How Much Critical Illness Insurance Cover do you Need?
Do you need critical illness cover ( also known as 36 dread diseases cover)?
YES! Everybody need it. Don’t ever think that you will be healthy all the time. The fact is that humans health deteriorate over time. I have seen children suffered from cancer and kidney failures too. It is scary if you ever imagine these dreadful diseases strike us someday.
If you suffered such an illness you would be able to obtain cover that would allow you to receive a lump sum to help with recuperation, medical costs, payment of your mortgage, regular payments to replace your income.
Before we go in dept, you must understand that critical illness cover is totally different from hospitalization and surgical coverage (most widely known as health card or medical card). Here is the layman explanation:
Critical illness cover pay you directly a lump sum
Medical Card pay the medical expenses incur during your hospitalization, paid directly to the hospital, not you. ( in some cases, it might be a reimbursement where you pay first, and claim later)
So now the question is how much coverage do you need? I will show you two methods to calculate the sum assured you require which will meet your current needs. The first method is a very simple estimation. The second one is a bit complicated. If you follow my explanation and steps below, it is quite an accurate and easy to follow method of calculation.
First Method: Income Replacement Calculation
For most of the critical illnesses, it takes from several months to several years for treatment and recovery. For the industry benchmark, a person can definitely afford coverage of 3 years of his current annual income. Put it simple:
Sum assured you need = 3 times your annual income
Example: Paul earn $50,000 a year, he should buy $150,000 sum assured cover for critical illness. The insurance premium for his policy shouldn’t exceed 10% of his annual income ($5000/year).
You might be curious Why 3 years income? Actually, it is a simple way of estimation. Just imagine that if you suffer from cancer, how long is the holiday you desire? If you bought 3 years of your income coverage, you can take 3 years off from your work for medical treatment. If you can afford higher coverage, it is certainly better.
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Second Method: Expenses Estimation
Using this method, you will need to specify or estimate the expenses you need if you are strike by one of the dread diseases. I will use an easy example to illustrate how the needs can be calculated:
Paul’s monthly expenses:
Mortgage – $1500/month
Car installment – $600/month
Daily expenses (food, cloths, grocery etc) – $1000/month
Medication – $500/month
Please take note that hospitalization and surgical benefit do not cover long term medication fees.
Total monthly expenses for Paul is $3600. You would have to estimate the number of years it takes to recover from an illness. This is a difficult one. Cancer might need 1-3 years. Kidney failure – will never recover. Coronary by-pass surgery 3-6 months after successful surgery. It all depends on how long you want to rest and stop working! Let’s say Paul require at least 2 years off.
Sum assured required = Monthly expenses estimated x 12 x number of years
Sum assured required = $3600 x 12 x 2 = $86,400
Insurance plan currently available for critical illnesses coverage in Malaysia:
Great Eastern Supreme Livin’ Care Plus, Greatlife Portfolio Insurance, Living Assurance Benefit Rider
The amount you are insured for critical illness determine your lifestyle during the disaster.
Over insured You will never have to worried about money. Just be happy and get yourself healed
Adequately insured You will be able to maintain your current lifestyle. Life goes on.
Under insured Your family members suffered together. Why do you want to make it hard for them? Don’t you love them?
If you think you can’t afford to buy adequate sum assured, can you afford the risk to see the suffering of your family?
Contact me for customized plan. I would like to know what you think about getting insured with critical illness coverage too.
Thursday, May 20, 2010
Tuesday, May 18, 2010
When Should We Review Our Life Insurance Coverage?
When Should We Review Our Life Insurance Coverage?
From time to time, there are certain changes in our lives that may have a significant impact on our insurance needs. We should think of it as a checkup. Most of us go for medical checkup once a year. It might be a simple blood test or a full body examination. Our financial security also need preventive medicine as maintenance. Needs change over time, sometimes it is much more rapidly than we realize. These below circumstances shall trigger us to revise our wealth protection needs.
