Sunday 16 December 2012

9 faces of Singapore Consumer Credit Behaviour

Earlier this year, DP Credit Bureau, Singapore’s consumer credit bureau and an Experian company, revealed new insight into Singaporean consumer credit behaviour using a consumer classification system.   Mapping credit behaviour against consumer demographic and lifestyle profiles, the analysis paints a rich picture of Singaporeans today in terms of how different consumer groups manage their money and their credit.

The 9 faces of Singapore are the following:

1) Affluent Elegance
2) Cosmopolitan Central
3) Upscale Pragmatists
4) Well heeled Clans
5) Cautious Community
6) Expanding Kinfolk
7) Contemporary Homemakers
8) Kopitiam Lifestyles
9) Working Class Traditionalists

If you're a Singaporean, you'll probably be able to identify yourself among one of these categories.
Do download the full report here.

Saturday 1 December 2012

The Secret life of a Credit Card Revolver

Easy Credit, Hard Repayment

(The following is based on a real life event)

Eugene (not his real name) is a 26 year old male Singaporean. He holds a 9-5 job and earns $2,500 a month as an executive in a MNC. Having worked since completing his local diploma, Eugene found his career opportunities and wage growth to be severely limited by his lack of a college degree, his job roles have mostly been in customer service & admin positions.  On a personal level,  Eugene is a avid soccer fan who enjoys placing small wagers on EPL games on weekends.

Earlier this year, Eugene suffered a serious fracture in a soccer game when he was between jobs and was without income for 6 months.  A combination of prolonged bad timing & bad luck wiped out the little savings Eugene had.  After liquidating all his insurance & investments,  he still found it hard to cover his day to day expenses and started to borrow on his credit card as a stop gap solution to his cash flow problems. As Eugene’s parents are both low income manual workers,  he did not want to place any financial burden on them.  At the same time, he did not wish to borrow from friends for fear of embarrassment. His last resort was banks.

Eugene learnt about the power of compounding interests the hard way. What started out as a few thousands of credit card debt steadily snowballed to tens of thousands.  He was committed to get his life back on track by finding stability in his current job position, as well as eliminating his gambling vice. After working through his personal budgeting, Eugene determined that by cutting down on the bulk of his lifestyle expenses and by living like a monk over the next 3 years. He will be able to fork out $1,000 a month to repay his mounting credit card debt.

Debt Repayment Plan
(Balance as at Dec 2012)

Outstanding Balance
Interest Rate
Total Interest Paid
Months to Pay Off
Month Paid off
Bank C Credit Line
Bank C Term Loan (0% installment plan)
Bank C Credit Card
Bank U Credit Card
Bank S Credit Card
Bank S Credit Card


·                  It will take close to 3 years to fully clear his debts. Even then, he would have no cash savings.

·                     The time taken to clear off his debts may be further extended if there are any upcoming contingency spending required (e.g parents face retrenchment? )

·                     The total interest paid on his cards is $7994.65. In the course of repayment, he will be paying more than 3 months of his current salary to banks to service the interest.

·                     The debt repayment plan is based on assumptions that he remains employed full time and in good health. In reality, consistency is not easily achieved.

·                     Eugene's most practical way to get out of debt faster is to consider working in part time jobs on weekends to generate another source of active income.


In 2011, the rollover balances in credit cards among Singapore consumers is in excess of $4.5 billion.
Most banks charge an interest of 2% on balances. Bank deposits in Singapore do not earn even 1% interest, however unsecured loans like credit cards accrue interest up to 24% per year. Talk about interest income!
Regardless of whether the debt is accumulated via vices such as gambling due to long term unemployment, hospitalizations etc, one should always aim to escape the bondage in as short a period as possible.

Its unfortunate that there are many people  like Eugene who are among us. They may appear to do fine on the outside but on the inside, they are drowning in debts. In Eugene’s case, his long term debt exposure has caused him to constantly lose focus at work. He is of marriageable age but he does not dare to find a partner as he is concerned of she will view him if his financial troubles are found out. As he is living from paycheck to paycheck, he often have to make various trips to cash deposit machines & payment kiosks to make payments for different banks to avoid the various late charges imposed by banks. Due to his low income, his interest payment alone is more than 25% of his take home pay and often he has to reject invitations from his friends for social gatherings, parties as well as give up on overseas holidays to tighten his wallet.  With all the sacrifices that he will be making,  Eugene hopes that his efforts will pay off so he can have a 2nd chance in life.

