What The Pandemic Has Taught Us About Personal Finance [TFC 123]

But that’s for them to talk about. At least on where we are at, I would like to congratulate you that you survived two years of pandemic. All these pandemic lockdowns, these strategies that the governments are using and how it has affected our lives. It’s a very, very real thing, right? So congratulate to you, congratulations to me, we all survived these two years. 

At this juncture, I feel like there are some things that we can come together to review and distill some lessons from this pandemic period, especially financial lessons through this period of the pandemic. Welcome back.

Good morning, everyone! I welcome you to another day with The Financial Coconut. In our podcasts, we’ll be debunking financial myths, discovering best financial practices and discussing financial strategies that fits our unique life. You get it, ultimately empowering us to create a life we love while managing our finances.

My name is Reggie, your host and aka your Chief Financial Coconut. Today, we’re going to do something simple. The world is coming to an end… no, no, no, the pandemic is coming to an end. The year is coming to an end and I would like to distill some of the lessons that we’ve put together through this pandemic period.

Okay, so it’s been two years of the podcast and also two years of the pandemic. I hope you’ve learnt some useful stuff and I thank you for staying around and spreading the podcast. That’s amazing. I’ve definitely learnt a lot of stuff also. Yes… Because of all of you, because of your questions, your queries, your concerns, I have actually pushed into boundaries that I never thought I will be concerned about. 

A lot of those things actually came from you guys because the truth is, if you’re an individual, you only really care about what you need to care about or what you actually care about. But, because of me and the relationship with you guys, with you Coconuts, it becomes a reality that I need to learn all these other things so that’s great. Great for you, great for me. And also, I’ve interviewed a lot of people along the way. Of course, now Andrew takes over Chills so that gives me more bandwidth to do other things. 

By the way, these two years have been very insightful and quite a learning journey for me. I hope it has been a learning journey for you too. We went from very geeky stuff about investments to some things that are a little too high level that some of you may feel a bit alienated so I apologize for that. We’re going to try to re-calibrate the flavour of Tuesday’s podcast and if you want to geek out, go to the other shows. We have a lot of new shows coming up and a lot of shows ongoing to share with you and to meet you at different standards so that as you progress in your investing journey, or as you progress on your personal finance journey, you get all these different places. 

We even went to the level of talking about some personal development stuff like how do you communicate with people, what are your thoughts, how do you look at your goals and all that. A lot of those things exist and I think it’s kind of correlated at some level because if you think about it, you want to manage your personal finance well, you’ve got to first learn about yourself, you’ve got to manage yourself, right? I think that’s all kind of put together. 

And so, in this pandemic process, these two years, a lot of new things have happened to us. You have lockdown(s), you cannot go out, you shrink your social circle, you move on digitally, you start to work anywhere you are. You see the stock market move, prices move around. Some people made a lot of money through this process, some people may have lost some money, some people is just like “what’s happening?” Whatever, whatever it is, I’m pretty sure there are a lot of things that we can learn together.

Today, I’m not going to cover everything. I’m going to discuss three lessons but if you have any other things that you’ve learnt, come to our Telegram group, share with us. The first thing through this pandemic that I have vividly recognized, and you may have heard this on the podcast from time to time, but this is the first pandemic lesson that I think we all can keep this vividly in a very clear fashion and that is, we all have a repertoire of needs but there are many mediums or many ways to go about meeting those needs. 

This is something that I’ve been talking about for a very long time. I want us to move away from this idea of needs versus wants because the problem with needs versus wants is the standard evil bucket problem. Where you put together a bunch of things like sports car, condo(minium), handbag(s), clubbing, restaurant night(s), you put together a bunch of things that are along the lines of a more luxury, more high quality of life or whatever high quality of consumption… not say quality of life. You put all these things together, you put them in a bucket and you call them evil and in this evil bucket, you call it a want. 

To me, I am trying to move very far away from this good versus evil kind of idea because it’s firstly too simplistic and also, there’s a lot of moral judgment in this process. I would say it may even become a problem because it sets unnecessary boundaries where you will not cross. In that sense, it limits your experience. It limits your understanding of things. It limits your progress on many level. All these good versus evil bucket segregation, I’m trying very hard to move away from a lot of these things and I hope you’re following with me.

The reality is we all have needs. We have a varied hierarchy of needs. Of course, I’m borrowing Maslow’s hierarchy of needs. You can go and read up about it. Don’t come to me with the “oh you know, some people dispute it”. Of course, every scholar out there is disputing some theories. That’s how they establish themselves.

