Lending Money to Friends or Relatives

I realised that alot of readers like me to share my personal experience on financial matters.

Afterall, pure textbook knowledge about financial planning matters are available everywhere and sometimes, humans learn best from the experiences of others. I have thus created this tag on personal experience where I share my very own personal experience with readers and hope that you will be enlightened by it too. My personal experience are not textbook examples of how you should deal with your personal finance. It is how I dealt with my personal finance given my unique circumstances and scenarios. Sometimes, I acted against head knowledge because I treasure certain things more.

Lending Money

Lending money to friends or relatives is a common issue that crops up in personal finance. Very often, we might get unexpected requests from friends to borrow some money. I am not talking about $10 kind of money because they forgot to bring money with them. I am talking about them borrowing money that ranges from the hundreds to thousands of dollars.

I have one principle I use when I lend money to others. My father was the one who taught me this:

"If you ever lend money to others, treat the money as gone."

This is indeed a wise saying.

Once you decide to lend money to somebody, you should be prepared to write off the debt and the treat the money as a gift to them. If you are not willing to do so, then do not lend them any money.

Once you lend a friend or relative money, it will be very difficult to get the money back. It is a "face" thing amongst Chinese I guess to never ask people to repay back loans especially if they are close friends and relatives. So you will basically be at their mercy when it comes to repayment unless you have bothered to draft up a comprehensive IOU statement.

I am glad to say that I have lent money to friends and relatives on two separate events. I thought about it and asked myself whether I was willing to GIVE away this money and treat it like I will never get it back. Both times, I decided that I was in a position to give the money as my finances was good. Afterall, I view myself as only a steward of the money that God has entrusted me with. I also figured that since this people dared to ask me, they must really need the money.

I am glad to say that I got repaid back both times. One was paid back in a few weeks while the other took a few years. I did not ask for any repayment at all and did not charge any interest. To me, the money was a gift to them and getting paid back was considered a bonus.

I know of people who have lent lots of money to others and have failed to get their money back.

Invest with Temasek through Seatown

In the near future, it might be possible for the public to co-invest with Temasek. A new investment firm called Seatown has been established last year and it will admit sophisticated investors in 3 to 5 years and the public in 8 to 10 years.

That means that around the year 2018 to 2020, the public might get the opportunity to co-invest with Temasek Holdings.

This news was first announced by Ms Ho Ching last year.

Temasek Holdings seeded Seatown with over $4billion and has experienced executives running Seatown.

I am looking forward to this.

Cheap and Good Books

I am always on a lookout to buy cheap and good books to read. I am addicted to reading and always need a book in hand to keep my sanity. It isn't the coolest of hobbies as there really isn't much to talk about after reading a book. Nevertheless, I get immense pleasure from just reading books, especially if they are good.

I guess deep down inside of me, I always wanted to be a sort of novel writer or something. But perhaps that dream might never get fulfilled. Afterall, how many famous authors do we know from Singapore? Most of the famous authors hail from countries like the United States and Britain. Very few come from Asia. This is especially so when it comes to writing in English. Who will want to buy a English novel written by a Chinese writer? The market is really limited in that sense.

Anyway, back to cheap and good books.

I found out that Penguin books are usually really cheap and good. Recently, I bought The Beach by Alex Garland for $10.70 at PageOne. I devoured the entire book in less than three days.

Just today, I also managed to grab another Penguin book that cost $10.70. Apparently, there is a whole list of this Penguin books that have this plain orange coloured cover that are all going for $10.70. A really good deal if you ask me.

So if you are really looking for a cheap and good book, look no further. Penguin books are really worthwhile in my opinion.

Every once a year, there is also a Penguin BookFair that is held at the Singapore Expo. If you are patient enough, you can get the books there for an even cheaper price.

Cheapest Way to Invest (Part 2)

Last month, I wrote a very quick and dirty post on the Cheapest Way to Invest. This post has also been published at CPF's IM$avvy site.

In the previous post, I outlined that the cheapest way to invest is probably a "wrong" question. Instead, the question should be posed as follows:

1. What investment incurs the lowest brokerage charges, sales charge or commissions?

2. What is the cheapest form of investment (cheapest in the sense of lowest monthly premium committment or lowest initial capital outlay)?

Lowest brokerage charges, Sales charges or commissions

There is no easy solution to finding a good investment with low brokerage charges, sales charges or commissions. Afterall, people who sell investment products need a way to make their living and very often, these people are compensated based on the amount that the customer invests.

As a rough guideline, the charges one should expect to pay for investing in shares should be around a minimum of $20 to $30 per trade (depending on the size of the trade). If the amount you are buying or selling is larger, the brokerage charges are actually a percentage of the amount. For lowest brokerage charges, do shop around in Singapore for the lowest charges. Carrying out the trades by yourself through the internet is often cheaper than getting the broker to carry out the trade for you.

For investments into funds (e.g. Fundsupermart or investment linked plans), the norm is a 5% sales charge. Over the years this has been reduced and some funds are now offering sales charges for as low as 1% or even promotional rates of 0.2%. One needs to understand that the sales charge is the difference between the bid-offer spread of the fund prices. Some platforms or companies also charge an annual ongoing fee based on your investment amount. This means that the larger your investment amount, the larger the ongoing fee. Take for example an investment of $10,000 into a fund with a 5% sales charge. That basically means that your investment amount is reduced to $9,500 almost immediately upon investing into the fund.

