My Passive Income (Month of Apr 11)

CPF(OA): $233 (from interest and dividends)
Cash: $1786 (from dividends and other passive incomes)
Total: $2019
Target: $3200
Achievement: 63.1%

There are no changes in my passive income 1 and 2.

For passive income 3, there is an increase as I have subscribed 8 lots of CIT right shares and bought another 8 more lots of CIT shares this month.

For passive income 4, there is decrease of $1. However since it is still in the building stage, I will be expecting it to go up and down. In my post "Forget about achieving Financial Freedom if you do not have perseverance or refuse to learn.", I have mentioned that it will take time and effort to build up passive income.

Have you started your journey towards financial freedom?

To all my blog readers, I have created my first poll in this blog. The purpose of this post is to find out how many of you have started your journey towards financial freedom. Please feel free to select any one of the six choices in the poll and press the vote button.

Poor service from DBS

Company that provides good customer service will make you coming back to continue to its services. On the other hand if the company is providing bad customer service, it will simply cause frustration and will make you think of discontinuing its services. And you only know you are getting good or bad service when thing happen.

Recently I am receiving poor service from DBS. The incident goes like this. DBS sent me a letter which comes with an application form to apply for my entitled shares. By following the instructions given, I sent back the application form by post promptly (1 week before the closing date of the application). As my entitled shares have not been credited into my account, I called back to DBS to find out the reasons. They just simply reply that they did not receive the application form and they are not able to do anything for me since the application period was over.

My question now is why they never update me that they have not received my application before the closing date. I believe not many people are entitled to buy these shares due to its requirement. In my opinion it is very unfair to a customer who is following all the instructions given by the company and yet not able to get its service. As a customer, I did nothing wrong. But when problem surfaces, they are not able to solve my problem or to do any form of compensation. So do you think they value us as a customer?

After searching through the internet, I realized that there are many other complaints make to DBS. My advice to all is to be careful if you are engaging their services. Don’t be a next “victim” like me.

Is it wise to clear your housing loan if you have enough money in CPF?

I believe that this is a common question that most of us will ask when there is enough money in the OA account to pay for the outstanding housing loan. So for this post, I will analyze whether it is better to clear the entire housing loan at once, or continue to service the loan and at the same time use the money for investment to get better return.

The example that I used is based on an outstanding housing loan of $100k with loan interest rate as 2.6%. The loan period is 10 years, and the monthly payment will be $947.25.

In the table below, I have listed out seven options. Option 1 is based on clearing the entire housing loan. Since the housing loan has been cleared, $947.25 will be saved each month to earn interest in CPF OA account for the next 10 years. For option 2 to 7, is based on $20k in the OA CPF to earn interest (as currently the first 20K cannot be used for investment). And the rest of the $80k will be used to for investment with different return ranging from 2.5% to 5%.



As you can see in the table, you may be better off to keep your money for investment if your investment return rate is 3% or more.

How much interest do you pay for your housing loan?

The monthly interest for the housing loan can be easily calculated using the below formula:

Monthly interest = (Outstanding Housing Loan X Loan Interest Rate) / (100 * 12 months)

For example, if the outstanding housing loan is $100,000 and the loan interest rate is 2.6%, monthly interest will be (100000 x 2.6) / (100 * 12) which is about $217.



Increase in housing loan rate can cause a burden to the house owner especially when the outstanding loan amount is huge. Let’s take an outstanding loan of $300,000 as an example. Based on the 1.6% interest rate, the monthly interest is $400. Every 1% increase in the interest rate will increase the monthly interest by $250. In my opinion, this is quite a huge sum of money to fork out.

So my advice to all is to spend some time calculating the monthly interest before you commit to use any floating rate housing loan. Low interest rate may not last forever and an increase in loan interest rate will definitely increase your financial burden.

Finally achieved a passive income of $2000

It has been one and a half year since I have taken my first step in the journey towards finance freedom. And finally I have reached another milestone as my passive income has amounted to $2000 this month.



I have done a projection on the growth of my passive income as shown below. This is based on the assumption that I continue to invest $30k per year on shares that give me a dividend of 5%.



The projection is quite in line with my next 20 years goal. If nothing goes wrong in the next 5 years, I should be able to achieve a passive income that covers 80% of my expenses. And next 10 years, a passive income that covers 100% of my expenses.