If you are interested in gain some proper insights on how to make money today either online or in the offline world, you can check out this website  - I Will Teach You To Be Rich, a personal finance blog created by Ramit Sethi.

What Is I Will Teach You To Be Rich Site About?

I Will Teach You To Be Rich is a community focused on personal finance and entrepreneurship for anyone who is interested in these topics. It hosts over 250,000 readers per month and 30,000+ newsletter subscribers. It’s been featured in most major media, including the Wall Street Journal, New York Times, NPR, ABC News, and CNBC.

What Are Some Of The Good Money Making Tips You Can Take Away From The Site

1. You can actually sign up for Ramit Sethi’s Newsletter where he will share with you tips on conscious spending and how to earn more. Also time management skills to help get back some more time for yourself.

2. A 10-Step Guide to earning more money which is basically a collection of the 10 popular blog posts written by Ramit Sethi on how you can learn to make more money

3. Useful articles on House Buying (from the USA aspects) and on Real Estate

4. Know the hidden perks behind some of your credit cards which can help you to save some money!

5. How to automate your Personal Finances and learn how to build your own Bulletproof Personal Finance System (how to make sure that your monthly income is being put into good use)

6. Want to learn how to start your own business? Get tips from Ramit Sethi who is a successful entrepreneur himself!

7. If you feel that there is something in your life that’s stopping you from being successful in life and making that lots of money, check out his section on the Psychology of Money.

When you are over at the site, you can actually spend quite a fair bit of time as there are many useful articles and resources to check out. If the content is beneficial to you, you may wish to get his book from Amazon.com.

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Would you like to take part in a survey and express your personal views about the major banks operating in Singapore and their roles toward Consumers in the current economic crisis?

I have personally taken the survey and it will take less than 5 minutes to complete. This survey is also nothing intrusive and will not be asking anything with regards to your bank account or personal sensitive information.

Participation in this survey is also simple and all you need are to click on the options given. There will be no need to give any personal comments as well.

And with your participation in this survey, it will actually give a better understanding on your attitude and perception of the major players in the Banking Industry.

Your opinion may also help the Banks to create products and services that will serve us all better.

For your time and effort, after completion, you will stand a chance to enter a draw and win one of the 60 movie vouchers that can be used in Cinemas in Singapore!

To take part in the survey:

Click >> Euro RSCG Asia-Pacific Quarterly Financial Services Survey

If you like to have more information with regards to the nature of this survey, please click over to this Press Release By Syndacast.com.

Note: No personal details will be identified in the findings and responses will be strictly confidential as data from this research will be reported only in the aggregate.

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Are you currently having a loan? It can be of any type – Credit Cards, Policy Loan, Student Loan, Car Loan as long as you are owing money.

And are you keeping watch of the compounding interest rate on those outstanding loans, especially those that charge you 5% and above? If you are not doing so, it’s better to wake up, dig out those accounts and clear as much as possible!

Reason being that Compounding Interest Rate can be both an Angel or a Devil working for you!

Why Such A Serious Note?

Recently I have a chance to meet this Client who is seriously in dilemma. He has comfortably borrowed a few times of a few thousand dollars (taken a policy loan) from his policy over the last two years and thinking that the interest rate is low, he has not taken the efforts to pay back everything.

So what happened was that, this few outstanding thousand dollars plus the magical compounding effect of the interest rate over the years had increased the loan to over $10,000 – and it’s going beyond his means to service the loan and his monthly premium. Do remember that when you take out a policy loan, you still will need service the monthly premium for your insurance policy.

So there he was… caught in between terminating a policy (losing nearly $100,000 worth of coverage) to clear off the outstanding loan, get back a small sum and was thinking of getting a new whole life plan that’s covering him only $50,000 – at a higher premium due to current age and longer break-even.

And also, should he have cleared off his loan and continue with his policy to his retirement age and beyond, this current whole life plan would have given him back nearly doubled in terms of surrender cash value as compared to his total premium paid (should he decide to stop the plan later)!

