Category Archives for Money Saving Tips

I saved money by NOT recontracting my mobile plan

Singaporeans typically recontract their mobile phone plans every 1.5-2 years for a new mobile phone. It’s the norm because mobile phones either don’t last that long, or the user experience gets really bad after a few Android/iOS updates.

Not a great way to save money if you asked me.

The last time I signed a contract with my local telco was at least 6 years ago when they were still offering 12 GB data plans on 3G network. Since then, I have always bought mobile phones at full price (or slightly discounted rates through friends) to replace damaged ones directly from mobile phone dealers.

If you look at the costs of our mobile plans over the years, they are getting more and more expensive for the value they bring. Offering discounts for mobile phones to lock you in a 2-year contract with telcos is a good gimmick that secures telcos with recurring revenue bya one-off discount.

Here’s how my mobile phone’s consumption is like for the past 6 months.

Month Local Incoming Local Outgoing Local SMS Local Data
May 93.5 mins 81.2 mins 9 messages 6.44 GB
June 19.4 mins 32.3 mins 0 messages 5.36 GB
July 22.6 mins 13.3 mins 8 messages 9 GB
August 46.3 mins 25 mins 2 messages 9.74 GB
September 42.2 mins 2.2 mins 2 messages 11.14 GB
October 42.2 mins 2.2 mins 6 messages 11.14 GB

You probably guessed it! I’m still using the 3G mobile plan with 12 GB data for costs me less than $29 per month.

Until my telco discontinues the 3G network like what they are doing to the 2G network right now, I doubt I would be changing my plan in the near future because the postpaid mobile plans based on my usage are 7-8 times of what I’m paying right now!

Telco Local Incoming Local Outgoing Local SMS Local Data Monthly Subscription
SingTel Free Unlimited Unlimited 12 GB $239
M1 Free Unlimited 5000 13 GB $228
Starhub Free Unlimited Unlimited 12 GB $220

I think there are more like-minded individuals who are no longer signing contracts for their mobile plans because all the telcos have started offering SIM only mobile plans over the past 2 years. Although SingTel is getting there with its 1-for-1 add-on deal, it’s still 60% more expensive than my current mobile plan.

Telco Local Incoming Local Outgoing Local SMS Local Data Monthly Subscription
SingTel Free 150 mins 500 13 GB $46.75
M1 Free 800 mins 2000 11 GB $75
Starhub Free Unlimited Unlimited 12 GB $110

The savings I get by choosing not to sign a new 2-year contract with my telco is more than sufficient to buy a new iPhone every year with enough change to spend on accessories. That said, I don’t buy a new mobile phone every year.

So the next time you intend to sign a new contract with your telco to get a new mobile phone on a discount, I hope you reconsider your decision because the new mobile plan may work out to be more expensive than you think!

A different perspective on the Supplementary Retirement Scheme

The Supplementary Retirement Scheme (SRS) was started in 2011 2001 and is part of the Singapore government’s multi-pronged strategy to address the financial needs of a greying population by helping Singaporeans to save more for their old age. It is operated by the private sector (mainly local banks).

Participating in SRS is voluntary and you can contribute any amount to your SRS account, subject to a cap ($12,750 in 2015 and $15,300 from 2016 onwards). In 2013, the three local banks administering the scheme said they have seen up to 20 per cent annual growth rate in the number of new SRS accounts opened over the past five years which to me, is a good sign because that shows that more Singaporeans are planning for their retirement.

Why naysayers are against contributing to the Supplementary Retirement Scheme

Despite the increase in new SRS accounts, there are many naysayers who are against the idea of contributing cash to SRS accounts.

Here’s a calculation on tax savings that I’ve taken from OCBC’s website on Supplementary Retirement Scheme based on an individual who earns $60,000 per year (that’s $5,000 per month) and $20,000 in personal reliefs.

supplementary-retirement-scheme-calculations

Naysayers would say that it’s ridiculous to contribute $12,750 in cold hard cash just to enjoy $405 in tax savings, especially the case for the lower-tier of middle income earners. They also argue that the tax savings is minimal when compared to returns generated from investments made with the same amount of money.

It’s really just a retirement savings plan with tax benefits

The way I look at my SRS account, I see it as a retirement savings plan with the added bonus of tax benefits. It acts as forced saving to prepare me for future retirement and I can’t access the money until the age of 62. As a reward for saving for retirement, the same amount is deducted from my taxable income.

