There were only two things certain in life Death and Taxes

How Much Is My Income Taxes [2021 Edition]

It is the tax season for 2021. If you had an income in 2020, filing of your income tax starts 1st March 2021. You will NEED to file it by 18 April 2021 (e-filing) or 15 April 2021 (paper filing). If you don’t, it could lead to a fine or even a court summon. Don’t say you have not been warned.

We don’t really talk about taxes in 6 Levels Wealth Karate Methodology. In a simple gist, taxes are bittersweet to me. On one hand, I don’t like to pay taxes as it is an expenses to me. On the other hand, if I pay higher taxes, it would mean that my income is higher! I’m just glad that in Singapore, we have a really attractive tax program and we pay significantly lesser taxes as compared to people in other countries. Without going too deep into that, here’s how how much to pay for your income taxes in 2021.

 

Do you need to pay taxes or not?

Yes. You only pay income taxes if your chargeable income is greater than $20,000. Some income are chargeable and some are not. Fun fact: your winning from your TOTO/4D is not a chargeable income. Check out the full list here.

If your chargeable income in 2020 is above $20,000, you will be taxed with the progressive income tax system. Singapore follows a progressive income tax system. This means that the higher your income, the more you pay in taxes. The resident tax rates are as follows.

How To Reduce My Income Taxes Resident Tax Rates

How To Reduce My Income Taxes Resident Tax Rates

However, this does not show the effective income taxes for your income. When I first saw this table, I thought that if I earn $80,000, my tax bracket would be 7% or $5,600. This is untrue.

How To Reduce My Income Taxes Effective Income Tax Rates

How To Reduce My Income Taxes Effective Income Tax Rates

If you are earning $80,000, you will be paying $3,350 in taxes which means my effective income tax rates are 4.19%. Personally, I think it is quite fair. With the same $80,000, you would be paying $23,571 or 29.46% effective income taxes in USA.

 

Is it automatic?

If you received a letter/SMS/form that tells you to file your income tax, you will have to log in and file it yourself. This sms below is one that I received from IRAS. Typically, most of my income have already be pre-filed as I’m a self-employed working with AIA.

Income Tax 2021 Filing

Income Tax 2021 Filing

 

If you received a letter/SMS/form that tells you NOT to file your income tax, you don’t have to do it. But please verify if your information is correct and accurate.

If you didn’t receive anything from IRAS, you will still need to file a tax return if your:

  • annual net business income exceeded $6,000, OR
  • annual income (inclusive of rental income) was more than $22,000 last year

 

Tax Deductibles

Since 2020 is over, you can’t really do much changes into your deductibles. You can start planning for 2021 instead. In Singapore, we have a list of deductibles given to encourage social and economic objectives such as filial piety, family formation and the advancement of skills.

Income – Deductibles = Chargeable Income

As mentioned above, you will pay taxes on your chargeable income. This means that deductibles will play a big role in the taxes you are paying.

IRAS has created a personal income relief checker to see how much deductible you are allowed. These deductible includes SRS Top Ups, CPF cash Top Ups, just to mention a few. There is a maximum of $80,000 tax reliefs.

 

Final thoughts by Wealthdojo

There were only two things certain in life Death and Taxes

There were only two things certain in life Death and Taxes

Co-incidentally, these two can be well managed by proper financial planning or using insurance tools to achieve your financial goals. This article is meant to be a general article on how to pay taxes in Singapore. If you would like to know more, just comment on this post or contact me and I would love to have a conversation with you on the above.

Stay healthy. Stay Safe and pay your taxes.

Thank you for your contribution to nation building.

 

Join my Telegram Channel for a tip a day! In Wealthdojo, we dedicate a small amount of time daily for learning new things. Continuous learning is one of the greatest secrets of success.

For those of you who want to turbocharge your journey, contact me at chengkokoh@gmail.com. I would like to hear from you what your experiences are currently and from there, we develop a plan specially catered just for your journey.

We wish you all the best! Stay Safe and Take Care!