Change in Human Economic Value
How do we calculate our human economic value? There are a few formulas but all the equations are tied to our earning capability.
1. When we earn more
After the yearly performance review, some of us will get promoted to a higher rank with more handsome pay. When your company is doing well for the pass year, you will most likely get an increment too. If your annual income has increased by 10% or more since you last updated your protection coverage, this is the right time to revise it. A key purpose of life insurance is to replace lost income. Please make sure your current coverage is in line with your needs. For example, the critical illness coverage need is about three times of our annual income. We shall increase our protection to meet our earning power.
2. When there is significant changes in our health
Most people only feel the needs to get insured when they detect deterioration of health. But isn’t it too late already? When this happens, the proposer is regarded as sub-standard life. The insurance company may impose loading or exclusion clause to be fair to those who are standard healthy lives in the same pool. The best time to get insured is when you are in great health condition, haven’t been hospitalized before or advised to take any long term medication. Get help from an experience insurance agent who can advice and help you to come up with a good proposal.
3. When we get bonus from inheritance
Getting extra inheritance means our net worth has just increased. This will normally resulted in increased passive income such as rental collectable and dividends from stock. When this happens, either we earn more and increase our cash flow, or we spend even more to fulfill our instant gratification. Either way will still affect our insurance needs.
4. When there is a shift in income
Such changes happen when we or our spouse resumed or discontinued work. This create shifts in income. The rule of thumb is to insure more on the person who earns more. However, don’t look down on housewives, or male home maker. Without them, we still need to hire baby sitters, maid, and even home tuition teacher to be able to comply with all the works previously taken care of by our spouse.
Change in Life Commitment & Responsibility
1. When we take up more debt
This occurs when we purchase a new home, or taking up more business loan to expand our business. Life insurance is a great tool to cancel your liability in the event of death, disability or even disease. Since we are paying interest for the mortgage or loan, we shall treat the insurance premium to cover the debt as part of the interest charges we pay. If the interest rate is 5%, we pay an extra 2% annually to get an adequate life insurance coverage. Total of interest now become 7%. Although we are paying more and reducing our positive cash flow, the return is significant at the event of unexpected disaster. We are actually using the bank’s money to insure our life and our assets indirectly!Life Insurance is cheap
Image: Marriage is a new beginning
2. When we get married
When a person marries their life insurance needs change as they have a partner to consider. It’s important to think about how our death may impact our spouse’s financial future and set our insurance policy at a level that will allow them a comfortable future. Love is not only shown by our words. Action says the words.
Sum assured equals level of love.
3. When we got kids
When a couple welcomes a new baby into their family their financial situation changes and it’s important to consider the fact that their life insurance now needs to cover additional expenses. We may also be thinking about our desire to provide college funding for their future. Life insurance can help to provide for educational expenses if we die prematurely. There is also more needs if we intend to create a child incentive living trust to manage the risk of double tragedy.
4. After divorce
Unfortunately this happens every day all around the world. I have clients used to be couple, but then divorce and still remains as my clients separately. The first thing they do in the policies review is to change the nominees. If they had joint life insurance policies it’s wise to revert back to an individual policy and have the beneficiary changed as well if it was their former spouse.
5. When we are taking on the financial responsibility of an aging parent
Taking care of an aging or ill parent is one of the toughest
responsibilities some people will ever face. So many caregivers feel overwhelmed. It is better to take the preventive precautions rather than solving the financial problems when it is too late. Buy medical insurance for our parents when they are still insurable.
6. When we are entering retirement
Some of our insurance plans include cash value that can be accessed to supplement other retirement income, while the coverage can be used to provide additional income to a surviving spouse, pay off debt, pay any resulting estate taxes or income taxes, or create a charitable gift at the time of our death. But most likely our commitment is lowered because most children have grown up and independent. Annuity that can provide a stable income stream might be the next insurance product we are looking for.
