Opinion

Four Missteps That Led to a Financial Apocalypse

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Ryan Ong

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It’s seldom the big mistakes that get you. I mean, you’d probably stop and think hard when presented with a question like “Do you want to trade your kidney for an iPad?” (unless you’re this guy). No, it’s the little slip-ups that get you. Saying “yes” to a small, harmless offer, or forgetting one little detail. Stuff like these four little things:

 

1. Drive Someone Else’s Uninsured Car

Have you ever seen medieval torture devices in museums? Iron maidens? The rack? Doris Day records? That’s the level of pain the police reserve, for people who drive drunk or uninsured.

Carrie (not her real name) is the lucky lady who did just that. She lives one floor below me. And back in ’09, she did a five minute favour that almost ended in jail time.

I remember you all wanted me to buy Polar cake,” Carrie reminds me, “So D. told me to take his car and drive to the NTUC.

As I was turning into the petrol station, these two big guys darted past the front of the car. The bumper cut a gash across one of the guy’s legs. He was bleeding quite badly, and he couldn’t walk. And you remember there was police, ambulance, and he needed stitches, all that hoo-ha.

I thought that was bad enough. I didn’t know D.’s car was uninsured; his car insurance lapsed two months before and he can claim he didn’t even realise.

So I got a letter saying I was driving a car without an insurance, it was an offence, and all that jazz.”

Carrie was hit with a $1,000 fine, and her license was suspended for a year. Too bad her job was selling insurance (whatever ironic joke you can think up, we’ve heard it). She thinks that a year without driving:

…made it hard to meet clients. My case count went down, so that impacts my income. And I had to re-take my driving test and all.”

The lesson here is simple. Try to avoid driving somebody else’s car. Even if it’s a five minute jaunt to the convenience store.

 

2. Take Someone’s Word That ‘You’re All Paid Up’…Verbally

 

Receipts
“The checkout guy didn’t call out the price, so I took the beer and ran. Also, there’s a court order that came with those.” – MoneySmart pantry restock, 2013

 

I’m usually sharp with my money, but things were different when I was a student.

I like to think (based on my current body shape) that mass is proportional to stored wisdom. So let’s just say I wasn’t as wise back then.

I did two degree courses at once (one in university, one in a private institute), because in those days, we were taught that a “social life” was something on par with unicorns and a fairy godmother.

As it turns out, the private institute had the organizational level of a rave club, were that rave club also on fire, and staffed entirely by meth addicts.

At some point past the Diploma level, said institute stopped sending me bills. I made one inquiry, and was told that I’d finished paying all the fees.

Which is kind of funny, because my books said I was short by around $14,000.

I kept quiet, which was admittedly dishonest. Look, when you’re a student, $14,000 is an assload of money. And no one said anything, until weeks before the final exam.

Then I got a phone call, demanding that I pay exactly $13,980 within the week. Arguments ensued, as I pointed out that they had (verbally) told me I was done with fees. Long story short, we came to an agreement…a painful one on both sides.

I didn’t pay the money, but walked away with just a Diploma. The whole extra year I’d spent prepping for the final exam was wasted. The lesson here is simple:

When someone stops sending you the bill, don’t quietly ignore their mistake. As tempting as it is. And if someone says you’re all paid up, when you suspect you aren’t, get it in writing from them.

 

3. Don’t Read the Maximum Liability of the Courier

 

Cargo port
“We encourage all shippers, particularly drug smugglers, to insure their items at the nearest police post.”

 

Let’s say you get something shipped via courier services, who then toss it in a plane with some potato sacks. When it breaks, how much do you expect they’ll compensate you?

Not the value of the item,” Jackson Meng found out, “but the maximum liability, if you did not pay the insurance.

I know because I shipped some artisanal glassware, which was custom made for me in Sweden. It had my family name in Chinese written inside the glass. I was working there, and I sent it home through a courier.

My wife said it was all cracked when she got it. When I called the courier, it took two weeks before they even acknowledged it was their fault. My items cost about $11,000. But they would only pay the maximum liability, which was $4.50 per kilo.

I fought like mad, I filed claims. But in the end they won. They only had to pay me $500. Can you imagine the heartache?”

I assure you, the courier was not some Podunk operation with two vans. This was a large multi-national company, which had its own planes.

So learn a simple lesson from Jackson: Pay the insurance. Don’t be fooled into assuming a bigger company means better care for your stuff. You can also follow us on Facebook; we’ll soon be looking for cheap, good alternatives to standard couriers.

 

4. Pay the Option on a House…Before Getting the Loan Approved

 

flats
“I changed my mind. I want to swap houses with the guy next door. Will that be a problem?”

 

When you want to buy a house, you first sign an Option to Purchase (OTP). That’s basically “calling dibs” on the house.

The OTP lasts up to three weeks (it may be less), and no one gets to buy the house except you, or the people named on the OTP. Of course, the seller isn’t going to take his house off the market based on your Colgate smile and handshake. You also need to pay a booking fee with the OTP.

This is 5% to 10% of the price. And it’s non-refundable, if you decide against buying later. Sometimes though, people get a bit overconfident.

I paid the booking fee before getting loan approval from the bank,” Andrew (not his real name) explains.

Actually I know I should not have done that. Maybe because it was my first condo, so I was quite excited. Head not clear. But after I signed, I was unable to get sufficient financing from the bank. Based on the loan they would give me, I would be almost $44,000 short.

So I was desperate. I had one week, I was running to this bank and that bank. No hope. In the end my dad sold his stocks at a big loss, to loan me the $44,000 to cover.

It was quite a traumatic experience, and it was a very stupid and expensive mistake.”

The proper approach is to get Approval in Principle (AIP) from the bank, before signing the OTP. The AIP states how much the bank will loan you, if you buy a house within the stipulated period.

(For HDB flats now, you have no choice. You must get loan approval before paying the OTP, but this situation happened in ’05).

If you don’t know how to get an AIP, or are clueless about the exact procedure, get some free help from mortgage specialists at MoneySmart.

 

Image Credits:
Mr.Thomas, jelene, neajjean, Thant Zin Myint,

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Ryan Ong

I was a freelance writer for over a decade, and covered topics from music to super-contagious foot diseases. I took this job because I believe financial news should be accessible and fun to read. Also, because the assignments don't involve shouting teenagers and debilitating plagues.