Personal Finance Flashcards
What is the role of MAS?
The Monetary Authority of Singapore (MAS) is Singapore’s
- central bank
- integrated financial regulator.
What does the Credit Bureau Singapore do?
It collects information from a wide variety of financial and nonfinancial entities, including microfinance institutions and credit card companies, and provides comprehensive consumer credit information with value-added services such as credit scores to private lenders.
What is the role of FiDrec
FIDReC’s mission is to provide an affordable, alternative dispute resolution scheme that is independent and impartial, to encourage and assist in the resolution of disputes between consumers and financial institutions in an amicable and fair manner.
What is the role of SDIC?
The main functions of SDIC under the DI Scheme are to collect premium contributions from DI Scheme members, manage the Deposit Insurance Fund, compensate insured depositors and educate the public on the DI Scheme.
What is SGFinDex?
SGFinDex is the world’s first public digital infrastructure to use a national digital identity and centrally managed online consent system to enable individuals to access, through applications, their financial information held across different government agencies and financial institutions.
What is the average CPI inflation of 1H2022?
5.2%
What is the spending percentage in 2022?
Increase from 59% in 2021 to 64% in 2022.
What are the 3 key drivers of inflation?
Food
Transport
Housing & Utilities
-> 63% of the overall CPI basket.
What is the life expectancy for males?
83
What is the life expectancy for females?
88
How many Singaporean Residents are 100 yrs old and above?
1000+
What is the % that people expect to outlive their savings?
67%
Why is there a need to plan?
- Save & Invest Early
- Slow down/Retire
- Financial Freedom
- Fully paid house
- Inflation
- Children Education
What can cause your plan to fail?
- Insufficient Returns
- Death
- Disability
- Medical Crisis
Beginning Or Ending in Fin Calc for Retirement Fund (Time Value of Money)
Beginning
What is the Interest on Interest Approach?
Enables investment to grow faster over time.
COMPOUND INTEREST
Beginning Or Ending in Fin Calc for Investments (Value of Compounding)
Ending
Risk and Return Approach (3 pointers)
- Risk Profile
- Average preferred investment period
- Minimum level of desired returns for investments
What is Dollar Cost Averaging?
Invest a FIXED amount of money every month for a long period of time.
Buy more when price is low, buy less when price is high.
Eg DBS Invest Saver
What is the rule of 72?
How long an investment takes to DOUBLE given a FIXED annual rate of interest:
Divide 72/annual rate = Number of years it will take for the initial investment to double.
What is the sequence of returns risk?
- During retirement sell investment periodically to support cash flow needs
- If negative returns occur first, then you sell, you are reducing the shares available to participate in later occuring positive returns
What is Loss Aversion?
Prefer avoiding losses to acquiring equivalent gains
eg it is better to not lose $5 than to find $5
What is Overconfidence Bias?
Person’s subjective confidence in his judgements is greater than the
objective accuracy of those judgements
What is Home Bias?
Tendency to invest bulk of portfolio in DOMESTIC equities
What is Herding?
Follow the crowd without taking into consideration their own judgement
What is Anchoring Bias?
Rely too heavily on an initial piece of information to make subsequent judgements
eg the initial price offered for a used car sets the standard for the rest of the negotiations, so that prices < the initial price may seem more reasonable even
if they are still higher than what the car is really worth
Financial Planning (20 to 30)
- Save
- Insurance & Invest
- Basics on investing (Risk Appetite, ST/LT goals)
Financial Planning (30 to 45)
- Review Insurance (Car, House, Kids)
- Set up Estate Plan
- Save & Invest
Financial Planning (45 to 60)
- Accumulate Wealth (Optimise CPF Savings)
- Preserve Wealth (Avoid being scammed)
- Invest (Reduce risk tolerance)
- Manage risks (Estate planning & insurance)
Financial Planning (60 to 70)
- Plan for future (Relook at monthly expenses and income + reduce spending)
- Keep track of investments
- Maintain an active lifestyle
Financial Planning (Above 70)
- Manage Income Spending (Fine tune Estate Plan, Track savings, investment & passive income)
- Tap into exisiting resources (Pioneer/Merdeka benefits/downsizing house to get cash)
- Choose low risk invesments
- Prevent getting scammed
How to calculate net worth?
Total Assets - Total Liabilities
What is calculated under Assets?
4 components
- Liquid Assets (Cash & Savings Deposit)
- Investments (Fixed Deposits, CPF Balance, Bonds, Stocks)
- Real Properties (HDB Flat)
- Personal Properties (Car, Club Membership, Jewelry, Furniture/Appliances)
What is calculated under Liabilities?
CL: 4
LT: 2
- Current Liabilities (Credit Card Balance, Utility Bills, Insurance premium, tax payable)
- LT Liabilities (Housing loan, car loan)
How to calculate Savings?
Take home income - expenses
How to calculate take home income?
- Salary
- Bonus
- Interest
= GROSS INCOME - Minus CPF contributions
What is considered under Expenses?
6
- Housing (Cash Loan, Utilities)
- Transport
- Food
- Medical
- Recreational
- Taxes (Income, property, road)
What is Liquidity Ratio?
Cash & Cash Equivalents (Liquid Assets) / Monthly Expenses
What is the recommended Liquidity Ratio?
3-6 months
12 months for gig workers
What is Savings Ratio?
Savings / Gross Income
What is the recommended savings ratio?
10% or higher
What is total debt service ratio?
total debt payment / gross income
What is a healthy total debt service ratio?
35% and below
What is non mortgage debt service ratio?
non mortgage debt / gross income
what is the recommended non mortgage debt service ratio?
15% and below
What is invested asset to net worth ratio?
total invested assets / net worth
What is the recommended total invested assets to net worth ratio?
50% and higher
