Financial Lessons Learned in Asia

I received great response from my last article, “England Hits the Panic Button,” even though some complained that it came across as “doom and gloom.” Like the Bible, I try to be realistic about problems. Because of the hope we have in Christ, we can face reality squarely and maintain our joy. God never promised we would be exempt from problems, only that He would be there with us through them, even unto death.

It’s only prudent to be concerned about the systemic problems we face and our failure thus far to acknowledge that we need God and His wisdom now more than ever. My hope is that Christians will recognize the economic dangers we face and be motivated to take action beforewe experience another major crisis.

Others are already preparing. Here are some things I observed on my recent trip to Asia that provide a new perspective on the way we tend to manage money in America:

  • The average savings rate among older Asian families ranges from a low of 20% to a high of around 40% of annual gross income. This high savings rate is driven by a “survival mentality”—meaning they have no expectation that someone else will take care of them, i.e., social or government programs. (For a look at how other nations rank on the basis of personal savings, see chart at the end of the article.)
  • Some younger Asians have not adopted this approach and are becoming caught up in materialism and living beyond their means using a variety of methods. Many Asians view credit cards as an “import from the West” that will be bad in the long term.
  • All employees in Singapore are required to save 20% of their salary and employers add 16%. This essentially means that 36% of the employees’ income is put into a personal account called the Provident Fund. This government backed savings account pays either 2.5% or 4% guaranteed. Of the 36% total contribution, 6% is set aside as a medical saving account. The rest of the money is for retirement, a down payment to buy a house, or could also be used to take care of elderly parents.
  • Investors we met shared their view that investing in emerging markets is no longer viewed as “riskier” than developed markets. This is a significant shift and does not bode well for Europe and America.
  • Singapore has a fiscal accountability policy for its elected officials. 1) No corruption will be tolerated. They want Singapore to be viewed as the Zurich of Asia, a safe investment due to high levels of earned trust. 2) Each new term, the government is required to “live within its means.” Officials cannot reach back into the reserves built by previous administrations to close current budget deficits. How simple is that?
  • Asian investors we interviewed see two conflicting approaches to solving the debt problem in Europe and America. America’s plan is to “borrow and spend” its way out of the debt crisis; Europe’s plan is to “cut and save” its way out.
  • What do Asian investors think? Both strategies cannot be correct. When one of these approaches fails, it will bring about a sudden downturn in global markets. They see this as a problem that should be apparent to any observer. The current crisis is not like the crash in 2008 that took most people by surprise. Therefore, they are cautious and preparing.

I promised you practical steps that you need to take now. Please note I will not take a position on a specific stock or investment nor will I tell you to make rash decisions like pulling all of your money out of a long-term investment. I recommend that you consult with professional advisors who share a biblical worldview before making any investment decisions.

Practical Steps

  • Increase your giving to God’s causes to lay up for yourself treasures that do not lose value and will return the highest satisfaction.
  • Begin saving as much as you can in liquid accounts. A good goal is 20% of your gross income.
  • Pay off all of your debt as quickly as possible. Do not incur more debt.
  • Increase your financial margin—the difference between your income and expenses. Begin simplifying your lifestyle with the goal of reducing your expenses. It costs money to maintain possessions. Don’t keep more things than you need. Sell or give away stuff that you no longer use.
  • Keep your investments diversified in different asset classes. Mutual funds are good, but don’t keep everything in funds tied to the same asset sector—that is not diversification. If you don’t understand an investment, don’t put your money there.
  • It’s perfectly okay to own some gold as a hedge against inflation, but like anything else, it should be viewed as a risky investment. Think of it more as insurance against the dollar (or all other assets) losing value. Don’t assume that you can predict the future price of gold (or any other investment).
  • There are several ways to own gold. Many prefer taking possession of the actual bullion. If you go that route, experts recommend the South African Krugerrand because it does not carry a face value like other gold coins. These coins are sold in 1 oz, 1/2 oz. 1/4 oz and 1/10 oz sizes. Be careful to avoid counterfeits.
  • Another method is to own stocks tied to gold. Rusty Leonard, a professional investment advisor, prefers owning stock tied to gold in an ETF (Exchange-Traded Fund) to ensure that you have an available market should you need to liquidate.
  • If you decide to buy gold, like any other investment, it should be no more than 12-15% of your portfolio. Consider it a long-term “insurance policy.”
  • Professional investors are experiencing great challenges navigating this market. Even some of the best minds in the business say they have never seen it this challenging. They do not know whether it is time to be “Risk On” or “Risk Off.” So be cautious and seek the Lord’s wisdom on every decision.

In my next update, I intend to cover the Occupy Wall Street movement from a biblical perspective.

P.S. Only one more issue left in your trial subscription. Be sure to subscribe here (It’s free!) so you won’t miss a single issue!

Source: “How Household Savings Stack Up in Asia, the West, and Latin America,” Bloomberg/Businessweek, June 10, 2010.

About Chuck Bentley

CEO, Crown Mininstries
This entry was posted in Handwriting on the Wall. Bookmark the permalink.

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