Happy New Year

Last day of 2012 and we survived the end of the world. We had a year of sex scandals, uncertain economic conditions, crazy road and industrial accidents, natural disasters, civil unrest around the world and doomsday prophesies.

It is time today to relook at 2012 and pray for those that are affected. It is today where you give thanks knowing you are safe and looking forward to 2013.

Today, you think about the people who you care and love and give thanks knowing they are safe and sound too. Who are these people? They are the people that if your phone rings at 3am at night and they tell you they are in trouble you will go all out to help them and you know they will do the same if you called them at 3am.

And if you know who these people are you may want to forward them this post just to let them know you appreciate them. (If your friend forwarded this post to you, they want you to know you are appreciated.)

I want to take this opporunity to give thanks to my parents that have been supportive of everything I do. I remembered a post I have seen on Facebook about the relationship between a pencil and an eraser is like the relationship between parents and children. I write my mistakes and they erase them no matter what. The relationship between a parent and a child is probably the only unconditional one. No matter how bad your mistakes, they will still love you, unless you have shot them in the face like the crazy person in the Newtown shooting.

I want to give thanks to my siblings that also have been supportive and understanding. Thank you for doing the things that I may not have done as a son to our parents. I apologise for not doing the things as a brother too.

My wife, thank you for believing and supporting in all my decisions. Thank you for believing that I will be a good financial adviser when others have shunned me. Thank you for taking care of things at home and giving me a great family. I know its not easy taking care of the kids (I know I am a kid at times).

Thank you all the great friends I have. You know who you are. Putting up with my sh*t at times. Thank you all my clients and prospects that have given me the the trust and opportunity to serve them.

Last but not least:

Thank you for the music, the songs I'm singing
Thanks for all the joy they're bringing
Who can live without it, I ask in all honesty
What would life be?
Without a song or a dance what are we?
So I say thank you for the music
For giving it to me

http://m.youtube.com/#/watch?client=mv-google&v=0dcbw4IEY5w&rdm=mfca6b1uj

So what are your plans in 2013? Have you taken the steps today towards what you want to achieve in 2013 or the future? Have you stopped today and smell the roses before it is too late?

Have a great 2013! May all your dreams be fulfilled in the year ahead!

The Haunting

In 2001, I have just completed the paper work with my friend's mom CPF monies and had asked her about her other insurances.  She had politely declined saying she had other friends in other insurance companies. This has come back to haunt me earlier in early 2012.

My friend informed me one day during one of the meet ups that his mom has contracted breast cancer. Damn! She had been like a mother to me, my friend like a brother. The news was difficult to swallow. 

Insurance? I asked. My friend told me not sure. Not sure? She said she had a plans with 2 other insurance companies, not sure? What do you mean, I asked my friend.

He told me they cannot contact one of the agents from one company and the other has migrated. So they were unsure about the insurance.

They have been talking about what to do next? Private hospitalisation is not going to be cheap, but the government hospital said her operation is in 3 months. 3 months?! I asked him what stage of cancer his mom was at. He said stage 3. Stage 3 and wait 3 months! Ridiculous!

They have then decided that they will get his mom to do the operation in a private hospital and come back to the public hospital for chemo and all. I also told my friend to get her mom to dig out all the policies so that I can see them.

Went over to his place, looked at the policies and my heart sank. The policies have been so long that the pages are sticking to on another. It makes that sickening sound when you try to pull the 2 pages away.

There was also reciept payments for premiums and found many that is damn long ago. Then I saw one particular letter that looked new. It turned out that she had a shield plan and premium had been paid in 2011. That was the only one which had payment receipt that was up to date. No rider to cover the cash portion of the hospitalisation and the plan has not been upgraded to the private one. Well at least some part of the hospitalisation was covered. No other plans was in force.

I went home in a daze, sat down and with tears welling up in my eyes, i wrote a text message to my friend and apologised. I have taken for granted that people will do a good job. I have protected my own feelings about being scorned and not persevere and ask more about her insurances. If only I had persisted, if only I had insist for her just to show me then. If only... sigh... why do we only ask ourselves these questions when something has happened? Why does people have to go through the dilemma of which hospital to go when something of this magnitude has occurred? Why do people not look at what may happen and plan for the worse instead of taking the risk that its not going to happen to them?

