We all know that life can sometimes be unpredictable, which makes it exciting and unnerving at times. On the surface, surprises in life come in two flavours: unfortunate and pleasant ones.
We buy insurance to protect ourselves from being negatively impacted financially if something unfortunate occurs, such as being in an accident, contracting a critical illness, or losing our baggage while on holiday.
We might think that we would welcome pleasant surprises in life, such as winning a prize or living longer. However, here’s why if we’re not financially prepared, these blessings can turn out to have a disastrous effect on our lives.
#1 Winning A Car At A Lucky Draw
Cars are regularly given out as grand prizes for many lucky draws. Perhaps this is because Singaporeans are well too aware of how costly it is to own a car here, and would value it as a prize.
Unfortunately, as we’ve explained previously, the cost price of a car is just a fraction of what you need to pay to own and maintain a car in Singapore. Even if you receive a car for “free”, you’ll need to pay for road tax, car insurance, season parking, before you even turn on the ignition and drive it home. As you use your vehicle, you’ll need to contend with petrol, ERP charges, and the cost of maintenance.
By a modest estimate, you’ll need to pay around $61,000 over 10 years, which works out to about $500 a month. For those who don’t have a spare $500 in cash every month would hardly consider winning a new car as “good news”.
Even if we have that money, it could go towards other things that we value more, such as our children’s education, or for building our retirement nest egg.
#2 Living Longer Than Your Life Expectancy
As medical science advances, we are living longer as a society, which should be good news right? We have more time to spend with our loved ones, more time to enjoy what this world has to offer, and more time to share our lifetime of wisdom and experience to the next generation.
But with living longer also comes big challenges if we’re not prepared financially. According to a study done by the Economist Intelligence Unit, commissioned by Prudential, 1 in 2 healthcare practitioners in Singapore say that Singaporean seniors will struggle to afford rising costs if they live to 100.
For the study, they interviewed more than 200 general and specialist physicians, nurses, as well as senior management and administrators of healthcare institutions. It looked at the healthcare challenges and financial implications that lay ahead for Singaporeans individually and the healthcare system as whole.
The report noted that while Singaporeans are living longer (with an average lifespan of 83.1 and inching towards 100), many of them are spending their later years with health conditions.
Towards this end, lifelong payouts provided by schemes like CPF LIFE and the soon-to-be-launched CareShield Life do give a degree of comfort and assurance. We can and should also plan early for our retirement, including for the happy situation that we live longer than expected.
Financial preparations aside, living a healthy lifestyle while we’re young and going for regular check-ups to detect serious conditions early would also maximise our healthy years and reduce our financial strain.
#3 Receiving A Promotion At Work
As working adults, we work hard with an eye towards being promoted – and the perks that it entails, including higher pay, a nicer title, and perhaps greater authority and autonomy.
Unfortunately, promotions also entail greater responsibilities and being answerable for the work of your subordinates. This could mean you will need to work much longer hours, and have to deal with not just your own work, but to check the work of others and take time to terrorise motivate members of your team.
With the additional workload, your health, sleep and even mental wellness might be affected, perhaps leading to greater healthcare costs or taking up expensive hobbies to deal with the unhappiness you feel at work.
#4 You/Your Partner Becoming Pregnant With A Baby
There is no doubt that expecting a child is one of the most amazing, joyful news you can receive.
On the other hand, you’ll immediately start to incur costs – gynaecologist visits throughout the pregnancy, delivery of your baby, and paying for virtually everything that your child needs until they’re old enough to work.
Schemes like the Baby Bonus, Child Development Account Grant, and NTUC’s Good Start Bundle aim to help parents with the cost of raising a child, while friends and family certainly chip in when they can, but it is important to be ready financially, so that you can focus on enjoying every moment of your little one’s formative years.
#5 Striking TOTO Or 4D
Search on ‘lottery winners’ online and you’ll find plenty of news reports of how these incredibly lucky individuals squandered all their newfound wealth and were back to their pay cheque-to-pay cheque lives shortly after.
The main reason for this is because while they were lucky to come into a windfall, they haven’t built up the right attitude and knowledge for managing money. Financial discipline, budgeting, and investing for the future is equally important, whether you have $1,000 or $1 million.
If you can’t manage your money, then even if you do have a one-time cash infusion, you’ll lose it over time, and be back to square one. This is why gamblers or those who can’t get by without borrowing money seem to always be stuck in their predicament, no matter how many time friends and family try to bail them out.
Listen to our podcast, where we have in-depth discussions on finance topics that matter to you.