Too big to fail? Europe is facing problems with some big banks.
http://www.bloomberg.com/news/2010-10-25/four-banks-should-plan-to-bail-out-of-europe-commentary-by-matthew-lynn.html
Tuesday, October 26, 2010
Benchmark for deduction - life insurance policy
I advise consumers to look at the benefit illustration for a whole life or investment-linked policy and check that the effect of deduction does not exceed 20% of the accumulated premium at the end of 25 years. This article explains why I chose 25 years as a gauge and how I derive the benchmark of 20%. It also give the benchmark for other durations. It is the SECRET that many consumers are looking for.
Pain of higher interest rate
Suppose you took a loan of $400,000 to buy a HDB flat and pay over 25 years at 2.6% interest. Your monthly installment is $1,780. If your family income (net of CPF contribution) is $4,500, the monthly installment takes away 40% of your income. You may think that it is still manageable.
Many people are paying 40% (or more) of their family income towards the mortgage payment. They use their CPF contributions and top it with their cash contribution.
What will happen if interest rate start to rise? Thirty years ago, borrowers were paying interest at 8% on their mortgage loan.
Let us just look at the impact of interest rate at 5% per annum. Your monthly would change to $2,250. This would represents 50% of your family income. The increase in interest rate will take away 10% of their net income. Can you afford this higher payment?
What happens when interest rate goes up to 7%? The monthly payment will jump to $$2,650. This will represent 60% of your income. The jump in interest rate from 2.6% to 7% will take away 20% of your income.
Will interest rate increase to 5%? Quite likely. Will it increase to 7%. Maybe. Some countries have interest rate at 10% or higher in recent years. Who says that this may not happen?
Lesson: avoid paying a high price for your property. make sure that the price does not exceed 5 years of your income. If your income is $4,500 a month, do not pay more than $270,000 for your property. Certainly, $400,000 is too much, and too dangerous!
Tan Kin Lian
Many people are paying 40% (or more) of their family income towards the mortgage payment. They use their CPF contributions and top it with their cash contribution.
What will happen if interest rate start to rise? Thirty years ago, borrowers were paying interest at 8% on their mortgage loan.
Let us just look at the impact of interest rate at 5% per annum. Your monthly would change to $2,250. This would represents 50% of your family income. The increase in interest rate will take away 10% of their net income. Can you afford this higher payment?
What happens when interest rate goes up to 7%? The monthly payment will jump to $$2,650. This will represent 60% of your income. The jump in interest rate from 2.6% to 7% will take away 20% of your income.
Will interest rate increase to 5%? Quite likely. Will it increase to 7%. Maybe. Some countries have interest rate at 10% or higher in recent years. Who says that this may not happen?
Lesson: avoid paying a high price for your property. make sure that the price does not exceed 5 years of your income. If your income is $4,500 a month, do not pay more than $270,000 for your property. Certainly, $400,000 is too much, and too dangerous!
Tan Kin Lian
The less you know about finance the better
Everywhere you turn these days, some bigwig policymaker is talking about
the importance of financial literacy education.
The only problem is, there’s a fair amount of evidence that a lot of what we do
to teach better financial habits, like courses in high school, doesn't work.
Maybe we should ignore real-world complexity altogether
and just teach people financial rules of thumb.
http://blogs.reuters.com/
The soft or confrontational approach?
A place for both the considered and the confrontational
Securities Investors Association (Singapore) with its softer approach
can rightly claim credit for its more recent achievements.
But it would be unfair to deny due recognition to those early trailblazers
whose style was more "confrontational" .
Narayana Narayana
Dealing with Wall Street
15 Inviolable Rules for Dealing with Wall Street
Those of you who have to interact with the sharks should learn the following rules:
CPF Life - Make it attractive
My student in SMU asked me, "Prof Tan, I find the CPF Life to be very complicated. It is so difficult to decide on choosing the four options, as they seem to work differently, with the DDA etc."
I agree with her views. I also find it to be difficult. I sent the attached article to the Straits Times two months ago, but they declined to publish it. In this article, I suggested how the Government can get out of the current mess that they have created.
I agree with her views. I also find it to be difficult. I sent the attached article to the Straits Times two months ago, but they declined to publish it. In this article, I suggested how the Government can get out of the current mess that they have created.
Retrenchment benefit for Singaporeans giving up their citizenships?
Contributed by DareToAct
When a company restructures, often times it hires new employees from other companies and retrenches some existing employees. When it does so, it pays these employees retrenchment benefits. Some unscrupulous companies try to move their employees around to "uninspiring" jobs and hope that the employees will just quit the company and find jobs elsewhere.
