When a guy says "I'm broke", that can mean any number of things. It could mean he should really sell that Audi he just bought, stop buying Chanel bags for his girlfriend and quit drinking so much. Or it could mean he's struggling to stay afloat thanks to mounting medical bills.
Let's be honest. Despite the prosperity of the country's economy, bread and butter issues and the fear of not having enough money for survival and retirement are hands down Singaporeans' biggest fears.
Here are three big life changes which can have a huge impact on your finances. Fail to plan for these and there's a good chance you will end up broke, too.
Illness or injury
It shouldn't be this way, but many Singaporeans' biggest fear is going bankrupt thanks to a serious illness or injury that requires a long stay in the hospital or costly treatment, or a chronic health condition that requires ongoing treatment for the rest of their lives. I have to admit that this is my biggest fear as well.
The changes made to the MediShield state system, which has been upgraded to MediShield Life, are a step in the right direction, but if you think that means you no longer need to buy private health insurance, you clearly still believe in fairy godmothers.
There are limits to how much MediShield Life can cover. For instance, a private insurance plan gives you the option of purchasing riders which will enable you to get your entire bill covered without having to fork out a co-payment sum, which you'll have to do if you rely entirely on MediShield Life.
The two most important things you can do now are:
- Take steps to preserve your health. Singaporeans tend to prioritise working hard and making money over looking after their health until it's too late. We may have a high life expectancy here, but diabetes is escalating to crazy levels and we have the world's fourth highest kidney failure rate. Incidentally, Medishield Life might not be able to help you much if you get either of the above.
- The minute you can afford it, get a private health insurance plan that integrates Medishield Life. MoneySmart's health insurance wizard makes it easy to compare plans.
Unless you're one of those model citizens who gets through the education system unscathed, wins scholarships, takes to the working world like a fish to water, earns six figures and then does your duty by popping out the requisite kids with never a second thought, you will face some speed bumps during your career and your life.
And one of the most financially damaging is, surely, retrenchment. It's bad enough if it happens to you when you're younger and commitment-free. But if you're a middle aged PMET who's amassed years of experience and commands a high salary, you might be in for a rough ride, as the odds are not in your favour.
Highly-trained mid-career professionals have the toughest time replacing their lost income-only 49 per cent manage to find jobs without six months, according to MOM, and even then only about 40 per cent manage to find jobs that can match their previous salaries.
If your spending has reached the point where you'll be in big trouble if you lose your job and are forced to rely on a much lower income for sustenance, it would be wise to safeguard yourself against disaster should the worst happen.
- Unless you have a truly retrenchment proof-job (like teaching), it pays to never grow complacent about your career. Many young employees know the importance of building diverse skillsets that allow lateral transfers if necessary, networking aggressively and always having a Plan B. Don't lose sight of that no matter how many years of experience you have. You never know when you'll have to go back to the drawing board.
- If you are earning $25,000 a month now, start spending $24,000 a month and you'll be knee deep in the brownest stuff possible if you get retrenched. Beware of lifestyle inflation and the fallacies of the insidious Singapore dream. If you live well beneath your means and save and invest wisely during your peak earning years, retrenchment won't be as scary, and could even be interpreted as a sign to slow down. Fail to do that and retrenchment could signal that your decades of work have all been for nothing.
Having a child
Despite everything the government has been doing to try to convince married, straight couples to have more children, the fact remains that it's expensive as hell, especially if you plan to go the kiasu parent route.
Let's not even get into how much it costs just to give birth. Estimates of how much it costs to raise a child in Singapore range from $340,000 to almost a million bucks.
Given the cost and the fact that it's already so difficult to retire in Singapore, it is absolutely crucial that would-be parents do the math and make adjustments to their lifestyle so they are able to comfortably take on the financial burden of child-rearing without sabotaging their retirement.
A recent study showed that a shocking 75 per cent of Singaporean mums in their thirties had not even thought of retirement, while 2 in 5 expected to rely on their children. If that's your only retirement plan, you'd better make sure Junior gets that PSC scholarship, cos he's going to be in for a tough time supporting the family while trying to build his own life in a country that just keeps getting more expensive.
- Proper retirement planning is key, even before your child arrives. Nobody's saying you can't have kids and still retire at a decent age without being a financial burden to your offspring. But to do that many people need to re-examine their lifestyles and accept that they need to take their lifestyles down a notch. It's best to find that out before Junior arrives.
- Do research on all the subsidies and grants you're eligible for as a parent. Other than the Baby Bonus we all know of, check whether you qualify for additional childcare and infantcare subsidies and know which centres you'll have to use to receive them. If your household income is below $6,000, you'll want to research the Kindergarten Fee Assistance Scheme too.
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