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Goodbye 2014, Hello 13th Month Bonus?

Phew! After a year of hard work, it’s time to bid 2014 farewell. It may had been a good year for many but a mediocre year for some – whichever the case, it’s time to move on and hope that 2015 will be better year.

It is also the time where everyone starts to set their New Year resolutions.

Improve self? Checked.
Improve fortunes? Checked.
Make new friends? Checked.
Improve career? Checked.
Travel to new places? Checked.

Before you start checking the entire list, wouldn’t it be good to have a fat bonus to accomplish all your resolutions?

It’s good to find out what you will received on top of your monthly salary, or what we call the Variable Wage Components which consists of the Annual Wage Supplement (AWS), Bonus and Variable Payment.

13th Month Bonus or AWS
The Annual Wage Supplement is also known as the 13th month bonus which you will receive in addition of your December’s salary. It is a single annual payment to employees that supplements the total amount of annual wage earned. If you have already received your bonus in December, lucky you!

But wait, is that a bonus or a supplement? While some would argue that it a mandatory compensation for a ’52 weeks in a year/4 weeks’, the Ministry of Manpower (MOM) defined it as:

Payment of AWS depends on the contractual agreement between the employer and the employee i.e. whether it is provided for in the employment contract or collective agreement.

What if it is not stated in the contract?

If it is not stipulated in the employment contract, AWS payment is subject to negotiation and mutual agreement between the employer and employee, or the trade union representing the employee.

Unlike countries like the Philippines and Latin America, it is not mandatory although it has been customarily provided for by companies in Singapore.

The AWS was first introduced back in July 1972 by the National Wage Council (NWC) to minimise the gap in the public and public sector and to promote a fair and equitable system of bonus payment. It has since set the precedent on how companies give out bonuses.

The point to note is that it is more of a privilege rather than a right, unless provided for in collective or individual agreements.

Bonus
Bonus, on the other hand, is paid out once to reward you for the efforts and contributions you made to the company. Like the AWS, it is not compulsory unless it is a contractual obligation and if it is provided for in the contract.

There are many different types of bonus such as Performance Bonus, Variable Bonus and Dividend Bonus.

Variable Payment
Variable payment is paid out as an incentive to increase the employee’s productivity or as a reward for your contributions. Take for example – commissions, overtime, variable allowance, incentives and gratuity. Variable payments are also not compulsory unless provided for in your contract.

As civil servants rejoiced at their 1.8 month bonus, which of you has received even more generous bonus? And how are you going to spend them? Discuss them in the forum here: http://moneydigest.sg/forums/index.php?threads/how-much-bonus-did-you-get-for-2014.248/

3 Tips to Performing Fundamental Analysis

You may have already known that there are two ways to analyse a company, fundamental and technical. In this post, I will be focusing on fundamental analysis and zoom into the things that are commonly looked out for when performing such analysis.

For a start, it would be good to have a foundation on basic accounting and financial accounting since you will be looking into Income Statements and Balance Sheets. Fundamental analysis is all about making sense of the numbers to give you meaningful information that can profit you.

Compare Against Past Data

When I first begin my analysis, I look at the latest financial statements released by the company. I simply look at their financial highlights to see what happened in the recent quarter if it’s a company that I’ve never researched on before. These numbers alone are not enough to tell you about the performance of the company. Always compare your numbers, quarter-on-quarter or year-on-year as some company businesses are cyclical in nature and what may seem to be a spike from the previous quarter may actually be normal or underperforming. This is one of the reasons why sometimes you may see companies report that their profits rise, but share price still falls. When you compare against past datas, you can also see trends which might help you to forecast the upcoming results and what you can expect will happen. These datas can be obtained from SGX’s website, which makes obtaining data or information really easy!

Look Out For Unusual Spikes Or Abnormalities

The numbers won’t lie. Thanks to FRS regulations and many other accounting regulations, companies must be transparent when reporting their results. You will notice that some numbers experience tremendous growth and these could be important or significant figures. This could be a spike in net profit margin, etc. It is then when you should open up your eyes and find out what is going on. There should be some questions that go through your mind as you see spikes. “Is it a one-off spike? If so, what is the impact?” Always question the numbers because this is where you can draw meaningful information out of it. Being able to discern what the information means can help you to gain a deeper understanding of the company and possibly give you a glimpse into the future of the company such as new projects, acquisitions, etc.

