If Singaporeans were put through a financial fitness test, it's fair to say that many of them would fail because they suffer from that all-too-common ailment - money-not-enough disease.
Many suffer from this condition not because they are poor, but because they don't practise financial planning and have poor money habits like overspending.
Indeed, many of those who fall into this category have a household income of over $10,000 a month, yet they don't have good savings plans that would tide them over during retirement or a prolonged crisis, the HSBC Financial Fitness Index noted in a recent study.
Its poll of 1,200 people late last year found that only 30 per cent were rated financially fit, 50 per cent were moderately fit, while 20 per cent were totally unfit.
Respondents were asked a series of questions related to their money habits, such as how they spend and plan and what they know about investment and data protection.
Most did pretty well in many of the questions except those that concerned making plans for retirement and having adequate cash for the long term. Almost half of these folks failed this part of the financial fitness test.
Many do not plan for retirement
The results are not surprising at all because they mirror and confirm what similar financial surveys have found - that many of us are not prepared for retirement. This means people who don't have huge savings accounts, and still don't do anything about it, will definitely run out of money at some point during their old age.
The numbers are already there for all to see and it's disconcerting: There are around 400,000 people aged 55 to 70 who don't even have enough in their Central Provident Fund (CPF) to hit the Basic Retirement Sum, which is intended to provide a lifelong basic monthly income of up to $800.
While the Government has launched a campaign to create awareness and to boost the savings of these folks by providing matched top-ups of $600 annually for the next five years, everyone needs to do his part as well to avoid being trapped in this cycle of inadequate savings.
The danger is that each generation of Singaporeans will produce a big cohort of retirees who will not have enough money. This is especially so because many people are now involved in freelance work in the gig economy that does not guarantee a stable income for the long term.
Moreover, many of these "self-employed" folk are not diligent in contributing to their retirement funds, so once they stop working, they will not have enough money to last them a lifetime.
Here are some numbers to chew on: Assume you start working at 25 and work all the way to 65. If you live to 85, it means that during your 40 years of working, you need to earn and save enough to pay for the expenses for not only those 40 years, but also another 20 years when you are not working.
So if you are content to have only six months of emergency funds, the question that you should really ask is: When you finally stop working, will you have enough to last for another 240 months?
Drop in income is top concern
The HSBC survey uncovered eight areas of money concerns that have been keeping many people awake at night. For instance, most people, including high-income earners, are worried about pay cuts and income reduction, proving that no one is spared the pain of the pandemic. Indeed, bad news on how companies and people are being affected has become almost a daily staple in this newspaper.
All money problems are linked: You worry about a drop in income because you are afraid of not having enough money to pay for unexpected expenses. Such fear is real because homes, cars and appliances will need repairs or replacement.
This is why it is always prudent to have sufficient cash savings and not invest every dollar you have. Imagine the trauma of having to liquidate your investments at a loss just to pay household bills.
Unexpected medical expenses
An irony of life is that if you have good medical insurance, you will have fewer money problems if you get a serious ailment that requires hospitalisation because the bill will be mostly paid for by your insurer. Paying for outpatient treatment will be the real drain on your savings.
If there is a lesson to be learnt from this pandemic, it is that it pays to put in extra effort to keep ourselves fit, physically and financially.
Unable to have a good retirement
Log in to both your CPF and bank accounts after reading this. If you don't see many digits in both balances, it is time to start worrying about your future.
Your money problem will not improve by doing nothing. While it is hard to increase your income overnight, you can certainly help yourself by reducing all non-essential spending.
The biggest obstacle to having a good retirement is not that you never made plans for investment but that you overspent beyond your means.
And don't be lulled into complacency just because you own a million-dollar home - it will not pay the bills unless you are prepared to uproot and downgrade in your old age.
Retrenchment and unemployment
Almost every worker has probably thought about this recently: "Will it be me next?"
You can actually work to lessen this risk by ensuring that you always deliver top-notch results that meet your employers' targets. Frankly, everyone loves a worker who provides good customer service - just remember this when you deal with your next customer.
Paying daily expenses
If you worry about this, it is time to have a budget to control your spending.
Allocate fixed sums to all essential expenses and reduce or totally cut expenses for leisure and entertainment until the situation improves.
Know that the happiest people don't have everything, they just make the best of everything they have.
Poor investment returns
Unless you are born with the Midas touch, you are unlikely to be able to retire comfortably just by investing alone. If it were so easy to get rich, no one would be working - everyone would be punting on the stock market full time.
The purpose of investing is to grow your savings over the long term so that you will have more to spend in old age.
Those who see investing as a substitute for having a good career should always ask this question: Do you have anything to fall back on if you lose money?
If you face this problem now, it is incumbent on you to stop this vicious circle.
Try to be financially independent so that you don't become your children's burden. Everyone stands a chance at this if they start planning for it today.
Check if you are financially fit
Can you beat the “no-money” disease? Run through the HSBC checklist to see how fit you are when it comes to money.
Good financial habits
• Saving money regularly
• Have not shopped impulsively beyond your means
• Can afford basic living expenses for six months without income
• Always pay credit card bills in full
• Always pay utility bills by due date
• Have used financial products to increase value of assets
• Monitor expenses every month to prevent overspending
• Have an income-and- expenditure budget
Good financial knowledge
• Aware of wealth management products that can help achieve financial goals
• Confident to choose products that suit your needs
• Understand the fees and expenses for such products
• Understand the product features, benefits and risks
• Compare different financial products before purchasing
• Have considered risk tolerance level
Good financial planning
• Review financial plan at least once a year
• Seek professional advice from financial advisers/insurance brokers/bank staff
• Review portfolio according to market situation and financial goals at least once a year
• Well prepared for healthcare costs or unpredictable medical expenses
• Well prepared for emergency/unexpected adversities
• Have comprehensive financial plan for retirement
• Aware of the amount needed for retirement expenses
• Monitor progress and performance of retirement savings regularly
• Adhere to retirement savings plan and meet expected progress markers
• Understand life goals and make financial plans for each goal
Good financial protection
• Change Internet banking password at least once a year
• Have not logged into Internet banking through public Wi-Fi
• Check bank and card monthly statements
• Do not let others see or know your banking passwords
• Have not provided credit card information on unknown or unfamiliar shopping portals
• Have never replied to unsolicited calls from dubious sources
• Have never shared banking information via instant messaging/social media platforms
• Have never replied to e-mails from dubious sources
Not many people will be able to answer yes to all these questions.
But you should at least follow all the basic steps related to banking security so that you do not end up as a victim of financial scams.
If most of these good habits are already familiar to you, give yourself a pat on the back.
Just like how you keep fit through regular exercise, staying fit when it comes to money is the same too. You need to put in a lifetime of working at it because there is also no short-cut to a good life.
Source: The Straits Times © Singapore Press Holdings Limited. Reproduced with permission.
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