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Year-end bonuses

Bullionstar

Bullionstar

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It is that time of the year when employees look forward to collecting their year-end bonuses. Last week, the government declared the 13th month and 1.1 month annual variable bonuses for all civil servants.
The Ministry of Trade and Industry has forecast Singapore’s economic growth to be about 3.5% – 4% for 2013. Growth is expected to be supported by externally-oriented sectors such as manufacturing and wholesale trade, in line with the slight pickup in the global economy, as well as domestically-oriented sectors like construction and business services which are expected to remain resilient.
With the world economy still in unstable mode, I believe most Singapore workers’ year end bonuses would be modest, in view of the moderated growth for Singapore economy.
This will be the 8th time I am collecting year-end bonuses. In my previous blog entry last year, I made a resolution last year to purchase an endowment plan for my baby daughter. This is to plan for her future tertiary education expenses. Hence, we bought an endowment plan in July.
For this year, I am setting aside some of the bonuses for next January’s Chinese New Year. I budgeted about $2500 to 3000 for the overall Chinese New Year expenses, which include red packets monies, new year clothing for my family and other miscellaneous expenses.
Apart from Chinese New Year, another costly event next year would be the income tax bill in April onward (I pay by installments). Even though I entitled for the child subsidy, I am afraid that this might not be able to cover all the bill-able taxes, so I am making provision of $1000 for that.
personal finance

Last year, I also mentioned about settling my car loan by 2014. After the loan policy set by MAS this year and the sky-high COE prices, my wife and myself decided not to settle the loan so fast as there is not much benefits in doing so.

Sure, we can save about $300 – 400 by doing so, however, the opportunity cost will be even higher. Let say if a good investment opportunity surfaced within these two years, we will not have the cash to take advantage. Currently, my monthly salary is more than comfortable enough to pay off the monthly installments.
I am doing fairly well in my job, so in terms of job security, I am not so worried even though I am the sole breadwinner. As for the housing loan, the amount of loan we took was also not that big, so within 3 years, we are confident of paying up in full. Given the new MAS loan policy for second investment property, we aim to finish off our property loan so that we can take up the full loan for our second property.

This year, I have started research on gold and had also published several articles on precious metals in my blog, SG Wealth Builder. In fact, I have started to store some of my wealth in bullion. I believe in precious metals, but view them more as wealth preservation tools instead of investment vehicles. I see gold as an important avenue to store the value of my wealth, given the scary rate at which United States government printing fiat money.

       Gold and Silver Bullion

I suppose most Singaporeans had already made plans on how they are going to use their bonuses. Some plan to go for overseas holidays while others plan to buy big-ticket items like car or house. My advice to those who had just started out working is exercise financial prudent and use your bonuses to pay off your study or credit card bills. The interest incurred, especially for credit cards. can be scary if you keep rolling the debts. So always aim to pay off your debt as soon as possible. And year end bonuses offer the best life-line to you to finish off your existing debt.

How much bonuses are you collecting this year and how you plan to spend it? Care to share?

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2 Comments

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  1. Hi, came across your blog today.

    Any reason why you wish to purchase an endowment plan for your daughter since I could see that you are investment savvy?

    An 20 year endowment plan at a very positive rate gives you 3-4% a year with higher expense and commission to the insurance agent/company. You would be better off investing in a RSP plan and there are many RSP plans in Fundsupermart for eg that allows you to invest with min $100 to start so you could mix and match your allocation across different asset/sector/regions to diversify risk.

    With such Equity/Bond funds RSP to average out risk across 15-20 years, the average returns should be at least 5-6% conservatively.

    Reason why I am giving my comments was also because that my newborn is coming in Jan 14 and I am planning to start a fund for him using RSP with investment horizon across 15-20 years for his education.

    Just my 2 cents. Thanks for contributing to the financial education space.

  2. Hi,

    Thanks for pointing out about the RSP. I did ponder whether to purchase regular saving plan linked to equities, such as OCBC’s BCIP. I understand for such plans, there are monthly transaction fees. So after deducting theses hidden fees, I suspected the return would not be 5-6% as what you claimed. Nevertheless, I will be doing more research on fundsupermarket’s RSP products.

    Thank you for pointing out.

    Regards

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