How To Make Better Money Decisions

When it comes to handling your finances well, there is a plethora of information available online and in the nearby library. Educating ourselves and widening our financial literacy is the first step to making better financial decisions.

Often, there is no single path that will lead us to the “right” decision. Instead, we must walk the path using different strategies and methods to come up with the best financial decision. Start with these steps.

#1: EDUCATE YOURSELF

Gather as much information as possible to organize your options and action plan. Although you are inclined to make a gut-driven decision, educating yourself is an important first step. Research shows that gut feelings tend to be more accurate when they are made by experts. Thus, becoming an expert on a certain financial issue can make your intuition more reliable.

#2: INTERVIEW PEOPLE WITH SIMILAR CHOICES

Talking to people who have taken the paths that you are considering will help you see the bigger picture. Choose people who are willing to speak to you with all honesty. Study suggests that this approach can help you make more accurate predictions about your own reactions to potential future events. While no one’s experience will mirror yours exactly, you will be able to learn a lot from these people.

#3: ESTABLISH A LIST OF OUTCOMES

When making decisions, I make it a point to list the possible outcomes of each option. Writing down the outcomes can help you make better decisions. Write down a couple of ways your option can go wrong and highlight how you can potentially lose money. Then, write down the ways your option can go right. This option is a strong contender if you think that there is nothing that can go wrong.

#4: DISCUSS YOUR DECISION

Look for a person whom you trust and respect. Discuss your financial decision with that person. Discussing your decision with others will help you understand the situation at hand. Moreover, you will be able to get feedback from someone who does not have a vested interest or a personal involvement in this decision.

#5: CONSIDER BOTH THE PRESENT AND FUTURE

Improve the quality of your financial decisions by making sure that you strike a balance between what benefits you at the present and future states. Do this by listing down the possible advantages and disadvantages of an option for the short-term. The other list must contain the advantages and disadvantages of the same option in the long run.

#6: GIVE EACH OPTION A TEST RUN

When buying cars, most people take advantage of the test run. With a huge financial investment such as this, people want to make the best decision. Giving each option a test run will enable you to observe how it will impact your life.

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Research shows that people tend to make decisions differently depending on their mood. To bypass this bias, you can imagine that you have already made a decision and absorb that choice for a few days. This method allows you to determine how you will feel when you are in a range of different situations. Furthermore, you can gradually test the impact of a financial decision.

Sources: 1, 2, & 3

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Seeing cryptocurrency as a get-rich-quick investment can be a massive mistake

cryptocurrency symbols

The word “cryptocurrency” has been thrown around rather frequently these days. However, this precarious investment may not be for everyone.

In fact, please don’t take our word for it. The Monetary Authority of Singapore (MAS) has warned the public on its volatility, and that risky investment products are unsuitable for retail investors. To be honest, it’s not hard to understand why.

Do you know that between 2018 to 2020, there have been over 500 police reports of crypto-related cheating, fraud, or other crimes? Nearly 400 of them were made last year, and the news revealed that roughly S$29 million was the figure for investors’ losses.

Experts highlighted the main risks:

  • Falling for scams
  • Jumping into crypto projects that fail
  • Involving in bad investments of obscure coins
A closer look into the scam tactics

Choo Oi Yee, chief commercial officer for private capital platform ADDX, shared that scammers are tapping onto examples of people who have struck it rich in rousing the greed of investors.

Ms Choo added that there are two scams under the Ponzi scheme:

  • Money from new investors is used as returns for earlier investors.
  • Pump & dump: Scammers buy a coin to push its price up misleadingly and then dump it after others jump on the bandwagon.

Hong Qi Yu, the founder and chief executive of the digital trading platform Tokenize Xchange, also commented regarding this issue. He said that scammers might use third-party accounts to hide their mischief.

Common tactics include:

  • Hacking into accounts
  • Using undoubting individuals as money mules
  • Threatening vulnerable individuals to use their accounts

To counter the ever-evolving strategy of scammers, Mr Hong urged legitimate operators to enhance their surveillance of unusual activities. He also recommended ​​“hot” and “cold” crypto wallets to reduce the risk of being hijacked.

Do your homework before cryptocurrency dealings
a person using laptop while researching

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With all that said, Ms Choo encourages potential cryptocurrency investors to do their homework. Crypto is complex, and a sound investment strategy involving investing in a range of assets is crucial.

Ms Goh (who declined to give her full name), who lost about S$30,000 to cryptocurrency trading platform Torque, prompted the public to learn about what they’re buying.