As I sat there feeling guilty, my thoughts went back to the day I walked out of my friends place in 2001.

Enlightened

I have just been sabo-ed by my boss to do a Personal Financial Review for a friend, and is dreading the whole process of having to do the calculations for him. The appointment was taking place at his home.

We sat down in his room and started the whole fact find process. I know for a fact it was not going to be very difficult as he just started work and have very little assets and liabilities. He has just started work and therefore need some help with allocation of his income. I have already did a savings plan for him and now trying to uncover what other financial objectives he should be concerned about.

I know for a fact that CPF then has just changed their laws to allow monies to be invested from 0 dollars up. My boss has also reminded me there were a lot of monies now for investment purpose. In my head I know that my friend will have CPF and there was another opportunity for sales. I went through the motion of doing the fact find.

'So any assets or liabilities?' knowing the answer is no. No. Do you have any existing plans, no, but i think parents have gotten something for me. The fact find conversation somehow started to move towards his education. He has just completed his education in UK. He had just come back and found a job as an engineer. I eventually asked him, so how old is your dad? He told me: 60.

60!? Suddenly, I started to think for myself. Do I still want to support my kid through his education and all when I am 60? Our statutory retirement age then was 55. 60?! I suddenly feared that I cannot retire in future. I feared that at the point of me wanting to retire, I cannot as I have kids still dependent on my income. Did a quick calculation that if I want to retire without much commitment to my kids, the age I must have my last kid is 35. (I am late already)

I suddenly became enlightened how my job value adds to people. It became clear why the need for doing a financial review is important. Many of us do not think too far into the future. We assume that everything will fall into place. It might but why run the risk?

I did up the personal financial review just as my friend's mom walked in. What are you all doing? Auntie I doing investments, you have CPF. I don't know how to see, said my friend's mom. Auntie you pass me your CPF statement I help you.

She went out to her room and returned with her CPF statement. Showed her how much she has in OA, SA, and medisave. She agreed to invest her CPF monies. Auntie, have you thought about your other insurance. Its ok, i got friends in other insurance companies and everything is cared for. In my head, I told myself, since she is not comfortable to talk about it then I will not push. I am already losing friend's on a daily basis. Next time then talk. Since her friends in other insurance companies should take care of her properly.

Little do I know this thought will come back and haunt me today.

Photo by: Eddi 07- Free Stock

The Next Level

I have just joined the financial industry and the year is 2001. I just left my office automation sales job and went on to be an insurance adviser. I had always been a non believer of insurance because my father told me so.

I went for a meeting with my friend's boss and he managed to convince me to go take the exams . At that time all you needed to take was 1 paper, certificate in life insurance which is obsolete today. I picked up the book dreading that I have another exam to study for, since I am already doing my part time degree in the evenings. Sat down and prioritised, degree will always come first. Insurance is a means to get pocket money.

My perception of insurance changed when I read the text, I saw why was insurance important. I saw how it worked and how it benefitted. I became an advocate. I ate, sh*t and slept insurance. I talked non stop about the importance of it. This is the time when you start losing friends, people eye your phone calls with suspicion. They think you have an ulterior motive when you call them out for coffee. This is a test of your friendship with your friends or those who you call friends. The friends will never hesitate to come out and meet you. They will never make excuses if you ask them for coffee. Friends will be the one that tell you to 'turn off your insurance mode'.

I have a friend who was my first client. He never rejected me and agreed to meet when I called him. New laws have been passed and the first 3 appointments have to be accompanied by your boss. Told my friend my boss is coming. He said, sure.

During the appointment, I explained the plan that I am recommending and my friend listened intently. After that we did the paper work. All the time my boss was silent. When we finished the paperwork, my boss spoke, he asked my friend: why didn't you want to do the PFR?

In my head I was stabbing my boss a thousand times over! PFR?! Personal Financial Review! This review takes the income, assets, liabilities and the financial objectives of a person. An adviser will then have to take the PFR and transfer all the information to the FHR Financial Health Review, key the figures into a financial calculator and then generate a report for that person. And in the times of 2001 where laptops was still retailing about $3-$4k, it is not an easy task. The PFR alone will take about an hour. I will have to go back to office after to do the FHR! Boss I am going to kill you!

