MoneyDigest - Personal Finance, Lifestyle, Money Saving Tips

Honestly, Why Are You Buying Insurance?

Insurance is a safeguard against unfortunate and unforeseen events. It is a strategic way to manage various risks. Insurance companies offer individuals or policyholders protection from potential losses in exchange of payments called premiums.

Aside from guaranteed coverage, what are the honest reasons why people buy insurance? On the flip side, what are the insurance company’s objectives as they offer their services?

OBJECTIVES OF INDIVIDUALS

As you age and progress along the stages of life, you become more and more aware of how necessary insurance is. A number of factors may lead to this realization such as seeing your elderly parents and starting your own family. While you know that you are supported by your CPF account as well as your Medishield Life, you can realize that it may not be comprehensive enough to meet your lifetime needs. This can serve as your wake up call to evaluate your present financial situation and plan for your future and that of your loved ones.

The exact reasons why people buy insurance is unique and highly subjective. However, here are some of them:

a. Worried about critical illness – consider health insurance.
b. Worried about permanent disability – consider life or term insurance.
c. Concerns about the loss of belongings – consider general insurance.
d. Concerns about death (as a breadwinner)- consider life or term insurance.

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OBJECTIVES OF INSURANCE COMPANIES

Nowadays, insurance companies offer a wide array of insurance products and policies that cover areas from property, health, and travel. Insurance companies must satisfy certain objectives to effectively function and meet their clients needs. Before purchasing one, know some of their objectives:

a. Pooling Money

By collecting premiums from a number of individuals or businesses, the insurance companies are able to pool their money together. They then pay out for the relatively few claims filed each annum. Keep in mind that majority of the policyholders do not file claims over the same period.

b. Financial Competence

Another objective is to ensure the policyholders that they are financially stable. Once one or more policyholders report that they were not duly compensated, society’s confidence in the system may be gone.

c. Influencing Behavior

One of the most important aims of insurance companies is to reward and promote responsible behavior. For instance, individuals with lower records of vehicular mishaps are more likely to be quoted with a lower car insurance premium than those with unsafe driving records. Rewarding safe driving practices can increase the likelihood of such desirable behavior.

Image Credits: pixabay.com (License: CC0 Public Domain)

Sources: 1 & 2

6 Essential Things You Must Have In Your Wallet At All Times

1. BRING IN THE MOOLA

No matter where you are planning to go, it is always a good idea to keep some cash in your wallet in case of emergencies. A general rule of thumb that I employ myself is to store as much money as I am willing to lose (i.e., no more than S$50).

Aside from this, there are other advantages if you carried spare cash such as avoiding ATM service fees and controlling your spending. Purchasing items in cash is Psychologically beneficial than paying with credit cards because it makes you more aware and cautious of your spending.

2. USE WHAT YOU HAVE

Use the money you have while avoiding the inconvenience of carrying loads of cash by bringing your debit card along with you. Maintain security by refraining from putting notes of your PIN or password beside it. Believe me, some careless people do this!

3. RECEIVE THE REWARDS

Having your credit cards handy will only tempt you to shop for more. But if you pay off your credit card balance consistently each month, you might as well maximize its rewards and discounts.

For instance, use your credit card for grocery shopping. Grocery shopping can be costly at times especially because businesses are becoming more competitive. And if you were to use a credit card, be sure to indulge on all of its discounts. Check out this list for more information.

4. KEEP THE COUPONS

Couponing is a strategy used by a consumer to pay less in shopping for groceries, tickets, and more. You may shy away from coupons but once you see the real value of their savings by looking at the receipt, you would realize how great it is.

In order to receive its benefits, you must always put the coupons of your favorite stores inside your wallet. Aside from the coupons handed by the salesperson, get coupons for dining, leisure, toys, pets services, and just about anything at cuponation.com.sg or groupon.sg.