Change of Risk in Life
1. When we change occupation
Actually, there are time before medical insurance coverage from our new employer begins. We should always have a personal hospitalization and surgical benefit covered at all time regardless of being employed, or self-employed. When we change job functions, we might be exposed to higher risk. For example, one of my client is an auditor. He takes flights quite often nowadays compare to his previous job. Topping up his coverage is a must.
2. When we pursue risky interest
Did you ever think of doing that exciting bungee jump? or deep sea diving? or car racing? Dangerous sports incur more risk and the insurance company would like to access our condition again.
3. When we stop smoking
Its a well known fact that individuals who smoke pay higher life insurance premiums than nonsmokers. If you have stopped smoking for a length of time you may be eligible for a reduced life insurance premium.
If life is a journey and not a destination, then we will have a number of different paths to travel throughout our lives. Along the way, we’ll experience blessings, challenges and changes that will change our financial priorities and needs. There are at least one of the above situation changes happen in our life every few years. The best time to review our life insurance policies is at the moment we expect it is going to happen. Contact your insurance agent or financial planner to have your policies reviewed.
Please get insured immediately. Life is full of surprise.
Contact me to inquire about life insurance planning.
Blog : http://greateastern-balachandran.blogspot.com
Facebook: Dynamic Investment & Protection
From time to time, there are certain changes in our lives that may have a significant impact on our insurance needs. We should think of it as a checkup. Most of us go for medical checkup once a year. It might be a simple blood test or a full body examination. Our financial security also need preventive medicine as maintenance. Needs change over time, sometimes it is much more rapidly than we realize. These below circumstances shall trigger us to revise our wealth protection needs.
Change in Human Economic Value
How do we calculate our human economic value? There are a few formulas but all the equations are tied to our earning capability.
1. When we earn more
After the yearly performance review, some of us will get promoted to a higher rank with more handsome pay. When your company is doing well for the pass year, you will most likely get an increment too. If your annual income has increased by 10% or more since you last updated your protection coverage, this is the right time to revise it. A key purpose of life insurance is to replace lost income. Please make sure your current coverage is in line with your needs. For example, the critical illness coverage need is about three times of our annual income. We shall increase our protection to meet our earning power.
2. When there is significant changes in our health
Most people only feel the needs to get insured when they detect deterioration of health. But isn’t it too late already? When this happens, the proposer is regarded as sub-standard life. The insurance company may impose loading or exclusion clause to be fair to those who are standard healthy lives in the same pool. The best time to get insured is when you are in great health condition, haven’t been hospitalized before or advised to take any long term medication. Get help from an experience insurance agent who can advice and help you to come up with a good proposal.
3. When we get bonus from inheritance
Getting extra inheritance means our net worth has just increased. This will normally resulted in increased passive income such as rental collectable and dividends from stock. When this happens, either we earn more and increase our cash flow, or we spend even more to fulfill our instant gratification. Either way will still affect our insurance needs.
4. When there is a shift in income
Such changes happen when we or our spouse resumed or discontinued work. This create shifts in income. The rule of thumb is to insure more on the person who earns more. However, don’t look down on housewives, or male home maker. Without them, we still need to hire baby sitters, maid, and even home tuition teacher to be able to comply with all the works previously taken care of by our spouse.
Change in Life Commitment & Responsibility
1. When we take up more debt
This occurs when we purchase a new home, or taking up more business loan to expand our business. Life insurance is a great tool to cancel your liability in the event of death, disability or even disease. Since we are paying interest for the mortgage or loan, we shall treat the insurance premium to cover the debt as part of the interest charges we pay. If the interest rate is 5%, we pay an extra 2% annually to get an adequate life insurance coverage. Total of interest now become 7%. Although we are paying more and reducing our positive cash flow, the return is significant at the event of unexpected disaster. We are actually using the bank’s money to insure our life and our assets indirectly!Life Insurance is cheap
Image: Marriage is a new beginning
2. When we get married
When a person marries their life insurance needs change as they have a partner to consider. It’s important to think about how our death may impact our spouse’s financial future and set our insurance policy at a level that will allow them a comfortable future. Love is not only shown by our words. Action says the words.