Anybody that brings you some research, you can also take another research and throw back at them and then counters it. It always exists. That is the scholarly world and that’s a different discussion. Just borrowing the commonly accepted Maslow’s hierarchy of needs, you realize that some needs are (of) higher order: social acceptance, relationship, love, actualization. All those things are higher orders and a lot of these higher order needs, they tend to fall in the “luxury” bucket or the “wants” bucket. 

Having the iPhone, the latest iPhone is… do you really need the latest features? Come on, even I’m using iPhone 12 or was it iPhone 10? Okay, whatever. I’m using one of the newer iPhones and I’m not using a lot of features. I didn’t even know there’re all these things, I bought a new Mac Air and I’m like okay, there all these new features, I don’t know how to use them. Are you really buying the latest stuff to get all those gadget-y experience and all these extra features?

Some of you may be, but I do think that a lot of people, we just want to be trendy. We want to be hip, we want to be socially accepted that way. We want to be the talk of the town or we want to be like “oh, all my friends have, I also want to have” and what’s wrong? There’s nothing wrong with that. Unless you frame something, there is no right or wrong. Let’s move away from moral ideas, let’s move away from those things.

What is important to note is that given the myriad of needs, all these needs that you have, there’re actually a lot of ways to go about achieving it which is where the mediums come in, or the ways to achieve the needs come in. You see it… you see it very vividly during this pandemic. In the past, your social need requires you to meet your friends, hang out. And then you cannot, then what do you do? A call… maybe the call, where you call each other… Truth is, the millennials actually… We’ve already went into the texting era, the tendency for us is we text rather than call. 

But a lot of people have actually tried calling each other, whether is it phone call or online call or video call or whatever, FaceTime. It is a way of achieving that need, that socializing need that we all have deep within. It may not be the best medium, but it is a medium. At least it helps you to go about achieving some of those needs. 

I’m sure for all of you in these two years, some friends may have sent you some gifts, sent you some pastries, sent you some cakes or sent you something here and there in this whole process of this pandemic and all (via) delivery. This is another medium of sharing with you that they love you, that they care about you. I want you to see this thing where it is need + medium. Based on your needs, you go and find the medium to achieve it and not need versus wants. 

By extension, with the clarity that it’s needs + medium, you can always find a more pocket-friendly medium. If your goal is to save some extra money or if your goal is to raise a little bit more capital over this year, there’s always a more pocket-friendly medium, which is more affordable. 

Community classes… I shout out to all the community centres out there in Singapore. It’s amazing. Please go and use it. It’s very well-run and there’re a lot of extra things there. Whether is it classes, whether is it a boba tea shop or whether is it, what have you… The community spaces are one of those very, very affordable mediums that I don’t know why Singaporeans are not using as much. I would highly encourage you to use it. 

Also, the public library. I’ve said this again and again, NLB (National Library Board) must sponsor me. The public library… they spent a lot of money. For all of you that didn’t know, all the people that publish books in Singapore or sell any books in Singapore, you can find in the public library because to get a license to sell the books or publish the books in Singapore, you have to donate at least two books to NLB to get it vetted and confirmed and then you’re part of the eco-system and then you can sell the books openly. Recognize that and go and do it. Use the library. It’s free and beautiful. There are a lot of mediums that are more pocket-friendly that I think we can use.

To me, this is a very clear experience through these two years of pandemic as there are a lot of needs that we needed to achieve, that we needed to fulfill but the traditional ways that we go about doing it is not working so we find new ways, we find new mediums to go about pursuing it and I want us to keep innovating and create new mediums, explore new mediums to achieve the varied needs that we have. Sometimes to be a little bit more pocket-friendly, you don’t always need the luxury stuff or the more expensive (stuff). There are many other ways to achieve your needs. 

Which brings me to point number two, pandemic financial lesson number two, and that is, increased liquidity will definitely lead to inflation. You may not agree with me but I will give you a little bit more clarity after a word from our sponsor. 

Okay, you may come to me and say “Oh, you know, Reggie, actually our Consumer Price Index is not very high. The recent numbers… 1.5% or 2%”, or something like that. We don’t see runaway inflation, we’re not seeing high inflation and that is the problem. That is a problem because the indicator in itself is different when you see it across all the different countries. The US have a certain way of measuring inflation, Australia has a certain way of measuring inflation, Singapore has a different way of measuring inflation and I lead you to the MAS (Monetary Authority of Singapore) website. Just go and look at how they measure inflation. 

