The Concept Of Money
A few days ago, our Finance Minister said Singapore property prices may decline further, “but I don’t think we’ll see a crash.” A friend who works in creative promotions, and who recently turned 40, finally bought an apartment of his own. He called me to ask, “Does it mean I bought my property at the right time? I am using my CPF money. What is the whole CPF debate about? I am not following. How will the new Minimum Sum scheme affect me?” He went on to exclaim, “The banker tried to explain the terms of the house loan to me. I had a headache after five minutes. By the time he finished, I literally had a migraine attack. It was too confusing. The banker told me the loan is locked-in yet I am free to change anytime. Do you know what it means?” He, along with many others I know, are right-brian individuals whose concept of money differs drastically from the financially literate and investment savvy.
There are many among us who are not conversant with bonds, shares, unit trusts, investment related funds and insurance. Their minds are just not wired that way. Using money to make more money, leveraging, diversifying investments – these are not what they know or motivated to understand. They know that money is important, but they only comprehend the more straightforward ways to earn money and are not keen or capable to run a business. This brings to mind Madam Pusparani, 34, whose husband was killed in a freak accident while working at Changi Airport Budget Terminal. She received almost $1 million dollars from insurance payouts and public donations. On the advice of a financial advisor hired by Changi Airport Croup, she divided the money among herself and her children, with $200,000 for each child in an annuity plan.
After clearing debts, she invested the remaining $100,000 in her brother’s transport business in Kuala Lumpur, hoping it would give her a stable income. The transport business did badly. She withdrew her children’s money, then fell out with her brother and did not recover any of her investment. By May last year she was broke. The money was gone. “I am thinking of going to work in Singapore. But I feel ashamed,” said Madam Pusparani tearfully. “I don’t know how to explain to the people who donated money to me and my children.” Her case contrasts sharply with that of Madam Poa Beng Hong whose husband, foreman Heng Yeow Pheow, dubbed “Hero Heng”, died saving eight workers in the 2004 Nicoll Highway collapse. The $380,000 in settlement from the three construction firms involved in the accident, and more than $630,000 from public donations, have been left untouched in a fixed-deposit account and trust fund respectively for her children.
Madam Pusparani’s experience is the classic case of mismanagement of sudden money. It reflects an unspoken aspect of our society – some people do not have anyone they can trust to advise them financially. They are alone in making big fiscal decisions. “Isolation can be a big factor,” says Thayer Willis, author of the book ‘Navigating The Dark Side Of Wealth’. “People who are dealing with these challenges of wealth know that most people won’t sympathise. Their attitude is: I should have your problems,” Willis said. A banker friend told me that managing money without financial literacy is a bigger problem and more relevant to us than we care to admit as our population greys. The basics of financial management are a discipline we owe to ourselves and our dependants. He said, “If you don’t trust a piece of advice, ask for a second, third even a fourth opinion. You are less alone than you think. There will be someone who can help you.”
For those with the financial expertise, it is a worthy volunteer service to extend to others, especially older people, who are alone and who need help. Even explaining the fundamentals of the CPF and MediShield schemes will help. My banker friend has this to say of his very wealthy clients, “They look at a $200 item and will think it is expensive. They will start to negotiate. My regular clients will buy it without hesitation if they need or want it. Over the years, my very wealthy clients have become wealthier.” He also says this about people with some disposable money, “Let people know only on a need-to-know basis. When relatives and friends come knocking with every possible story to get you to part with your money, you will either have broken relationships or no more money.” This is his take on sudden money, “If you came into money suddenly, let it sit in the bank for at least 3 to 6 months. Let the shock and shift in your mind settle before making any decision.” His final tip,”If you are not a business person, having more money does not automatically make you business savvy. Ultimately, you must learn to say ‘no’ to yourself, loved ones, friends, strangers, if you feel intuitively you should not spend, lend or invest.” Very sound advice indeed.
