Financial Advice for New Economy Contractors (eg. Uber)

FireIce SG

With the rise of tech startups like Uber and Airbnb, a lot of people have been taking up new jobs in the recent years either as a full-gig or as a way to earn supplementary income. Though these jobs can be attractive especially in face of rising unemployment rate and slow income growth, they are not without their own financial pitfalls. If you are considering becoming a "new economy" contractor like driving for Uber or hosting Airbnbs out of your HDB flat.

A rising tide lifts up all boats. When companies like Grab, Uber and Airbnb are growing like weeds, people who are participating in that growth can be rewarded immensely. Now, Uber drivers in Singapore can expect to make S$26 per hour in Singapore. If you work 50 hours a week, that's easily more than S$5,000 per month of income, which compares favorably against the national average of S$4,056, though there are other costs involved like paying for petrol. However, when you are first starting off as a contractor, it's not easy to forecast exactly how much money you will earn or even how reliable your source of income might be. There will be some days or weeks when you just don't get enough business.

Therefore, when you are first starting out as a new economy contractor, it might be a good idea to apply for a personal line of credit. Since the best personal line of credit offerings in the market offer annual fee waivers, you can secure an access to readily available funding in case you are short of cash for a few days or weeks at a time. While credit cards are usually the best way to pay for things when you don't have enough cash in your bank account, you can't always rely on it especially if you can't pay off the balance within your current billing cycle (i.e. maximum of 30 days). A line of credit lends you a sum at an interest rate that's lower than that of a credit card, so you can still afford to pay for things you need. When you've established a steady stream of cash flow from your gig after a year or two, you can cancel your line of credit and avoid paying the annual fee after the fee waiver expires.

Another downside of having a contractor job is that you don't get any CPF contribution or health insurance from your employer. Just because you don't get these benefits, however, it doesn't mean that you shouldn't have them. Therefore, you should really consider cutting out a portion of your weekly income and setting it aside for investment so that you can build either a rainy day or a retirement fund. Given that most new economy contractors are relatively young in their 20's and 30's, investing in funds is an especially great idea that can compound their net worth over a long period of time. To start investing today, check out our guide on the best online brokerages in Singapore.

Take a look at the chart above. here, we feature two people who invested $10,000 that returns 10% per year. This means that after one year they would have $11,000 ($10,000 x 10% = $1,000 and $1,000 + $10,000 = $11,000). The only diffrence between Person 1 and Person 2, however, is that Person 1 began investing at age 20 while Person 2 began at age 30. Because of this difference of 10 years, Person 1 has more than double what Person 2 by the time they reach the age of 65. It’s like what Warren Buffett said: the best thing you can do for your retirement savings is to start investing early.

While you are developing your own "business" as a Uber driver or an Airbnb host, you should try to minimise your reliance on debt. Borrowing to finance your consumption that isn't necessary will only increase your financial burden as monthly interest payments start to build up over time. However, if you encounter an emergency that you absolutely cannot avoid (i.e. large medical bills, etc.), you may want to consider getting a personal loan to help you cope with the immediate necessities.

Although personal loans aren't the cheapest source of money, they still offer a decent interest rate especially for things that cannot be backed by an asset; only loans like home loans tend to be cheap because the loan can be guaranteed by the borrower's home. When you need to borrow to pay for your hospital bill, there's nothing that a lender can receive in case you default on your loan. Therefore, personal loans tend to cost more; however, they are still much cheaper than their alternatives like credit card debt, pawnshop loans or payday loans.

To be a successful as a contractor, you must be able to protect yourself from the unpredictable emergencies that life can throw at you at any given point. Contractors have to deal with unsteady flow of income and lack of job security that a full-time job can provide, so it's all the more important to be conservative about one's finances. While a line of credit, a personal loan or investing can help you prepare financially when you might suddenly need a large sum of money, it's always recommended that you control your spending down to a minimal level in the first place.

The article 3 Financial Advice for Uber Drivers and Other New Economy Contractors originally appeared on ValuePenguin.

Mieshatate00 SG

Eunice is nice SG

Will Singapore’s banks stand for greater transparency with consumers?

Banks are using slick marketing to attract custom but the public remains unconvinced. Upholding transparency standards must be the norm, not a distant ideal.

By Nicolette Chua, edited by Francesca Ross

Banks are becoming bolder in their product marketing campaigns. They are using publicity drives to give lucrative offers, rewards and conditions to customers that sign up for their credit and debit cards. The promotional materials behind these campaigns often failed to disclose what customers really need to know.

