ok la just to share with people about what i learnt. not much,
but to those who have totally no idea, hope this can be of
help.
Basically in FP, our planning is for 2 scenarios,
the first being your Retirement.
the second being your Insurance.
Retirement
questions you need to ask yourself
What kinda of lifestyle do you want? How much do you need a
month? without depending on your kids.
This will give rise to how much money you need to have by the
time u retire.
an assumption we make is that you retire at 65, and that in the
best (or worse) case you live up to 85. that means 20 years. also
due to the freedom and amount of time you have to yourself, you
will most likely spend more than you think. luxury will be common.
surely you dont expect yourself to sit at home for 20 years
right?
so how much you need for monthly after you retire, multiply the
number by 20 years. do not forget to factor in inflation!
Insurance
sure none of us wanna die before our time, but lets face it, if
1 fine day you dont wake up again, what are the responsibilities
you have to your family? if u r single, ok lor, make sure your
insurance can cover your funeral. but if u r married with kids? how
then?
you need to make sure your family does not suffer from the lack
of your income. as such u need to plan adequately. simply
take your annual pay and multiply by the difference in years to
your retirement. meaning if you are drawing 30k annually, and you
are currently 35, meaning 30 years more to your retirement at 65.
take 30k x 35 to get 1050000.
Of cos that is in theory la. in reality, you wouldnt save
30k a year. you have your expenses and that will come from the
30k. so lets be conservative and take it u spend half of what
u earn. that will leave 525000. out of the 525000, surely you have
some savings before you pass on, so take that into consideration.
so maybe after all your savings and investment you are only left
with 300000. so go buy that life policy for 300000, instead of
whatever others might tell you.
ok i feel damn stupid to share this but i guess i have to be
truthful to myself and since i am sharing my knowledge with you
guys, i should not hide anything.
There you have it, you do not need to cover yourself by a huge
amount. insurance is meant to bridge the difference or shortfall.
that is the conservative way of financial planning. planning just
what you need.
Another thing to note about insurance is to make sure you MUST
have these 3 types.
namely a Life or Term policy
a Critical Illness policy
an Accident policy.
and also to make sure that your policies have coverage for
inpatient charges, as certain policies do not cover your hospital
bills, which can come out to be quite hefty.
Other than Insurance and Retirement, i have list the other
important things to plan for.
Savings
Investments
Insurance
Retirement
Having covered insurance and retirement. i will now touch on
savings.
Savings is well for your daily expenses and for things like your
kids education, your new car, luxuries in life and the wants and
needs of your family. 1 thing to note is that the banks in
singapore savings accounts, they do no cover the inflation rate,
meaning every year your money lose its value due to inflation, and
by putting it in a bank you are still losing the value but to a
lesser extent depending on the interest rate.
so the ideal thing to do is to increase the interest rate or
rate of return on your money to match the inflation rate so as to
get the same value for your dollar. how to do it? this is where
investment comes in.
Funds
Unit trusts
Equities and securities
are some of the instruments of investments. they belong to the
higher risk higher return category.
Treasury loans
Bonds
Fixed deposits
belong to the lower risk category.
Also there are Investment linked insurance policies. which
covers both insurance and investments. but as of now i am not very
sure about these policies so i shall go into detail yet.
Hope what i mentioned above will help someone in their financial
future.