My Advice To Him

Rather than stopping the plan to clear off the loan, he should be paying back and clearing the loan within the next 5 years. It will be tough on him but he should be thinking of the long term because of the rewards he’ll be getting from his current plan.

A new whole life plan would only mean that he is seriously short-changed in terms of critical illness coverage and the amount of premium to be paid will be unfair!

Now, My Advice To You

CPF Website has this interesting loan repayment calculator that you can use to roughly understand how long you need to clear off your loan, based on your current monthly instalment amount and interest rate.

E.g. An outstanding simple loan of $10,000, based on interest rate of 6% with monthly instalment amount of $100 will take you 11.6 years to clear off!

And should you have converted this $100 to a regular savings plan for the similar 11 years (endowment or investment plan), you can be getting back $17,550 (based on average of 5% returns) or $22,417 (based on average of 9% returns). Thanks to Math.com’s Savings Calculator!

And based on the above loan scenario, should you be able to increase the monthly instalment amount from $100 to $200, it will only take you 4.8 years to clear off! Will that extra $100 be an impact on your daily lifestyle? $100 per month is just $25 per week or $3.57 per day! Rather going for that expensive gourmet coffee, how about a simple coffeeshop coffee or those free coffee provided by your company?

So do you see the impact that an outstanding loan can do to your retirement planning or to your current life insurance?

Can you also see the rewards that you can get even just by having that extra money set aside to put into a regular savings plan?

Think about it!

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How’s your Gut View On All Your Investments?

Do you know that there are two kinds of investors out there in the market and these two different types of character will actually determine if you can make money in investments in the long run. So who are they?

Note: The kind of investment I am talking about here is normally for index funds and not those individual stocks.

1. The Sit-Wait-Invest-Withdraw-Complain Group

Common traits: Based on my observation with some of the clients that I have met. They are those typical “uncles” type who normally invest with a few friends. They:

• Do not time the market but rather will observe a certain fund,
• Wait for the prices to go up and up
• Once their gut feel is that this type of fund will sure make them money, then they will invest
• (most of the time) once there’s a market correction, be it for a long or short term, instead of waiting, these people will cut loss and sell everything off and make a big fuss that they lose money in investments.
• But are still willing to go in for the next round

Their typical investment graph is this:

Oh no! The Stock Market Is Going Down

2. The Study-Observe-Invest-Endure-Smile Group

Common Traits: Also based on my observation is that these people are normally rather quiet and composed most of the time. They:

• Normally will invest alone so as not to get affected by hearsay
• Will study the companies, potentials and future prospects of the fund that they plan to go in
• Will normally buy while the prices are rather low and will observe how the market will work for them
• Will endure through any market corrections, be it in long term or short term
• Will typically invest for the long term because they understand the nature of the market and most of the time, they profit the most.

Their typical investment graph is this:

Oh Yes! The Stock Market Is Going Up!

What’s The Difference Between These Two Types And How Will A Change For You Today Benefit You?

The main difference between them are quite a few but the main and most important difference is the timing that both take. Ask yourself this question, “Are you always waiting for the right time to enter the market?”

If you answered a yes to that, most of the time you will stand to lose! Why is that so? Simply put is that, the common nature of any investment graph (for any index fund) is normally upward climbing like the second graph as seen above.

The reason for the climb can be summarized due to two factors: 1. Inflation and 2. Demand and Supply. With these two factors in mind and in play, the first graph that you see above is actually on a short term basis and a small part of the big picture (the second graph).

Also, if you do time the market to go in, you stand to lose a lot also because of the fact that “what goes up must come down”, so if you do wait for the price to stabilize and slowly climb up, your gain is actually the shortest term and not of the full potential. Also, if you actually go in at the wrong time, instead of the fund going up, it goes down, your loss is there.

If you do your study well, you will know that there’s no perfect timing to go in; As long as the index fund is of a good mix, go in early and either you sell it off as you gain (this gain is bigger) or you ride through the wave for a even bigger gain.

Do Not Take This Advice Plainly

What is being discussed here is for your general knowledge and do not apply this to every single index funds you see. If you are planning to go into any investments, please do your own study of your chosen funds as well as understanding your risk appetite and your time horizon before you go into it.

