This is Part 1 of a 3 part series on tips and tricks of managing family finances. 

With a growing family of 6, it is prudent that my dear husband and I are careful with all our resources.  Of course the root of all our resources is really money.  So, if we manage our money well, then each dollar would go a longer way in providing our needs.  This is not to say we turned into tight wads, but it is more not to squander our hard-earned money on poor purchases or extravagant spending.  What I am going to be sharing is based purely on personal experience and in no way, be viewed as professional advice.

In the first part, I would like to share some of the measures we put in place for our long terms goals and emergency financial readiness.

1  Have a will done
We have been advised early on in our planning by our financial adviser to have will done.  Being the sandwich generation of having 4 kids and 4 parents to support, it is imperative that we have a plan should anything happen to us.  Having a will done here in Singapore amounts nothing more than a few decisions (e.g. who to execute your will, who will be the legal guardians of the kids), some time, and a fee to the lawyer.  After going through it, I strongly recommend that you put this at the top of your priority list to safeguard your family’s future.  Another thing to note is that, after the will is done, it should be revisited every few years to make sure changing needs are met (e.g. additional kids, change in financial status)

2  Sort out your insurance strategy
I am no expert and leave it to them to advise on the various products on the market.  For us, we approached an independent financial adviser to help us evaluate this portion.  As he is not attached to any individual firm, he had access to products from many different companies.  As such, we were able to compare the features and premium attached to each product and evaluate more fairly what we need.  After the exercise we had the following in place:

- Life Insurance
  This was in place before we spoke to our FA, the decision is to keep it going as the coverage is fairly complete.

 - Health Insurance
  Even though we each have various forms of health insurance from our employers, we wanted to make sure everyone in our family is covered in a comprehensive surgical and hospital plan.  We figured, the payments for normal illness would be affordable but we don’t want to be hit with things like cancer, organ transplant, heart attacks, strokes, which requires long term expensive care. 

- Education Plans
  In Singapore, we contribute 20% of our gross income into CPF (Central Provident Fund) that we can use for housing, education, healthcare and retirement.  By the time our first 2 kids are ready to attend university, we should have enough to fund a local university education for both.  However, for our next 2 kids, the funds may already have been depleted.  Thus, we bought 2 education plans with an annual premium.  This will ensure that we have a plan in place for their future educational needs.

- Home Insurance
  Most Singaporeans, whether living in public or private housing, would have some kind of home insurance in place.  However, these normally only cover the external areas of the housing.  So any fire or theft INSIDE the housing will not be covered.  Losing all the valuables and especially our precious family photographs is painful enough.  This is something I bought to ensure that we get to replace the contents of our house. 

- Home Mortgage Insurance
  Again, most of us would have some kind of insurance if we are in public housing.  The premium is usually a really small price to pay.  Should one of the spouses dies or has a permanent disability, this insurance would cover for one or both mortgage payments.  For private properties, this is especially important since the mortgage is usually much higher than for public housing.

3  Start an Emergency Fund
The usual standard that you will read everywhere is to have at least 6 months worth of expenses saved up in your Emergency Fund.  My suggestion is to have a up to a year.  This is my reason – a large part of our income is going towards payments of mortgage, car and insurance premiums, thus, if I lose my job, I may not have much time to reduce that amount.  It takes time to sell the car or adjust the payment amounts on the mortgage and insurance premiums, which may take a few months.  Having an Emergency Fund of up to a year’s worth of expenses would give us the time we need to adjust the family spending and put in other strategies to increase income.

4 Invest Invest Invest
Old advice I know, but very important.  A lot of my friends choose to be conservative and not invest or invest in instruments that result in low returns.  Time is on my side, I choose to invest slightly aggressively while educating myself on the various instruments.  When I talk to my financial advisor, I am well informed and thus, able to make good decisions around what to invest.  This will make sure my money work hard for me in the long run.  Yes, we win some we lose some – the eventual goal is to have a good net positive on the returns of investment.  Not investing will ensure I will not have any growth at all.  In fact, with inflation, not investing is a sure way of ensuring my money drops in value.