Chengkok, Sensei of Wealthdojo.

What To Do With Your Children's Hong Bao Money

What To Do With Your Children’s Hong Bao Money?

Happy Lunar New Year! Wishing everyone here good health and may your wealth multiply in the years to come. Hopefully, the last 4 days have been one where you have been giving/receiving or your child has been receiving hongbao. One common question that I go from parents with regards to financial planning is what they should do with the money. Most of them are keeping it for their children as emergency funds. This is a good initiative. That being said, is this an opportunity to share money lessons with your children?

What To Do With Your Children's Hong Bao Money

What To Do With Your Children’s Hong Bao Money (Source)

 

Your intention sets the tone

What do you want your child to learn from receiving the hongbao? Is it gratitude? Is it charity? Is it spending? Is it emergency funds? Your intention sets your child’s tone. By default, people will stick to the easiest thing of all: Not doing anything. This is precisely why most parents are keeping their children’s money as emergency funds. (PS: I’m not saying that emergency funds is a bad thing. It is also important.)

However, as the child do not have much ownership of the funds, they do not really learn from that concept. To them, it is their parents are keeping their money for them.

So what can you do this year to inspire your children to take charge of their money. This may or may not be applicable and felt by you depending on your relationship with money. Here are some suggestions.

 

Happiness of Spending Money

Wait a minute. A finance blog asking me to spend money? Yes. It came to my attention that “saving money” or “spending money” has became such a pain for people. As our education on money commonly involves parents screaming at us to save money (or that they don’t have money), it has become very hard for some people to spend mentality. Each time you spend, you will feel a pinch when you see your bank balance drop. That’s commonly known as the poverty or scarcity mindset. Eventually, you might grow up with enough money in your bank but feeling miserable that you don’t have enough.

What To Do With Your Children's Hong Bao Money Spend It

What To Do With Your Children’s Hong Bao Money Spend It

As parents, one of the best thing you can do for them is let them buy something that they have already wanted for a long time. Take 20%, $30 or whatever amount (be reasonable) in their hongbao money and bring them to the shopping center. Let them buy whatever they want. Let them feel the happiness of what money can buy. You will be surprised that some children will buy books, stationaries and of course toys. You can take this chance to introduce to them the 4 Quadrants Shopping Guide.

Let them take charge of their finances, the earlier they do, the more responsible they will become.

 

Delayed Gratification

To balance it up with spending, delayed gratification is next. A simple game you can play with your children is called The Marshmallow Test. I won’t explain too much here. Wait this hilarious video on how children wrestle with waiting to eat a marshmallow in hopes of a bigger prize (more marshmallows).

In finance, the timeline would be longer than this test. The intention is to get the children to save their hongbao money for a longer period of time so that they can get back more at a certain age. This could be done by a simple endowment plan or just Singapore Government Bonds that matures after a set period. When they receive the money after xx years, you can calculate with them (do it with them) how much they have put in and compare it to how much they have received. This can be done with your financial advisor.

 

Investing Lessons

This opens up many lessons for young children. You can share with them about volatility, about index (example if you invests in a Country ETF), about companies (example: when apple makes money, you “make” money too), about value or about growth.

One of the easiest way is to invest in companies that they already know. For illustration, my example will be SBS Transits.

Disclaimer: Not a buy/sell recommendation here.

For children, they probably will be familiar with certain products such as the IPhone, Bus services, Netflix etc. When you invest their money (they can only open a brokerage account when they are 18) for them, they get to see if their money grows in terms of capital appreciation or dividends. You can consider investing for them once a year as a dollar cost averaging approach for them to build up their portfolio.

For those of you would like to have something simpler, consider investing into country ETF like the STI Index, China ETF or S&P500. When the particular country does well, they are able to see the value of their investment grow as well. Similarly, do consider a dollar cost averaging approach for your children and invite them to ask questions. This is a great opportunity to for your children to learn about investing either with yourself or your trusted financial advisor.

