Personal Finance 101
Asked on 19 Nov 2019
What were some things you took into consideration?
Hi anon, definitely insurance will be the key consideration. It is the safety net that will always be there regardless of market condition.
Insurance will pay you the amount of money you need when you need it.
Had a hospitalization, and covered by a shield plan? Your hospital bill is taken care of.
Out of work due to CI and fighting to recover? Your expenses can be taken care of by your payout.
There were many considerations to take into account when selecting the right policy, including what kind of insurance is important at this life stage, what amount of coverage I need, and what my affordability factor is. Naturally, my health, being good when I was young, is also a key consideration. If I was saddled with health issues, I would probably not be very insurable.
So yes, sort your insurance out first. Make sure you have that safety net. If you never use it, it's not a problem either. No one expects to use the airbag of their car, or the lifevest on an airplane. But if you think about it, which is more expensive, the airbag or the car? Insurance is your plan B you never hope to use, but when push comes to shove, you will be glad you have it.
Insurance first always.
Make sure you have sufficient coverage first before putting money into the markets.
Because if you fall ill in the next few years, you'd have put in a few hundreds to a few thousands for hundreds of thousands of payout as part of your claim.
No investment can give you that.
Insurance is meant to protect your income. Without income, all your assets will fall no matter how big they are. Because you'll have to sell them to survive.
If you can only do one thing at the start, woud have assumed the following:
You have only a regular income that is small that can be set aside after setting up your income and expenses and cashflow.. then
What would want to do? Let's say you are now starting at point 0 networth. Your regular income will give you savings of $6,000 by the end of the year ($500/mth).
Assuming a rate of return at 4% only.
20 years later, you would have $185,815 in investments only; or
20 years later, you would have $154,846 in investments but, protected from any CI ($200,000.00) and death/TPD ($400,000)?
Would you want to have a peace of mind?
(A) Take the risk of getting hit by unexpected ball curve between year 0 to year 20?
(B) Be comfortable in making the decision? A lost of $30,000 in investment in future value, but your investment will still be there even if you are hit by CI/TPD?
I think this is the greatest question to ask yourself too. How many people become poor because they did not insure vs how many people are not poor because they insured themselves?
Insurance always comes first! Insurance is used to secure yourself from an uncertain event in the future. One more thing to consider here is an emergency fund consisting of about 4-6 months of expenses to act as a barrier in case of an unforseen situation. Once all this is taken care of, you can use the remaining excess for investment purposes and grow your assets.
I work at Kristal.AI, and it's my passion to evaluate various upcoming investment opportunities.
Insurance comes first ALWAYS.
Make sure you get at the very least this two:
1) Hospitalization coverage with a cash rider, followed by
2) A whole life or term plan (depending on your preference) that covers you in terms of death, disability, and illness.
Rule of thumb for coverage: 10x your annual income for Death/Disability, 5x for critical illness coverage
Once you have these two in place, then you can start to look into investing because the bedrock of your investment portfolio should be life insurance.
What I tell my clients is: Investments use capital, Insurance creates capital
Insurance is meant to protect your income. Without your income, whatever high returns your investments are giving you, you will have to give up or sell them to survive.
In the event, if you suddenly fall very sick, and you receive a massive payout of, e.g. $300,000. You can almost semi-retire if you put the money in the right places.
Insurance - make sure that you cover yourself sufficiently before you start building your wealth.
It's always most impt to guard/protect your wealth before building it.
Hope this helps !
Insurance first to protect my savings later. Without insurance, my savings may get wiped out in the event of critical illness or disability. Insurance acts like a gatekeeper to my bank account to prevents the big cost items (like cancers, hospital bills) to rob my bank.
Hi, please settle your insurance first before you invest/grow your wealth. Insurance is like a foundation, your investments is like the building you build on top of it. Without strong foundation, any disaster can easily wipe out your building (investment) down.
I believe you do not want to invest just to pay a doctor/surgeon someday!
I believe the majority will go for insurance instead of investment and I, too will advise the same. Building the safety net is important, especially when you need it on rainy days.
You could make a lot of money through investments, but one single major event could potentially wipe out your savings.
While you go for insurance first, do take that time to learn more about investing such as reading on seedly platform ;)
You can only answer this question yourself.
Question 1: If you are unwell, will your insurance (always a guaranteed value) take care of you. or your investment (always a non-guaranteed value)?
If your answer is insurance, then start by understanding yourself and your needs. In most cases, the key priority is always healthcare insurance regardless of whether your are a Singaporean or not. If you are a Singaporean, here is why: https://www.blog.pzl.sg/is-medishield-life-enough-in-singapore/
If your answer is investment, then the second question is: Are you happy if your investment return is used to pay for your health needs? And what if the investment is not doing well but you still need medical attention?
As always, we are our biggest asset. Therefore, we should always take care of ourselves first before we do anything else. Without us, what is the value of money?
Insurance. Investment can wait. But accidents, illness or even death, could come anytime. We don't want to be caught without any insurance protection because unexpected events like major illness could set you back even further financially.