14 Sep The Confession
Two things happened recently to prompt me to write what I am about to write.
The $400 question
Since 2013, the Federal Reserve Board has conducted a survey to monitor the financial and economic status of American consumers. One of the questions involved asking respondents how they would react to an emergency situation that requires them to come up with $400. 47% of the respondents replied that they would have to either borrow or sell something to come up with the amount, or that it would be impossible for them to cough up the money at all.
About a month ago, writer Neal Gabler bared his soul and shared the actual state of his personal finances in a commentary entitled ‘The Secret Shame of Middle Class Americans’ published in The Atlantic magazine. Or perhaps what he shared could be better termed as the ‘lack of finances’
Author of five books, journalist and visiting professor at State University of New York, Neal described his earnings (over) modestly as upper middle class. Despite all that, Neal candidly admitted that behind all the facade of a prosperous middle class family, he indeed belongs to the 47%.
Should a situation arise during the month, be it a car repair or a medical emergency, he would have difficulty coughing up $400 to overcome it. Like many Americans, he lives on the edge of the financial cliff and is just one pay check away from ruin.
For him to come out and make the admission requires tremendous courage. (I sure hope the atlantic pays their contributors well). In the age where ability and success is often correlated to net worth and earning powers, where Facebook and Instagram feeds are used for humble bragging holiday destinations and material possessions, making the admission is akin to admitting impotency.
After all, as he quotes, ‘You are more likely to hear from your buddy that he is on Viagra then that he has credit card problems.
Guy A and Guy B.
Then, a week ago, cyber space became abuzz when a girl decided to share her dating woes with the world. Posting ananomously on confession site NUSWhispers, she lamented about the difference between her current boyfriend Guy A and up and coming contender Guy B. Here is the post in full.
The drama continued to unfold in the following days as both Guy A and Guy B weighed in with their take. (Follow Mothership for their real time updates)
Opinions abound. Some claim that such characters do not exist in NUS and the original poster was nothing but a troll. Others label her a greedy and unfaithful gold digger who is totally undeserving.
What struck me though, is that even though we doubt the characters, we never doubted the plot. We all know of others who has struggled with tough choices in love and life. We all know someone who has dumped or has been dumped for another richer, younger, more promising and better looking prospect. We ourselves might even have been on the receiving end.
To put it in an even more cruel way, what is there from stopping our partners from having this conversation with us tomorrow? Nothing.
Whichever way you choose to see it, her confession struck a chord with many. She could be a gold digger looking for her meal ticket or just a little girl searching for true love. Either way, her confession is sincere, her dilemma is real and heartfelt.
So, after the long preamble, I am ready to share my confession.
Are you ready? Here goes. My finances are in a mess. Yes, you read right. In. A. Mess.
I am a personal finance and investment blogger. Every week, I tell people what to do with their money. I am supposed to be in total control of my own. Unfortunately that is not the case. Let me explain.
Income and Expenses.
On this front, I used to think like the Brazil National Soccer Team. Screw defense, the only way to win games is to score more goals than the opponent. As long as I make more and more and more money, who cares about how much I spend? Rather than spending time tracking daily expenses, why not spend the time to make more?
And so, that is how my household has been operating all this while. At the end of the month, a fixed sum is automatically transferred to a stash savings account. Everything else I am happy to spend. On first glance it seems like a balanced situation to be in – make some, save some, spend the rest.
But on further examination, I realised that despite regular contribution to the account, the savings are barely growing. In fact, big ticket items often eat up huge chunks of savings at one go. Now that is not a happy situation at all.
Savings are effectively zero and to borrow a government cliche, we are ‘eating into past reserves’. Sometimes I wish we had an elected president to veto our spendings.
I look at it rationally and think that there is only two ways to go about remedying it. Siphon more money away every month or be brutal with the big ticket items.
The former would require us to think twice every time we want to spend on a restaurant meal or some good-to-have-but-not-really-essential-gadgets, or cut down on unnecessary monthly recurring expenses. The latter means a lesser car (or even no car, can we even entertain that thought?) and less extravagant holidays. Either way, there is going to be some pain.
We have not planned for it. Neither have we written a will, or prepared a Lasting Power of Attorney. It is a crime. Enough said.
I am a finance blogger. I am supposed to be at ease with geeky finance stuff like the Black Scholes model and to know the difference between EBID, EBITDA and EBITDAE. People expect me to be keenly in touch with the market and be able to express an opinion about whether Fullerton Health, RMG or Singapore O&G is the better buy, and why.
That is so not true. The reality is I am far removed from the market. The more I age, the more passive my investment choices have become. The Singapore Permanent Portfolio is the mainstay while another portion is invested CNAV stocks. A regular savings plan to dollar cost average the STI ETF rounds up my investment universe. Everything else is in cash (when big ticket items are not eating into it).
Once again, it may seem all fine and dandy. Problem is, and I am totally ashamed to say this, I have no idea how well they are doing. The current dollar value yes, I can pull that out without much difficulty. But if you were to ask me how well the portfolios did last year, what is the average compounded over the years, these pieces of vital information I have no clue.
After sharing her confession and braving the maelstrom that followed, Ms-Stuck-Between-Two-Guys has since resolved to be with her boyfriend and stop seeing Guy B.
Neal Gabler has since come clean and no longer has to put up the facade of prosperity.
Confessions are cathartic. By coming out and telling the truth, it helps in purging and closing off an undesirable chapter and allows both Neal and Girl to move on to the next.
So do I. With this, I hope to hack the saving issue, get the will and LPA sorted out asap and also figure out a way to track an investment portfolio effectively. Wish me luck!