Commissions are paid out to insurance agents/financial consultants/relationship managers/financial planners/brokers/etc whenever they make a sale of an insurance product. In today's context, many investment products are now tied in with insurance and the insurance companies pay a distribution fee to the agents who manage to sell the products to customers. This distribution fee is the commissions that are paid out as wages/commissions to the various levels of people in the insurance company.

Whatever the case, it is always good to source around for the lowest charges. However, it is also important to note that such charges are hard to escape from and there will definitely be charges to pay. Take a look at the Benefit Illustration for products from insurance companies to make the comparison.

Lowest Monthly Premiums or Lowest Initial Capital Outlay

Based on what I know, $100 is usually the lowest monthly premium for any regular investing/savings plan. However, it is not uncommon to see endowment savings plans that allow you to commit as little as $50 per month. Philips also has a ShareBuilders Plan that allows you to buy certain blue-chip stocks on SGX for as little as $100 per month.

For investment into funds, the usual minimum investment amount should be $1000 though it is not uncommon for some to have investment amounts of $5000.

Unregulated Investments

MAS does not regulate certain investment products so the consumer has to beware when investing in the following:

1. Land Banking

2. Oil pods

3. Wine Investments

Others like ponzi schemes and multi-level marketing are also investments which consumers should take note of. I did not include these products into this post because I feel that they are not really worth the risk. You make your own call =)

New Look For This Site

Hi People!

I finally did the thing that I have been procrastinating for the longest time. I gave this site an overhaul using the latest design features from Blogger.

I have always been afraid of tinkering about with the design because I was afraid that it might corrupt my files and stuff. Silly me!

Anyway, since I had some time to burn today, I just fiddled around with Blogger's latest design tab functions and chose the simplest design for my blog. I think the new look is much better than the previous look.

For your info, to comment on this blog now, you will have to click the comments link that is located near the title of the post.

Hope you like the new layout of this blog. Do let me know if there is anything that you feel needs to be tweaked to make this blog look better.

Best regards,

FF

Recycling the Singapore Way - Karang Guni

Very often, we get to hear the sounds of the beeping of a bicycle-like horn around various HDB estates in Singapore. The unmistakable sound of that horn is actually the "recycling" man making his rounds around the blocks to collect any old newspapers, household gadgets or simply anything that can be recycled. We call them the Karang Guni man though I am not certain what it means exactly in Malay. All I know is that if you offer him your old newspapers, he will offer you some loose change based on the weight of the old newspapers you have sold him.

Just recently, I heard the sound of the karang guni man's horn beeping across the corridor and managed to catch his attention that I had some old newspapers that I wanted to "sell" him. In the past few months, the wife had been throwing away the old newspapers down the rubbish chute because she had no idea what to do with them.

After bringing out all the newspapers, the man tied them up with a pink rafia string and proceeded to weigh them. He announced it as "8 Kilos" and then handed me 80 cents, explaining that I get 10 cents for each kilo of newspapers.

What he did next was most unexpected. He whipped out a name card from his wallet and handed it over to me. He told me that I could call the number on that name card whenever I had something that I wanted to get rid off.

Part of the name card reads:

Specialise in collection of Old Clothing, Used/defective Home Appliances, Television, Mobile Phone, Old News Paper and Others. We also provide Removal & Transportation services.

A change of the times and definitely Uniquely Singapore! Shows how much the karang guni man has progressed since yester year.

How much for shampoo that cures hair loss?

How much will you pay for a bottle of shampoo that is supposed to be able to cure and prevent hair loss?

I was sitting in a hairdresser's chair recently enjoying my usual haircut when the hairdresser started chatting me up. After the usual pleasantries, she highlighted to me in a very light hearted manner that my hair or scalp was slightly oily.

(I have had oily hair for many years and I always thought that it was because I used too much gel when I was younger to style my hair. I switched to hair wax which was supposedly better but that did not stop my hair from being oily.)

After highlighting that fact, she went on to give me a diagnosis of the male pattern hair loss that I was facing and asked me questions about whether I had experience hair loss, receding hair line etc..

All this hit home quite hard as I have been pretty conscious about the fact that my hair line has indeed been creeping up my forehead and I looked a little bald from certain angles. Even some friends have told me that I looked like a fat and balding uncle on facebook (thanks to candid and unflattering pictures of me that end up on facebook without me knowing...)

That is very sad. To be 28 and going on to 29 and to look bald is not a thought that I like entertaining very much. But everytime when I look in the mirror, I am certain that my hair seems to be getting much thinner and I will one day lose all my hair.

After much sales talk, she managed to convince me to buy a bottle of shampoo for $22. It has some teatree oil extract which is supposed to be good to keep my scalp less oily. I willingly parted with the money as I believe prevention is better than cure and I am willing to spend money to prevent myself from going bald. Her sales talk that preyed on my fear of losing hair was also really good.

After a few weeks of using the product, my wife has commented that my hair is no longer oily and is smooth and nice to run her fingers through. I am still not sure about the anti-hairloss function of the shampoo and can only wait it out for a few more years to see whether it is really effective.

Hopefully this will turn out to be one of my better investments.