The new get-rich rules

SO WHAT IF THE economy looks like it's on the brink of another downturn?

Because this could jolly well be the year that you start your journey towards amassing an abundance of wealth.

How?

Here's the plan: an easy financial tune-up that will save you plenty of cash, and smart investment tactics to help you make loads more.

SEE WHAT YOUR BANK IS HIDING FROM YOU

Start your tune-up at where you keep by what you find.

Most recently, a technical glitch at HSBC caused its customers to be charged more than they had actually spent. Although some discrepancies were significant enough to be spotted easily, others were not.

Some banks also charge miscellaneous fees that you may not be aware of. And if you don't examine your bank statements regularly, you could miss them entirely.

Take action if you see something you don't like.

"Some institutions will throw in a freebie as a form of service recovery for mistakes they've made, or even drop monthly fees if you make certain adjustments to the way you bank," says Greg McBride, a senior banking financial analyst.

SLASH YOUR MOBILE BILLS 

Eighty per cent of mobile phone users overpay for service, says Schwark Satyavolu, co-founder of Billshrink.com (a website that analyses how you spend your money and advises you on how to save).

Not by just cents, either, but by an average of $200 a year. If you're not wedded to the latest phone - can you live without an iPhone 4S? - a no contract plan will probably save you big.

You can get unlimited phone, texting and surfing the Net for roughly $40 a month. If you can't abandon your gadget, you can at least save on texting by using free apps like Textplus, IMO and Textnow.

And don't rule out prepaid - if you're either a very light or very heavy (unlimited) user, this may be the best option for you.

Next, call your service provider. Let the company know that you've seen its competitor's ads and you're thinking about switching if you don't get a better offer. More often than not, the rep will pony up a "special promotion" to save you some bucks.

INTERROGATE YOUR CREDIT CARD 

We can never stress this enough: As long as you have credit card debt, you'll never get rich. It's a simple truth. Accept it, then do something about it.

The problem isn't really the amount you owe, but what it's standing in the way of: a downpayment on a property, your ability to invest in stocks with good ROI, a rainy day savings account.

And don't just transfer your debt from one low-rate card to the next. Eliminate it!

Take out a low-interest personal loan to clear all your credit card debts, and work to pay off that loan as quickly as possible without incurring new debt on your cards (meaning, don't even use them).

BADGER YOUR BOSS 

Okay, now that you're losing less money, it's time to bring in more.

Here's what not to do: March into your boss's office and declare: "If you won't pay me what I'm worth, I'll find a company that will."

Instead, lay the groundwork now for a big raise next year, says Deborah Kolb, a negotiation consultant.

Start by periodically reminding your boss how much you do - just drop it in the conversation.

Next, schedule a series of quick meetings to update him on the projects you're working on. Finally, six months before the next round of raises, meet with him formally.

Tell him exactly what you believe you're worth, Kolb says. Then ask him for a six-month plan, with specific goals, to take you there.

PLAY THE MARKET LIKE A PRO 

These smart investment tactics will ensure that looking at your bank balance puts a smile on your face.

Mix the risk Spread your investments across two or more funds in different sectors to guard against a single investment underperforming, says Darius McDermott, a financial analyst.

Play the long game

Smarter investors opt for drip-feed schemes known as "dollar cost averaging", where you buy "units" on a month-bymonth basis. It removes the need for a big lump sum and has good returns in volatile markets.

Watch and learn

Review your investment by comparing it every six months against a benchmark such as the STI index, says Ben Yeardsley, an international funds and wealth manager.

READ THE ESTATE SECTION 

Many Singaporeans have become instant millionaires over the past decade through real estate. But there's really no telling when the bubble may pop, given that the economy may be heading for a downturn. Yet, none of this matters.

It's still a smart investment for two reasons: First, every payment you make builds equity in the property - it's like putting money in a savings account (unlike paying for your car, which is a depreciating asset).

And, second, interest rates on housing loans are currently very low. Combine these two factors and the "real" monthly cost is half of what It seems. If the house rises in value quickly, that's icing on the cake.