Most people will agree that Singapore is run like a company. Our cabinet ministers and senior civil servants are paid like corporate executives. When Singapore Inc was having growth problem after the Asian financial crisis, our government stepped up their foreign talent strategy and "recruited" many to join Singapore Inc. Those Singaporeans who lost their jobs due to the restructuring were urged to upgrade, retrain, redesign. From what I can gather reading newspapers and other media, it seems like many "employees" of Singapore Inc are not finding it easy to cope.
Maybe the government can consider this: pay retrenchment benefits to Singaporean who wants to "resign" from Singapore Inc. It allows those who think they can have a better life elsewhere to leave with a small sum of money (they deserved it as they have contributed to Singapore Inc's growth from 3rd world to 1st) so that they can settle better into their new "job". It is also good for Singapore Inc as the CEO can now spend time doing "unproductive" work like explaining policies to those who do not have the capacity to understand or worry about being fired at AGM.
It's a win-win, no?
DareToAct
When a company restructures, often times it hires new employees from other companies and retrenches some existing employees. When it does so, it pays these employees retrenchment benefits. Some unscrupulous companies try to move their employees around to "uninspiring" jobs and hope that the employees will just quit the company and find jobs elsewhere.
Most people will agree that Singapore is run like a company. Our cabinet ministers and senior civil servants are paid like corporate executives. When Singapore Inc was having growth problem after the Asian financial crisis, our government stepped up their foreign talent strategy and "recruited" many to join Singapore Inc. Those Singaporeans who lost their jobs due to the restructuring were urged to upgrade, retrain, redesign. From what I can gather reading newspapers and other media, it seems like many "employees" of Singapore Inc are not finding it easy to cope.
Maybe the government can consider this: pay retrenchment benefits to Singaporean who wants to "resign" from Singapore Inc. It allows those who think they can have a better life elsewhere to leave with a small sum of money (they deserved it as they have contributed to Singapore Inc's growth from 3rd world to 1st) so that they can settle better into their new "job". It is also good for Singapore Inc as the CEO can now spend time doing "unproductive" work like explaining policies to those who do not have the capacity to understand or worry about being fired at AGM.
It's a win-win, no?
DareToAct
Monday, October 25, 2010
Promotion at i-Shop
There are several promotions of up to 40% of the books available at i-Shop.
Bundle of 5 books - 40%
Wisdom on How to Live Life - 3 books by Tommy Wong - 20%
Bundle of 4 rechargeable torchlights - 23%
Bundle of 5 books - 40%
Wisdom on How to Live Life - 3 books by Tommy Wong - 20%
Bundle of 4 rechargeable torchlights - 23%
Insurance woes of stroke victim's daughter .
I am a professional in the same industry and did not wish to leave the matter to others.
Policyholders should have the right to decide if they want to be represented by an agent or immediate family members when they are critically ill.
Lee Meow Hua (Ms)
http://www.straitstimes.com/STForum/OnlineStory/STIStory_594771.html
Policyholders should have the right to decide if they want to be represented by an agent or immediate family members when they are critically ill.
Lee Meow Hua (Ms)
http://www.straitstimes.com/STForum/OnlineStory/STIStory_594771.html
A Theory of Justice - Joseph Stiglitz
Among the casualties of this whole mess, according to Stiglitz? Faith
in the legal system itself. "The legal system is supposed to be the
codification of our norms and beliefs, things that we need to make
our system work," he said. "If the legal system is seen as exploitative,
then confidence in our whole system starts eroding."
"When you say the Pledge of Allegiance, you say, with 'justice for
all," Stiglitz said. "People aren't sure that we have justice for all.
Somebody is caught for a minor drug offense, they are sent to prison
for a very long time. And yet, these so-called white-collar crimes,
which are not victimless; almost none of these guys, almost none of
them, go to prison."
"Families are as important as corporations," he said. "Keeping kids
in school, not forcing them out of their home, keeping the
community together, is certainly as important as keeping a
corporation alive."
Joseph Stiglitz
in the legal system itself. "The legal system is supposed to be the
codification of our norms and beliefs, things that we need to make
our system work," he said. "If the legal system is seen as exploitative,
then confidence in our whole system starts eroding."
"When you say the Pledge of Allegiance, you say, with 'justice for
all," Stiglitz said. "People aren't sure that we have justice for all.
Somebody is caught for a minor drug offense, they are sent to prison
for a very long time. And yet, these so-called white-collar crimes,
which are not victimless; almost none of these guys, almost none of
them, go to prison."
"Families are as important as corporations," he said. "Keeping kids
in school, not forcing them out of their home, keeping the
community together, is certainly as important as keeping a
corporation alive."
