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Saturday, 26 May 2012

10 Ways to Save Money by Spending More

There is a fine line between miser and smart spender.

As your accounts grow in size and decimal places, there are several key purchases that may increase your quality of life — and even save you some cash in the process!

A range of experts shared advice for items that savvy investors should buy in order to climb the ladder and accumulate wealth while also increasing day-to-day enjoyment.

Here are 10 thrifty ideas for smart ways to spend more without feeling guilty: 

Hire Some Help 

Time is money. If your hourly income is more than what you would pay for someone else to clean the house, walk the dog or mow the lawn, then hiring some help makes financial sense.

Jennifer Litwin, an author and consumer reporter, added that grocery delivery can be a big-time saver. Litwin listed “avoiding the new long self-check-out lines; getting fruits and vegetables that are well-wrapped and packed; and shopping from the comfort of your own home and still being able to take advantage of sales” among the service’s advantages.

The time saved from outsourcing some of your daily chores can be used to relax after a long day at work, log in some extra face time at the office, or brainstorm new investing ideas.

Dress for Success
Sloppy outfits are not exactly an express ticket to the C-Suite. While Silicon Valley is known for its casual environment, rocking the hoodie in a typical business landscape may elicit some unwanted attention — even if you’re Facebook CEO Mark Zuckerberg. Fanya Chandler, Nordstrom’s national stylist director, advised investing in core pieces.

This means men can splurge for a high-quality suit while women can spend a little more on the dress, skirt or jacket. Blouses are a spot where women can scale back a little, she said.

Loren Bendele, CEO and co-founder of, suggested investing in handbags, well-made jeans and staple children’s clothing also. 

“The most expensive item you’ll buy is the one you never wear,” he cautioned. 

Table for Two, Please
If you’ve found the One (or narrowed it down to one for now), don’t forget about date night.

While anniversaries are often associated with splurging, Bendele said surprising your plus-one with tickets or going out to dinner could be a way to build lasting memories.

“Date nights don’t necessarily have to be expensive either,” he said. “Picnics on the beach, breakfast in bed and candlelight dinners at home are always big events.”

Research from the National Survey of Families and Households provides further evidence for the importance of some alone time

“Indeed, the predicted probability of divorce for those who rarely had couple time was 21 percent for both wives and husbands, but only 14 percent for wives and 10 percent for husbands who reported having couple time almost every day,” wrote researchers from the University of Virginia’s National Marriage Project.

Turning to the Financial Pros
Depending on the extent on your burgeoning financial empire, adding a trusted financial adviser to the payroll may be a good idea. Experts have years of experience that they can draw on to grow your portfolio while you can concentrate on your own career. But be sure to keep tabs on your accounts and ask questions to make sure that their investing values and philosophies match your own.

Is Your Business Card Rolodex Ready?
“That's bone. And the lettering is something called Silian Rail,” boasts Patrick Bateman in “American Psycho,” in which he exhibits some serious business card envy.

For this tip though, skip the corporate competitiveness and concentrate on the basics. suggests sticking to the standard business card size of 3.5 inches by 2 inches, keeping cards simple and including relevant contact information, including company name, phone number, email address and website address.

Critical information should be relegated to the front since business cards often spend the rest of their days in card holders that obscure the backs.

While many companies will provide employees with cards, this suggestion is especially useful for people trying to expand freelance or side businesses.

It’s Tool Time
Buying high-quality tools can save time, money and a leaky drain or two if you learn to use them correctly. But don’t be tempted to quit your day job to become Mr. Fix-It full time for your home though — if a problem arises that is beyond the scope of your skills, call the pros.

Consider Refinancing
With average 30-year and 15-year fixed mortgage rates at record lows, homeowners should consider whether now is a good time to refinance. Freddie Mac said the 30-year loan rate had dipped to 3.79 percent as of May 18, the lowest since long-term mortgages began in the 1950s.

“Record-low mortgage rates and low home prices are making home buying more attractive to Americans, and refinancing is a perfect example of spending money so you save more in the long run,” Bendele said.

Saying 'I Don't' to Cash Bars
As the average price of a wedding climbed to more than $27,000 last year, according to the Real Weddings Survey, couples-to-be may want to consider wedding insurance.
Several companies offer policies that range in coverage type and level to help couples recover lost expenses if plans go awry.