“Learn how to use the (crypto) exchange because different exchanges have different fees. You can save a lot on fees if you’re using the right exchange for the right coins.”

Another investor, Andy (not his real name), who lost about S$38,500 as a scam victim, asks investors to do their due diligence.

“The entire blockchain and cryptocurrency space (are) highly volatile. And the technology behind it is very difficult to understand, so unless you’re highly passionate about this whole landscape, don’t see it as a get-rich-quick scheme,” he noted.

When investment opportunities sound too good to be true, they probably are. Don’t let your hard-earned money go to waste via hasty investment decisions.

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Follow These Steps To Acquire Stocks In Singapore

With an abundance of low-cost investment brokerages and a wide range of investment products, we believe that anyone can get started on investing. Unless your ambition is to become a day trader, you do not need to master technical analysis or complex charting techniques.

Simply carve out your path by following these steps.

#1: OPEN AN INVESTMENT BROKERAGE ACCOUNT

Unlike your comfort food, stocks cannot be bought at a store and taken home in a paper bag. You need to go through an account with an investment brokerage. A brokerage is a company or firm that acts as the middleman to connect you to the stock exchange.

Brokerage companies usually receive compensation by means of commissions or fees that are charged once the transaction has been completed. Brokerage accounts charge through minimum fees (i.e., to pay on each trade) or trading fees (i.e., percentage of each trade). These fees will affect your profits, so ensure that you do your research.

#2: FUND YOUR ACCOUNT

It is necessary to transfer money to your account to begin trading. Take note of the brokerage company’s requirements such as the minimum fee.

These companies generally accept multiple funding methods such as PayNow transfer, FAST transfer via online banking, or overseas remittance. Use a method that suits you best.

#3: DETERMINE WHICH STOCKS TO INVEST IN

Do your research, ask financial questions, and compare the facts to determine which stocks to invest in. There are different types of investment products such as Blue chip stocks and Real Estate Investment Trusts (REITs).

Blue chip stocks are the stocks of well-known, high-quality companies that are leaders in their industries. Investors usually hang on to these stocks for long periods and collect its dividends. Local “blue chips” include Singtel, DBS, and ComfortDelGro. Many Singaporean investors prefer to invest in blue chip stocks because of its perceived certainty and stability. Local blue chips are deemed to be less risky and are often common household names that most Singaporean investors can relate to.

Real Estate Investment Trusts (REITs) allow you to buy shares in a variety of properties. For instance, CapitaLand and Ascendas gives you access to purchase shares in commercial properties such as shopping malls and office buildings. It is one of the most popular options for investors seeking regular income.

#4: ACQUIRE YOUR FIRST SHARES/STOCKS

Once your funds have been sorted out, you can buy your first shares/stocks using your brokerage’s online platform. As a beginner, you may make investing a regular habit by spending a fixed amount every month on generic Exchange Trade Fund. The Exchange Trade Funds (ETFs) are similar to mutual funds in many ways. Although, ETFs are bought and sold throughout the day on stock exchanges.

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The idea is that over the long term, the ETFs will rise. By buying a fixed sum every month, you will be able to spread out your risk through ups and downs. Consistently funding your account is key.

Sources: 1 & 2

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What to do on a financial detox

using the calculator

When you think of the word “detox”, what comes to your mind? For us, it’s something related to food. Similarly, shift this “food detox” idea to the financial realm, and you will somehow get it.

Financial detox is essentially a process where you take time to cleanse your finances and give your money habits a thorough review. If you want to know what to do on a financial detox, keep reading.

#1: Talk about money

Money is a sensitive topic; we get it. But there is no running away from it during a financial detox.

Before you find a friend, family member, or financial advisor, you will want to sit yourself down and take a good look at your financial goals. Then, see what aspects of your habits or personality are hindering you from reaching that aim. Once your outline is ready, speak with that trusted person and thrash it out.

#2: Settle your debts

You may not be able to settle your debts immediately but if that is part of your financial goal (which it should be), start thinking of ways to get there.

A wise way to start is to set a budget. You will want to refer to your salary, spending, and bad habits when setting a budget. While sticking to a strict budget is essential when clearing debts, be mindful that bad habits take time to change. Give yourself some (cash) space to breathe if necessary.

#3: Tackle bad habits
a woman holding onto a credit card

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Speaking of bad habits, you will want to tackle them before they start creeping back into your daily routine. Use these questions to help yourself understand the money mindset you hold:

  • What is your money stance?
  • Do you tend to spend when you’re sad or happy?
  • How do you feel about saving, borrowing, and spending?
  • Have you succumbed to the YOLO concept and spend impulsively without giving much thought to your budget?