What To Do With Your Children's Hong Bao Money Investing

What To Do With Your Children’s Hong Bao Money Investing (Source)

Final thoughts by Wealthdojo

I cannot imagine how much of a head start your children will have if they start learn these money lessons as some adults take decades to learn these. Let me know what you guys think in the comments below.

We wish you a Happy Lunar New Year!

 

 

Join my Telegram Channel for a tip a day! In Wealthdojo, we dedicate a small amount of time daily for learning new things. Continuous learning is one of the greatest secrets of success.

For those of you who want to turbocharge your journey, contact me at chengkokoh@gmail.com. I would like to hear from you what your experiences are currently and from there, we develop a plan specially catered just for your journey.

We wish you all the best! Stay Safe and Take Care!

Chengkok, Sensei of Wealthdojo.

Should You Invest Your Emergency Funds

Should You Invest Your Emergency Funds?

Interest rate in the bank is at the all time low. The time where you are able to get 2% per annum in high interest account is over. With the market at all time high, one question I get is if you should invest your emergency funds?

Should You Invest Your Emergency Funds

Should You Invest Your Emergency Funds

“The interest in the bank is so low. I should use the power of compounding and invest in the stock market”.

This is the current narration in Singapore right now and I don’t blame them. Most of us are literally looking at our money stagnant. If you are like me, you might feel frustrations keeping the money in the banks which is “not doing anything”. Here is a quick introduction of compound interest.

 

Compound Interest

Let’s assume that we have $50,000 that we are keeping as emergency funds. We will be using the following numbers for our illustration.

The S&P500 10 years historical returns: 13.6%

The STI 10 years historical returns: 1.97%

Current OCBC Account EIR (Salary Only): 0.7%

Should You Invest Your Emergency Funds Comparison

Should You Invest Your Emergency Funds Comparison

As you can see on the above future value formulation, the difference is simply ridiculous on a 30 years time horizon. If you have invested the $50,000 in the S&P500, you would have gotten $2.29 million (think about that for a moment). If you invested in the STI, you would have got $89K and if you just leave it in your multiplier account, you would have gotten $61K.

How is it not tempting to invest your emergency funds?

 

So why not invest and keep it as cash?

In life there are many what ifs, that’s the reason why you buy insurance in the first place. By having an emergency fund, you are preventing your life from being a roller-coaster. There are certain things that are unpredictable and could affect your family drastically.

If you desperately need cash then and if the market is NOT in your favor. That would mean that you will need to take a loss without giving it time to bounce back. Ask yourself, do you want to sell at an unfavorable time?

Should You Invest Your Emergency Funds and Sell Here

Should You Invest Your Emergency Funds and Sell Here

Some reasons to have emergency funds are job loss, medical emergencies (especially with the changes in the hospital plans: Co-payments), your family member’s medical emergencies, car repairs or home repairs.

“You will never know when you need the money”

 

Your emergency fund is not designed to be a wealth builder

Not everything is designed to be a wealth builder. Sometimes you need the liquidity as a “personal insurance policy” for yourself and your family. I know some that uses credit cards (which might be suitable credit card for emergency) to design their emergency funds, but that’s another topic all together.

 

Final Thoughts By Wealthdojo

Your emergency fund is not designed to be a wealth builder. For those that wish to read about how I spend my money, you can read one of my best article: The Ultimate 4 Quadrants Shopping Guide Especially If You Are 28 and Older.

Till next time!

 

For those of you who want to kick start your Wealth Management journey in 2021, why not consider joining my telegram channel?

Join my Telegram Channel for a tip a day! In Wealthdojo, we dedicate a small amount of time daily for learning new things. Continuous learning is one of the greatest secrets of success.

For those of you who want to turbocharge your journey, contact me at chengkokoh@gmail.com. I would like to hear from you what your experiences are currently and from there, we develop a plan specially catered just for your journey.

We wish you all the best! Stay Safe and Take Care!

Chengkok, Sensei of Wealthdojo.