Readers facing personal debt problems can contact Credit Counselling Singapore (CCS) to seek their advice and assistance:

Quote: “When a man is in love or in debt, someone else has the advantage." Anonymous

Saturday 24 November 2012

Dissecting our Emotionless Society

A recent survey conducted by Gallup concluded that Singaporeans ranks as the most emotionless society in the world.  Participants were asked whether they experienced five positive and five negative emotions a lot during the course of a day. 

Graphic: Bloomberg Newsweek, Source: Gallup

The 36% in Singapore who reported feeling anything is the lowest in the world.  Ask any Singaporean on the streets  and i would guess few would find it surprising.  Below is a list of common Singaporean traits which you can probably relate to:

- We do not bother to speak to unfamiliar people we meet in lifts (Same office building/HDB)
- We do not know who our neighbours are and what they do for a living 
- We are unaware and uninterested of the problems our co-workers are facing at work
- Many of us do not even bother to sit on priority seats on public transport for fear of social  
- When we attend concerts or ceremonies, we do not even applaud as loud as we should
- We are often unappreciative of things people go out of the way to do for us.  
- We are less expressive when it comes to displaying our emotions of love & gratitude
   (Ironically we are very expressive when it comes to complaining anonymously online)
- The list goes on....

This lack of social expression and cohesion is often attributed to our lightning paced lifestyle where people constantly struggle to fulfill their career, family, financial demands.  In fact, Singaporeans have grown so accustomed to it that when we see a 70 year old hatchback toilet cleaner at MRT stations, doing physically demeaning tasks, we do not even twitch an eyebrow. Our hearts have hardened to such an extent.

Source: Economist Intelligence Unit
This is in direct contrast to a " where to be born in 2013 index" where Singapore ranked 6 overall for newborns to have opportunities to enjoy a safe, healthy and prosperous life. So the question is: Is it really such a good idea to pop babies in Singapore to endure 18 years of vigorous education and grow up to be working adults who just couldn't care less?

So how did we collectively reach this stage where despite our economic success, we rank low in basically everything that "makes life worth living" ? Where we become rich in material possessions but poor in our social connections with our fellow countryman? From a financial perspective, there are many driving forces which led to this " emotionless" state within Singaporeans.  Many prominent economists and social psychologists have discovered that many indicators that measure social well being e.g. how happy a child is, the level of trust within a community, level of social mobility has a strong correlation with the extent of income inequality within a country.

Source: Ted 2011.  Richard Wilkinson: How economic inequality harms societies

Recent studies have shown that the top 20% in our society is 10 times richer than our bottom 20%. (This is twice the inequality of other developed nations like Japan, Finland & Norway). The large contrast between our rich and poor and our constant need for social validity has been pulling us further and further apart. It seems like in Singapore, one really have to get rich, or  die trying just to make ends meet.  It would be interesting to observe how "emotionless" Singaporeans can evolve in years to come as the trend seems set to continue.  At the meantime, perhaps we could show more emotions by enjoying a good laugh, at least at ourselves.

Another failed campaign?

Do read my other articles:
The Sandwich Generation in Singapore
CPF system & its application of Behavioural Economics

Sunday 11 November 2012

Retirement in Spore- An inconvenient truth

Retirement is often pictured as golden period where one enjoy the fruits of decades of hard work.  To some, it could be having a stress free life and doing the things we enjoy. For others it might be enjoying the company of family and friends or engaging in a religious or social cause.

However, due to the pragmatic nature among Singaporeans, not having to worry about money is often ranked as the most important aspect of a happy retirement. Many "planners" among us understand that having sufficient funds is a pre-requisite for retirement and this financial security also helps in creating peace of mind.  

HSBC: The Future of Retirement Survey 2011 (Singapore Report)

It is estimated that the average Singaporean has about $120,000 in cash savings at age 55.  It does not take a financial expert to know that this amount is inadequate, especially in high cost Singapore where the costs of a nursing home stay can easily cost thousands per month. So how much does one need to retire in Singapore? Like any confused Singaporean, i turned to the CPF's website and tried out their retirement savings calculator. (Try it out!!) 

Current Age: 25 (Fresh male graduate entering workforce)
Desired Retirement Age : 65 (Current Statutory Retirement Age)
Desired Monthly income: $2000 (Cost of subsidised elderly nursing home + buffer for healthcare costs)
No of years the income should last: 23  (Life expectancy of males = 83 + 5 = 88) 
Return on investments : 4% (current CPF interest rate for Retirement Account)
Rate of inflation: 5% (2012 3rd Qtr inflation rate = 4.7%)

Everyone Needs to be a Multi Millionaire!!! 

