Millennial Conversation - Decency

I sat there listening to her life story. Her father is incarcerated. Her mother lost her wits. She's taking care of her two school-going brothers. Everyday, food is a staple of canned mackerel or frozen chicken with rice and some greens. I could feel the grim circumstances of her life. Between rushing to campus after work to prepping the family's food in the wee morning. Sleep is a luxury.?

Her head looked down most of the time as if to hide her embarrassment. I held back my words. This was a girl shoved to adulthood too soon. You could see from the wrinkles on her brow that life had dragged her through enough. Her family survives through various subsidies and financial grants. She has a dedicated social worker that communicates with her every quarter. Surviving on donated food and a few hundred from charities and government support.

"Subsidized insurance?" I gasped.

I told her that the coverage would be concessionary. Something that if you had the privilege to, a smaller premium covers a wide range of risk.

"Here's what I'll do for you."

Premiums would not be paid by you. But by the GST payout, you will be receiving this year. You will receive $700 since your salary is below $34,000 and you're in a rental flat.

"Insurance is not the way out," I warned her.

I can offer you -?

$100,000 Death cover

$100,000 Accidental cover

$2,000 fractures

$3,000 Medical expenses for accidents or sickness like dengue

As-charged Hospitalisation with a 5% co-payment

$50 a day Hospitalisation cash

$100,000 cancer cover

$100,000 critical illness cover

The final bill - $667 per year.

I thought I had lost her. Her head was in her hands. The cold air in the room weighed down her eyelids. In my head, I had to keep her attention. She had skipped a lecture today to attend this meeting. I needed to give my utmost.

While she sipped the coffee I had served, my mind ran. How unfair that a person doing her best to hold up a family has to waste her money on insurance. While the rich, in their ever so different lifestyle, can leverage and gain generational wealth. Having insurance at no cost.

I knew that the broad $100,000 couldn't cover sufficiently. We live in a time where cancer treatments could cost upwards of $200,000.?

I told her, because I cannot directly offer some of her insurance, I'll act as a guide to help her apply.?

Her goal needs to be to escape from the cycle.?

Financial Discipline was the game. I introduced her to the 50% mindset.

"You're bringing back $1,400 monthly."

"About 10% needs to be for you, 50% for your family. The balance goes into your emergency savings."

The 50% mindset sets you up to have a temporary poverty mindset. Something that tells you that you cannot afford anything. This continues till your emergency funds have been fulfilled. Building assets is the second step. A firm financial foundation is what the philosophy promises.

The generations after millennials are entrenched in this perpetual consumerism. Shopping at the tip of our fingers. Advertisements hitting you left and right. In 2021, the average person encounters 6,000 to 10,000 ads daily. Not spending a dime for drinks or food outside is an irregularity.

Adopting this mindset detoxes materialism. A poverty mindset, however, is known for people buying smaller, seemingly insignificant purchases. They buy small packed items instead of a multi-pack, the difference being focused on the dollar cost per item instead of the overall value.

The 50% mindset forces financial discipline, only up to a certain period. Together with an investment plan, it squeezes the income and lays out resources for further planning.?

"That 40% is flexible. The amount can be used for other expenses."

For every additional expense you need, transfer only the required amount. We use human nature to our advantage. Once the balance in your emergency account hits 6 times your monthly salary, we'll re-evaluate. About $9,000 is the mark where we shift our focus.

The last 10% will be invested. $150 a month for 10 years. Once we hit $18,000, regardless of whether it's fully paid or not, using that, we will start a new path. The remaining amount in your investments from profits will be used as an asset, that can be borrowed from.

Understand this. To get higher returns, you will need a larger sum to invest.?

The 50% mindset is not forever. It is a way for you to build your financial foundations. To ensure a decent future. Create a buffer, obtain assets you can borrow without affecting its growth and Narrow your focus on high-growth vehicles.

Then, Silence.

Highlighting challenges for Singaporeans.

Speak to a Experienced financial advisor.?Strategy starts with a conversation.

This is a series of 3 articles discussing the Millennial retirement:

1) Millennial Conversation: Disparity

2) Millennial Conversation: Dignity

3) Millennial Conversation: Decency