Anja Winikka,’s site editor, said that couples should not skimp on either some form of a gratis bar for guests or a reputable photographer for the big day. She also suggested spending the extra money to get some professional help to help coordinate the wedding festivities.

“As much as you want to take on the creativity of DIY activities for elements of the wedding, the last thing you want to do on the day of the event is worry about the flowers, food, etc.,” Winikka said. “There are some vendors that should be hired professionally to avoid a stressful wedding day.”

Skip the Nosebleeds 

Sporting events, Broadway, concerts — these are a few times when upgrading seats and paying a little extra may be worth it. But this does not mean that splurging for the VIP passes is the best idea either. Aim for the middle ground for maximum enjoyment with minimal impact on your wallet.

This concept also applies to family vacations. 

“You can’t put a price tag on the life-long memories from family vacations,” Bendele said. “It is important to spend time together, and whether you plan a modest vacation or a more extravagant one, enjoying time spent together is a highly valuable investment.”

Networking to the Top
Rubbing elbows at relevant networking events is another area where it is important to spend. Investing in memberships at professional societies in addition to dinners and fundraisers provides plenty of opportunities to further your career and catch up on the latest news in your industry.

Same goes for personal development seminars and courses as long as you put them into action, said J.D. Roth, founder and editor of the personal finance blog

“Any personal development is a good investment, if you ask me,” he said.

“But only if you act on the things you learn. Just going to a bunch of seminars won’t make you a better person. You have to put the things you learn into practice.”

Tuesday, 22 May 2012

Getting to Retirement With Minimal Financial Risk

JPMorgan Chase’s giant trading loss began as an effort to manage the bank’s risks — a move that turned into something that now looks more like a speculative bet. But don’t think this is solely a big-bank problem. Even small investors can run into trouble discerning the fine line between hedging and risk taking.
Investors can try to limit their risks by holding down their stock exposure through diversified investments. But many people are still depending on the market’s engine — perhaps more than they might think — to maintain a comfortable lifestyle in retirement, say, or pay for their children’s college educations.

While this strategy has worked for many people and is considered prudent by financial advisers, it’s still a wager. Your portfolio can take a painful nose dive just before you retire, which means you may have to work longer (if you can) or cut spending. But somewhere along the way, as pensions vanished and 401(k)’s took hold, investing in stocks for retirement was viewed as a manageable risk. After all, even after the market collapse in 2008-9, what other choice is there?

There are other approaches to risk management, but all of them involve their own set of trade-offs, costs and risks. And, as in JPMorgan’s case, going too far can also create problems.

“The caveat to most risk management techniques is the simple acknowledgment that, taken to extremes, they are no longer risk management techniques but the introduction of new risks or bets themselves,” said Michael Kitces, director of research at the Pinnacle Advisory Group in Columbia, Md., who also blogs about financial planning at Nerd’s Eye View.

Whatever approach you take is going to cost you something, even if you avoid the stock market altogether. So how you deal with investment risk will ultimately depend on what you’re willing to give up. Here are some different approaches:

ELIMINATE MOST RISK Trying to squeeze out risk is still going to require some sacrifices. The idea is that you save enough money to meet your goal — say, covering your basic expenses in retirement — without investing in risky assets. The big caveat is that you’ll need to save aggressively, perhaps much more so than if you turned to the stock market for some assistance (assuming it provides a decent return during your time frame).

But some academics like Zvi Bodie, a finance professor at Boston University, say they believe it can be done by taking a “safety first” approach, where you start by figuring out what your bare essentials will cost in retirement. Then, you save aggressively to cover those expenses, and put the money into virtually risk-free investments, like Treasury Inflation-Protected Securities (TIPS) or I-Bonds. (I-Bonds never decline in value, are issued by Treasury and pay a fixed interest rate, currently 0 percent, as well as a variable rate that keeps pace with inflation.)

The idea is to create a safety net once you stop working. So if you bought $10,000 of I-Bonds each year over a 40-year career — the maximum you can buy each year, though Professor Bodie expects the amount will be adjusted for inflation — you would leave the work force with $400,000. Today, a 65-year-old man could take that money and buy an annuity that would provide roughly $15,000 in inflation-adjusted income annually (with spousal survivor benefits). This could be used with Social Security income — for a retiree at full retirement age today, a maximum of about $30,000 annually — to cover the basics.