5. STORE LOYALTY/MEMBERSHIP CARDS

One of the surefire ways to save money while you shop is by organizing your loyalty or membership cards in your wallet. These types of cards deliver discounts and rewards points that will lead to bigger savings in the long run.

If you frequent Sephora, do sign-up for their loyalty program and receive up to 10% discount and other exclusive benefits – for free! Simply fill up quick form by approaching the cashier or by politely asking their staff.

6. PASTE YOUR CONTACT INFORMATION

In case of emergencies such as accidents or loss of belongings, a kind stranger will be able to help you if you keep a list of your most important contacts. This list must contain at least three of the phone or handphone numbers of your most trusted peers or family members.

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*Simple Reminder: Do not place all of your personal information inside your wallet as it can lead to identity theft if it falls into the “wrong hands”.

Sources: 1 & 2

Interesting Ang Bao Facts Every Singaporean Shall Know

It is that time of the year again! We are about three weeks from the festivities of the Chinese New Year. Family reunions, abundant food, and small red packets called “Ang Bao, Hongbao, or Ang Pao” shall grace Singapore once again.

The color red embodies luck that is supposed to ward off the evil spirits. Along with its potent color, here are 5 Ang Bao Facts Every Singaporean Shall Know:

1. AMOUNT TO GIVE OUT

There is no specific standard on the lowest or the highest amount to give but the amount definitely reflects your character as a person. A simple survey on TheAsianParent Facebook Page showed that readers usually give out S$2 – S$80 to children in 2014. Although, Singaporeans usually give out S$6. If you are truly in touch with your Chinese roots, you will give out an amount ending with an even digit as odd digits are traditionally associated with funerals.

2. NOTES TO PUT IN

Generally, the number of notes you put it does not matter as long as the amount you gave is in the range of what is expected. Most Singaporeans do not mind if you opt for putting four S$2 or two S$5 notes! However, leaving even-numbered notes is believed to bring out future success!

3. NUMBER FOUR

Some people are likely to avoid giving amounts in fours such as S$40, S$44, and S$400. This is due to the fact that the number “4” is similar (or rhymes) with the word “death in several Chinese dialects.

4. DIFFERENT NATIONS

Since Singapore is a mixture of different cultures, we as a nation have created practices centering red packet gifting. It is not uncommon to have marriages between two different races, leading to traditional practices being modified or ignored. But aside from the Chinese, nations such as Vietnamese, Japanese, Filipinos and South Koreans have similar customs.

5. DIFFERENT CELEBRATIONS

Aside from Chinese New Year, red packets are given to religious practitioners and lion dance performers as a payment for their excellent service. Also, it is given to couples during wedding banquets. The minimum Ang Bao amount for this event is about S$50. It certainly is “little” compared to the minimum of S$150 handed out in Taiwan.

Image Credits: pixabay.com (License: CC0 Public Domain)

Let us be the first to greet you, advance Happy Chinese New Year!

Sources: 1, 2, & 3

5 Surefire Ways To Boost Your Net Worth

With the wealth you possess right now, do you barely get by or do you live lavishly?

Realize your financial situation by actually calculating your net worth. It is pretty straightforward! Simply add up the value of your assets and deduct the value of your liabilities.

Assets include savings, investments, CPF balances, insurance, properties, cars, or anything you own with monetary value. While liabilities include loans, mortgages, credit card debt, or all the money you still owe.

To save you time and effort, here is a tool to help you calculate and benchmark your personal net worth: salary.sg/2007/calculate-net-worth-and-benchmark-it. Remember to measure your net worth every six months to a year as recommended by financial experts. Doing too often may lead to unnecessary stress and panic.

Interestingly, one might end up with a negative net worth due to taking on a number of loans and poor money management skills. Do not let this happen to you!

Consider these 5 Surefire Ways To Boost Your Net Worth:

1. BE A DEBT NINJA

Slice debts out of your life as soon as possible. You probably heard this tip before. But, it goes without saying that aiming to clear off the high-interest debts (e.g., outstanding credit card balance) will help you pay lower interests in the long run.