5 Manage your debt
Seems like the most common sense thing to do.  This needs to be employed in tandem with the above strategies.  If not, all the growth that we gain will be eroded our debts.  My debts at this point of my life includes housing and car loans – these are relatively low interest loans.  I avoid all kinds of consumer debt e.g. outstanding balances on my credit cards or credit lines.  I pay up every month.  I go as far to consolidate my credit cards and have no credit line.  If you have a healthy Emergency Fund, you really do not need a credit line.

In the next part, I will be covering tips and tricks that I use on a daily basis to stretch every dollar we earn.

Note : This is a guest post from Dear Husband, who painstakingly put this Very Useful post together.  Thanks Dar!

Having just completed the exhilarating exercise of purchasing a private property in Singapore, I find it to be a much wilder adventure than buying a HDB flat. It was an eye opener and a learning experience for me, and I would like to share in here what I have learnt.

The Prep

Do your homework first before you start your house hunting. Read up on the rules and regulations that will affect your purchase. If you currently own a HDB flat, can you sell your flat or own a second property? If you are a foreigner, what are your restrictions? If you are a resident, how much CPF can you use? Trust me, these documentation are not easy to find. And the frequent changes to the regulations make things even more confusing. In my case, several sources (property agents, friends, etc) had told me different versions about how much CPF money I could and could not use. If in doubt, do not be afraid to approach the relevant authorities directly at their office counters, through emails or enquiry lines.

Also, talk to several banks to learn about their home loan packages. There are a few things you need to find out: the difference between fixed- and variable-rates packages, lock-in periods, the maximum loan percentage, and the loan tenure. Ask their advices on the upper limit of the property price you should target, based on your family income and expenses. Are there any extra perks if you also sign up for their renovation package? If you have also signed up for some other accounts in that bank, are there any inter-linked benefits?

Finances

Financing a property is not as simple as it seems, if you want to get more bang for your buck. Typically there are two portions to the financing: the loan, and the balance cash (including CPF). For the loan portion, you have to decide how much loan to borrow, whether to go with fixed or variable interest rates, and how long to lock in your loan. Make some projection of your current and future financial status as well. For example, if you do not foresee any realistic possibility in making a substantial repayment of the loan in the next two year, it may be a good idea to go for a two-year lock-in period to reduce the interest. As for the cash portion, a commonly overlooked figure is the various taxes and fees (such as stamp duties). Some may also consider taking up a bridging loan to temporarily cover the balance cash. But whatever financial instruments you sign yourself up for, always go in with your eyes wide open and understand what you are getting into.

Hunting Plan

It is impossible to visit every listing on the market. Are you going to engage an agent (with a fee, of course) to scout for you, or do it yourself? If you are planning to pour through the classified ads, Saturday Straits Times is a must-read. The Internet is also a good source. I personally like http://www.iproperty.com.sg/, http://www.propertyguru.com.sg/ and http://www.streetsine.com/, where properties are listed on a map. StreetSine.com has a very interesting feature called StreetSine Quality Index (SQI) for each listed property, which rates the convenience of the property’s amenities in terms of trains, supermarkets, schools etc.

Make a list of the important criteria you are looking for, like transport, amenities, food, number of bedrooms, price, etc. That will help you to zoom in faster to what you want. If you are new to property hunting, I suggest this: in the beginning, go for a few open-house of properties that you think roughly fit your requirements, and get a few of what to look out for in a property. Then gradually, filter and amend your criteria as you go along.

One criterion whose importance is sometimes overlooked or understated is the property tenure: 99-year or freehold.
http://www.iproperty.com.sg/iexpert/Question.aspx?ID=500 gives a good comparison between the two.
The Leasehold Table in http://www.sla.gov.sg/doc/faq/How%20DP%20is%20calculated.pdf will also give an indication of the depreciation of leasehold property against freehold.

Eventually, you will be clear enough about what you want, and you will have learnt how to read the fine prints in property advertisements. Then you can just browse through market listings from the comfort of your home, and only visit those that are closer matches to what you desire. You will save more time this way. When you are viewing a property that turns out to be unsuitable, be open to share with the marketing agent the criteria you are searching for. You never know, but the agent may have another property up his or her sleeve that is exactly what you are looking for.

