From The Straits Times    |


PHOTO Theepatheep Kawinpathawee

1 I DON’T WANT TO SET MYSELF A BUDGET
Budgeting is scary because it impacts on your lifestyle and takes away your freedom to spend on whatever you want. So, Constance Lim, independent financial adviser and volunteer financial education trainer with the Association of Women for Action and Research, suggests calling it something else. “Call it ‘strategic planning’ to increase your ‘raw materials’ (your savings) instead.”

Some people think budgeting is something you do only when you’re broke – which isn’t the case. Constance cites an example: “I read about a man who earns $30,000 a month but ended up owing $600,000 worth of credit card debts. It’s not about how much money you have – budgets are essential to help you manage your cash flow so that you won’t sabotage your financial future.”

Constance suggests setting aside 10 to 20 per cent of your pay into your savings first. “So even if you spend the rest, your savings are secure,” she says.

Ask yourself what your objectives are. Being able to afford a home in five years? Saving for your kids’ education? Growing your nest egg for retirement? “With a goal in mind, it’s easier to give up buying one less pair of shoes and having two fewer expensive dinners out a week,” adds Rebecca Regan, senior financial planner from AAM Advisory.

2 I DON’T WANT TO KNOW MY REAL FINANCIAL STATUS
Most of us have a general inkling but often neglect to examine our financial statements and check on loans, savings and debts, because it’s a confrontational process, says Constance. “In doing so, you’re admitting that you may have overspent for a long time and now have little to no savings. Or that you still have a long way to go before you can pay off your house or car. But being financially healthy means acknowledging that you may have a problem before you start looking for solutions.”

Rebecca agrees, adding that if it scares you that much, do it with your husband, friend or financial adviser – someone you can trust.

3 I DON’T UNDERSTAND THE FINANCIAL JARGON
Numbers, financial jargon and the sheer amount of information available can be overwhelming. But that’s no excuse to shy away, says Constance. “Get acquainted with financial concepts through books like the Dummies Guide series, Rich Dad Poor Dad by Robert Kiyosaki or The Richest Man in Babylon by George Samuel Clason. These are written simply and aim to help people with no financial background to understand money matters easily,” she says.

And if you already have a financial adviser or have friends in the financial industry, don’t be embarrassed to reach out for help if you don’t understand something, says Tanya Maher, senior financial planner from AAM Advisory.

4 I DON’T KNOW HOW TO FIND THE RIGHT FINANCIAL ADVISER
“Financial advisers sometimes have an unfortunate reputation as ‘salesmen’ who stop contacting their clients once you’ve signed with them. But like any relationship, it takes two – you can take the initiative to engage with your financial adviser too,” says Constance. This will help them to understand your needs better and motivate them to keep in touch.

Finances are deeply personal. So before you take a leap of faith, ask your prospective financial adviser for references or client testimonials, suggests Tanya. “It’s perfectly all right to speak to three or four financial advisers to see whom you feel most comfortable talking about your money with. If they fail your ‘interview’, then they’re not suitable for your needs.”

5 I DON’T THINK I HAVE ENOUGH TO INVEST
Don’t undermine whatever amount you start with – money will grow when you have a disciplined saving habit in place, says Constance. “There are investment avenues for all budgets – from $100-a-month investment- savings plans for blue-chip stocks to investment-linked plans for insurance.” Even if you start small, you can always adjust the amounts when you’re in a position to do so. Tanya says: “Don’t beat yourself up if you can’t immediately set aside the amount you wish. If you’d like to set aside $500 but can realistically only afford $250, do it. That’s better than putting it off altogether; it also means half the battle’s won.”

6 I DON’T LIKE TO TAKE RISKS
There are a wide variety of investment instruments to suit different tolerance levels, says Rebecca. “Some people are more gung-ho and willing to put their money in higher-risk stocks or alternative investments, like gold. But if you’re risk-averse, invest in things like government bonds or fixed- interests that are more secure but provide less in returns.”

Tanya adds: “Inflation in Singapore hovers at around four per cent. And with our recent promotion to being the most expensive city in the world to live in, unless you do something to grow your money, its cash value will deteriorate over time.”

7 I DON’T HAVE TIME TO WATCH OVER MY INVESTMENTS
While lack of time is a valid reason, Constance says there are affordable investment tools that allow for minimal monitoring. “Start with an investment-linked plan (life- insurance-cum-investment) or an endowment plan (life insurance that pays a lump sum at the end of its term).”

When you’re more confident, you can look into unit trusts, which are funds managed by professional fund managers. While you don’t have to actively monitor your funds, you still need to keep an eye on
the performance of the managers. “Depending on the market you invest in, some will be more volatile than others; you also need to account for the management fees,” says Constance.

8 I DON’T WANT TO LOSE MONEY DUE TO FINANCIAL MISTAKES
Think of these mistakes as a form of feedback, says Constance. “To learn from them, ask yourself: how did you make the stock-purchase decision
in the first place – did you buy it on a friend’s recommendation because he’d made money from it? That’s a wrong reason to buy into stocks. So next time, try making your own decisions based on the company’s quarterly or half-yearly reports.”

9 I MAY NOT HAVE ENOUGH FUNDS WHEN I RETIRE
Calculate how much you’ll need to retire, using the Retirement Calculator on the Central Provident Fund website (mycpf.cpf.gov.sg/members/ calculators/mbr-calculators.htm). Input data such as how much you’ll need monthly during your retirement years, what age you wish to retire at and how much you have in savings now. The calculator will work out the sum needed to see you through age 85, for instance.

The retirement calculator gives you a good idea of your retirement status – where you are now, where you need to be and how much more you need to get there. “And if you’re not convinced that you need to invest or relook your investment strategies, your shortfall should give you that nudge,” says Constance.

10 I DON’T WANT TO ARGUE WITH HUBBY
Having different priorities on what you want to spend on can be tricky. Ideally, you should maintain open communication with Hubby and make joint decisions involving money. But if it’s hard to talk to him without starting an argument – he may feel he knows better – consider taking care of your own financial future. Constance suggests: “If you’re unable to get your husband on the same page, speak to him about starting your investment journey with your own money.”

This article was originally published in Simply Her May 2014.