Insurance a crucial building block

With markets swinging about as they do these days, it is natural for some investors to focus on spotting winners and try to pick the perfect entry and exit points. But growing your wealth is more than just a function of maximising stock returns in the shortest time possible. Managing outflows, especially unexpected ones, and steady wealth accumulation over the long term, are equally important to the planning and pursuit of any significant financial goal.

The increased market volatility that we are experiencing is reason for many investors to fret over their portfolios. Yet, while prudent management of these monies is essential, it would be a mistake to overlook a more basic building block for growing wealth. As much as you would hate to see the value of your portfolio fall by 20 per cent, the hospital bill resulting from an unexpected major illness or the loss of income due to an accident-caused disability can severely disrupt your financial goals.

For instance, you may have to liquidate your investments to pay for treatment and other basic needs. This is why it is critical to ensure that you have some basic insurance in place, which will allow you to continue working towards your investment goals even if something catastrophic happens to you.



Strengthen the backline

A simple term policy is an affordable way to begin. Those in their 20s, who have just started work, may find this option most palatable as desired cover can be obtained inexpensively. For some, a term plan may act as a liability cancellation policy so that the family is not saddled with the burden of repaying the outstanding mortgage on the family home in the case of the policyholder's demise.

While term plans can be bought with additional cover for critical and terminal illnesses, conventional whole life policies provide greater flexibility, offering optional protection for eventualities like disability and loss of income. These additional covers, called riders, can be added and removed at will.

Whole life plans may be constructed so that payments are accelerated during your working life to allow you to enjoy premium-free cover after retirement. Perhaps, the biggest advantage that whole life plans have over term plans is that they can serve also as a tool for wealth accumulation. Part of the higher premiums collected in whole life plans are invested in the insurer's participation fund, resulting in steady returns that can be cashed out as needed.

Consumers should note that whole life policies are designed to accumulate value over the long-term, so the cost of surrendering the policy early, particularly in the first few years, is very high as premiums mostly go towards paying for the cost of insurance.



Sure and steady progress

There are insurance products that go further towards the goal of wealth accumulation. Endowment policies may not be new, but unlike the 30-year tenures of old, durations these days can be much shorter if you haven't the patience or if you have started your retirement planning late.

Endowment plans are gaining wider acceptance here as more Singaporeans realise the place of steady, low-risk investments when it comes to their retirement savings. In deciding on an endowment plan, it is usually helpful to link it to an objective, which will help determine what the most appropriate tenure is. For example, a 25-year-old executive may find a 10-year plan appropriate if he is planning to use the payout to help pay for a condominium at age 35.

For investors who prefer the convenience of an all-in-one solution, investment-linked policies cover both wealth protection and accumulation needs. You get to decide the balance between protection and investment, and you get more say about how your money is invested. Potential returns are higher, as you may choose to invest in unit trusts that adopt a more aggressive stance than the insurer's typically conservative participation fund. But along with that is a higher chance of incurring losses should your investment strategy prove unsound or unbalanced.



Pass it on

Finally, insurance can help in legacy planning. A universal life plan is a single premium policy that can help you pass on wealth to your children, with a guaranteed rate of return on the money invested. If you plan to leave S$3 million to your children, you can take out a universal life plan with a sum assured of S$3 million for a fraction of the amount. The sum assured of the universal life plan is guaranteed, so you can be assured that your children will receive the bequest you intended for them even if you pass on early.

If you choose to manage and invest your funds on your own instead of buying a universal life plan, there is a risk that your bequest to your loved ones will fall short of the S$3 million you intended for them, as the amount will be dependent on the market value of your investments when the bequest is made.

There is no denying the allure of taking a punt on the market, but neglect not the basic foundations of financial planning. Insurance is a crucial building block in achieving your financial goals and with recent innovations, it can even offer solutions for more advanced needs.



Shrikant Bhat is head of wealth management at Citibank Singapore.