In my head I was hoping my friend will say: no, its ok no need. Instead, he asked: whats that? My boss looked at me and I went on to explain what the PFR is. Explained to him what I will have to do after I get back to the office. He said: Sure, I don't mind. 'But its going to take about one hour or more. We do here now or we make another appointment.' I asked. He finally asked me to go to his place on another day to do the PFR. Boring!

But little do I know that this exercise will bring my understanding and need of a financial plan to the next level.

The Road Less Travelled

I have sent in a copier to my customer in Tuas and I have just tried to troubleshoot her copier while in my shirt, pants and tie. I feel relieved knowing my technician will be down first thing the next morning to fix her problem.

Went to wok as uual the next day, making calls and doing some paper work. At noon my mobile rang. Picked up the phone and it was my customer from the previous day. Tang, I thought you said first thing in the morning? Huh? You mean my technician not there yet? I asked. No.... Ok ok sorry, I check with my service department and call you back.

Called my service manager. What happen? I thought you said you can send somebody down first thing in the morning? Oh sorry Tang, we had more important customer. I hung up the phone fuming, you mean my customer not important? Walked into the office and told my manager: Send me for technician course. My manager was surprise and ask me what happened. Related the whole story to him and he say cannot like that la, blah blah blah. I am thinking why should I be a slave to the service department, how can I keep my integrity as a person if the people supporting is not helping.

Another customer also called telling me his machine breakdown but this guy is worse he called and told me to send him another new machine as he suspect I sent him a reconditioned one. I already ask you technician to go back. Tang you better get a new machine to my office before lunch if not I call the lawyer. Called my manager, he arranged for my service manager to do up a new machine, recalled the driver back to send the machine. My one minute phone call from a customer resulted in me owing favours to 3 persons, my manager, service manager and driver, who all skipped lunch just to get a machine out to my customer. Sigh I am becoming a slave to the machine, literally!

I had another run in with another customer but that was not as bad, but by now I fear when the phone rings. I dare not look when my phone rings and when its an unknown number I shudder thinking it might be another customer wanting to complain about their machine. It became too stressful for me and that was when my friend from the insurance industry asked me to explore. I said ok though I was a non believer.

My first insurance policy I bought from a friend out of support (too many of us did this). He called me and told me he just joined as an insurance adviser. Ok, do up a plan to set aside for $200 every month. Met him the next day with his boss and he told me: Tang this is the plan but I have to explain. No need where to sign, I said. But I have to... put up my palm in his face and said: just tell me where to sign. I was mean but I wanted to support him as a friend. My father told me before that insurance bluff people one, cheat money. But since my friend joined must support la.

Did the paper work and he left, but the day when I joined the financial industry I called him and apologised and thanked him that he helped me see what I did not see then. I myself have taken the road less travelled.

Coming Back To Reality

I have just came back from Bali and reality is setting back in. Its back to work and its not any better even though I may have my own time. Its still work and fortunately I enjoy my job. Confucius said “Choose a job you love, and you will never have to work a day in your life.”

I started my career in the financial industry since the year 2000. It was one of those friends that asked me to join them in an insurance company. But I don't believe in insurance was my reply. She was persistent and asked me to just go and be open about it. Since I was not really happy where I was and she was a friend, I said ok.

I was then in the office automation industry selling Multifunctional Products. The thing you call copiers in the office. They now scan, fax, print and copy, therefore multi functional. Anyway then it was new technology. Do you remember the time the scanners in your copiers actually move to copy documents? So if you have one document to copy 100 copies, the scanner in your copier has to scan your documents a hundred times. You cannot remove your documents until all is done.

So there I was after ORD from the Police Force National Service, being a photocopier sales person. I was schooled in Architectural Technology in the Polytechnic and knew that there was a big market for copiers in the architectural firms. Managed to get a listing of architectural firms and called them one by one. In the mean time, my boss also told me my territory was in Tuas! Tuas! Sigh... Tuas was then filled with many new companies and factories starting shop here.