Joseph Stiglitz
Deceptive and predatory practices
During a wide-ranging interview with DailyFinance at AOL
headquarters in New York City this week, Stiglitz, who served as
chief economist of the World Bank from 1997-2000 and is currently
University Professor at Columbia University, explained how the
availability of cheap money (thanks in large measure to former Fed
Chairman Alan Greenspan), combined with outright mortgage fraud
and deceptive and predatory lending practices put millions of people
into homes they couldn't afford and caused real estate prices to
skyrocket. That created a bubble that would inevitably pop.
My comment
Deceptive and predatory practices are also found in Singapore. They
have to be addressed by the authority.
headquarters in New York City this week, Stiglitz, who served as
chief economist of the World Bank from 1997-2000 and is currently
University Professor at Columbia University, explained how the
availability of cheap money (thanks in large measure to former Fed
Chairman Alan Greenspan), combined with outright mortgage fraud
and deceptive and predatory lending practices put millions of people
into homes they couldn't afford and caused real estate prices to
skyrocket. That created a bubble that would inevitably pop.
My comment
Deceptive and predatory practices are also found in Singapore. They
have to be addressed by the authority.
Structure of a Life Insurance Policy
This article explains the structure of a life insurance policy in simple terms for a lay person. It helps you to understand the role of a life insurance policy and how to pay the right price for its benefits. More importantly, it helps you to avoid paying too much for a life insurance policy that can become a financial burden to you for a lifetime.
Conversation with a Job Entrant
This job entrant is being pushed to buy a life insurance policy that he does not fully understand and will take away nearly 50% of his future savings. Read how to avoid this type of risk that falls on most young people.
Sunday, October 24, 2010
Life insurance - past and present
Dear Mr Tan,
I have been following your blog for a number of years and I find that it offers good advice on financial and insurance planning. However, I cannot reconcile your views advising against buying whole life insurance policies to buying term policies. When you were heading NTUC Income, the company was actively promoting whole life insurance policies. Now you are advising against buying whole life policies because of the poor returns. Has something drastically changed ? If so, what has or have changed ? Please kindly enlighten me.
Thank you.
REPLY
When I headed NTUC Income, I offered whole life policies that gave a good yield to the policyholders. I bought many of these policies for myself and my family.
If you can find a policy that gives a good yield, you can buy it. But if it gives a poor yield and takes away 40% or more of your future accumulated premiums, you should avoid it. This matter has been covered in my website and blog on many occasions.
Read this FAQ:
A fair deal
I met a successful life insurance agent in Indonesia. He is experienced in selling health insurance and single premium products. He explained to me about how he is able to convince his clients about the value of his product.
I asked him if he would sell a whole life or investment linked product where 50% of the accumulated premium is taken away from the consumer. The policy pays a high commission to the agent. He considered this matter and replied "no". He felt that it would not be fair to give a poor deal to the consumer. He was quite surprised that this type of product is being sold in Singapore.
I asked him if he would sell a whole life or investment linked product where 50% of the accumulated premium is taken away from the consumer. The policy pays a high commission to the agent. He considered this matter and replied "no". He felt that it would not be fair to give a poor deal to the consumer. He was quite surprised that this type of product is being sold in Singapore.
Surveys
There are a few surveys that are still open. Please click on the "Survey" tab on the right or the following:
http://tankinlian.blogspot.com/search/label/Survey
http://tankinlian.blogspot.com/search/label/Survey
Layout for a Book
I am looking for a person to do the layout for my new book. I have written it in a Word document and need to have it laid out in A5 size. There are some images that need to be enhanced and touched up. You need to have a knowledge of Word and Paint. If you are interested, please send an e-mail to kinlian@gmail.com.
TKL apps on Apple App Store
You can search for "Tan Kin Lian" in the Apple App Store and download several free apps, e.g. Tangram and Shape Quiz. These apps have a rating of 4+
The paid versions, which has 100 shapes, are also available.
The paid versions, which has 100 shapes, are also available.
Jail for Corporate Crooks
Joseph Stigliz, ex World Bank Chief Economist and 2001 Winner of Nobel prize (Economics), calls for jail time for corporate crooks and questions the wisdom behind policies favouring a few big corporations over 300 million people.
Article
Interview
These are two executive articles. I like you to read them because Singapore bas been following the bad practices that had caused the economic downfall of America - the bad behavior of the banks and the corporate sector. Although Singapore is enjoying a healthy economy now, there is the risk the continuing problems in America will hit the rest of the world and caused the next global recession. If it happens, Singapore can be hit quite hard.
Article
Interview
These are two executive articles. I like you to read them because Singapore bas been following the bad practices that had caused the economic downfall of America - the bad behavior of the banks and the corporate sector. Although Singapore is enjoying a healthy economy now, there is the risk the continuing problems in America will hit the rest of the world and caused the next global recession. If it happens, Singapore can be hit quite hard.
Subscribe to:
Posts (Atom)