Saturday 5 September 2020

Personal Updates- Boss Finally Restores Part of Initial Pay Cut (咸鱼大翻身)

Earlier in March'20, I mentioned that I was made to take a "Voluntary Paycut" of 10%. After that, it got worse and at one point, my company implemented unpaid leave and pay cut of up to 30% off. Many of my relatives and friends told me that I am considered lucky to still have a job in the midst of all this COVID-19 economic lock-down which devastated many businesses. I was forced to dig into my personal savings for some daily family expenses such as insurance premiums, parent's allowances and kids' tuition. Luckily, for September 2020, good news finally came, my Boss suddenly became generous and reduced the 30% pay cut to only 10%, as our Company's business begin picking up again after the end of the Circuit Breaker.

Three Observations During This Recession:
1. Best to work for the Singapore Government- stable iron rice bowl! My wife, a government servant, only got reduction in bonuses paid out. But no reduction in monthly salary at all. She even told me that my Company sucks for reducing pay of its employees and I looked at her incredulously. I told my wife that in the commercial sector, most of the businesses implemented some form of pay cut especially for those in hospitality & airline sectors as this is one of the worst economic crisis ever faced by all in Singapore. 

2. It is recession now. But surprisingly, you will not be able to find much empty warehouse space in Singapore. My Company is having an extremely challenging time trying to get an empty warehouse for an upcoming project but most of all major players like Capitaland Ascendas, Ara Logos, Mapletree, AIMS AMP warehouse spaces are not available till end of the year. Reason being that the government agencies seems to have booked temporary storage for excess stockpiling of essential goods till year end and may extend up to at least 1st half of next year. So, seems holding on to logistics stocks is a safe option as government spending is being injected to sustain warehousing space. Also price of warehousing space apparently went up compared to 1-2 years back at this time of recession (S$1.05 psf now becomes S$1.20psf)...another weird phenomenon that has me scratching my head. 

3.  Lightning speed rate of decline in stock price for airlines and hospitality stocks. It is incredible to see SIA plunge to an all time record low price. Also, hospitality stocks were severely hit. Eagle Hospitality Trust went into bank loan default in less than  9 months after IPO. Moral of the story is to keep exposure to such stocks minimum if one cannot stomach such drastic decline, in particularly, during a pandemic induced recession. Pandemic induced recession may not be just a rare event. We already have a scary episode in 2003 SARS crisis, 2009 H1N1 which are smaller scale outbreaks but which nevertheless also caused much severe impact to economies. So once a while, there will be outbreak of such diseases in the foreseeable future.

Other Thoughts
When times are good, the boss gives only 2%-3% increment. When times are bad, the boss cut your pay 30% and even remove the expected bonus to be paid out from previous profitable year in the name of conserving cash-flow. Therefore, one should ultimately depend on one own self and strive to achieve financial independence as soon as possible. Game it and then forget about the rules entrapping one at work.        

Wednesday 2 September 2020

Whole-life Critical Illness Insurance Plan Is A Heavy Boulder to Shoulder

What happened to the talented Chadwick Boseman can happen to anyone. Chadwick, the Black Panther superhero, died of colon cancer at the young age of 43 after fighting it for 4 years. I was sadden at the passing of Chadwick who is still so young and has many more to offer to the World. The growing rate of this terrible disease in young people is alarming. Critical illness policies are thus important and essential for protecting yourself and also your loved ones while one is still in the prime of one's live. During my last posting on my struggle with whole-life insurance policies in March 2012, I have briefly mentioned the 3 whole-life critical illness policies, namely, (i) NTUC Income, (ii) Aviva and (iii) Tokio Marine Life, that I have been holding. I like the NTUC Income Living Policy series as it generates good cash value over the many years that I have been holding. However, this is a traditional whole life policy that one is required to pay until age 85 years old unlike limited payment products that is the norm these days. I simply cannot envision myself paying S$1,500 per year up till 85 years old. 

Whole-life CI is necessary but very expensive and a constant struggle to maintain
I was extremely happy when my Aviva critical illness coverage policy became fully paid up in 2017. It feels as if a big stone was taken off my shoulder. However, the bad news is that the agent which sold me the Aviva policy convinced me to sign up for a new AXA plan with coverage of another S$100K for early critical illness coverage and this was another limited payment plan of 15 years at S$2,484.90 per annum.

2 months ago, I decided to terminate my NTUC Income Living Policy as I have enough of paying and paying non-stop to sustain this traditional whole-life plan that does not make sense to me since day 1. I was happy to take out the cash value that had built up and converted them into my emergency cash on hand. This also means I get to save S$1,500 every year from paying NTUC Income.

Life is full of contradiction
The strange thing is that after I cancelled the NTUC Income whole life policy, I suddenly felt a tinge of regret. I know it sounds ironic. But I then decided to sign up for another standard critical illness policy with Prudential but this time round, I opted for a 15 years term policy for S$100K of coverage for normal critical illness at a fraction of the price of whole-life for only about S$400 per annum. I guess I just want to have a peace of mind to have something extra before my kids finished their studies and are able to stand on their own feet.

For those who just started work, paying for whole life critical illness insurance is a huge burden with the low start-up salary package as one strives to work his or her way up by building expertise and on the job experiences. But guess it is an issue of having sufficient financial discipline to endure the hardship upfront and enjoying the fruits of the labour after the policy became fully paid up where  one eventually gets the protection for life.