The first few days, my boss drove me around to show me the ropes. It was still heaven because I was doing a part time degree and had night classes. I could still go to class at night relatively fresh! But after the honeymoon period, when I had to drive myself to Tuas it all changed. Driving is tiring and the journey up and down from Tuas drained me when I go to class at night. I cannot stay awake!

I managed to convince some companies to take up my copiers, that was when the job started feeling like work! I delivered 4 machines to 4 different companies to get 3 of them calling me back telling me there was a problem with the machine. I remembered a customer in Tuas, send her the machine in the morning. Everything went smoothly during the demo. Went back to the office feeling good about it.

Lunch time, phone rang. Tang, machine says paper jam my customer said. I check already but got no paper jam. Ok ok stay calm try and remember all the things to do trouble shooting. Mam the LCD screen will tell you where the jam is. Check already don't have. Ok next step. Turn your machine off and on? Done already. Eerr... Switch off the mains wait 5 secs. Also do already. Alamak! How? Ok ok mam tell you what I come right now. The time 5 pm, suppose to knock off soon. Ran down to my car and started my lonely drive to Tuas.

Went through the door to my customers office went straight to the machine. Looked at the LCD display. True enough paper jam. Did whatever the LCD display asked me to do. Still paper jam! Went down on my knees peered up through the paper trays just to ensure the paper is not there (I was in my shirt, pants and tie). Don't have!

Stood up, looked at my customer meekly and said mam don't worry my service guy will come first thing in the morning. She said ok. As i walked out the office, picked up my phone and started dialing for my service manager. Can you send one technician down to my customer tomorrow first thing in the morning. Sure, my service manager said.

What a day, well at least its settled (so i thought) and drove home.

The Unseen Monster

Read this in the papers yesterday and I was thinking of the times when I was in corporate, working 9 to 5 and receiving a take home pay at the end of the month.

I have always wondered 'Why does my pay never seem to be enough even when I get a raise every year? Why is it that I get a raise every years yet, you never seem to have more savings or a better standard of living?

After being in the financial industry I started realising the mistakes that most of us make and I have been through it myself.

Firstly, inflation has been slowly eroding away the value of our monies. We all know about inflation but many do not do anything about it. 

The government tells us CPI increased. CPI? What's that? Can eat or not?

For those who knows what CPI represents, most will also ignore the consequences of high CPI.

Some who knows what CPI is, what is its repercussion and consequences, they will still procrastinate about doing something about it.

So what is CPI? CPI, Consumer Price Index or what we know commonly as Inflation is the silent killer that has been eating at our monies. So how does inflation affect us.

I remembered the year 2003 when I started to indulge in kopi-o. One cup of kopi-o then cost $0.50. 8 years on in 2012, my indulgence is now, $0.90 per cup. (And I do not take only a cup one day.) What do you think inflation of my kopi-o has been the past 8 years. On an average the inflation for my cup of kopi-o per year is 7.6%. 

 Many of you might think: 'But its only $0.40 what! Tang why you bother write blog for $0.40!'

Let us move the decimal points, something that cost $5 will cost $9. Something costing $50 will cost $90. Something that had cost $500 now cost $900. The difference is now, $4, $40 and $400 respectively. The difference will get bigger once the sum of money becomes bigger. $0.40 seems acceptable, but does $40,000 in 8 years sound reasonable?

To put inflation into perspective, imagine you earn $4000 every month, you spend $3,500, and save $500. You get a pay raise of 4% and inflation has been at 7%. After 8 years, your income after a pay raise of 4% every year will be $5,475. Your expenses that is growing with inflation of 7% will be at $6,013, with no more extra for savings.

Based on the above example, how can we maintain our standard of living when the cost of our expenses are moving faster than our pay! It has moved beyond our means and we have to start digging into our savings just to maintain the lifestyle we enjoyed just 8 years ago. And once our savings run out, we either start signing our credit cards or compromise our standard of living.

Being young and having my first credit card was detrimental. With inflation increasing, and me trying to keep up with my standard of living, I ran up a total of almost $30,000 in credit card bills. And with the interest rates of credit cards at 24% p.a it is almost impossible to clear my debt while just trying to pay off the minimum amount. 

