My friend's encounter with a dishonest financial planner

Recently a colleague of mine shared with me that her financial planner had been paying her a fixed sum of money every quarter for her CPF investments in OA and SA accounts. She was quite happy about it until she wanted to upgrade her home. When she got to HDB, she was shocked to find that there was zero amount of money in her account when there should be some balance left after financing her current HDB loans. To her surprise, more CPF money had been recently deducted from her account for more investments which she didn't know about. It turned out that her financial planner had keyed in her PIN without her knowledge to approve of the trades on her behalf. He did this without informing her at all. She was so furious. She scolded him and he apologized several times. She immediately went down to the IFAST office to lodge a complain but they could not do anything at all for this FA was from an agent's office. All her investments were immediately sold off the following week because she wanted to close her account. All-in all, she made some losses in her CPF investments.

The following week after that, I read from somewhere that it is wrong for an FA to promise a cashback from CPF investments because CPF is only meant for the retirement. Oh dear... my colleague's been cheated...

So the next time you pick out a financial planner to do your investments, make sure you do some research first and understand what is going on in the financial world. You'll never know what sort of rouges you might meet out there.

Well, I'm not saying that all FAs are bad. There are good guys out there too. It's just good to always understand what your FA is doing for you and all those financial jargons...

Cash Flow

My heros from the finance world include Robert Kiyosaki, Donald Trump, Adam Khoo and Warren Buffet. I've read some of their books and have been inspired by some of the advice given by them. One of the important things that they have emphasized upon is cash flow. Always make sure that your expenses are lesser than your income and never, NEVER give in to debt. Debt can spiral into a never ending burden. Spend within your means and always try to invest some of your savings to beat inflation. The one thing all my finance heros have in common is that they are all rich and I dream of following their footsteps one day. It's a slow process because I don't earn a lot and struggle with everyday bills too. However, having a positive cashflow can help reach that goal some how. I guess we can't go wrong if we do the same things that the rich do right?

The Difference between Striking the Lottery and Earning it yourself

Recently a friend of mine hit a pot of gold. Yeah, I actually know a very lucky person. She had won the lottery for $150,000. Now that's hard to come by everyday. I'd say with that sort of luck, one should try to use that sort of money wisely. If God gives, He has His reasons. She has an ailing son and before winning the lottery I saw her struggling with the medical bills for her kid.

When she became rich, I saw her spending the money on the latest IT gadgets, buying branded stuff and upgrading her lifestyle by feasting in restaurants every day. I thought it was such a waste but it wasn't my business to be telling her how to spend off that money. I thought a good portion of it could have been invested for her son's education and medical bills.

I guess in life, a person tends to squander off money that comes for free easily compared to a person who has to work very hard to save that same amount of money. I always believe that there is a huge responsibilty that comes with being rich. Fake friends might suddenly appear and relatives may have certain expectations of them. I've heard of people going to churches and temples to pray that they strike the lottery desperately but most never do. God has his reasons and his purpose so the best is always to work for it while saving and investing as well.

The Unit Trust – The Money Hamper.

A unit trust is like a hamper of financial products. It’s usually known as a mutual fund in some countries. The fund manager goes out to do the shopping. He usually buys some stocks and bonds from a few stock markets and then packages them nicely into nice little hampers. Each unit (hamper) can contain a certain % of each sort of stock and bond. Along with the packaging, it will be given a fanciful name such as “Beverly Hills Asian Equities” or “Tan Ah Kow Europe Emerging Markets”.

There is usually a first time subscription fee of 5% for equity unit trusts and 3% for bond unit trusts. Other charges such as management fees are usually internally deducted from the number of units that you have. It is usually cheaper to buy unit trusts online or through a financial intermediary such as banks or financial planners. The reason is these companies are able to purchase the investments in bulk and resell them to you at a cheaper sales charge.

UT Funds (a.k.a Unit trusts) can be packaged in many different ways. For example: Equities, Bonds, Balanced Funds which are a mixed of equities and bonds, country specific funds, special themed funds such as technology funds, emerging markets or even REITS.

Unit Trusts are generally less risky than owning stocks. It like owning a mini portfolio of stocks and bonds all nicely packaged for you. However, to spread the risk further, it’s good to have a portfolio of many types of unit trusts to cover different areas of investments. If you’re not sure which funds to pick out, you could try using the services of a financial planner. Otherwise, there are online resources and magazines to refer to on suggestions of what sort of investments to purchase.

Anybody like to share what are your favourite sort of funds that you have?

The Beauty and The Sins of The Credit Card

A credit card in my opinion can be both a good and bad financial tool. If you’re a shopaholic and can’t control your expenses or the sort who likes to pay only the minimum of $50 while rolling the rest of the debt to the following month, then you should do the following: pay up all your debts, cut up those cards and sever all your ties with the card company forever!!! Debt can destroy your life if it goes out of control.

On the other hand, if you’re a disciplined spender, that is if you are able to pay all your bills by the end of the interest free period and spend without your means, a credit card can be a very good financial tool. Firstly with a monthly statement, you can have a summary of all your spending nicely printed out for you by the credit card company. In that way you get to monitor your spending easily. By charging everything to your card and paying all your expenses by the due date, your money gets to sit in your bank account for a few extra days and hence earn that extra few days of interest before getting deducted from your account.

The amount of spending in your card also helps you earn points which you can exchange for useful stuff such as a supermarket vouchers which you can use to get useful household stuff or toiletries that you really need. But remember, at the end of it all, you should only spend and charge your expenses to your card if you really need to spend on those items.

Subscription fees for credit cards can be expensive too. Make full use of the free subscription periods to own a credit card. After that you could try to negotiate with the card company if they could waive off the following year’s subscription. Otherwise, simply cancel the card and apply for a new one at another bank that offers free subscriptions for the first or second year.

That’s it for credit cards for now. Feel free to share if there are any more interesting ways to maximize a credit card.

A reflection of the past..

After reading several sad stories about the credit crunch in the US, I started to reflect about the time when I went through the unemployment depression during the last 2 recessions. Yes I was unfortunate enough to go without a job during two recessions in our hometown.

You see, I had graduated during the year 1999 when Singapore was just slipping into a recession and had to complete with other gradates in the tight labour market for a job. It was around that time when the dot com bubble started forming in the economy and that was how I had managed to get a contract job with a well known IT company. I stuck with the IT firm for about a year and half until they started to freeze their headcount and could not longer renew my contract. And alas! I was back in the wild looking for another job again. Just a week after that, the Sept 11 terrorist attacks shock the world and rocked the job market in our already volatile economy. It took another 4 long months before I found another job to replenish my depleting bank account.

The miserable days of unemployment has taught me the importance of saving and to be very very cautious about saving and spending. The latest happenings in the US markets gave birth to a new idea for this blog and that's what this site is all about.

I thought it would be great if I could start a forum about saving, spending and investing and share ideas with people in the blogging community. My current heros in the finance world are Robert Kiyosaki, Adam Khoo and Donald Triump. Let's see how this site takes off...