Investment is always a good way to make your money work harder but always do learn how to do it smartly!

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Times are bad, your hands are tight and all your savings account don’t seem to generate enough interest for you… How… You may ask…

If you should turn to a local financial institution for a personal loan, the interest may kill you with time, should you be unable to repay them back in time. For the latest personal loan rates, you can go to my trusted site – Qotion.sg for a good reference.

When all seems gloomy with the high interest rate being offered by the financial institutions. You call them “loan sharks and broad daylight robbery!” behind their back and suddenly you remembered you have bought quite a few life insurance policies with cash values. You decide to turn to them…

You can click on this link as provided by Dr. Money for the various insurance companies’ life insurance policy loan rates.

Then you may ask, which many clients have asked me as well… “Why am I paying an interest rate, back to the insurance company, for the loan which happens to be my premiums being put there all this while?” and “What is this Bonus Encashment I hear about?”

So What Is This Policy Loan All About?

If you have bought policies like whole life or endowment plans or what we normally call them as participating policies, like, after 2 or 3 years, there will be a cash value available and this amount will increase with the accumulated years together with the annual bonuses being declared every year. With the accumulation, you will get your break-even year then you start having some “profits” and then maturity or you may choose to surrender.

So with this cash value, you can take a policy loan of up to over 90% of the cash value. This policy loan will then carry a interest rate and it would be best to clear off this loan within 1 or 2 years before it hurts you in your pocket.

Why The Interest Rate?

Though the loan you are taking comes from your premiums on your life insurance policies. So the interest rate makes sense that the insurance company gives this loan to you and expect a small return, for you to settle your short term financial needs, whereas still covering you on what your insurance plan covers you.

Do note that you still need to pay the premiums for the insurance plan that you have taken a loan against.

If you don’t wish to repay the loan and you are less than willing to pay for the insurance premiums, then the automatic premium loan will be kicked in to pay for your insurance premiums from your remaining cash value till two things happen:

1. You have enough of everything, and decide to surrender the policy. The final value amount you will be getting back will be less the loan amount (with interest) and less the insurance premiums paid.
2. The unforeseen happens and you make a claim against your policy. The amount paid will be less the loan amount (with interest).

With this, I hope you can understand the rationale of the interest rate on your loan taken from your policy.

How About Bonus Encashment?

For any whole life insurance and endowment plans, there will be an annual bonus being declared to your policy. This will be reflected in your annual statement. Also to note is that once this annual bonus is being declared, it will be guaranteed and the insurance company will have no right to withdraw it, no matter how hard they plead with you.

Another thing to learn from the bonus structure is that you have another bonus that’s being declared to you; and thats’ the special or terminal bonus. This will be declared only when the plan is matured, surrendered or claimed. So, when in times of need, this type of bonus is almost untouchable.

Now, back to the issue of bonus encashment, and as understood from a local insurance company, though the annual bonus is guaranteed in your policies, should you decide to encash this bonus, it’ll be of a discounted value. Why is this so and is it a common practice for all insurance companies – it will be best to check with them.

Also to note is that this discounted value will be of a small value if there is a long remaining duration to the maturity date of your plan.

In summary, though the choices seem to be unfavorable when you are in need of money and wish to take up a loan, this is the common practices of insurance companies and financial institutions. But as a rule of thumb to a proper financial planning – one should always have at least six months of your income set aside as emergency funds, safely locked away in another bank account with no easy access to withdrawals.

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There is crisis in the financial market! People are losing faith in banks and insurance companies. People are stopping their insurance policies and are less open to the idea of planning for their future. A lot of people in the financial services line may lose their job anytime. Banks are working hard to salvage the situation and others are seizing this crisis to make a windfall as well.

These are the current news that are populating the newspaper and news media…

But should we be so affected by this current crisis?

>> For those who say yes!

I understand from there are many whom have been putting quite a fair bit of their savings/hard-earned money into their insurance policies or into those that claim high returns yet seemed too good to be true kind of bank products and are fearful that once the crisis get way out of hand, everything that they have put into may just go down the drain.

