Being bankrupt

In Singapore, recently there are many articles on people especially young ones are not able to pay down their debts. In Singapore, you could be made a bankrupt as long as your aggregate debt is more than SGD$10,000.

A bankrupt is duty bound to account for any money or property he receives after bankruptcy. He is allowed to keep a reasonable part of his income for himself and family, and then handover the excess to Official Assignee (OA) for distribution to creditors.

Depending on your occupation, you might be required to terminate your services or redeployed to another job. So note that you might lose your dream job, jeopardizing your career. You might be required to inform your employer of your bankruptcy status, and also do note that your bankruptcy status would be announced in the newspaper.

You still can take a holiday overseas but you must seek for approval from OA. The OA might require you to declare who is paying your traveling expenses.

Having been a bankrupt, your credit record is held in the Credit Bureau, keeping your bankruptcy record for up to six years. Such records might be passed to banks when you apply for loans after your discharge, making it likely that the bank would reject your applications.

For more information on Bankruptcy in Singapore, please click here.
For more information on Planning your Budget, please click here.

Bankruptcy and Discplined Spending

In Sunday Times (22nd June 2008 edition), it was mentioned that those that are under 30s are now forming a larger percentage of those filing for bankruptcy.

Main reasons given was the materialism and desire for high life. Having desire is good because it spurs you to seek out more avenues to satisfy your desire, but if inappropriately handled can be disastrous.

Thus it is strongly recommended that you do some budget planning. Have a budget on how much to spend per month. If you desire a luxury item that will take several months to save up, try to resist the urge to sign the purchase with your credit card. Instead, put the money away in another savings account that is not very accessible to you, immediately when you receive your salary. Give yourself small rewards when you have successfully put aside some money, this will keep you going. Once you have save up enough money, please go and sign the purchase with your credit card to earn some rewards and also the luxury item you have been waiting for months!

Preparing a budget and sticking to it might not make you a millionaire but it is essential to help you be free from financial problems. Preparing a budget would also allow you to see where your money is spent and are you spending it wisely, building both for the long term and short term plans of your life.

For more information on cash budget planning or other financial planning, please click here.

Credit Cards For Personal Financial Management

Just ran through an article in Straits Times (13 June 2008 Edition). Inside it mentioned that credit card users that goes delinquent tend to be the following group of people.

1) Young Working Adults (between the age of 21-29)
2) Divorcee
3) Male

Credit cards are actually great tools for personal finance management. But credit card applications should be considered carefully. Holding too many credit cards might not be a good idea, given that you have to manage many accounts.

When considering to apply for any credit cards, be it Citibank or UOB, Visa or Masters, my recommendation is to look at credit cards privileges for instance discounts, credit card promotions with specific retailers, credit cards points for redemption and many more. Apply for a credit card that will give you the greatest benefit based on your household and personal expenditure. Thus this will reduce the credit card account that you need to manage.

Have a monthly budget on the amount you spend on credit cards. Using the consolidated credit card statement, to keep yourself informed if you have exceeded your budget. If you do, look at your income statement when you prepare next month's cash budget and see what expenditure you can reduce further, until you have a disciplined approach to using your credit cards.

Celebrate if you can have successfully maintained a disciplined approach, by having a good meal once in a while (because you deserved it), but remember, use your dining credit cards at your favourite restaurant and budget for it.

For more information, on using credit cards, please click here.

OCBC Preferred Stock

Recently OCBC offered Preference shares to both institutional and retail investors.

"The dividend is paid twice a year in June and December.

The minimum subscription is 200 preference shares or S$20,000, and thereafter in multiples of 100 preference shares or S$10,000.

OCBC says the preference shares are perpetual securities with no fixed redemption date.

This is a very new investment tools thus most retails investors here are not familiar with preferred stocks investing.'' - Taken from ChannelNewsAsia on 02 June 2008

Basically preferred shares work like normal stocks, just that there is a fixed dividend yield on par value and other conditions on it for instance, is it a cumulative preferred stocks, when is it redeemable and so on.

OCBC preferred stock is providing a dividend yield of 5.1% par value which is significantly higher than the return of 0.8% for bank deposit or the return of 3.3% on a ten-year Singapore Government Bond.

" The preferences shares have been rated Aa3 by ratings agency Moody's. Fitch has given an A+plus rating, while Standard and Poor's has assigned an A-minus. " - Taken from ChannelNewsAsia on 02 June 2008

The preference shares in this case have received high credit ratings. Thus it is very unlikely that the bank will go bankrupt.

But since the dividend are not guaranteed and cumulative, investors have to note that there might be chances that the bank will not pay dividends. Investors have to realise also since it is issued by a bank, whether it can issue dividends will also be subjected to MAS rules. In instances, where the bank has insufficient reserves if it issues dividend or the bank is in danger of becoming insolvent, it is very unlikely that the bank will issue dividends.

But OCBC claimed that since the end of World War II, it has never stop paying dividends on its common stocks (shares that are a class lower than preference shares.)

Investors are advised to read up on what is offered by OCBC Preference shares before committing investment capital into it.

You can read more about preferred stocks and its risks here.