Financial Ratios

This is where your financial accounting will help you out. However even if you don’t have a financial accounting background, not to worry because these days the ratios are given to you already. Knowing how to calculate the different ratios and understanding the impact of a high or low ratio will give you that extra edge against other investors who do not know what the ratios mean. The few ratios that I like to look out for are Debt Ratio, Return (Efficiency) Ratio and Liquidity Ratio. These ratios are a way to make a better sense of the numbers that you see on the income statement or balance sheet. This is drawing out meaningful information from face value information. Do remember that these ratios are not one-size-fits-all. Different industries have different norms and you will have to take account of that. Always do a cross-comparison with other companies in the similar industry to get a rough gauge of what the norm is.

In A Nutshell..

There are a lot of information flowing around that we have access to. Simply put, it is how we make sense out of the information and taking the right steps to profit from the information given to us. All of this takes time to learn and it’s a never-ending journey of learning. Do not be too overwhelmed by the things that you have not learnt yet if you are just starting out, and take things one step at a time. Over the weekends, pick up a book in the library and expand your knowledge on the subject. Or you could also simply google the questions you have in mind. Even better, ask your friends who are already in the know. Investing is a journey to requires one to keep learning and improving. This is a long journey that will be worth it at the end!

10 Hottest Jobs for 2015

If you are a fresh High School graduate venturing off to College, at some point you may be unaware of which course you will take. As you weigh your options, you may look at what are the in-demand jobs of the year.

To answer your itching curiosity, Economic Modeling Specialists Intl. (EMSI) and CareerBuilder Company got together to gather a new list of 10 Hottest Jobs for 2015. These data are based on the workforce’s supply and demand.

EMSI turns labor market data into useful information to aid organizations in understanding the economy, employees, and work while CareerBuilder is a “classified ads” website that posts jobs for people who are seeking for them.

On that note, here are a number of jobs that are most in-demand for 2015…

1. MARKETING EXECUTIVE

Gap between job postings and hires: 22,996

Job growth (2010 – 2014): +10%

Image Credits: Mari Smith via Flickr

2. SOFTWARE DEVELOPER

Gap between job postings and hires: 21,084

Job growth (2010 – 2014): +15%

Image Credits: Official GDC via Flickr

3. REGISTERED NURSE

Gap between job postings and hires: 21,084

Job growth (2010 – 2014): +15%

4. INDUSTRIAL ENGINEER

Gap between job postings and hires: 18,151

Job growth (2010 – 2014): +9%

5. NETWORK AND COMPUTER SYSTEM ADMINISTRATOR

Gap between job postings and hires: 17,054

Job growth (2010 – 2014): +7%

6. WEB DEVELOPER

Gap between job postings and hires: 15,492

Job growth (2010 – 2014): +17%

Image Credits: Campaign Monitor via Flickr

7. MEDICAL AND HEALTH SERVICES MANAGER

Gap between job postings and hires: 15,070

Job growth (2010 – 2014): +6%

8. PHYSICAL THERAPIST

Gap between job postings and hires: 13,545

Job growth (2010 – 2014): +10%

Image Credits: Official U.S. Navy Page via Flickr

9. SPEECH-LANGUAGE PATHOLOGIST

Gap between job postings and hires: 8,001

Job growth (2010 – 2014): +5%

10. SALES MANAGER

Gap between job postings and hires: 6,309

Job growth (2010 – 2014): +8%

Image Credits: Ken Teegardin via Flickr

Source: MSN

These 10 jobs are the professions for which companies post each month significantly that outnumbers the amount of people they actually hire. Thus, it shows what talents are the companies most hungry for.

Fixed or Floating Rate, Which is Better For Your Home Loan?

Your home is often the biggest purchase you ever made in your life, however that also means landing yourself the biggest debt you ever had.

Properties in Singapore are expensive – be it HDB flats, excecuive condos, or bungalows. It’s not uncommon to have a million dollar price tag onto it. And often, taking up a mortgage loan would also means being in debt for 25, 30 or even 40 years.

Therefore, you want to be careful in choosing the most cost effective lender with the best mortgage terms.

Lenders usually offer many different types of mortgage packages such as interest-only mortgages, off-set mortgages and more. Understanding the difference between a fixed or floating rate loan and which is better is a major financial decision for home buyers.

Fixed Interest Rate

As the name suggests, the interest rate tags to your mortgage is fixed for a specific period and could span 1, 3 or 5 years before reverting to a floating rate once the term is up. For buyers who are risk adverse and want to reduce uncertainties, fixed interest loan is the way to go ask you don’t subject yourself to the fluctuation in interest rates. The cost to it is you have to pay a premium on top of the existing rate (so that lender can hedge the risk of lending you at fixed term) and when interest rate falls, you still pay the same rate when other borrowers on floating terms pay a lower rate.