Some people see it the other way round, where the sole purpose of having a SRS account is for tax deductions and totally missed the point that it’s meant to complement their CPF accounts and build their retirement funds.

supplementary-retirement-scheme-diagram

Consider the money in your SRS account as a part of your investment portfolio

Using my OCBC Blue Chips Investment Plan (BCIP), I am able to use the money in my SRS account to make regular investments in the stock market. As I am focusing on creating an investment portfolio of ETF index funds, I use the money in my SRS account to purchase Nikko AM STI ETF shares every month. In the past few months where the market is on a downturn, the monthly investment from my BCIP account using my SRS money benefited me because it helped to average down on my Nikko AM STI ETF stock holdings.

In the past, all SRS withdrawals must be made in cash. If money in the SRS account was used in investments, the investments had to be liquidated before the proceeds could be withdrawn in cash from the SRS account.

From July 2015, SRS account holders will be able to apply to their SRS operators to withdraw investments from their Supplementary Retirement Scheme (SRS) accounts without having to liquidate their investments (refer to Ministry of Finance website).

This means that if I reach the age of 62, where I am qualified to withdraw from my SRS account and I didn’t have any urgent need for the cash, I can transfer $40,000 worth of investments from my SRS account to my CDP account. That allows my SRS investments to continue to grow in my CDP account and I can liquidate them when I need the cash. This method of transfer will also qualify for 50% tax concession.

A contingency plan when the Singapore government makes more changes to CPF Life

As we continue to plan for our retirement, the reality is that policies governing our CPF accounts is ever changing and will continue to evolve according to our population trends, e.g. mortality rate, etc.

It’s safe to say that by the time I reach the stipulated retirement age, the age when payout from CPF Life commences is not likely to remain at 65. Having a fully funded SRS account of $400,000, I will be able to withdraw $40,000 from 62-72 without having to pay any taxes. That provides a fallback for me if the age where CPF Life payout commences is delayed by a couple of years.

Conclusion

As someone who is on the lower tier of the middle income class, I still believe that contributing to my SRS account has its merits and will continue to do so until it’s fully funded. I’m also pretty sure that my SRS account will play a pivotal role in my retirement planning many years later.

Are you contributing to your SRS account? I’d love to hear your thoughts.

Mustachian Googler lives in a van while working in Google and saves 90% of his income

In recent Mustachian news, a Google engineer called Brandon received his 15 minutes of fame when he was found to be living inside a 16-foot 2006 Ford truck and lived in the Google parking lot for free.

Unless you have been living under a rock, you’d know that it’s common knowledge that Google pays its employees well and provides one of the healthiest, happiest and most productive work environments possible. Living in a truck was an option that Brandon subjected himself to.

Brandon’s story in a nutshell

While Brandon was interning at Google last summer, he was living in the cheapest corporate housing offered: two bedrooms and four people for about $65 a night (roughly $2,000 a month). Like most Googlers, Brandon spends very little time in his apartment for the exorbitant amount of rent he spends on the apartment.

Once he knew he was coming back to Google to work full-time, he started plotting for a solution as the rental situation in the Bay Area is very expensive. Inspired by the experience of Ben Discoe, a programmer who spent 13 months living out of a conversion van in the Google parking lot, Brandon bought a truck for $10,000 (which was easily paid for with his sign-on bonus) and ‘moved into’ the parking lot in Google.

google-truck

Making full use of Google’s amenities

Brandon’s idea was that the only shelter he really needed was a place to sleep, and “company perks could provide the rest.” He eats all 3 meals at work and takes a shower every morning after working out in the corporate gym. He charges all his electronic equipment in the office and they last through the night so he never really needed a lot of electricity in his truck, if any.

By the way, Brandon’s never late for work since the office is just minutes away from his ‘home’.

Saving 90% of his income

As Brandon is able to avoid paying crazy rental fees and makes full use of Google’s amenities, he saves about 90% of his income and puts that money into paying off his student loan and building his investment portfolio. It also allows him to enjoy the San Francisco life better, dining in nicer restaurants with the money he would have spent on rent.

“If I do plan on traveling the world, I’ll need to be comfortable with unconventional living situations, and this is certainly a good place to start,” he writes in his blog. “Plus, there is never going to be a better time in my life for me to try this. I’m young, flexible, and I don’t have to worry about this decision affecting anyone else in my life.”