2021 New Year Revolution

Start a Financial Revolution Not Resolution in 2021

It is 2021. I find it annoying that there are still tons of articles out there will tell you to write down New Year Resolutions such as paying off debts, spend less than you earn, set a budget, drink less Starbucks etc. It is 2021. You already know that. In the new era, it is not about finding information. It is also not just about finding the right information (6 Steps Wealth Karate). In the new era, it is making use of the right information easily.

Some of readers have shared with me they fall short of their 2020 financial resolution because they have the lack of clarity or strategy. I wish to take this one step deeper. It is not that you did not know what to do. It is also not that you did not know how to do. However, psychologically it is not easy.

In this article, I will be writing how to start a financial revolution so that you can create the right environment to win psychologically.

Now, all this can only be done after done this: You can only start 2021 properly after doing these 3 things. Start here first.

 

2021 New Year Revolution

2021 New Year Revolution

2021 New Year Revolution. Photo from Huffpost.

To put yourself in the right environment, you need to first understand yourself. I summarized this by a quote that I frequently used.

There are three things extremely hard: steel, a diamond, and to know one’s self. ~ Benjamin Franklin

After understanding yourself, then you can create the right environment for success. You want to create a system that is psychologically easy to win. Here are 4 ways to put things in your favor psychologically. I bet you will not be able to find this easily elsewhere.

 

#1: Set Weekly Budgets Instead of Monthly Budgets

Ever wonder how we could save so much when we were students but not now? The trick is that most of the students are given a weekly allowance instead of a monthly one. When students then track their budget on a frequent basis, this creates a saliency effect. The more we noticed something, the more we are aware about it, the more we will review it.

For majority of us, we are now following a monthly budget. We don’t review it as often and so become surprised when we overspend during the 3rd or 4th week of the month. If budgeting is an issue for you (psychologically), set weekly budgets.

If you are planning for big ticket items, you can consider using this to help you. If you have spending issues, do read our Ultimate 4 Quadrants Shopping Guide.

 

#2: Audit Your Finances

Just like teachers marking the examinations paper for students, or MAS checking the quality of consultant’s advice, we feel a certain pressure and would want to make sure that our work is correct. It is the same for finances. It has came to my attention that most people don’t audit their finances at all. This means we will not know if we are on the right track when it comes to finances.

Auditing your finances is very simple. Just like a teacher marking each question, ask yourself if an expenditure is reasonable. Notice that I mentioned reasonable rather than “correct”.

For example, one of my friend have been subscribing to Spotify for $9.99 a month. He initially subscribed to Spotify because he wanted to listen to ads-free music on the way to work (I think that’s pretty reasonable). However, in March 2020 he has started to worked from home and he realised he has forgotten about it and is continuing to pay for Spotify but have not been using the service for the past 7 to 8 months. He has now stopped the payment but will be taking it up again when he needs to travel to work again.

I recommend you to audit your finances once every half a year. Spot those that are “unreasonable”. They could help you save a lot in the long run.

Financial Revolution 2021 Audit

Financial Revolution 2021 Audit: Source: CIA

 

#3: Allocate More

Do this only after you have already prepared your emergency funds. After that, yes. Allocate more.

It is very natural to feel happy when you see your bank account increasing. However, you will only realised the effects of inflation after many years. I strongly recommend you to allocate more when you have the opportunity. Whether it is an insurance policy, an endowment policy, an investment policy or buying into stocks or property, I encourage you to add more when the time is right.

To psychologically help you, you can employ certain tools such as regular saving plans to deduct a similar amount every month. This automation will help you allocate more and yes be on your journey to financial freedom.

 

#4: Sell Things That Are New That You Don’t Want

Look around your house right now, I believe that there will be some items that have been there sitting in the cupboard for a while. Be it a gift from a friend or a book that have not been touched or a lucky draw that you have won, there will be some item that has been around but have not been used.

Take this opportunity to do some spring cleaning and make some money. Put it on carousel. You will be surprised at how much money you can make out of your own room.

Before selling them, ask yourself 3 questions.

  1. Have you used it for the last 3 months?
  2. Will you use it for the next 3 months?
  3. Does it have sentimental value?