Sum assured equals level of love.
3. When we got kids
When a couple welcomes a new baby into their family their financial situation changes and it’s important to consider the fact that their life insurance now needs to cover additional expenses. We may also be thinking about our desire to provide college funding for their future. Life insurance can help to provide for educational expenses if we die prematurely. There is also more needs if we intend to create a child incentive living trust to manage the risk of double tragedy.
4. After divorce
Unfortunately this happens every day all around the world. I have clients used to be couple, but then divorce and still remains as my clients separately. The first thing they do in the policies review is to change the nominees. If they had joint life insurance policies it’s wise to revert back to an individual policy and have the beneficiary changed as well if it was their former spouse.
5. When we are taking on the financial responsibility of an aging parent
Taking care of an aging or ill parent is one of the toughest
responsibilities some people will ever face. So many caregivers feel overwhelmed. It is better to take the preventive precautions rather than solving the financial problems when it is too late. Buy medical insurance for our parents when they are still insurable.
6. When we are entering retirement
Some of our insurance plans include cash value that can be accessed to supplement other retirement income, while the coverage can be used to provide additional income to a surviving spouse, pay off debt, pay any resulting estate taxes or income taxes, or create a charitable gift at the time of our death. But most likely our commitment is lowered because most children have grown up and independent. Annuity that can provide a stable income stream might be the next insurance product we are looking for.
Change of Risk in Life
1. When we change occupation
Actually, there are time before medical insurance coverage from our new employer begins. We should always have a personal hospitalization and surgical benefit covered at all time regardless of being employed, or self-employed. When we change job functions, we might be exposed to higher risk. For example, one of my client is an auditor. He takes flights quite often nowadays compare to his previous job. Topping up his coverage is a must.
2. When we pursue risky interest
Did you ever think of doing that exciting bungee jump? or deep sea diving? or car racing? Dangerous sports incur more risk and the insurance company would like to access our condition again.
3. When we stop smoking
Its a well known fact that individuals who smoke pay higher life insurance premiums than nonsmokers. If you have stopped smoking for a length of time you may be eligible for a reduced life insurance premium.
If life is a journey and not a destination, then we will have a number of different paths to travel throughout our lives. Along the way, we’ll experience blessings, challenges and changes that will change our financial priorities and needs. There are at least one of the above situation changes happen in our life every few years. The best time to review our life insurance policies is at the moment we expect it is going to happen. Contact your insurance agent or financial planner to have your policies reviewed.
Please get insured immediately. Life is full of surprise.
Contact me to inquire about life insurance planning.
Blog : http://greateastern-balachandran.blogspot.com
Facebook: Dynamic Investment & Protection
Thursday, May 13, 2010
Investment Linked Insurance
Investment Linked Insurance
An investment-linked insurance plan is a life insurancethat combines investment and protection. Your premiums provide not only a life insurance cover, but part of the premiums will also be invested in specific investment funds of your choice. You get to choose how to allocate your insurance premiums towards protection and investment.
Things I Should Know
Choosing the right investment-linked insurance plan
You want the flexibility to choose your own level of protection and investment.
You wish to vary the amount of your premium payments or coverage based on your own personal financial situation.
You have the flexibility to choose the type of funds based on your risk aptitude.
You want a savings plan to maintain your standard of living after retirement.
When it comes to picking the right plan, always:
Consider the amount you wish or can invest in the plan, either in single or regular-premium plans.
Remember to also consider the types of funds and the level of protection you need.
Evaluate your options carefully to find the right plan with the right fund to suit your needs.
Regular premium Plan
A single premium-plan features a single lump-sum premium payment, so you don’t have to worry about making regular premium payments, and worrying about lapsing.