For Self-Stay

There are many houses you just cannot help falling in love with. And there are the impulsive buyers who are enamored, take a mental snapshot of themselves in that beautiful house, and put down a cheque right away. What they do not imagine, is a mental video of themselves living in the house, in the neighbourhood, going to and from work, sending their children to and from school. A heavenly house may turn out to be hellish to live in. I know of more than a few friends who bought a house on one end of the island and travel daily to the other end to work or fetch their children to their caretaker. So, if you intend to stay in your new property, prioritize your criteria carefully, and stick to the plan. Give yourself a cool-off period before signing on the dotted line.

Voila!

When you have found “the one”, make good use of the cool-off period to also research on your property of desire. Is it worth the asking price? Compare its price per square foot (PSF) to those in the same project, and to other similar ones in the neighbourhood. It will be even better if you can find the price at which the current owner bought the property you like; you would then have a better gauge of the bottom-line in negotiating the price. https://www.ura.gov.sg/real_estate/main.jsp allows you to search for any property transactions in recent years. You can also buy a Home Report from http://www.streetsine.com/ that gives you many interesting information and analysis of any property. The report also includes details such as the official property size; this once saved me from being conned by a seller agent who claimed a certain property was bigger than it really was. From the URA website, you can also check up recent transactions with caveats lodged to ensure that the property has not just been sold. Property scams are not unheard of, so it pays to perform due diligence check on it. http://www.iras.gov.sg/irasHome/quickLinksListing.aspx?typeID=804&id=870&cid=324 also allows you to check the owners and annual value of a property to make sure whoever is attempting to sell you the property has the right to do so.

Other details you may want to find out before making a decision are its regular maintenance fees (for apartments and condominiums), and its valuation. The property valuation affects how much you can loan from a bank, so if your banker valuates the property at a lower sum, you can ask the agent who is marketing the property. Most marketing agents will have lined up a list of banks that can match up to their valuation. And if you are looking at en bloc resale opportunities for a condominium, or rebuilding or extending a landed property, you will have to find out the property’s plot ratio (more on this later) and height limit. A good source is the URA Master Plan, found in http://www.ura.gov.sg/. The Master Plan will also show any major planned changes to the neighbourhood that may affect the future value of the property. Some experienced buyers will also attempt to find out about the developer of the property to check if they have a history of development quality complaints.

Finally, keep in mind that whatever trends and analysis you extracted from your research are subjective to individual circumstances, and plans are often subjected to unforeseen changes, so you will still have to exercise your own judgment from case to case.

Other Tips & Information

I found this article to be insightful:
http://www.hotvictory.com/ten_deadly_mistakes_that_buyer.htm.

http://condo.singaporeexpats.com/ provides comprehensive information on condominiums and apartments in Singapore, including a very extensive database of floor plans and site maps. You can easily determine if the unit layout suits your need before even visiting the place. However, physically viewing a unit of interest is extremely important, to see the context and environment which is not reflected in a floor plan. At the very least, visualize how the unit fit into the site map and what are the units and facilities around that unit. I have seen ground floor units with the common swimming pool leading right up to its living room window sill; imagine how noisy it will be when you’re watching TV. I have visited a unit that, on the floor plan, looked very nice with a wide balcony and big roof terrace, only to find out that the is inset into the block such that the balcony is flanked by the long walls of the neighbouring units and the viewing angle is just about 90 degrees wide! And what was worse, the roof terrace actually overlooked the roof gutter of the neighour unit, filled with dried leaves and rubbish. So, if possible, try to see for yourself what you are planning to buy.

Plot area, in a nutshell, stipulates how much living space (GFA) is allowed on a specific plot of land. http://www.ura.gov.sg/circulars/text/dcdgfahb_d0e4.htm specifies exactly how to compute Gross Floor Area (GFA) and Plot Ratio. For example, with an allowable plot ratio of 2.0 for a 5,000 sqft land, you can build a 2-storey house or condominium, with each storey exactly 5,000 sqft wide; or you can build a 4-storey house with each storey 2,500 sqft wide. So, this means that if you buy a condominium in a project that has not reached its maximum plot ratio, there is a possibility that some developer will want to buy the project site en-bloc and then redevelop it to a high plot ratio.

That sums up my adventure in hunting for a house. I wish you all the best in your hunt too.