Amazing! Based on conservative assumptions, the generation Z of singaporeans today need to accumulate $4.3 million by age 65 just to ensure self sufficiency at old age. Even in today's dollars, our average Singaporean is underfunded for retirement by more than 80%  [($614,510- $120,000)/$614,510] based on cash & investment savings alone.  Most young people you speak to today (females especially) would not want to work beyond age 55.  To achieve this means one needs to have even more money than CPF's recommended $4.3 million figure!     It really makes me wonder if I have to work till my deathbed if wages in Singapore do not rise in tandem with our stellar economic performance.  This has become a critical issue confronting Singaporeans in years to come. With increasing costs of living, especially healthcare costs, our generation may be embroiled in financial struggle just to retire worry free.

Working by choice? Or by lack of choice? 
We are constantly reminded of how painful the cost is, for the lack of retirement planning, either voluntarily or involuntarily when we see cleaners in their 50s or 60s patrolling our MRT stations, hawker centres etc.   Recently there is an incident of an 80 year old dishwasher who dropped dead in the toilet at the hawker centre where she had been working for 6 years. It was reported that she had to work from morning to night with only 2 off days in a month and had looked very sick prior to her death.  The government's calling has always encouraged active employment at old age by requesting for our elderly to delay retirement.  The question we should ask is, are our elderly working because they want to? or because they have to?

Retirement planning & insurance planning are perhaps the most important aspect of financial planning. One only goes through retirement & death or major disability once in their lifetimes. There is no way one can "learn" through experience and become better unlike (failed investments, failed relationships).  A one time failure for many may constitute a lifetime failure as many in old age do not have the luxury of time and energy to recover financially.

A dignity free retirement is  a personal responsibility, not an entitlement in our society today. 

Trivia Joke:

There were 2 men who died and entered heaven. God asked them: " What was your biggest regret in your lives?"

Man A said: "My biggest regret was not spending all my money before i died."

Man B said: " You lucky bastard,  my biggest regret was spending all my money before i died!" 

Do read my other articles:

Saturday 3 November 2012

Risk Intelligence - the consequences of our confidence

I have just completed reading the book Risk Intelligence by Prof. Dylan Evans and have found it to be an interesting read. The central theme of the book talks about how much we are rewarded when we are right, and how much we are punished when are wrong. It  argues that for many executives in power today who have autonomy in making large scale decisions, understanding one's risk intelligence may be more important than having expert knowledge over a professional field. 

So what exactly is risk intelligence? It is defined as the ability to estimate probabilities accurately and having the right amount of certainty to make educated guesses.  In today's environment, it is a complex skill as everyone is working on limited information in an increasingly uncertain world.

There are some key takeaways from the book which i found to be particularly interesting: 

Most people are poor in assessing probabilities.

- Things one learn by developing high risk intelligence in one area can spill over to other areas of our lives. (E.g tertiary educated people are less likely to participate in high risk and low return activities like smoking, gambling, unprotected sex compared to their less educated counterparts). 

Risk appetite is an attitude towards risk while risk intelligence is a cognitive skill. 
Having a high risk appetite and  low risk intelligence is a certain recipe for disaster. On the other extreme, there are the risk averse lot who are constantly seeking more information that they are stuck in analysis paralysis and never gets any real work done. 
It is also advocated that one can create some simple yet effective systems to greatly enhance results in our professional and personal lives. These strategies aim to reduce our loss exposure in times of weakness  and  maximise our gains in times of strength. Some examples include: 

Setting a threshold - Choosing to take action when one have 60%/70%/80% chance of success.  This prevents one from taking a position simply for the purpose of finding a quick buck or chasing losses.

Bet sizing - Placing amounts of wagers proportional to one's level of confidence. It is therefore possible to achieve a net positive return even if one is right only 1 out of 10 times when he is "all in" .  This is the most profitable option if one has a high risk intellligence. 

Expected Value - Knowing what events are of pure chance compared to events where superior skill is rewarded. In reality. this is not as simple as it seems, there are still a lot of smart people who believe they can beat the house in a casino, or raid the stock market by following certain " trading systems". Common sense is not so common after all. 

When does one hold, fold or bet the entire farm? 

The core idea about risk intelligence involves knowing oneself  and our limitations and is vastly different from academic intelligence.  As a result, top students who are often rewarded in school for knowing things may find themselves having a low risk quotient due to an overconfidence in their abilities.  On the other hand, average students may find themselves scoring higher on the risk intelligence scale due to a more accurate self assessment of their abilities. 