Features a life insurance policy with a death or total permanent disability cover of around 125% of your lump-sum investment.
Benefit payments will be to the sum assured or the value of the investment units at the time of claim, whichever is higher.
Allows you to immediately invest more to generate returns.
Single Premium Plan
Regular-premium plan
The regular-premium plan is a more suitable plan for you if you don’t want to invest a large sum at the start of the plan.
Gives you the flexibility to increase your premiums and coverage when your finances improve in the future which are paid either monthly, quarterly, semi-annually or annually.
The basic insurance coverage, in the event of death or total permanent disability, is usually a multiple of the annual premium.
The benefit payment will be the total of sum assured plus the value of the investment units.
Understanding The Risk
Investment-linked plans, like other types of investments, are exposed to investment risk. The unit price of an investment fund (managed by the insurance company)is linked to the total value of the plan, which fluctuates with the movements in the unit price. You may realise a gain or loss when you sell your units, and may even get less than what you invested. Past-performance of an investment-linked fund's track record is only a guide to future performance.
Dynamic Investments & Protection
http://greateastern-balachandran.blogspot.com
Please get insured immediately. Life is full of surprise.
Contact me to inquire about Life insurance & Financial planning.
An investment-linked insurance plan is a life insurancethat combines investment and protection. Your premiums provide not only a life insurance cover, but part of the premiums will also be invested in specific investment funds of your choice. You get to choose how to allocate your insurance premiums towards protection and investment.
Things I Should Know
Choosing the right investment-linked insurance plan
You want the flexibility to choose your own level of protection and investment.
You wish to vary the amount of your premium payments or coverage based on your own personal financial situation.
You have the flexibility to choose the type of funds based on your risk aptitude.
You want a savings plan to maintain your standard of living after retirement.
When it comes to picking the right plan, always:
Consider the amount you wish or can invest in the plan, either in single or regular-premium plans.
Remember to also consider the types of funds and the level of protection you need.
Evaluate your options carefully to find the right plan with the right fund to suit your needs.
Regular premium Plan
A single premium-plan features a single lump-sum premium payment, so you don’t have to worry about making regular premium payments, and worrying about lapsing.
Features a life insurance policy with a death or total permanent disability cover of around 125% of your lump-sum investment.
Benefit payments will be to the sum assured or the value of the investment units at the time of claim, whichever is higher.
Allows you to immediately invest more to generate returns.
Single Premium Plan
Regular-premium plan
The regular-premium plan is a more suitable plan for you if you don’t want to invest a large sum at the start of the plan.
Gives you the flexibility to increase your premiums and coverage when your finances improve in the future which are paid either monthly, quarterly, semi-annually or annually.
The basic insurance coverage, in the event of death or total permanent disability, is usually a multiple of the annual premium.
The benefit payment will be the total of sum assured plus the value of the investment units.
Understanding The Risk
Investment-linked plans, like other types of investments, are exposed to investment risk. The unit price of an investment fund (managed by the insurance company)is linked to the total value of the plan, which fluctuates with the movements in the unit price. You may realise a gain or loss when you sell your units, and may even get less than what you invested. Past-performance of an investment-linked fund's track record is only a guide to future performance.
Dynamic Investments & Protection
http://greateastern-balachandran.blogspot.com
Please get insured immediately. Life is full of surprise.
Contact me to inquire about Life insurance & Financial planning.
Friday, May 7, 2010
Do you need Insurance Switching?
Do you need Insurance Switching?
You have heard of unit trust switching, which is a way to lock your investment gain without paying double service fees. As mentioned in my previous article about the secret of unit trust investment, switching need to be done from time to time and integrated into your portfolio rebalancing strategy. But this post, we are going to discuss about insurance switching, nothing to do with investment actually.
What is insurance switching?
