lay-man's planning

I've always been an advocate of some insurance protection, so this issue is to share with you some of the things that I've learnt. Some may scoff or baulk at the mere mention of insurance, but from the way I see it, it is actually a necessity. When I was younger and whenever I wanted something, my mom would always ask, "Is it a necessity? Without it, would your life be any different?" As opposed to luxury, a necessity is something that you need and without it, yes.. one will suffer. Heh, this trick is what some parents could use as well, 'coz ended up, we children didn't get to buy any nintendo's, atari's or what not ('coz can't win that argument!)

As the cost of healthcare will continue to rise, I don't think anyone can be prepared to foot all the bills just by their own bank savings. Unless you're an orphan, then you'd only have to plan for yourself. Most of the time, planning also means, it is for your family members as well.

In the past, most of us may think, diseases will not befall any of us or it won't happen to any of our family members. Yes, no one wants bad things to happen to them. But in reality, it may.

As soon as one is financially able, one should:
1. Get a life insurance. If death occurs, at least the surviving family will get a sum of money prepare for the funeral. Sad la.. but true mah, right?

2. Get a good hospitalization plan. First and simple step, upgrade Medisave to Medishield (it only cost about SGD$96 per year and payable via CPF medisave, so no need touch your cash!) However, take note that there is something called 'co-insurance'. Meaning that, you will likely have to pay some amount of money even after claims. Here is a calculator provided by CPF for you to estimate. If you have extra cash, do consider some other product outside there that offer a more comprehensive medical and hospitalization plan.

So with step #1, and #2 of the above, you can start to make other plans. For example, what happens if life is good but you wanna make more money?

If you're a fresh grad, then can consider:

1. Savings plan (usually this will run quite long, for example 21 or 25 years). This is to force you to put money into somewhere. Like savings to bank but with penalty for default! Haha. Of course, with higher interest rates than banks. I've heard the minimum amount offered by Prudential is SGD$70 per month. So even if the paycheck is small, say, SGD$1500, $70 is just 4.7% of the amount! As it is advisable to save at least 30% of your salary, then please place the 26% into a real bank so that you have some cash on hand. Some of these plan offer cashback annually, or every 3 years. Of course, in doing so, you still can take some of your money out but will reduce the final lump sum at the end of the term.

2. Investment linked policies. Good for when you do not have much money to invest, and can wait for the portfolio to grow slowly.

Retirement planning

As mentioned above, what will happen when we're retired and thus no more income. For lucky ones, of course they would've have some cash generating business running somewhere without them having to lift a finger. For normal ppl like myself, probably having a sum set aside for this purpose, also makes sense.

How much is enough for retirement? Depends on how much you want to spend, it seems. So if you intend to spend $2000 per month for the rest of your life (+30 years after 55) after retirement, you'll need roughly $620,000. If we can save $800 per mth from age 26 onwards till 55, we would've saved about $300,000. So, without some form of investment, likely money will never be enough when we retire.

Luckily, government has some form of planning for us already, which is the CPF and Medisave plans. So something is better than nothing. However, with much factors beyond our control, for example, healthcare cost, living cost (as natural resources are being depleted, its substitute could cost more as money were pumped into the R&D etc).

As the saying goes, "Best to prepare an umbrella in case of rainy days". But the question is, have you shopped for one?