With the influx of new insights on behavioural economics, the science of decision making may have just taken a new step forward.  Readers who would like to find out their risk quotient can take the test at

Read related articles:
Are young people investing or gambling? 
Why young people should NEVER invest their CPF savings

Wednesday 25 January 2012

Myths and Truths of the Life Insurance Industry

Life insurance is something very close to my heart.  It was one of the first financial products I marketed since I joined a local bank as a financial consultant 5 years ago. Today, I am a firm advocate of proper insurance planning and am glad that my career decision has allowed me to gain tremendous exposure by meeting people from all walks of life.  However, like all jobs, it is not always smooth sailing.  It is a well known fact that 90% of financial advisers, especially those of tied agencies, do not stay long in the industry. On a personal level, I have at least changed 3 different insurance advisers over the past 3 years, all of whom are young and aspiring graduates who decided to call it quits.    

It is a worrying trend given such high attrition rates.  I believe it can be attributed to the wrong expectations people have when they start out as an insurance adviser. Sadly, many of these misconceptions are initiated by insurance agencies that are desperate to recruit at all costs.  Judging from the number of ads posted daily by recruiters, Insurance advisers always seem to be in high demand despite it’s out of the world benefits.  A typical ad for insurance adviser looks like this: 

(I have plagiarized this image from my friend, Seth Wee’s website. Do visit the original site by clicking this link. )

I would like to dispel a few myths that aspiring life advisers may have and also set the expectations right.  For other readers, it might also be helpful to know the challenges that your life insurance agent may be facing. 


Myth 1:  One can earn unlimited income

Income is never unlimited.  The reason is because to generate income, one requires time and work.   If time and work has limits, so does one’s income. Time and effort will eventually reach a ceiling.  One has to be careful of such misleading statements. 

Income (unlimited??)  =  Time (limited) + work (limited)


Myth 2:  People need your help


People do not want your help. Yes, it is true that many Singaporeans are severely underinsured and underfunded for retirement.  However a recent AIA survey conducted in 2011 has demonstrated that Singaporeans are more concerned about upgrading to the latest Iphone models than about purchasing the right insurance. (See survey findings here)

To put it simply, life insurance is a “need”, people however act on “wants”.

Myth 3:  An insurance adviser is a respected profession

People do not respect insurance advisers because it is a sales job. Regardless of one’s education or experience, as long as one’s remuneration is based on marketing a product, the customer will always hold the upper hand. Lawyers get paid even if they fight a losing case. Doctors get paid even if the surgery is not successful.   A true professional is paid when he does a job, a sales person is paid only when he closes a sale.  I have written extensively about this topic, See my article : (Difference between financial sales & financial planning)

Myth 4:  Income commensurate with ability, unlike a fixed salaried position

Ability here refers to marketing ability, not the ability to give proper insurance advice.  As it is a sales job, one will find that a lot of time and effort is spent on prospecting and generating interest to prospects rather than providing advisory work.  This is especially true of new advisers.

In addition, one can quickly recognize that most top performers in the insurance industry are often those blessed with the gift of the gab with attractive personalities rather than those who are most competent in giving insurance advice.

Myth 5:  Being in insurance means running your own business

Life insurance is a flawed business.  Can you think of another job in the world where one has to consistently prospect for new clients even though they have 350 clients?  Any business with 350 clients will be laughing all the way to the bank. Not for life insurance. As 1st year and renewal commissions run out, one has to constantly find new prospects to close.  If one closes 50 cases a year, in 7 years time, he would have 350 clients.  If the adviser chooses to meet one client a day per year for a financial review, he would effectively have no new business coming in, thus destroying his income stream. The nature of Life Insurance business means one have to constantly source for new clients while giving up existing ones.

The real winners of course are the insurance companies and agencies which continue to profit from premiums paid by customers whose advisers leave the companies. The real people running a business are these financial intermediaries, not the insurance adviser.


Despite it being a noble profession, people do not have very high regard for the average life insurance adviser.   It is common for new advisers to find that their friends start alienating them for fear of being prospected.  People in general respect other highly paid professionals in finance like investment bankers even though an insurance adviser can leave a positive footprint in other people’s life unlike the former that only make one filthy rich, but have little or no contribution to society.

My experience suggests that sustainability  in the industry is attributed more to personality rather than competence.   If you are wearing a dress, has a mesmerizing smile and have flocks of rich men prepared to meet you anytime of the day,  the life insurance industry is a place where one can truly earn an extraordinarily high income at a young age.  However if one does not satisfy the above criteria.  It is of utmost importance to plan a strategy of conducting business rather than depending on hard work alone.  Hard working and good natured people do not necessarily succeed in life.   

As for the misleading advertising conducted by insurance companies, remember the old adage
" when it sounds too good to be true, it probably is"