The answers to the above questions will guide you in working out some methods to deal with bad money decisions.

For example, peeps who find themselves spending hastily should consider a “cool-off period”. Instead of making a purchase immediately, give yourself a day or two to think it through. If you can live without having that latest juice mixer in your possession, then don’t buy it.

#4: Take on a financial challenge

A financial challenge should help you to start saving. We have previously written an article on money-saving challenges, and these are some of the ideas you might be interested in:

  • Borrow, don’t buy
  • Exercise the 1% trial
  • Give yourself 52 weeks
  • Set aside your spare change
  • Introduce a “no extra spend” week

The above concepts may look weird without proper context so hop over to read more here. Ultimately, you know yourself best, so tweak those challenges mentioned above so you can stick to the plan till the end.

#5: Expand your wealth
investment

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There will come a time where you will need to face retirement. Before that phase arrives, start venturing into expanding your wealth.

While savings are good, they will get depleted one day. Not sure if you want to get your hands into investing since the markets are volatile? What if we tell you there are options to start investing from $100? Whether it’s unit trusts, robo-investments, or exchange traded funds (ETFs), click through the link to find out more.

Final thoughts

Like how a food detox program is painful, a financial detox is equally tough. But it’s an absolutely vital process if you want to take hold of your finances and gain control of money on your life. You will get through it! Just take baby steps.

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Consider these options to start investing from $100

$100 Singapore notes

Do you know that according to a study of Singaporeans’ financial wellness state by OCBC last year, only 60% of women have investments? Faring better on the flip side, 75% of male respondents aged between 21 and 65 noted that they are investing.

Are you a novice when it comes to investing? If you have a low-risk appetite and not so investment savvy at the moment, fret not. All you need to take is baby steps.

“You don’t need a lot of money to start investing,” highlighted Vasu Menon, executive director of investment strategy at OCBC Bank. “A regular investment plan where you squirrel away small amounts each month into pre-selected investments is one fuss-free way to start building a portfolio.” 

Consider these options to start your first investment from $100!

#1: Exchange Traded Funds (ETFs)

The OCBC Blue Chip Investment Plan allows you to invest in ETFs from just $100 a month. Just in case you’re clueless, ETFs are funds that are listed and traded on the stock exchange.

Even if you do not know much, that’s okay. The great thing about ETFs is that you don’t need a lot of market monitoring, thanks to the dollar-cost averaging. By regularly investing a specific sum of money over time, you can potentially lower your average price per counter.

“Diversify over time by phasing your investments into the markets through a regular investment plan, so that if the markets see a drawdown or sharp volatility, you will have dry powder to buy at lower levels, which reduces your average cost. A regular investment plan allows you to benefit from dollar-cost averaging,” Menon shares.

#2: Unit Trusts
working with a fund manager

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For folks who want to know that their money is in good hands, unit trusts would be a good investment strategy. To put it simply, an experienced fund manager oversees a pool of funds from a group of investors and uses it to invest in a range of financial assets.

The good news is that you don’t need significant capital to access a diversified portfolio. You can choose between making consistent investments from $100/month or opt for the minimum $1000/month lump sum route.

Purchase methods include cash, Central Provident Fund (CPF) Investment Scheme, and the Supplementary Retirement Scheme (SRS) for selected funds.

“For myself, I started my investment journey by investing my own CPF monies since the funds were just sitting idle in my account, out of sight and out of mind. I took the first step by setting up a CPF investment account and began exploring opportunities to invest,” said Tan Siew Lee, Singapore’s head of wealth management at OCBC Bank.

#3: Robo-Investing

As we come to a close, robo-investing is our last option. Through this investment strategy, novice investors who want to invest actively via algorithms will be able to construct, monitor, and review portfolios.

Menon shares that OCBC RoboInvest could be one way to begin. Selected portfolios just require a small initial investment of US$100, making a fantastic way for almost anyone to kickstart their investment journey.

While we can’t say the same for other robo-investing platforms, Menon assures us that OCBC RoboInvest automates investments with guidance and validation from wealth experts to give you peace of mind.

However, that doesn’t mean a hands-off kind of financial venture. While your portfolio is monitored and periodically re-balanced based on economic and market movements, you hold the final say to approve any changes made to your portfolio.

Want to find out more on OCBC RoboInvest? Click through this link: ocbc.com/personal-banking/investments/roboinvest.

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