Yvonne Lim

Circle of competence

This is one of my favorite concepts in life. It is actually Warren Buffett’s belief towards investing – to only pick and analyze companies which he understands. To focus investors on areas that they have an edge in. This is his way to win.
Personally, I also believe that this applies to life – that if we focus our effort and commit to one area, we will become highly successful in it and that we will win in life, too. I am also in the midst of building my career in this one singular area so I cannot say for sure that it WILL definitely work.. But based on the many successful individuals, I believe it to be true.

this recent article I came across on Business Insider illustrates this really well:

“If you want to be the best tennis player in the world, you may start out trying and soon find out that it’s hopeless — that other people blow right by you. However, if you want to become the best plumbing contractor in Bemidji, that is probably doable by two-thirds of you. It takes a will. It takes the intelligence. But after a while, you’d gradually know all about the plumbing business in Bemidji and master the art. That is an attainable objective, given enough discipline. And people who could never win a chess tournament or stand in center court in a respectable tennis tournament can rise quite high in life by slowly developing a circle of competence — which results partly from what they were born with and partly from what they slowly develop through work.”

Recently, I met with quite a few people who have a keen interest to start their own business but whom have put off their aspirations because of their lack of capital. As a result, they also do not build on their competency, which is a HUGE waste… because out there, there are people whose ‘edge’ is that they are rich and they are willing to invest. Food for thought for all of us? To build a circle of competence, regardless .

Why are our piggy banks shaped like pigs?

The origin of piggy banks dates back nearly 600 years, in a time before real banks existed. Back then,, people commonly stored their money at home — not under the mattress (or hay rack), but in common kitchen jars. These clay pots are also know as pygg pots.
As language evolved, pygg and word pig (pigge) starts to sound the same… After which, in the 19th century when English potters received requests for pygg banks, they started producing banks shaped like pigs. An accidental invention.

I started thinking about piggy banks because I was shortlisting gifts ideas for the little ones. Then, I remembered the one common item I have always received as a kid – the piggy bank. It also got me thinking or rather, trying to recall the first time I saved for something i really wanted. I do not remember what was it for me, but I do remember how I felt after I achieved it- major sense of achievement.

I also remember my first piggy bank, the old school plastic piggy one which had no opening for taking the money out. I always wondered why it was made that way and it got me making countless attempts to shake the money out from the slot. Attempts only, as I never succeeded. But I suppose that is what it means to save for rainy day. You only ‘kill your piggy’ and take the money out when you really have to, when what you want is more important than the ‘friend’.
The situation now is very different. I think it will gets increasingly difficult to educate the younger crowd on ‘value’, or on the concept of ‘putting in effort for what you want’. This is especially true in SG context where the young ones usually get what they want simply by asking. It’s a sticky case.

Gift ideas
1. Toys
2. Clothes
~~3. Piggy banks~~
4. Tech gadgets

And of course… It’s no longer relevant or appreciated as a gift idea.

Frugal v cheap

Original article: http://www.investopedia.com/financial-edge/0412/how-to-tell-if-youre-cheap-or-frugal.aspx

Risk, a precondition for return

Attended a symposium sometime back and one of the speakers, Gabriele Vincenzo explained the concept of risk that stuck with me. That is, risk as a precondition for return rather than an undesirable by-product of return. All in all, the key is to ensure that the risk is ‘Intended Understood Quantified & Compensated’.

While commuting this morning I also thought of the two most unintended risks that people take. Inflation & cash flow risk (or liquidity risk). These are typically the factors that result in missed opportunity or pushes people to make suboptimal decisions; or being unable to make any decision at all.

Inflation is a risk that is understood by most but not compensated unless we actively plan for it. To put things into perspective, I’m gonna use my fav example: If you have $1000 today, you can buy 333 plates of chicken rice. In 20 years time and assuming inflation to be 3%, you will only be able to afford 185 plates.

So… if we see risk as a precondition of return, I would say that inflation is an unworthy risk to be taking..

Time for work.. More on cash flow risks later. 😉

Basic understanding on your Health Schemes

Despite being on most of the Govt medical schemes & subsidies, many Singaporeans still find themselves confused. What is the purpose and the differences between Medisave & Medishield & Medifund?

Medisave (The Saving Account)

As the name suggests, Medisave is a national saving scheme introduced in April 1984. It is 1 of the 3 CPF accounts (Ordinary, Special, Medisave) whereby your monthly CPF contribution is made to. The intention of this is to help individuals set aside part of their income to meet their future personal or immediate family’s hospitalization, day surgery and certain outpatient expenses. For someone aged below 35, the income contribution going into the Medisave account is ~7%.

Medisave contribution is compulsory if you are:

a self-employed person; and
a Singapore citizen or Singapore permanent resident;
earning a yearly net trade income^# of more than $6,000.

Medishield (The Insurance)

Medishield on the other hand, is an opt-out low cost basic medical insurance scheme. The purpose of the Medishield is to shield Singaporeans against large hospital bills which cannot be covered for by the Medisave balances. Premiums for this basic insurance is payable through the Medisave account (up to a limit). Currently, the coverage extends to Class B2/C hospitalisation bills and Co-payment is required- this means that the insured will have to co-pay part of the medical bill. The coverage is also ‘Sub-limit’ and this means that there is a limit to the amount claimable for each hospitalisation category. For hospital stays in higher wards or private hospitals, coverage will be pro-rated.

Q: So what are the Integrated Shield Plans & Upgrade that I hear about?

Medishield provides basic coverage, Singaporeans seeking more comprehensive coverage would enhance their health coverage via Medisave-approved Integrated Shield plans. These plan retain the benefits and coverage of the basic MediShield tier, while enjoying enhanced coverage provided by their private insurers.
Premiums are likewise, paid by Medisave. For individuals who do not wish to pay for any co-payment, an additional rider can be taken up along with the upgrade to cover for it. Cash premium is applicable for such riders.

Q: So who do I claim from in the event of hospitalisation? My private insurer or Medishield?

Upon upgrade, premiums are paid directly to the private insurers who will service all of your needs. The private insurers will service all claims and sort out all back-end arrangements with CPF Board to include any payouts from MediShield. You can also seek to claim from your employees benefits, if required.

MediFund (The safety net)

Medifund is an endowment fund set by the Government in 1993 to act as a safety net to assist needy Singaporeans who are unable to afford their medical care. The interest earned on this fund is given out to hospitals as grants to help needy Singaporeans pay for the medical bills which they cannot afford.

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