Floating Interest Rate

On the other hand, floating interest is revised every month or every 3 months.Your repayment amount would therefore change every month. The rate fluctuates according to the Singapore Interbank Offered Rate (SIBOR), Swap Offer Rate (SOR) or the Internal Board Rate (IBR). SIBOR and SOR are more transparent than the IBR which may change according to the company’s discretion, so make your choices wisely. A floating interest rate is more suitable for astute buyers who are able to accurately assess and predict interest rate movement.

Which one to choose?

It’s never easy to decide which rate to choose as it is akin to selecting the correct stock in a market filled with uncertainties. Interest rate movement is volatile and may go up or down without you being prepared for it.

First, ask yourself if you have the financial means to afford a risk in an interest rate hike. If you are someone who just barely scraped through the monthly repayment, you should not be gambling with the interest rate, albeit a lower initial cost. What you need is certainty, so that you would be able to accurately plan and budget your monthly expenses. You don’t want to go around borrowing money to meet other necessary expenses. A peace of mind has a value in itself.

Conversely, if have lots of spare and liquid cash (now and in the future), you may consider a variable SIBOR if you want to take advantage of the low interest rate environment. If you want some degree of certainty, you can consider taking a longer tenor SIBOR rate of up to 12 months, even though it cost a little more than a 1 or 3 month SIBOR.

It is also important to note its correlation with the US’s fed rate and with interest rate hike looming as early as April 2015, it may be wise to time the commencement of your loan.

If you want to reduce your exposure to the US market, you can also consider DBS’s fixed deposit home rate (FHR) which is calculated from the average of DBS 12-month and 24-month interest rate. The FHR is more stable and is not subjected to constant repricing on the daily market movement but that is not to say that it is completely independent of externalities. It is still considered a board rate which DBS has the discretion to adjust the rate to meet their objectives.

There are also other factors to take note of in deciding the right home loan package. One should also consider if there is any prepayment penalty should you decide to pay off your loan early or refinance it in the future. The duration of the loan should also be taken into consideration when deciding whether to take a fixed or floating rate loan. If you take a longer tenor loan, what you need most is stability.

If you are financial savvy, you may want to keep yourself informed of the supply and demand for funds in the interbank market and how it influences interest rate movement.

Lastly, don’t forget to make Janet Yellen your friend.

Starting A New Family? Here’s 4 Tips

It’s not easy starting a new family. While you might be busy dreaming about the warm and fuzzy moments you’re going to have in the future with your spouse and your children, there are some pressing financial issues you would need to face right now. How are you going to use your money wisely on a daily basis? How are you going to safeguard your family future? Don’t fret, we’ve brought to you a few tips, so you can better manage your family finances

Keep Your New Expenses In Mind

Maybe you’ve thought of getting that new TV you’ve been eyeing for a while. Maybe you’ve saved just the amount of money needed to get that massage chair that’s always been at the back of your head. Well, did you take into account all the new expenses you’re going to have to pay for, now that you’re starting a family?

You’re no longer just earning for two, you’re going to have to provide for three, or more (if you struck the twins or triplets lottery). There’s plenty of child related expenses you’re going to have to take note of, such as baby food, diapers and immunisations. It’s best if you lay out all the expenses you would need to care for your baby, so you know for sure what you’re getting into, and to allow you to better budget for the future.

Set Up A Savings Plan

If you hadn’t already done so, you should set up a savings plan so you can better provide for your child’s future. Savings plans are more easily set up compared to investments or bonds. The basic idea is a simple automatic, monthly deduction of funds which will go into a special account, which can only be accessed once your child reaches a certain age. It might be hard to consistently set aside money on your accord, which is why a savings plan would be great as you don’t even have to think about it once you set it up. The “pain” of having less income per month isn’t felt so strongly this way.

Get Life Insurance and Medical Insurance

You always need to be prepared for the unexpected. Insurance acts as a safety net, so you and your family can be protected should anything happen to any one of you. Medical insurance is important as there are many medical issues which your child or any family might face which would require a hefty bill. The presence of a medical insurance plan would help you cover these expenses should the need arise.

Although many modern families are dual-income families, this does not mean the early demise of you or your spouse would not result in a heavy financial burden on your family. Life insurance helps your family deal with the financial needs that would be definitely be harder to attend to with the absence of you or your spouse.

Teach Your Child Good Financial Habits

Financial habits are ingrained from a young age, so make sure your child adopts the right habits that will put him in good stead for a financially stable future. Managing family finances is a team effort which involves every single member of the family, including your children. Little things such as not buying toys they don’t need, turning off the lights, and putting aside a small sum of money each day help your family make better use of your finances.

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