Insurance switching is an industry jargon that’s actually not known to most life insurance agents. If you follow through all my articles about life insurance, you will notice the difference between investment-linked policy (ILP) and traditional policy. For ILP, insurance company charges natural premium, or simply means that the insurance charges increase according to age. But for traditional policy owner, you pay a level premium which is calculated using the age of entry. Insurance switching here means dropping traditional plan to get an ILP or vice versa.
Do you really need to switch insurance?
There are two sides of view, you either switch from traditional plan to ILP, or from ILP to traditional plan.
Switch from Traditional plan to ILP
some agents advice their potential clients to lapse their existing traditional and buy a new ILP. This is definitely wrong because Bank Negara had imposed a rule that the act of replacing a policy within one year will be penalized. The new policy agent won’t get any commission on the new sale.
however, there are still some policyholders actually followed the agents’ advice to switch because of the appealing features of an ILP – low premium, high coverage, better health card etc. Why aren’t the agents penalized? This is due to the lack of linking between different insurance companies. There is no such centralized system where company A can track the status of the policy held at company B.
you must realize that ILPs charges a high insurance cost especially at old age. You are getting the advantage of low insurance charges at young age. ILP is not so appealing to older folks who wants whole life protection on dread diseases. When you reach age 70, the mortality is simply ridiculous that your premium paid is impossible to cope with the ultra high insurance charges.
Switch from ILP to Traditional
some policy owners thought that ILP is actually for investment. But that’s not true in that terms just because some agents might sell you the investment features of ILP. ILP is designed with integrated insurance features. In fact, ILP is a very effective tool to give comprehensive coverage at low affordable premium especially for younger people.
when you get older, you might want to consider to actually switch from ILP to traditional plan. The proper way to do that is to reduce the protection on ILP, and buy new traditional plan. Ask your consultants whether the insurance companies provide a guaranteed switch that doesn’t require any health proof. When you reduce your ILP protection, it is not necessary to reduce your premium. Instead, you can take premium holiday and just stop paying premium as long as your investment value is substantial enough.
Please get insured immediately. Life is full of surprise.
Contact me to inquire about life insurance planning.
You have heard of unit trust switching, which is a way to lock your investment gain without paying double service fees. As mentioned in my previous article about the secret of unit trust investment, switching need to be done from time to time and integrated into your portfolio rebalancing strategy. But this post, we are going to discuss about insurance switching, nothing to do with investment actually.
What is insurance switching?
Insurance switching is an industry jargon that’s actually not known to most life insurance agents. If you follow through all my articles about life insurance, you will notice the difference between investment-linked policy (ILP) and traditional policy. For ILP, insurance company charges natural premium, or simply means that the insurance charges increase according to age. But for traditional policy owner, you pay a level premium which is calculated using the age of entry. Insurance switching here means dropping traditional plan to get an ILP or vice versa.
Do you really need to switch insurance?
There are two sides of view, you either switch from traditional plan to ILP, or from ILP to traditional plan.
Switch from Traditional plan to ILP
some agents advice their potential clients to lapse their existing traditional and buy a new ILP. This is definitely wrong because Bank Negara had imposed a rule that the act of replacing a policy within one year will be penalized. The new policy agent won’t get any commission on the new sale.
however, there are still some policyholders actually followed the agents’ advice to switch because of the appealing features of an ILP – low premium, high coverage, better health card etc. Why aren’t the agents penalized? This is due to the lack of linking between different insurance companies. There is no such centralized system where company A can track the status of the policy held at company B.
you must realize that ILPs charges a high insurance cost especially at old age. You are getting the advantage of low insurance charges at young age. ILP is not so appealing to older folks who wants whole life protection on dread diseases. When you reach age 70, the mortality is simply ridiculous that your premium paid is impossible to cope with the ultra high insurance charges.