“That’s not too bad,” added Professor Bodie, co-author of “Risk Less and Prosper” (Wiley 2011).
He also suggested creating something that approximated a personal pension through a so-called TIPS ladder. Here, you would figure out your basic spending needs each year, and buy TIPS with varying terms so that the bonds mature over time, as you need the money. (Given the tax treatment of TIPS, he recommended doing this in a tax-deferred or tax-sheltered account. It also takes significant planning since TIPS are sold in five-year maturities.)

Mr. Bodie said he did not have a problem investing money in riskier assets for discretionary spending. He also said that younger people could handle somewhat more risk since they had the luxury of time to make adjustments.

Still, this approach isn’t foolproof either. You may be sacrificing more than you need to if the markets do well. You can also lose the ability to save aggressively if you are laid off, for example, or have an expensive medical issue. And then there are all of life’s other costs — college tuition, saving for a down payment on a home, health insurance.

“The trouble is, of course, that almost no one can accumulate that much money — in rough terms, about 25 years of living expenses after Social Security and pensions — just by investing in safe assets,” said William J. Bernstein, author of “The Investor’s Manifesto” (Wiley 2009) and other investing books. “You have to take some risk to get there, and because you’re taking that risk, you may not get there. But taking that risk is still your best shot.”

There are several different ways to figure out how much that kind of low-risk approach may cost you. But let’s say you decided that saving $1 million was enough (that is, $1 million in inflation-adjusted dollars, meaning it keeps pace with inflation over time). You may be able to get there after 30 years by saving $750 a month, or $9,000 annually, and investing that money in a portfolio evenly split between stock and bonds, which earned 4.7 percent after inflation. But to avoid the stock market altogether, you would have to increase your monthly savings to $1,250 a month, or $15,000 a year, and receive a 2.5 percent return after inflation in a diversified bond-only portfolio, according to calculations by Kent Smetters, a risk management professor at the University of Pennsylvania’s Wharton School and founder of Veritat Advisors, which takes an approach similar to the one advocated by Professor Bodie.

REDUCE RISK, LIVE WITH SOME Investing in a diversified portfolio — split among different types of stocks and bonds, while gradually reducing your exposure to risky stocks — is the classic way to reduce your risk. But it doesn’t eliminate risk. “In a crunch, or even in a normal sharply down market, like we’ve had the past few weeks, there are only risky and riskless assets,” Mr. Bernstein said. “So in the short term, diversification among different stock asset classes is usually of no help. They all get taken out and get shot. But over a decade or longer, diversification among stock asset classes is nearly magic.”

And when you add a healthy helping of bonds, you further reduce that risk. The trick is finding a level of risk you’re comfortable with so that you don’t bail out at the worst possible time. This approach also requires you to consider what a worst case might feel like, and what sort of changes you need to make to adjust.
You can also reduce your risk through hedging techniques. One relatively straightforward strategy is buying “put” option contracts, which give you the right to sell a fixed number of shares (say, of an exchange-traded fund that tracks a stock index) at a certain price within a certain period of time. This essentially puts a floor on your losses. If the shares don’t drop, you lose only the cost of the option.

So while this allows you to hedge your risk, it can weigh on your total return because you are paying for the insurance the puts provide. The downside, of course, are the costs and the hassles of such a strategy. “You can approximate any hedging strategy you might want far more cheaply simply by selling some risky assets,” Mr. Bernstein said. “There is no risk fairy who will write you a cheap option that will take stock risk off your hands.”

TRANSFER OR SHARE RISK This approach to risk management typically involves buying insurance. If you’re about to retire, you could buy a single-premium immediate annuity, where you pay an insurance company a pile of cash and, in return, the company pays you a stream of income for the rest of your life. The downside is that you just surrendered a pile of cash, which means you will not be able to use that money in an emergency. And if you die prematurely, your heirs won’t receive it either. There’s the risk, too, that the insurance company could run into financial trouble.

Annuities can also feel expensive. They may pay out approximately 4 or 5 percent of your investment, according to Professor Bodie, depending on the options you choose. An investment of $500,000 will buy slightly less than $2,400 in monthly income for a 65-year old man and his 62-year-old wife, according to a rough estimate from But inflation-adjusted payments will cost more.
“Any insurance is going to cost you,” said Professor Bodie, who says he believes annuities may make sense for some retirees. “There is no free lunch.”

Friday, 4 May 2012

Can You Be Friends With Your Boss?