But when I started in the financial industry, the idea of planning began to sink in. I always thought that Income - Expense = Savings, but some seminars I attended changed my whole perspective. One speaker actually mentioned that the real formula to be rich and financially independent is to save and to save the formula is Income - SAVINGS = Expenses!

That blew me away! I had been a slave to my money! I have allowed myself to work for money, I have not allowed money to work for me. I have to be a master of money and not a slave to it! That day, I got home, took out my scissors, cut away my cards. 

Found some personal loan that will give a slightly lower interest and transferred my balance so that I can pay off my debt in a very systematic way. 

In the mean time, I also walked into POSB,  ask them about an account that will take my money from my salary on a monthly basis on a fixed date. I do not want an ATM card or internet access for this account. They told me about the fabulous MySavings account that allowed flexibility of setting aside a fixed amount of my salary on a user defined date! If I need to withdraw from the account I had to go to the branch, queue, to get my money. (Though now the account has changed, they now give internet access and tie it to your ATM card. But the habit of savings has been formed)

Life changed, debts was cleared and inflation was still a concern. 

Savings interest: 0.125%

Inflation: 7%

Real rate of return on my money: - 6.875%

I knew I had to do something about it.

Family Impact Analysis

Let us look at our family, do we run our family like a business? Let us look at how similar a family is compared to a business. Businesses is about profit and loss. Its about bottom line. Its about being responsible to their shareholders. 

So who are the shareholders of your family and are you being responsible for them? Parents, kids, spouse and anybody who may have a vested interest. The profit or loss in your home will be taking your combined household income minus all expenses. 

Businesses have balance sheets every month to ensure they are still running on profit. If they know they are running close to a loss, they have measures and strategies to cut cost and bring the business back into the black. They know their fixed expenses and cash flow needed every month. They project how much expenses may be needed in future to sustain the business. They have risk management strategies to ensure that profitability and net worth of business is not compromised.

Do you know if your family is running on a profit or loss? Do you have a strategy if your family is running on a loss? Do you have projections for the future so that you know the family is sustained? Do you have risk management strategies to ensure profits and net worth are not compromised in your family?

Businesses also understand that they have to invest their liquid assets to allow their money to work harder for them. They may think of doing other businesses to diversify their exposure in their core markets. They may also employ asset management companies to invest their monies. They leverage on these companies' expertise in markets and sectors they may not be familiar with.

Are you letting your monies sit in liquid assets? Is your family's assets being invested to allow it to work harder for you? Is your assets diversified to reduce your exposure in one market?

If you have not thought about the above you may like to consider doing a Family Impact Analysis. Think about all the possible risk that may affect your family. Think about the probability of the risk happening. Think about the impact on the family. Then if you want a better understanding, complete the below questionnaire with your name, email and phone number

Lessons From Businesses You Can Port Into Your Home

I will like to thank Mr Steven Ng Liang Hwi who has gave me much inspiration for this post. Your input as a risk manager in your company is a great learning lesson for me too.

Have you ever wondered what the risk management department in your company does? They seem to disapprove many of your initiatives or create many unnecessary red tapes before you can push your idea through. Why are they being so narcissistic about new ideas and initiative? Don't they realise the amount of productivity/ sales/ bottom line that will be increased if this initiative is passed through?

Well that is the job they do. They have a system called a Business Impact Analysis, they look at the company as a whole, find out all possible risk that may affect the company. Put a figure to the possibility of the risk happening. Put another figure to the impact of the risk if it happens. Put these figures into a software which will calculate whether the risk is big enough to mitigate it.

For example, if the risk is not probable and will not impact the company they may choose to neglect the risk as the impact to the company is negligible. But if the probability of the risk is high and the impact to the company is high then they will have to adopt one of 4 strategies to mitigate this risk.

Therefore when you decide that you have a great idea and initiative that will greatly benefit the company, you have just created another risk for the risk department. They will have to go through the whole process of finding out all the risk that is associated with your idea; Put the figures in to the software for the probability of the risk happening. Calculate the financial impact of the risk happening. Then decide which risk they want to take and which they do not and on and on and on. By the time they say ok, the fire in your belly for the idea has extinguish.