Consumers are doubtful about OCBC’s promise of full transparency

In April 2017, Oversea-Chinese Banking Corporation Limited (OCBC Bank) launched a campaign under the tagline “To stay true, we are going to stop advertising like others”. The objective was to put a stop the “misleading advertising, complicated mechanics and hidden restrictions of promotions written in fine print”. Creative agency GOVT Singapore led the effort.

The costly campaign saw three full-page advertisements in The Straits Times, along with sponsored online ads. One video even showed OCBC’s Head of Consumer Financial Services (Singapore), Dennis Tan taking a lie detector test to demonstrate the bank’s commitment to full transparency.

This campaign did not sit well with the public. Some people felt it was yet another gimmicky marketing tactic. The bank’s Facebook page was filled with customers’ comments about how OCBC had fallen short on its service standards.

Financial blogger Mile Lion wrote a piece on OCBC’s promise of full transparency. He took issue with the bank’s sponsored post on Mothership and its Titanium Rewards Card. He believed it had failed to address the cap on its “10x rewards earning”.

UOB received public backlash for the misleading terms of its KrisFlyer Debit Card

Members of the public were also upset with UOB’s promotion of its Krisflyer Savings Account Debit Card. The bank claimed to boast attractive rewards of “up to 5.4 KrisFlyer miles per $1 SGD spent”. TigerAir and Scoot benefits for cardholders such as priority check-in, complimentary seat selection, complimentary additional baggage and a fee waiver for future flights were also advertised.

UOB aggressively marketed the card to millennials through popular local influencers on social media. It was expected that customers would be drawn to these people happily posing amidst picturesque scenery; evoking a leisurely, touristy atmosphere.

The problem was that it was not explained that to earn more than 1.4 Krisflyer miles for every $1 spent customers would need a minimum account balance of S$100,000 (US$72,233) or more. This is an unrealistic amount for those who have just started making money.

Financial blogger Mile Lion’s article added that this savings account earned virtually no interest. The bonus miles offered upon the card’s launch were also for a limited period only. This was not explicitly mentioned in UOB’s advertisements.

Finance website Dollars and Sense took a softer stance to the fiasco. Its writers gave UOB credit for its innovative product but noted its poor customer communication. It is no wonder that banks have been in the limelight for all the wrong reasons when their marketing strategies have been so poorly-executed.

A lack of consumer trust is causing banks to lose their relevance

Source: EY 2016 Global Consumer Banking Survey

The EY 2016 Global Consumer Banking Survey showed customers were skeptical about whether banks would look after their interests. The survey also showed that 40% of respondents depended less on traditional banks than they did before. They were interested in alternatives, such as digital services.

The report recommended that banks build a loyal customer base through proper customer engagement. This would need them to simplify their products and provide quality advice that is tailored to the needs of each customer. Banks in Singapore have already stepped up their customer engagement by actively responding to feedback on their social media accounts. They need to further prove their reliability by ensuring customers consistently receive high-quality products and customer service.

Brands need to know what customers really want

Marketing is not what it used to be. Eye-catching advertorials or publicity stunts can only do so much for a brand. Marketers often overlook the art of simplicity when creating a loyal customer base. Customers want to trust a brand before making a purchase.

The problem for consumers these days is that they “have no option but to trust”. This is especially the case for non-tangible products such as education or financial services. Online user reviews of financial products are available but they are subjective. The quality of a financial product can only be objectively assessed if one has prior understanding of financial mechanisms. Online contributors do not always have this knowledge.

Brands need to achieve “trustability” to remain relevant in the market. This means going the extra mile to provide the best deal – not just from the company’s perspective, but the customer’s too. To do this, a brand ought to build up a network of trustworthy advisers that customers look up to for recommendations.

Cosmetics retailer Sephora is a good example of this. Sephora created its own community, Beauty Talk, which allows influencers and customers to leave honest product reviews. The brand has won a level of transparency and “trustabiity” that customers appreciate thanks to this emphasis on authenticity. This type of influencer marketing strategy is more valuable than selecting promoters on a mass scale.

Brands often suffer a trade-off when being transparent. If they are open about their dealings they might raise the trustworthiness of their brand, but they also risk rival companies producing spin-offs of their product. This would quickly reduce a company’s profitability. It is a risk that cannot be avoided.

Brands will only become family favourites when they consistently strive for the maximum possible transparency and high-quality service standards. This will also bring them a loyal customer base.

Banks should set the standard for greater transparency

The over-the-top campaign by OCBC Bank raised a salient point: the onus is on banks to set higher standards. They must be transparent, reliable and high-quality service providers. OCBC’s campaign highlighted how online influencers need to be cautious about the products they are touting to their follower base. Consumer trust is the cornerstone of a successful brand image.

Seron.des15 SG

Thanks for the good advice e can by the every person can easily save his economy . i Will definately apply your advice , so that i can save my economy ..

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