. So he marries someone with the same values and they work together to earn multiples of $300,000 to cover each person's expenses within the family. By a certain age, the dude might be able to cover his family expenses and pay for his mortgage using only his dividend income, maybe even saving a portion of it in the process.

At this stage, it is certainly possible for someone to retire based on the power of the raw passive income that they are getting every quarter.

But should they exercise this power and live happily ever after ?

I think the answer is no.

At 38, I'm not naive that there is a 100% chance  that this stage of retirement can be sustained. ( Actual odds are determined by a Monte Carlo simulation ) Even if my portfolio holds up, the boredom will probably kill me. At best, if I peg my odds, I should not need to touch my capital for perhaps 3-4 years, although rising interest rates can ruin my plan in the medium term.

But 3-4 years is just what it takes for a person to take stock of his life and decide to do something for his personal interest and passion.

And that is precisely my plan.

Retire for a couple of years, take stock of my life and then take it in a radically different direction.

Tuesday, December 03, 2013

Ground Zero - A new beginning...

It's been quite a while since my last article.

As of today, I resigned from my government job. My last day is 3rd January 2014.

For the first time in my life, I've resigned from my job without a solid plan on what I'm going to do next. It's a strangely liberating experience, and actually a little scary. I have never left a job without another one waiting for me. At the back of my head are lessons from Moshe Milevsky on the meaning of human capital - did I just write off millions of dollars of future income I would have earned had I kept my nose on the grind ?

Is this some time of mid-life crisis ?

In a sense, I've been hatching this plot for the past 15 years, trying to grow my annual investment income to that of the equivalent of a median household income in this country along with some spare change, about half of these investment flows get farmed back into the portfolio or the home mortgage, so I guess the mathematical part of the retirement equation has been solved.

What remains unresolved is the humanities component of my retirement plan. Too many books focus on the nuts and bolts of retirement. Some focus on hobbies, others on philanthropy.

But too few focus on living a meaningful life - how to extract the most of your time and how to engage your friends who may still be busy building up their families and wealth.

I have about 20 working days before lose my earned income for quite a while. Maybe this retirement will be short-lived,  maybe I'll sustain it until I die of old age. Right now I have exercised many options, applied to many institutions to pick up many skills to keep myself occupied so I don't go cold turkey in 2014. The plan is to have no plan, or perhaps, the plan is to have too many plans that arise out of spontaneity. I'm betting that a semblance of Order would arise out of Chaos.

But one things for sure...

For now, when people ask me what I am doing or what I intend to do next year, my answer is "I don't know."