Allow me to read you a paragraph from the MAS website, in one of their documents. “CPI: Consumer Price Index. The CPI is commonly used as a measure of consumer price changes in the economy. It tracks the changes in prices of a fixed basket of consumption goods and services, commonly purchased by the general resident households over time. The CPI covers only consumption expenditure incurred by resident household.” This is the first thing. “It excludes non-consumption expenditures such as purchase of houses, shares, or other financial assets and income taxes.”

I’m not blaming MAS, I’m not saying anything, but I’m just wanting to point out to you that in the media, you keep hearing inflation, inflation, inflation but the media is led by the US media and they measure inflation in a very different fashion. But in Singapore, we measure it in… without house, that means your HDB (Housing Development Board) not counted, your property not counted, your shares not counted and the angmohs (Westerners) that live in Singapore, no matter how they spend, not counted also. Nowadays, a lot of Chinese and Indians and a lot of Asians, wealthy Asians that live in Singapore. However they spend is not counted, but however they spend will spill into effects in Singapore’s life, in Singaporeans’ life. 

You start to see enclaves, rich enclaves but that’s a whole discussion another day. I specifically want to point out that why I say an increase in liquidity will definitely breed inflation. That is you see inflation happening in the financial markets. If you want to see how inflation moves, instead of seeing it as one thing, like one indicator, I want you to see it in three baskets: goods, services, and assets. When is (it) a situation where goods get inflated? That means your rice, your meat, the normal stuff that you get day-to-day… what is the situation when these things, prices move up and the inflation goes up? 

The higher chance is when your home currency crash. It’s not when there’s increase in liquidity. Venezuela, Iran, even Turkey today, they’re going through some problems… is when their home currency crash. Let’s say, Sing(apore) dollar crash. Suddenly, our currency is so small but we still got to import all these things so all the things that we import become very expensive. That’s when the goods’ prices will move up and inflation will move up accordingly based on that.

Honestly, today you make a little bit more money, you start to stock rice? You start to buy canned beans? You don’t do that, right? That is the highest probability where you see goods prices move up. Where you see inflation pressure on goods is when home currency crash.

For services, it’s a relatively stable situation. Of course, when home currency crash, when goods move up, when goods become more expensive, services will move along. Generally, they have some in tandem, but the real upward pressure of services really comes on the affordability of the local population. That means, the median wage is more aligned to services’ price increase. 

We will not expand it here today, but you just think about it. You go Whampoa today, you can still find $5 barber. But (if) you live in Tampines, maybe $10, $12 barber these days. You go to Orchard, there’s only a $50 hairdresser or a $100 stylist. It is very regional and you start to say, “but it’s the same thing, cut hair”. Okay, okay. If you’re a stylist listening, don’t blame me, don’t flame me. But the reality is it’s a haircut but why is it in different places, it is priced differently?

Services are very tied to the local population unless it’s exportable services like banking, law, business management. Those things are different. Most services are very tied to the local population so the median wage of the particular population is the underlying indicator as to why inflation will move up for services. 

But, financial assets… the underlying causality in my view, the underlying causality is when there’s increase in liquidity. When interest rates come down, when there’s a lot of money sloshing around, they all move into property market. They move into the share market, they move into the Bitcoin market, they move into cryptocurrency, they move into all these kinds of investment assets out there and you see it, right? You don’t need me to tell you. Through this pandemic, you learn it. It’s very, very clear. 

That is why I am a strong believer…. Don’t go and look at all The Edge or what other weird people are saying. I’m a firm believer that when there’s an increase in liquidity, it will cause inflation and it cause inflation in the financial markets first, not inflation in goods or services.

What does it mean? It means that when there’s increase in liquidity, generally all assets will move up. Inflational pressure on financial markets… it’s a good time for you to make money if you’re investing and trying to be more opportunistic. But at the same time, it also means that your property prices will become more expensive because property is not included in the CPI.

I reiterate, the CPI is Consumer Price Index, which is the leading indicator of inflation. All the numbers that are going on the news: 5%, 2%, 1%, all (are) called CPI but different people are measuring it differently and you should care about it. Why you should care about it? Because it affects your property prices and because it is not part of the CPI. It looks like “oh, okay. CPI, no problem” but it affects your HDB’s price. Can’t you tell? 

Like it or not, increase in liquidity will cause inflation but primarily in the financial assets class which is your shares, your property and all that jazz. Whether or not will that spill over into the real economy, will that make goods more expensive, will that make services more expensive, I don’t know. I don’t know enough to give you that kind of inference. 