For that, there are many good reasons that we should be really affected by this current crisis!

But, on the other hand, there are some factors to consider like for instance:

On Your Insurance Policies:

You may have bought (for many years already) into a few Protection plans and/or Savings plan and these are meant for peace of mind against any instance of unforseen circumstance like illnesses or even in preparation for a good retirement or for your life long dreams and goals.

The crisis has just started without any finalization as yet. Should you be deciding to (really) terminate your policies – consider this… What if you do suffer a illness during this period, but you have terminated your policies, where will you be looking to get those money? From a new insurance policy that is not approved yet? You get the answer… Also if your insurance policies have not break even – imagine the losses you will be getting.

On Those Bank Products:

I believe this can only be meant for a lesson to be learned. There are no perfect products in this world. My only advice is that you have to study the product carefully, especially all the fine prints and the risk involved to participate in the product. Also that you should not be putting all your savings into one single product.

>> For Those Who Say No!

For you who say no, I guess you may be getting some good opportunities out of the crisis or that you are simply a very positive person.

Seriously, what can we learn from this or any crisis?

There is a chinese saying that states that there’s always an opportunity amidst any crisis which is very much the case like for instances:

• Other insurers, that are not deeply affected by the crisis, get to have a certain percentage of the “lost” clients going to them.
• Investors, that have noticed the incoming crisis, have their resources ready to get a good buy in the Stocks market
• There are also few educational programs coming out of the blue to teach people like you and me – how to survive in this crisis or the type of business/product/services that you can have to make a profit out of this or any crisis.

For me, my personal view out of this crisis, in terms of financial planning and insurance is that:

• Diversification: For any insurance products, you should not be getting all of them from just one company, even if the Financial Planner is your closest sibling. For e.g. if you do know that you need around $200,000 worth of life protection, you can get your coverage between 2 – 3 insurance companies, so should there be a (real) crisis in one of the companies – your loss is just half or a third and not 100%. And not only just that, for any bonuses in your policies, you are not deeply affected by one company’s performance. If one company should face a stagnant growth, which you have no say at all, you can always depend on the others for better returns.
• Opportunity: I do agree that for any crisis, there’s opportunity. But I should not be talking much on the “lost” client coming to me. Instead I want to focus on insurance related topic like investment-linked products (ILP). I am currently into a ILP using the Dollar-Cost-Averaging method. With the value of unit trust (especially Equities) going down over the next few weeks, my similar dollar buying into the next month will mean that I am getting more units -> break-even faster -> profit higher and faster (when the value picks up in the next few months or years). If you do face a similar opportunity, seize the chance fast!
• Know Yourself Better: There are many out there who do not know themselves well. They commit to a certain product because of the good recommendation.  Like for example, you are not a risk-taker, therefore if I recommend you to take up an investment in equities, despite my recommendation that it will have a double digit growth (on the average). You should not be taking the plan up as any negative growth will only make you more worried and higher chances of giving up the policy. Therefore you need to know yourself and your personal limits better before making any commitment!

In summary, with the crisis in sight, if you are deeply affected by it – you can only learn how to make your own judgement, be more patience and be open to any opportunities. Let’s keep our fingers crossed and hope for the worst to be over!

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Have you ever wondered “why the poor gets poorer, and the richer gets richer?”

I have been pondering on this question for the last few days after going through some financial planning with some clients.

Many of these clients, whom I have the privilege to do their financial planning, come from low to middle-income earners.

The main characteristics of these people are that:

• They are very careful with their money and every cent counts
• The basic instinct of survival comes to play – Security.

With security in mind, they are very likely to hold onto their money – closest to their hearts – continue saving the money in the bank account.

So what is wrong with this picture here?

This brings us to the gender of my posting today – The Impact Of Current Inflation…

In a nutshell, Inflation is simply a rise/increment in the cost of daily necessities and services over time. An illustration of the impact of Inflation can be shown as: if inflation rate is 5%, your regular Fast Food meal of S$5 can easily cost S$5.25 (S$5 + 5% of S$5) soon.