Switch from ILP to Traditional
some policy owners thought that ILP is actually for investment. But that’s not true in that terms just because some agents might sell you the investment features of ILP. ILP is designed with integrated insurance features. In fact, ILP is a very effective tool to give comprehensive coverage at low affordable premium especially for younger people.
when you get older, you might want to consider to actually switch from ILP to traditional plan. The proper way to do that is to reduce the protection on ILP, and buy new traditional plan. Ask your consultants whether the insurance companies provide a guaranteed switch that doesn’t require any health proof. When you reduce your ILP protection, it is not necessary to reduce your premium. Instead, you can take premium holiday and just stop paying premium as long as your investment value is substantial enough.
Please get insured immediately. Life is full of surprise.
Contact me to inquire about life insurance planning.
Monday, May 3, 2010
Do you qualify to save?
Do you qualify to save?
3 basic requirement of saving more money:
1. Ability to earn
Our earning ability equals to our value. The amount of money we earn equals to the amount of value we add to other people.
Crux of it is we are always in control of the amount of value we want to add to others.
2. Discipline
Saving money is all about discipline. We must have the discipline to save, and also the discipline to spend.
Imagine a bank account that does not give you any withdrawal facility! Just like a piggy bank. You can only deposit money. After opening such an account, you must deposit money into it every single day. The bank officer will call you up to clear the account someday in the future because your account is too full with cash!
This is the kind of discipline we are talking about. Spend less and spend later. Save first and save more.
3. Time
It takes time to save money and accumulate wealth. The eight wonder of the world: Efffect of Compound Interest will only work if we have enough time for it.
If we do not spend the interest return of wealth, the biggest interest return will come at the later years. That means the longer the time that we let the interest to compound, the higher the interest we get at the later stage
Do you have the time to save money? Congratulations if you are very young. Sorry if you are too old or going to die soon.
Money Saved = Ability to earn x Saving rate x time
Examine the mathematic equation above. You will notice that when any one of the variable is zero, the amount of money saved = 0.
When we lost either one of the 3 basic requirement, we won’t be able to save more money. Major diseases will destroy our earning ability. Pre-mature death will take away our time to save money. If you lack the discipline to save money, it is better to engage some financial system to help you.
Even though the rate of return is mediocre, insurance endowment plan is a prefect plan to ensure we overcome the above challenges.
Dynamic Investments & Protection
http://greateastern-balachandran.blogspot.com
Please get insured immediately. Life is full of surprise.
Contact me to inquire about life insurance & Financial planning.
3 basic requirement of saving more money:
1. Ability to earn
Our earning ability equals to our value. The amount of money we earn equals to the amount of value we add to other people.
Crux of it is we are always in control of the amount of value we want to add to others.
2. Discipline
Saving money is all about discipline. We must have the discipline to save, and also the discipline to spend.
Imagine a bank account that does not give you any withdrawal facility! Just like a piggy bank. You can only deposit money. After opening such an account, you must deposit money into it every single day. The bank officer will call you up to clear the account someday in the future because your account is too full with cash!
This is the kind of discipline we are talking about. Spend less and spend later. Save first and save more.
3. Time
It takes time to save money and accumulate wealth. The eight wonder of the world: Efffect of Compound Interest will only work if we have enough time for it.
If we do not spend the interest return of wealth, the biggest interest return will come at the later years. That means the longer the time that we let the interest to compound, the higher the interest we get at the later stage
Do you have the time to save money? Congratulations if you are very young. Sorry if you are too old or going to die soon.
Money Saved = Ability to earn x Saving rate x time
Examine the mathematic equation above. You will notice that when any one of the variable is zero, the amount of money saved = 0.
When we lost either one of the 3 basic requirement, we won’t be able to save more money. Major diseases will destroy our earning ability. Pre-mature death will take away our time to save money. If you lack the discipline to save money, it is better to engage some financial system to help you.
Even though the rate of return is mediocre, insurance endowment plan is a prefect plan to ensure we overcome the above challenges.
Dynamic Investments & Protection
http://greateastern-balachandran.blogspot.com
Please get insured immediately. Life is full of surprise.
Contact me to inquire about life insurance & Financial planning.
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