But at least in the future, when we start to see people do that, we see governments do that: increase liquidity, pump more money, lower interest rates, then you will know that going forward, the financial markets will come back, will move up. I think that’s where we are. Which is also why I’m a firm believer that as interest rates climb up, the financial markets will shrink. That is… We will see, we will see. By the time this episode goes out, the Fed (Federal Reserve) will have already adjust(ed) interest rates. By then, you will know. If interest rates go up, you see the financial market shrinks. That’s what I believe in. 

Which brings me to the third pandemic financial lesson for all you Singaporeans listening, and that is I believe that a lot of Singaporeans have a highly concentrated portfolio, not in a sense of just investments. I know a lot of people, they invest in REITs (Real-Estate Investment Trusts) in Singapore, they invest in dividend stocks in Singapore and they’re very iffy about investing abroad. That’s a whole different discussion, we’ve done a lot of that ongoing. 

What I have recognized in this process of this pandemic is that your job is tied to a Singapore company, your flat is tied to a Singapore company. Your kids go to a Singapore education institution, your investments are also tied in Singapore and your retirement is tied in CPF (Central Provident Fund). It is not technically a problem, it is just an observation. 

As an observation, when you realize that Singaporeans have a very highly concentrated portfolio all in Singapore, you ask yourself: is this risky? I would say yeah, a bit. A bit risky. Which is why more and more of us, we’re investing abroad, we’re investing in different countries. You can be working for a Singapore company, your income is invested in a Singapore company. Essentially, the underlying success of your life or your income is the underlying success of the Singapore company, which is the underlying success of Singapore. You’re already tied to Singapore’s success and your retirement money is also tied to the CPF, which is tied to GIC (Government of Singapore Investment Corporation) at Temasek, which is… You get the idea. 

What I’m saying going forward is that, maybe more and more Singaporeans, we should explore a broader horizon abroad. Maybe we can work for other companies, don’t need to be a Singapore company. We don’t… maybe we don’t even need to work in Singapore. We can still get a flat. We can still put our money in CPF because we have to. But can we put some money from CPF to invest abroad? There are a lot of options these days. 

I want you to realize that a lot of us, we have a very highly concentrated portfolio in Singapore and what does that mean? When you have a highly concentrated portfolio, if the underlying portfolio moves up a lot, you see a lot of success. You make a lot of money because it’s a concentrated portfolio. We have established that with Chris Susanto from Re-thinkWealth… so go and check out one of the earlier Chills episode. If you have a very concentrated portfolio, if the underlying investment, which is Singapore because Singapore company, Singapore house, Singapore retirement fund, Singapore stock market, everything… The underlying factor is Singapore. If Singapore does well, you’ll do very well financially, emotionally, everything… Career, everything, which leads to financial. 

Which is why, there’s a big bunch of the boomers and the pre-boomers… who do you call that? What do you call them? The Pioneer Generation, the Merdeka Generation, the boomers. They are so sold on Singapore as an idea, but let us not forget that Singapore at that point in time is a growth company, it’s a growth stock. Just so happened this growth stock worked, that’s why all of them like, “whoa! They do very well, they’re growth stock”. 

But now as a… If you look at it from a company’s angle, Singapore is a matured company. We’re struggling to even have a very concentrated strategy because there’re so many interests, so many people that want to do so many different things. 

We want to go green but we have very big oil and gas industry here. For a very long time, we didn’t want to go into the vices then after that, now we go into the vices, we have gambling but at the same time, we try to tax the people. There are many different things because it is more established. Let’s just put it this way. This is a natural order, it’s not a moral judgment. Natural order where, when a company becomes bigger, it becomes mature, there’re a lot of incentive structure, there’re a lot of incentive problems. Which is why, a lot of people, when they work in MNCs (Multi-National Corporations), they are very unhappy because you are a small fry within this big pond and they have a lot of different things going on. 

It’s the same idea when you look at Singapore today. It is a matured company. It is a matured country. It is not a growth stock. If you’re very concentrated in a matured company, at best you get dividends. At best, you get very good dividends. Dividends like CPF money move up, your REITs portfolio continue to grow, your income move in tandem along with the medium wage but you’re not going to see bursts. You’re not going to see fast moving growth anymore. For all of you that are okay with that, great. Go ahead. Singapore’s a great place. 

But for all of you that are trying to experience that massive growth, you want to see the change in your life, then you really got to question: in a matured company, which is Singapore, Singapore Inc., is this the place to be? This is the question mark. Of course, if you are in a growth area like tech, like whatever you know… If you’re in those areas then okay, everywhere you go, you’re growing because there’s a broader order, but I’m talking about most of us.