If those answers are no, those items will not be missed. This is where I personally sell my own items. Check out my Carousell items to give yourself an idea.

 

Final Thoughts By Wealthdojo

Don’t start a resolution, start a revolution! If you haven’t been successful in your financial journey, just pick one of the above and commit to it for the next 3 months. I assure you that you will look back at 2021 and be proud of yourself.

For those of you who want to kick start your Wealth Management journey in 2021, why not consider joining my telegram channel?

Join my Telegram Channel for a tip a day! In Wealthdojo, we dedicate a small amount of time daily for learning new things. Continuous learning is one of the greatest secrets of success.

For those of you who want to turbocharge your journey, contact me at chengkokoh@gmail.com. I would like to hear from you what your experiences are currently and from there, we develop a plan specially catered just for your journey.

We wish you all the best! Stay Safe and Take Care!

Chengkok, Sensei of Wealthdojo.

 

3 Money Beliefs That Will Destroy Your Life Sharpen Your Axe

3 Money Beliefs That Will Destroy Your Life

3 Money Beliefs That Will Destroy Your Life Worried

3 Money Beliefs That Will Destroy Your Life Worried: Image source

Much of our lives revolve around money. In a sense, money does make the world go round. We rely on money to get things done and fulfil our basic needs each day. 

As a result, money can be the source of a lot of our worries and problems. A lack of money can cause a high level of stress and lead to negative thoughts. 

The set of beliefs that we have about money can either make things better or worse.  When we have disempowering beliefs, it’s difficult to see opportunities and possibilities since we’re so focused on the negative. E.g. I can’t, I don’t, I’m never going to, It’s hard. 

These negative thoughts lead to negative feelings, which then go on to impact every other aspect of our lives. 

I believe that having the right mindset can change the way that we perceive and experience life. Here are three money beliefs that can hold you back from living a fulfilled life, and ways that you can shift your perspective on them.  

 

Belief #1: If you work harder, you’ll be able to earn more 

This might’ve been true back in the day. But nowadays, with the possibilities that the internet affords, more and more people are finding ways to work less and earn more. Your income no longer needs to be tied to the amount of hours you put in. 

Instead of working harder, you can work smarter. It’s like the difference between trying to chop down trees with a dull vs. sharpened axe. Spend some time sharpening your axe (upfront effort), and you’ll be able to get the job done much faster. 

3 Money Beliefs That Will Destroy Your Life Sharpen Your Axe

3 Money Beliefs That Will Destroy Your Life Sharpen Your Axe Image source

Internet entrepreneurs who sell a product that doesn’t require a huge ongoing time commitment can work fewer hours and might eventually even earn more than salaried employees. The internet enables you to reach customers at scale from all over the world and earn money while you sleep. 

One way to start selling something online without needing to spend much money upfront is teaching something that you know. 

For example, you can use platforms like Skillshare or Udemy to create an online course. You create it once, and each time someone enrols, you get paid!  

Of course, this will require some time and effort upfront, but once it’s done, the money will keep coming in without you having to lift a finger. And this is just ONE potential business idea. A quick Google will enable you to find many, many more. 

3 Money Beliefs That Will Destroy Your Life New Skills

3 Money Beliefs That Will Destroy Your Life New Skills: Image source

Nevertheless, if you think that the internet entrepreneur thing is not for you, there are still ways that you can increase your income potential without working harder. 

You can learn some new skills online through the very same platforms that I just mentioned (+ many more) and increase your value to an employer. If you’re a Singaporean over the age of 25, you can also make use of your SkillsFuture credit

Instead of waiting and hoping for a promotion, you can make the leap to a new field with skills that are in demand, e.g. digital marketing, AI/machine learning, data analytics. 

Of course, don’t learn something for the sake of learning it — ideally, you’d actually have some interest in it! Otherwise, it’ll be very painful and it won’t be a career that you’ll enjoy. 

