Early this year, the U.S. Consumer Financial Protection Bureau conducted a study on 59 consumers as well as 30 professionals to define what financial well-being actually is. Through their in-depth interviews they found that your income does not matter; consumers can experience financial well-being or the lack of it because it is highly personal. Therefore, financial well-being is defined as having financial freedom of choice and financial security in the present and in the future.
FACTORS THAT INFLUENCE THE FINANCIAL WELL-BEING
a. Social and economic environment,
b. Personality and attitudes,
c. Decision context,
d. Knowledge and skills,
e. Available opportunities,
f. and Behavior.
Image Credits: pixabay.com (CC0 Public Domain)
FINANCIAL WELL-BEING’S FOUR ELEMENTS
1. PRESENT SECURITY
You are able to pay your bills on time and do not have to worry about having enough money. You manage your finances and not the other way around.
2. FUTURE SECURITY
You are prepared to handle any financial emergencies or shocks that when it strikes, you have sufficient insurance, savings, and support from your family and friends.
3. PRESENT FREEDOM OF CHOICE
You have control over your life because you have financial freedom. Taking holidays, going out for dinner, and being generous to your family are done as you wish.
4. FUTURE FREEDOM OF CHOICE
You have short-term and long-term financial goals and you know how to meet them.
Image Credits: pixabay.com (CC0 Public Domain)
WAYS TO BOOST YOUR FINANCIAL WELL-BEING
1. EARN IT
Many people cut expenses but only a few examine ways to increase income. In the event of job loss, it is still important to do whatever it takes to provide for yourself and your family.
2. PROTECT IT
Do research (e.g., from newspapers, Internet, and financial experts) to ensure that all your monetary efforts are not wasted.
3. MANAGE IT
After you retire, the bottom line is not how much you make but how much you keep.
4. GROW IT
With careful financial planning, money will grow even in a slower economy.
5. ENJOY IT
A comprehensive plan will allow you to go for vacations, new car, and so much more. With this, you can transfer some funds to your heirs or to charitable causes.
Take each day as an opportunity to work towards improving your financial well-being! 🙂
Some of us are hesitant or skeptical toward Financial Consultants. To increase your knowledge on this subject, what do Financial Consultants actually do on a daily basis?
In general, Financial Consultants are professionals who guide their clients to manage their money, investment options, and asset relocation. But, what they do is far more complex than that. A career as a Financial Consultant gets to enjoy the flexible working hours and the privilege to indulge on the job incentives (e.g., Free Trip to Australia). Thus, the freedom will help them spend more time with their treasured family and friends. It can not only be challenging as they face a lot of rejection but also rewarding as they see their clients improving their monetary lifestyle. There is a job growth in this field as long as you go through continuous training with determination and openness.
Especially in large companies such as Prudential, HSBC, etc., Financial Consultants are:
a. Financial Planners
b. Dependable Advisors
c. Monetary Coaches, and
d. Financial Solutions Provider.
Financial planning entails creating the client’s financial goals by determining the shortage and the actual financial situation. Then, trusted advisory includes managing cash flow and developing money management strategies. While, Monetary coaching entails guiding clients to save more and to motivate them to avoid procrastination. Lastly, Providing Financial Solutions includes offering affordable solutions and options to achieve one’s financial goals.
Financial Consultants are more than just insurance salesmen because they organize your finances after identifying their financial needs and providing them with valid options. All these are given within a practical timeframe. Furthermore, the relationship established with you does not end after the “sale” is done. Financial Consultants are responsible for regular follow-ups to ensure that your needs are taken cared of. In short, they are committed before and after sales.
Image Credits: State Farm via Flickr with CC License
An insurance resource that exists for one sole purpose: to empower you to make informed decisions about your insurance purchases based on no one’s agenda except your own.
Here’s how they stood out from the rest:
30% Commission Rebates
In addition to promotions, you will receive 30% commission rebates back in cash when you purchase any product through DIYInsurance for greater cost savings to you. Learn more about commissions rebate here.
Independence
All staff from DIYInsurance are paid a fixed salary and do not participate in sales-based compensation or incentives of any kind. Not being remunerated on a commission-basis means DIYInsurance is independent and are able to focus on doing our best to fulfill your needs. There is no hard-selling and no over-selling.
DIYInsurance Rating
The DIYInsurance rating system helps you find the product which is of the best value that suits your needs. The Specialist Consulting Group with expertise insurance knowledge, compiles, analyses, compares, updates and research products distributed by insurance companies based on features and price. Based on the product’s value, it is converted to the number of stars as displayed in the comparison platform.
While i love the amazing skyline from Victoria Peak, what got me excited were not the insta-worthy photos i took or the dim sum i gobbled down at Lung King Heen.
It was the fact that i actually travel for free.
Free? Does it means that i won a free trip to Hong Kong or had my travel sponsored by a company?