A few years ago I attended a party that was broken up by the cops—and when it happened, I was sitting next to my boss. I’ve been invited to a boss’s wedding and gone to dinner with several more. Once, my boss’s boss invited a co-worker and me for drinks at a private social club to which he belonged because I mentioned that I’d always wanted to see it. (Actually, I think I said something like, “Take me to where all the rich people are!” and sent him an appointment reminder through Microsoft Outlook.)

I’ve always gotten along with my bosses and have enjoyed hanging out with many of them outside the office. But not all friendships are created equally, and there’s a distinct line I’ve never felt comfortable enough to cross. There are work friends and after-work friends. There are friends with whom you’ll discuss your love life, friends you approach for favors, friends you drunk dial, and friends you’ll invite into your home even when you haven’t showered and you’re wearing pajamas. Call me old-fashioned, but I just don’t want to watch a Will Ferrell movie and eat Chinese takeout with someone who could fire me.

To find out if I’m too casual or too rigid with my bosses, I decided to consult some experts. I asked Barbara Patcher, a business etiquette speaker, if bosses and employees can ever be friends. She immediately lectured me about improper relationships. “Are you friends with benefits? Cause that is not O.K.,” she said. (Lord, no. I’d never do that. At least not until Johnny Depp launches a magazine.) “What is the gender balance?” Patcher asked. “Is it male-female? That’s a little tough. What’s the age gap? Is it your immediate boss? If it’s a higher-up boss, they can get in trouble for having friendships with younger underlings. These are all questions that need to be answered.” Talking to Patcher really stressed me out. I’m impressed my boss and I can even have a conversation without a copy of the company harassment policy on hand at all times.

Angie Herbers, a professional HR consultant, told me not to worry, that being friends with a higher-up isn’t that big of a deal. “I actually encourage friendships between bosses and their employees,” she said. “People like to work with people they like, and if you can develop a friendship with your boss, you’ll want to be more productive. You’ll want to worker harder, and you’ll probably want to stay at the company.” Herbers pointed to Zappos Chief Executive Tony Hsieh as someone who develops close relationships with his employees. In the early days of his original company, LinkExchange, Hsieh made a point to hire friends and friends-of-friends, which made the long hours of startup business enjoyable. When he came to Zappos, he cultivated a similar culture and turned the online retailer into a workplace that’s so closely knit its employees now refer to it as the “Zappos family.”

But Zappos’s culture is unusual—so unusual that Hsieh once wrote a book about it—and for every employee who works in a low-key, anti-corporate environment, there are thousands more who toil in Office Space-type cubicles, surrounded by piles of TPS reports. There, befriending the boss might be a little more difficult. Although according to Linsday Cross, a writer in Fort Wayne, Ind., it’s still possible.

When Cross was 23, she worked as an office manager at a beer wholesaler and quickly became friends with a 27-year-old woman named Molly, who just happened to be vice president for sales. They both had children the same age, which meant that they had a lot of conversations about child care. They got along well, so they went out to lunch together, sometimes hung out after work, and quickly developed a regular, nonwork friendship. Then Molly promoted Cross so that she worked directly under her, a move Cross says “bothered some people who had also applied for the job internally. They thought she picked me because I was her favorite.” That made her work harder, which made her a better employee, and surprisingly, her friendship with Molly didn’t suffer for it. “She’s a very straight-forward person, so if she told me something wasn’t right and I had to do it over again, I knew that was something she’d say to me even if she wasn’t my boss,” Cross says.

Cross and Molly didn’t have many boundaries. But Thomas, 30, who works at a communications company in Dallas, has become friends with his boss’s boss—a relationship that requires definite rules. Thomas says his boss’s boss is significantly older than he is, but because he’s a single man with kids at college, he finds he has more in common with his younger employee than he does the married types who live in the suburbs. “We don’t have families to come home to at night, so we can do other things,” Thomas says. “We play pickup soccer together or go running, sometimes go out to dinner. But I’m not going to invite him to weekend parties.”

The weekend, it turns out, is the most common boundary that people designate in boss-employee friendships. There’s something about a Saturday dinner that’s different from one on a Wednesday. “I talk to my boss about my personal life more than I do some of my real friends,” says Caroline Coykendall, a sales representative for an insurance agency in Las Vegas, who is friends with her immediate manager. “But we’ll never have a ‘Hey, it’s Friday, let’s go get crazy on the Strip’ type of thing.”