Do you see what’s happening to the power of your money? For a student to continue enjoying his fast food meal like yesterday, the Parents have to give extra $1 (they are not so miserable as to give only $0.25 more) so as to allow the student to continue his lifestyle.

With this, it also forms a vicious cycle of negative asset allocation, which means that there are a lot of catching up to be done with the current (same) amount of money that you have. The signs of the “Poor” getting poorer are more obvious now…

Inflation -> Prices Increase -> You set aside more money into maintaining current lifestyle -> You have lesser money available to make them work harder for you -> You’re happy with current lifestyle without knowing that you are landing yourself into a “fruitless” future -> This can be brought forward to your dependents -> The cycle carries on…

Want another harsh reality? If you put this S$5 into your savings account for 1 year – with 0.25% interest, you are getting S$5.01; with 1% interest, you are getting S$5.05. So how are you getting the remaining $0.24 or $0.20 for your fast food meal? Did you say “Don’t eat then…”, then I would say, look at the face of your poor child with his watery eyes or fiery temper…

Do I have any solution to combat the current inflation?

Yes, I do. But are you prepared to do it? It’s never too late to get started…

1. Follow the tip from this post, and be disciplined enough to set aside 10% of your income every month
2. Do this till you have six months of savings set aside as Emergency Funds
3. Read this post and gauge for yourself which is the best savings program for you. Note: If you are savvy with Stocks, Unit Trust, Forex, Options, Futures, Real Estate, other options, by all means do go ahead. Just be careful. Do your own studies and not by hearsay. Either go for single lump sum or into monthly savings mode (with the 10% disciplined savings)
4. Transfer part of your money in the CPF OA to the CPF SA to earn the 4% returns. Do this regularly.
5. Be prepared to do this with a long-term mindset, so as to allow your money to work hard.

You may notice that this solution does not really solve the impacts of the current inflation but… at least you are slowly getting yourself out of the vicious cycle. Your future will bear fruits, not only for yourself but also your next generation.

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If you have $5,000 today, do you want to know how much will this money have grown in 20 years time if you save in a Bank?

One of the tools, that I have commonly used to illustrate the Power of Compounding Effects, is one that our CPF Board has provided. You can access this tool by clicking here.

Firstly, let’s see some of the common interest rates that local banks are offering:

Normal Bank Saving Interest Rate: 0.25% p.a

For your $5,000:

• In 10 years time, you can see this amount: $5,126.42
• In 20 years time, you can see this amount: $5,256.03 (an increment of $256.03 or 5% growth)

Will your $5,000 ever reach $10,000? Sad to say, even if you do not touch the $5,000 for the next 50 years, you’ll only get back $5,664.86.

A Better Saving Program from the Bank: 1% p.a

For your $5,000:

• In 10 years time, you can see this amount: $5,523.11
• In 20 years time, you can see this amount: $6,100.95 (an increment of $1,100.95 or 22% growth)

Will your $5,000 ever reach $10,000 then? Also sad to say, even if you do not touch the $5,000 for the next 50 years, you’ll only be getting back $8,223.16.

So, with this kind of returns, do you think it’ll be worthwhile to spend some time exploring into more alternatives like Savings Program (either monthly or single-premium) from Insurance Companies?

So let’s see the kind of returns that you may get from having a Savings Program with an Insurance Company.

With a Traditional Plan (one that participates in the performance of the Company)

With Projected Returns of 3.75% p.a:

Your $5,000 can become:

• $6,700+ in 10 years time
• $8,000+ in 15 years time
• $9,500+ in 20 years time
• and If you are around 27 years of age and keep this $5,000 till you are 65 years old, you will be seeing returns of $19,000+ ($14,000 more, or 280% growth)

With Projected Returns of 5.25% p.a.:

Your $5,000 can become:

• $7,300+ in 10 years time
• $9,100+ in 15 years time
• $11,000+ in 20 years time
• and If you are around 27 years of age and keep this $5,000 till you are 65 years old, you will be seeing returns of $25,000+ ($20,000 more, or 400% growth)

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