People in accounting, people in law, business management, services sector, hawker, all these people, they are not in growth sectors. All their performance and their progress is tied to the growth of the country. The growth of the country is in a matured situation and we are going through that process. So, Singaporeans having a very concentrated portfolio on Singapore, you got to question yourself: is this the way to go for you? If it is, cool. Good. 

So yes, I think these are the three core pandemic financial lessons that we can recognize and we can learn. Through this situation, some things become a lot, a lot clearer. I’m sure there are many others and all these others, you can come to to our Telegram group and share with us. 

I’m going to sum it up today. Number one, that is, we all have many needs but there are many mediums to go about achieving it. Avoid putting in the needs and the wants, because a lot of people, when they look at wants, it’s an evil bucket. Once you put anything as evil, you don’t try it, you don’t test it, you don’t stretch your boundaries. You will not be able to experience it in a fuller fashion. 

With that, I want you to see it with needs + mediums. In Singapore, in these two years lock-down, I’m sure you recognize that there’re many mediums to go about achieving the varied needs that you have. Whatever that you used to do, there are new mediums to go about achieving those needs. 

Point number two is that increase in liquidity will definitely lead to inflation. Not inflation that’s being tracked like the CPI, which is what Singapore track(s), not including housing, not including shares, not including investments but you see the increase in liquidity, mixed capital, very cheap and it pushed up all the assets. All the financial assets out there are been pushed up, even your Bitcoin, even your cryptocurrencies. This is something that I think we all should be very aware of going forward in the future. When you see central banks, you see any government try to increase liquidity, then you know financial assets are about to move because there’s more money here. 

Point number three is a lot of Singaporeans have a very highly concentrated portfolio in Singapore. You work in Singapore, your house is in Singapore, your retirement is in Singapore, everything is Singapore. In a matured company which is where Singapore is, concentrated portfolios only give you dividends. Is it okay with you? If it’s okay, great. Good for you. If you are seeking high growth, high progress, then maybe Singapore, as a place to put all your eggs in a basket, may not be the place to be for you and with that, I hope you learnt something useful today. See ya.

Hey, I hope you learnt something useful today and truly appreciate that you took time off to better your life with The Financial Coconut. Knowledge is that much powerful and interesting when shared, debated and discussed. Join our community Telegram group, follow us on our socials, sign up for our weekly newsletter. We are doing a weekly newsletter reboot. We are going to have a lot of information within the newsletter. 

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With that, have a great day ahead. Stay tuned next week and always remember: personal finance can be chill, clear and sustainable for all.

Okay, today is the last episode of 2021. I hope you found it useful. Some of these points, actually all of these points, I spent a lot of time to think about it because I think it’s a worthy discussion and there are a lot of underlying discussions that we can have that don’t need to sound very complicated, very economics, too complicated.

There are actually a lot of lessons that we can draw from nation to business to investments to personal life. You can kind of put some of these things together and you can see it in a rounder fashion rather than harp on certain beliefs or certain things that are being pedalled in mainstream media.

That’s it for this year and I want to give you a real thank you, a heartfelt gratitude for you staying around with the podcast. I know we’ve been through quite a process, trying different content. Not all will fit your palate but you know, even though it does not fit your palate, you still stay around so that’s great.

For all the people that you know that may have fizzled out from the podcast a little bit, hey, go and give them a nudge. Let them know that we’re trying to reposition Tuesday’s episodes. Going forward, we will have a lot more content in the coming year.

We’re working with different financial institutions, we’re working with agencies, a lot of things are coming and we’re going to keep creating more content for you. If you have any other interesting things you want us to talk about, email to me: hello@thefinancialcoconut.com, DM us on Instagram or Telegram or what have you. 

All that being said, I want to thank you for making this happen. Two years of pandemic and I started as a nobody. Now, I am kind of somebody so, that’s great. Good stuff. Thank you and keep helping us grow and I hope you keep learning along together with the community, together with us. 

Next week’s episode will be the first episode of 2022. Wow, 2022 already. I’m getting 30 years old this year and in 2022, we’re going to start the episode with what underpins your goals which is important because I think we’ve talked about what is the best goal setting practices, what are some things to look out for.

We’ve done that last year. I don’t want to keep doing the same thing. This year, I feel like we should take some time to look at what underpins our goals. Why do we set these goals? What is our incentive structure and what is our underlying desire? I have consolidated some thoughts on this and it’s been years in the making, I hope you find it useful.

That’s not to say that you definitely have to change your goals, that is to say that knowing these things will help you become more astute in setting your goals and setting your themes and trying to understand why you want certain things. 

Have a great year ahead, I wish you all the best and I’ll see you next year. Bye!