The Strategies to Mitigate Risk

So now lets say your idea is fantastic and risk department has identified the risk and wants to mitigate it. There are 4 strategies and these are to:

1) Accept the risk,

2) Avoid the risk, 

3) Reduce the risk, or

4) Transfer the risk

Lets look at each strategies individually. Lets assume that one of the risk for a company is working at height. If a company Accepts this risk, they will just get workers to work from height without safety gear and accept the fact that if a worker fall they will cover the bills and liabilities that come with it. 

If they assume a Avoid risk strategy, they will not take jobs that is too high. They will only jobs that have no heights thus limiting the jobs they take and limiting their income.

The above 2 strategies are totally impractical as accepting the risk creates too significant an impact to a company happens if something happens.

Therefore, the 2 practical approach will be Reduce and Transfer. Risk reduction for the above example will be for company to ensure safety gears are used. Safe standard operating procedure are in place. Penalty in place for flouting of safety guidelines. These will help the company reduce the risk while working from heights.

But reducing risk is only one strategy and does not ensure that accidents don't happen and most companies will adopt a risk transfer strategy as well. They buy insurance that will transfer the financial risk to insurance companies thus ensuring that liabilities resulting from an accident does not affect their profits or savings. They transfer this risk by paying a small portion of their total liabilities in premiums for a substantially bigger payout when an accidents happens.

So what lessons can be learnt from a business? Are we running our family like a business? Are we exposing our families to unnecessary risk without mitigating them? How can we do a Family Impact Analysis? 

Stay tune for the next post!

Lessons From A Taxi Driver

23/10/2012 Tuesday

Dropped my bike off at AMK industrial park 2 for some oil leaking from my engine and decided to grab a cab home. As I was walking towards the junction, a cab pulled up going to make a left turn. Flagged it. Uncle wound down his window,

'Where you going?' He asked. 'Uncle, Simei.'. He hesitated , took a second glance at his clock and waved me on board. 'How you want to go? CTE then PIE then exit Simei?' he asked.

'Uncle, TPE also can' I said.

'CTE then PIE then exit Simei? Ok ah?' he asked again. Figured he was hard of hearing already, I said: 'Ok, ok, can can.'

As I was sitting in the back of the taxi, I remembered attending one of Dr Andrew Goh's training titled: Think Like A Taxi Driver and decided to engage with uncle. 'Uncle, you had lunch already?' I asked.

'After I drop you off I am going to return taxi at Sengkang.' he said.

Eeeerrrrr... ok ok uncle hard of hearing. Ask again: 'Uncle, you had lunch already?' 

'Eat liao. But nowadays don't eat rice, just eat porridge. Drive taxi no time eat.'

'So uncle, how long have you been driving taxi already?' Uncle ask me guess. '10 years?' I answered.

'34 years already. This year I 67. (At that moment I felt at peace knowing I had at least a million dollars worth of insurance coverage) 3 years time, I going to retire'

'Wa uncle so long ah? You got kids or not?' Uncle said got kids, 1 boy, 1 girl. 'Then uncle relax liao la, no need work so hard.' I said.

Uncle went on to tell me his wisdom; he said he used to drive taxi for 12-14 hours when younger now drive for 6 hours, enough to cover his basic needs. He told me not to expect from my kids. If they make it big in life they can give you more ok. If cannot then have to continue working to sustain. He gets $300 from CPF and he has some savings. He said he co-owned his taxi for 20 years. If you don't co-own, you pay $60 rental for taxi in 1980s. If co-own you pay $60 for 4 years and $30 after that. He said he saved the $30 per day and now has savings to pay off some stuff every month. In essence, he told me he cannot stop driving his taxi.

Then he told me: Young man, now that you are still young, better save for your retirement. Don't anyhow spend your money. When young earn more, but also save more.

Sigh! As a financial planner we advocate that to people on a daily basis. We have plans and solutions for many of these financial objectives including retirement. But half of the replies you get when you want to meet up with people: I got already. You people earn so much. Bluff people one. Think about it. No need. And finally the best: NOT INTERESTED. 

And guess when will people be interested to do something about their retirement?

During retirement.  

Well guess life's like that. The quote from Gladiator sums it up: What You Do In Life Echoes in Eternity. So whether your retirement allows you a choice to work or not depends on what you do today.