Good guess, but nope!
Well, the trick here is about planning my own finances. I couldn’t have included Hong Kong into the list of places to visit without exceeding the budget i set aside for this year.
A few years ago when i was still a student, i didn’t care too much about my own finances since i was spending within my means. Like many others, I had my money stashed away in a POSB’s saving account. Who care about interest rates when we hardly have five figures in our possession? The returns were pittance that it hardly warrant any extra attention.
My attitude changed when i had friends who were boasting about how much money they were making. I told myself i wanted to be like them — to be rich, in the shortest amount of time.
It seems then that the only way is to investventure gamble into the stocks market. I had no idea where to start until one day i was approached by a financial adviser when i was exiting the MRT station. And being a ambitious and impulsive young adult, i was persuaded into buying a saving plan that invests into the market with some kind of insurance cover that comes with it.
It felt good even though i had no idea what i was buying into – the feel good factor that i am now investing like an adult.
I call in to check on the policy every month, but apparently i was told that it is still in the early stage and had little or no cash value.
After a few months i gave up because it hardly grows and sadly i was told that if i were to terminate the plan, i would end up with almost nothing.
The change
From then on, I told myself that no one else can manage my own finances except myself. I need to take the responsibility or i will be the one suffering down the road.
I spend months reading up on books, forums, MoneySense and any resources that i could laid hands on. I begin to understand the importance of budgeting, investing and how to manage my own finances.
I started by switching my funds to a higher interest-bearing account such as the OCBC 360 where customers could potentially earn up to 3.25% as at 1 May 2015.
It was also then that i realized that previously i was holding on to an investment-linked plan which comes with high fee and charges. It is not cost-effective to achieve my goals and i had to take the hard decision to surrender and make a loss.
A better way that i learnt is to buy term insurance and invest the difference. Term insurance is cheap and affordable although it does not have cash value. But the difference i could potentially save could be put into better investment vehicle such as the low cost fund that tracks the Straits Time Index (STI) which has a historical return of around 8 per cent in the long run.
I was introduced to the online platform DIYInsurance — a portal which allows me to compare the different term insurance plans out there. What appeals to me is that they rebate 30% of the commission back to the customer and at the same time still make an effort to go through the planning process, making sure that the person is on the right track.
They have a live chat system where i can ask any questions on how to use the online platform, as well as clarifying with the client services manager on the semantics of insurance definition. It was fuss free and it beats the inconvenience of holding on to the line when you call in to financial institutions for enquiries.
If you are wondering how much money i save using the DIY method, i have done up some numbers for comparison.
(Click to enlarge)
As you can see, i was previously paying $300 a month for a $200K cover on death and disability and a $50K rider on critical illnesses. If the funds grow at 4%, it will take me 20 years to break even and 35 years to make a small profit of $15K. (calculate the ROI)
If i were to employ the alternative strategy of buying term and investing the difference, i’d be merely paying $100 a month for a $500K cover on death, disability and $300K on critical illnesses. The other $100 will be channeled to a low cost fund, and assuming it grows at the same rate, my portfolio would be sitting at a value of $35K after 20 years or $88K after 35 years. (note that i’m contributing 2/3 of what i’d have otherwise contributed to the ILP and i have pegged its growth at 4% for comparison purposes)
As a result, i managed to put away $100 a month into my travel funds and this adds up to a significant amount of $1,200 a year. A sum that is sufficient for me to pay for the return air ticket to Hong Kong which including hotel and shopping expenses incurred during the trip. I am also getting $400 worth of commission rebates from DIYInsurance which i can either re-invest or spend it on my next trip. (I have re-invested it)
In conclusion
By taking charge of my own finances, i am now enjoying a higher returns of 2.25% (excluding the 1% bonus to insure or invest) from the money sitting in the bank as well as future incoming funds. I have also manage to cut down on unnecessary fee and charges slapped on expensive insurance products by switching to a more affordable term cover and investing in a low cost funds.
I have lost some money in the investment linked product but at the same time i have took home valuable knowledge and wisdom of managing my own finances, and as a result, created more wealth from it.
Well, perhaps a road trip to Australia next?
(Article contributed by Cheryl, a Marketing Executive working in Singapore.)
My house has got a whole new look – thanks to the interior designers which put the furniture and fittings in place. The family car which has served us well for months has just went for a major servicing after running for another 40km. And i just had my dinner in a restaurant – a bento set prepared by Japanese chefs.
The services sector is paramount to the Singapore economy and as we get more innovative, it is not uncommon to see businesses offering different value added services to meet the demand of its people. Think Uber and Helpling.
That being said, i never let a financial planner handle my finances. Why, you might ask, since they are all services that help make the life of the common folks easier?