O.K., so binge drinking in a casino is out of the question. But what about a lower-key activity, such as inviting someone over for dinner? While Patcher seemed to think anything I did would result in a Monica Lewinsky-style scandal, Herbers said that under the right circumstances, I could have my boss over for dinner. “But do you necessarily want that kind of friendship?” she asked. No, probably not. For one thing, I’d have to clean my apartment first.

Wednesday, 2 May 2012



Someone asked me why thoughtless lavish spending encourages inflation when it helps to stimulate the economy …

In one small example, buying an apartment you can’t afford then defaulting on the downpayment means that your thoughtless spending just helped to raise the price of properties unrealistically and returning the apartment doesn’t bring the price down. Instead, the developer can now sell that same apartment for a second time but at a higher premium. Your reckless greed just contributed to inflating property prices for the next buyer who really needs a home but cannot afford it now.

I don’t call that stimulating the economy. I call it selfish idiocy and poor financial management at other people’s expense.

In another small example, spending money on things you waste also sends inflation up. Buying more food than you can eat translates into wastage and disposal of wastage costs money. It also encourages the retailer to supply more and thus increases his spending to increase his inventory. Whatever the retailer can’t sell translates into wastage and lost revenue which means he will have to mark up to cover his losses. Such mark ups often stay up and don’t come down and the ripple effect goes backwards through the supply chain.
I don’t call that stimulating the economy. I call it selfish wasteful consumption with no regard for others who can’t afford the consequences of your gluttony.

In one last small example, buying a car you don’t need fuels the need to import more petroleum which in turn (in its own supply chain) raises the price of fuel. More cars also means more congestion which translates into higher ERP rates. Parking rates also increase and these rate hikes never come down.

To meet the needs of the demand by those who can’t afford it, car suppliers ship in more cars in anticipation of a high take up rate. When their cars can’t move, they can’t lower the price of the car as they have to factor in shipping costs, exchange rates and storage expenses. Cost of maintaining the unsold cars also help keep prices up.

Now do we even need to explore the consequences of the price of the COE?

I don’t call that stimulating the economy. I call it face pride and ego in spending money you don’t have for something you don’t really need only to impress those who don’t really care because someone else is always gong to have a bigger, better, faster and more expensive car than you. If you really need an expensive car to impress someone, then that someone is really not worth the sacrifice.

Then someone asked what we can do to make things better.

There is a lot that we can all do as a collective effort to control and even bring down inflation.
We can stop spending lavishly with money we don’t have! This goes back to the thoughtlessness I was referring to in my last posting Weekend Food For Though 28 April 2012; ‘Just How Do Singaporeans Live?’.

Lots of people here are heavily leveraged on their credit cards and spending beyond their means with no real solution to paying off all their debts. Others are over-leveraged on loans based on their current income capability instead of realistically looking at their long-term affordability even factoring in bad times.

We’re spending money we don’t have on things we don’t really need. We’re entertaining ourselves and making ourselves happy today without care for tomorrow. All this unnecessary lavish spending only encourages inflation.

There is a fine line between stimulating the economy with necessary spending and fueling inflation with wastage and unnecessary spending. This is called Consumer Sentiment. There are so many other reports that track consumer’s habits to tell us the state of consumer affairs; consumer spending versus consumer income, discretionary spending, consumer credit, inventory reports, services PMI, etc. All these reports are weighed and measured to give us other data like CPI and PPI and other PMI reports.

When you spend, you contribute to these statistics which obviously translate into stimulation or inflation. Singapore is no longer in need of stimulation. It is bloated and inflated with a credit bubble. When this bubble pops, it will be messy, very messy and a lot of people are going to get burnt. It happened in 2008, 2001, 1997, 1987, 1874 and many other times in history all around the world. Our problem is that it is happening more frequently now than any other time in post-war history.

The last time we had such a tight accumulation of bubbles and pops was in the early 1900s. It ended with the great equalization that was WWII. Before that and moving backwards in time, it was Roosevelt’s recession in 1937 then the Great Depression in 1929 then the Panic of 1907 and the Panic of 1893. We’re are probably on the precipice of another great catalyst for equalization.

Spend when you need to. Spend on what you can really afford. Spend on what you truly need. Otherwise, stop spending especially when you can’t afford to and don’t need to. Every contribution helps.

Remember that when you spend to impress, those whom you’ve impressed will not be there to bail you out when the good times end. So why bother?

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