Happy Year of the Rabbit and the "secret" of 1M50

The Year of the Rabbit is probably a good year for banks, with rising interest rates boosting their bottomline somewhat and many rushing to organise events after a covid induced hiatus over the last few years.

All the lunch slots I have post Chinese New Year are already taken and restaurants are running at full capacity and unless you are a regular to the good restaurants, you can't even get onto the waitlist. I even turned down a few mass CNY dinner celebrations organised by the banks.

I have been getting more CNY goodies and red packets this year as well. 

Perhaps everyone is wishing for a more docile Rabbit as the Tiger had been rather ferocicous, creating havoc across all asset classes from traditional stocks and bonds to forex and crypto.

Let me show yhou some of the empty red packets I received this time. 

Which one do you like best? ...

• From left to right (top) - Credit Suisse, NB, DBS TPC, DBS Treasures
• From left to right (bottom) - Franklin Templeton, Mizhuho, SCB, UBS

I have a weakness for red packets that showcase that year's zodiac. To me, it seemed more sincere as no one can't recycle the red packets until 12 years later 😂 but of course, this wouldn't sit well with the ESG proponents as it is made for one time use.

The red packets from UBS - I dare you to give to your grandparents ...

The "worst" red packets I received was from UBS. The colour combination coupled with the words 福禄寿 is a tad to similar to what people burn instead of give... (you know what I mean).

My last blog post showing my CPF balance is a post that garners the most comments or likes. Some favorite questions include, how old I am (i.e. at what age I achieve this) and whether is it because I have used CPF to buy properties etc. 

Actually the secret is not about buying properties as whatever amount you used to invest in property, you only pay back the capital and the interest it would have earned if you have not used it. You don't top up the CPF with capital gains. 

The secret to achieving $1m before turning 50 is actually compounding from an early stage. Meaning you try to make use of the higher interest rate in the CPF Special Account and you try to voluntarily contribute until you hit the annual cap when you are younger. The earlier you do this when you are young, the faster it compounds - that is the secret. Dollar & Sense has an article but I can summarise them in a few simple steps:

1. Find a job that pays you at least $6,000 
2. The job should pay you a decent bonus to hit the annual cap
3. If you can't hit the annual cap through bonus, you can do voluntary contribution until you hit the annual cap. Contribute to CPF SA first followed by CPF OA
4. You can also do voluntarily one way transfer from CPF OA to CPF SA if you have not hit the minimum sum
5. Start repaying the amount you have drawn to pay for the property. While it is debatable now whether you should still do this since borrowing from CPF are lower than the bank mortgage but the advantages are "forced savings" and "risk free" compounding
   

Viola - before you knew it, you hit the $1m mark before your 50th birthday

As mentioned in my last post, I was going to optimise my returns for CPF by investing in T-bills.  I applied for $650,000 with a competitive bid of 4%. I was provisionally allotted $107,820.68 which means I will receive approximately $110,000 6 months later. 

I set a limit of 4% as I felt that it is not worth the time and effort if it falls below that. I also didn't get the full allocation I applied for (See results below). The interest I earned for 6 months is $2,179.32 and the interest I earned if I left the amount alone was $1,572, meaning I managed to arbitrage $584.

Results of T-bill 

If you looked at the results annoucement, the demand was pretty strong despite the falling rates. 

Today is CNY eve, hope you are gathered somewhere for your reunion dinner.

Here's wishing all my readers a wonderful year of the Rabbit with great health and happy returns. 

祝您与家人兔年幸福美满，一帆风顺，事事顺心，财源滚滚！