True. We are human beings after all and we tend to follow the path of least resistance. Why burden ourselves with the technicalities on how to fix a car or the myriad ways of where to place my sofa sets? I can definitely make my own meals, but i probably can’t dish out the the Xiao Long Bao at Din Tai Fung or to enact the perfect ambiance in a fine dining restaurant.
And if things goes wrong, the most i probably have is an upset stomach or a house that looks like a hostel. (which can be easily remedied without much repercussion)
My finances? There is more to just switching to the next better plan – my future is at stake.
Taking responsibility of my own finances
As Dave Ramsey aptly put it,
Personal Finance is only 20% head knowledge. It’s 80% behavior!
Don’t get me wrong. Personal finance can be complicated if you put the dynamics of investment and financial risk into the equation. Financial planners like the insurance agent or the bankers have their place in today modern society.
But if you are the ordinary man or woman on the street, like myself, chances are you are qualified to make your own decision. The word here is qualified and by that, i don’t mean you need to be educated in the area of Banking or Finance. If you have manage to chance upon this article, you are probably savvy enough to hook yourself onto the World Wide Web. With the internet, you can do wonders with the vast amount of information and knowledge out there – from learning how to cook a Shepherd’s Pie to planning your solo trip to Europe.
Can you manage and plan your own finances using the internet? You bet!
A website with useful resources would be MoneySENSE, a national financial education programme in Singapore. It has almost everything you need to become a financial literate – from the theoretical aspect to the nifty calculators.
Financial planning involves a few steps, and while you can budget and plan for your retirement the way you want it, there is one important factor that many have overlooked. Risk.
You can craft yourself an ingenious financial plan, but it can never be perfect should something unfortunate happen yesterday and ruin it. And that’s where insurance comes into play – to transfer the risk of loss to another party (the insurer in this case)
Encounters with insurance agents
Why would i not consult the insurance agents then? Well, i did, few years ago.
After several sessions with 3 financial advisers from different companies, i have had umpteen reminders that i need to save for retirement since i’m in my twenties. Spot on. We should always start accumulating wealth early and take advantage of the effect of compounding, where returns are reinvested to generate their own earnings.
But that’s not what i’m looking for. As i already have some money invested in the Straits Time Index Exchange Traded Funds, or STI ETF, i’m looking at covering myself with term insurance to hedge the risk of loss from unexpected events.
However, I was informed that i need to diversify my investment and/or to have another account to grow my wealth so i was recommended a whole life insurance and endowment products on the basis that i need another saving plan. I was also informed that term plans has no cash value and i’m just throwing my money into the drain.
Being the skeptical me, i was not sold to their recommendation and furthermore i have just started working with not much funds for any other products.
Online Insurance Aggregators
Only recently when i came across the news that there were websites out there that actually helps you to compare the different insurance plans from different insurers, i know it’s about time to reconsider my options.
Both are similar as they serve as a platform for consumers to compare the different insurance policies out there. They also provide handy calculators for you to work out the amount of coverage you need without consulting the insurance salesperson.
compareFIRST has a comprehensive list where you get to compare different insurance companies in Singapore. It even allows you to compare Direct Purchase Insurance (DPI), which is purchased directly from the company without any commission charged. The limitations of DPI is you can only purchase up to $400K of sum assured with a fixed term of 5 years, 20 years and up to age 65.
As i have calculated my need to insure myself up to $1 million, i could not take advantage of the more affordable DPI. I could have purchase two policies of $400K and one policy with $200K sum assured, but that is not cost-effective than if i were to purchase a single jumbo term insurance from a company.
Usually, insurance companies offer a substantial discount if you were to purchase a large term plans. I have used quotes obtained for Zurich Z-Protect in this example and as you can see, i end up paying $481.30 more a year if i were to purchase 3 separate DPI policies than a single non-DPI policy.
As its name suggest, you have to do your own planning and calculate your own needs and because of that they rebates 30% of the commission from non-DPI policies back to the customer. That works out to be a saving of around $387 (good enough to purchase a pair of Scoot economy tickets to Bangkok.)
If you think that you probably get little or no services because of doing it yourself, you are wrong.
Mr Christopher Tan, CEO of Providend said:
Instead of asking our insurance specialist to work out the insurance recommendations for you, we put that advice on the portal by way of the comparison tool. But anytime you need help or advice, you can always email, call or web chat our licensed and trained client service managers. Having said the above, when you come in for documentation, we will still do a final check for you to make sure your planning have been sound and we will still provide you with product advice, meaning, we will explain in detail the insurance you are buying.
That is basically saying you are getting your insurance with services – for less. Don’t worry about getting into sales talk with their client service managers because they are remunerated a fixed salary with no commission, so independent and transparency is the key here.
In conclusion
By taking responsibility of your own finances and doing it yourself, you not only save money but you also have a clearer picture of your own future – which means more flexibility to adapt to changes in different life stages. Would you rather be dependent and scramble to look for your insurance agent many years down the road when you get married, have your first child or buy your first apartment?