 

Belief #2: It’s not possible to become wealthy without a good family background 

It’s true that being from a well-off family provides you with many opportunities that might not be available to others. You can move in the right social circles, get access to a good education and have more financial resources at your disposal. 

But there are many examples of people who became wealthy despite not growing up with a valuable network, getting a prestigious education or having money readily available. 

You shouldn’t let your upbringing or circumstances hold you back, nor complain about all the entitled people who seem to have an easy life because they got handed a silver spoon. 

Daymond John from Shark Tank was raised by a single mom in a rough neighbourhood and is dyslexic. He’s now got an estimated net worth of $300 million. 

3 Money Beliefs That Will Destroy Your Life Daymond John

3 Money Beliefs That Will Destroy Your Life Daymond John: Image source

He didn’t win the lottery or have it easy. He started a business called FUBU from the ground up, and their “office” was his mother’s house. He even closed the business three times from 1989-1992 because he ran out of capital. 

You might think, “oh sure, he’s probably one of those rare lucky people,” but there are also quite a few (largely unfamiliar) examples of Asian entrepreneurs going from rags to riches. 

Just because these people are not famous in mainstream media and their stories are not well-known, it doesn’t mean that they don’t exist. There are probably many more people out there who haven’t had a story written about them. You could become one of them. 

 

Belief #3: Money can buy happiness 

Money can buy a lot of things. And it can definitely help you solve a lot of problems. But it can’t buy happiness, because that’s something that can only be achieved internally. 

Our minds are programmed to keep wanting something new, something better, something different. We build up a sense of excitement and believe that getting X thing will bring us long-lasting happiness. 

We may be really happy for a moment, but the feeling will soon pass and we’ll be back to wanting something else to experience the same high. 

Having a good meal — that’s great in the moment, but forgotten in a few hours. 

Getting a nice bag/car/house/[insert other material thing here] — that’s great for a while, and then you get used to it. What’s next? 

3 Money Beliefs That Will Destroy Your Life Shopping

3 Money Beliefs That Will Destroy Your Life Shopping: Image source

And for the people who want the money not for the high of consumption, but for the high you get by showing off your status, when will it ever be enough? 

The truth is, we don’t end up happier after fulfilling our wants. 

We just end up wanting more. 

It’s funny, though, because our happiness actually comes from the absence of wanting. When we’ve gotten that new [insert material thing here], for a moment we don’t want anything else. But once our mind gets bored, it looks for something else to focus on… 

To find more lasting happiness and fulfilment, we should work towards things that also benefit others, or things that have a sense of profound importance to us (e.g. things we want to do before we die).  

Having a daily gratitude practice is also beneficial to remind us of everything that we already have and lessen our urge to have more.

 

Change your beliefs, change your life

We always act in accordance with our beliefs. That’s why a simple mindset shift can do wonders. I believe that we should seek to learn about different perspectives and find role models who have achieved what we might’ve once thought was impossible. 

Have you had any of these beliefs? If so, will you take steps to overcome them? 

This is a guest post by Rachel from Hey, it’s Rachel. She writes about mindset, personal finance, and all things personal development. She’s on a mission to empower millions of people around the world to live their best lives through education on mindset and growth.

 

Final thoughts by Wealthdojo

These are my favorite quotes from Rachel. Thanks for the beautiful article.

  1. Money can buy a lot of things. And it can definitely help you solve a lot of problems. But it can’t buy happiness, because that’s something that can only be achieved internally. 
  2. It’s funny, though, because our happiness actually comes from the absence of wanting. When we’ve gotten that new [insert material thing here], for a moment we don’t want anything else.
  3. Instead of working harder, you can work smarter.

 

Join my Telegram Channel for a tip a day! In Wealthdojo, we dedicate a small amount of time daily for learning new things. Continuous learning is one of the greatest secrets of success.

For those of you who want to turbocharge your journey, contact me at chengkokoh@gmail.com. I would like to hear from you what your experiences are currently and from there, we develop a plan specially catered just for your journey.

We wish you all the best! Stay Safe and Take Care!

Chengkok, Sensei of Wealthdojo.