Minimize the negative effects of debt while increasing your wealth by taking part in the debt diet, as popularized by Oprah Winfrey.

2. SPEND LESS

Nobody, including me, likes to hear that they are spending too much. I know how delicious a cup of Starbucks caramel frappuccino is or how satisfying it is to get the latest IPhone but these things will catch up on your wallet. The small and big expenses can add up as fast as Kopitiam queues lengthen during lunch time.

This is why you must take down your expenses everyday for at least a week and realize your spending habits. By knowing so, eliminate or reduce the areas which are unnecessary. This act of cutting expenses can have a substantial impact to your net worth!

3. INVEST MORE

It only makes sense that making your money work for you can improve your wealth. If you have spare cash lying around your savings account (experiencing small interest growth), consider investing in index funds, unit trusts, bonds, or RIETs (Real Estate Investment Trust).

*Friendly Reminder: If you do not have enough knowledge or did not consult a financial adviser, please refrain from committing to any type of investment first.

4. GET A RAISE

Another way to increase your wealth is by increasing your income. If you have been in the organization for a period of time and feel that you had done some good, there is no harm in asking for a reasonable pay raise.

Do not open a discussion with your boss unless you are fully prepared. Consider these six things to help you prepare.

5. SEEK PROFESSIONAL HELP

One of the most underrated and overlooked step to growing one’s net worth is seeking professional help. Many people are ashamed of their current financial state and get sucked in their negative tracks. Fear not my friend as experienced professionals are able to guide you in budgeting and planning as well as provide you with the latest information on how to grow your assets.

Image Credits: pixabay.com (License: CC0 Public Domain)

There may be no secret formula to permanently increasing your wealth but every time you decrease your debt and boost your assets, your net worth certainly spikes up!

Sources: 1, 2, & 3

Newbie’s Guide To Buying Insurance In Singapore

Insurance is a binding contract or policy in which an individual receives reimbursement or financial protection against losses. It provides coverage or security against a myriad of unwanted or unforeseen events such as death of the spouse, permanent disability, critical illness, and damaged car.

First, you must determine the situation you are in then and decide what type of insurance is appropriate for you. The policies and the insurance jargons can be confusing to a novice. To help you, here are some things you should consider before purchasing an insurance policy in Singapore:

1. PRICES

When purchasing for an insurance policy in Singapore, look for the best-priced deal that is suitable for you because prices can vary from one company to the next. Furthermore, the policies these companies offer are different. So, beyond the price, it is important to consider other factors as well.

2. TYPES

There are three main types of insurance sold in Singapore namely: Life Insurance, Health Insurance, and General Insurance. It is important to make sure you know what you want and you know what the insurance policies entails.

a. Life Insurance

This policy protects you and your dependants by giving the sum assured under certain circumstances such as being permanently disabled or critically ill. The agreed amount of money is intended to help you and your dependants meet your financial needs.

b. Health Insurance

This policy covers accidents, illnesses, and disabilities that affects your health. To help you and your family deal with the expenses, different health insurance policies are available in the market.

c. General Insurance

This policy secures you against a wide range of events such as damage to your home or loss of your belongings. Upon the occurrence of the event, the insurance company will pay you with an agreed amount to cover a portion or all of your loss.

3. TERMS

As a newbie, you are exposed to different insurance terms that can sometimes be confusing. This is why you must read through a comprehensive glossary of terms such as this list compiled by A.M. Best Company. This is the sample:

a. Annuity- a type of insurance policy that pays out fixed income payments at regular timings for one’s retirement.

b. Premium- price of protection for a specified period of time or a specified risk.

c. Whole Life Insurance- a type of life insurance serves a lifetime of protection. The policy will pay out the total sum insured plus any additional that you have accumulated before you passed away or become permanently disabled.

Image Credits: pixabay.com (License: CC0 Public Domain)

Sources: 1 & 2

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