In just a few hours, we will be saying goodbye to Year 2011 and welcoming 2012… how are you, in the financial planning aspects?

Some Questions To Reflect Back In 2011

If you are not too sure of your current state, here’s some general questions that you can ask yourself and it’s also a good reflection of what you need to focus on in the coming 2012…

Ask yourself:

- Did your savings grow, remain the same or shrink?

- How’s your investment portfolio?

- Do you feel more ready for your Retirement?

- In terms of any unforeseen circumstances – are you prepared?

- With the weather so unpredictable, are your precious assets well protected (or well-insured)?

- In terms of educating yourself in the area of finances, have you done so?

- Your health – is it well maintained?

If you feel that there’s a big shortfall in terms of your planning for any of the above mentioned, I will always say that it’s still not too late – if you sit down, set your mind and draft out some plans to really tackle them in 2012. Likewise, with the financial planning industry gearing up (the recent regulations being that Planners would need to take up more investment credentials to better advise for their clients – it’s a good time to arrange for a discussion with your Financial Planner!

What You May Need To Pay Attention To In 2012

- Unforgiving Economy

2011 is the year where you see the ups and downs of the economy – one moment you have people who say that the economy is finally seeing the end of the worst moments; the next you have people who are warning to be prepared for the worst.

In 2012, the same may just continue. So rather than going along with that flow and be stuck, it’s good to educate yourself with books or seminars that will teach you which financial instruments that will survive in this time of uncertainties and still help you to grow your investments or savings.

For example, there are some companies that still pay dividends during these tough times and if you are good with understanding Forex, you will be able to tap on those uncertainties and cash in for a good time. Do note that every form of investments do have its level of risks, so be advised to educate yourself and know your own risk appetite.

- Unpredictable Weather

Do you notice that the weather is becoming more and more unpredictable – it can be that hot or that rainy. Because of such, it pays to be more attentive towards your assets, e.g. cars, motorbikes, residential properties and ask yourself if they need to be insured with some General Insurance. You can also check with yourself if there’s a need to protect yourself with an Accident Plan. It does pay to be careful.

- Never Too Late For Retirement Or Children University Education

If you have told yourself that you will not work that hard when you retire or that you want to see the world and be financially relaxed – it’s never too late to start planning for your retirement. Be disciplined in 2012 and start saving a comfortable amount every month and tell yourself that you will not touch these money till you are retired.

Likewise, if you are starting a family real soon, it’s also advisable to start saving for your child’s education fund in the future.  Start early and the amount that you need to set aside is literally smaller.

If you are unsure on how to well tackle these issues, you can always consult your Financial Planner on getting the numbers and how much you really need to set aside and do your own planning from there.

- Look After Your Health & Health Insurance

If you have yet to look into your health status, it’s a good time to consider that option in 2012. Give yourself a proper health report from the Doctors on how healthy you are and what possible health problems you may face as you get older.

Similarly it does pay to look into your Health Insurance and see if you are covered adequately. I would suggest that you look into this area first before going for any possible health check, stressing again, any health issues will have effects on your future insurance application – it’s either a straight rejection, face an exclusion or having the need to pay extra premiums.

Have A Good 2012

Do hope the above pointers can help you do some proper planning in 2012. I wish you – good health and wealth in 2012 and the coming years. Lastly thanks for being my reader of this blog!

If given a choice to properly plan for yourself, would you trust a Book that touches on the topic of what you need to know about Insurance Products or a Financial Planner who is not a newbie in the industry and qualified to give proper advice? Or would you have the combination of both?

And if you are amazed by what is being asked above, it’s not something new as there are people who plan for themselves with the help of a book. Though there’s nothing wrong with that because there are some good books that give you proper advice and even proper steps to work through your budget to sorting out your priorities to knowing what’s the order of importance in terms of getting an insurance plan.

The only concern that one may have is grabbing hold of a book that do not really guide the reader much but only list down on what’s the highly recommended insurance plan(s) in that author’s point of view and penalizes the other types. For example, I came across an author who only endorses Term Insurance, penalizes Whole Life Insurance and favors a particular type of Stock Investment in the book.

A Client Who Followed That Book And Did Changes

I have the real-case experience of having a Client who contacted me to request for a termination of the child’s Whole Life Insurance after it has been in-force for the past five years and another five more years to go before that client stops paying for that policy for the child – just because that client has read that book that says Whole Life Insurance has high expenses and fees built-in and the client is expected to face heavy losses should the policy continues…

I advised that should the client really decide to terminate that policy, the client would expect to suffer heavy surrendering charges which can amount to 60 – 70% of what was being paid till date. The client says it would be best to follow that book and confirmed that it would be best to terminate it and suffer the initial bit of losses.

Another colleague did helped to persuade that client but seemed like the client has really made up the mind and that policy was terminated on that date.

What Can You Learn From This Particular Incident

If a book is written to share the Author’s Point of View – it’s better to consult on what’s being shared in it with one or maybe a few Financial Planners if they agree with what’s being shared…

Here’s Three Pointers For You To Take Away:

1. Expenses & Fees Are High For A Whole Life Insurance. If you compare this to a Term Insurance, this statement holds true but in exchange you get to have some form of savings (+ enjoy insurance company’s bonuses). And if you are referring to different age groups, it gets higher as one gets older. That’s why there’s an age-old saying that it’s advisable and cheaper when you buy insurance at a younger age – such as the case for a toddler.

2. One Should Always Avoid Whole Life Insurance. If you are disciplined enough to save & grow your money and trust me – it’s not possible for everybody – I do have friends who are earning a high income but saves less than 5% of that amount for each month – you are better off without a Whole Life Insurance but with a Term Insurance for Protection Purposes. You should also avoid when you are older (even though you may not have such plan before) – as explained in Pointer #1.

3. All Whole Life Insurance Are Created Equally. If you are reading this for the first time, the answer is no if you are comparing to the Traditional Type whereby one has to keep paying the premiums till a certain age, e.g. age 85. Some Whole Life Insurance allows you to as short as 5 to 10 years and continues to protect & enjoy bonus savings for the life assured for whole life. And also, do you know that despite the many premium terms (in options like 5, 10, 15, 20, 25, till age 65 & age 85) and taking the first four options as a discussion point – you may pay lesser premium for a shorter premium term despite having the same amount of coverage. In some cases, you may even enjoy a shorter break-even time frame (which means your policy is in profits).

If you are holding on to such a book and especially if it’s a really thin book – do you notice that, just merely on Whole Life Insurance, there’s a lot of possibilities and scenarios to consider for anybody on different life stages. And if the concept of planning for yourself can be explained in such a thin book – there’s no need for Financial Planners to exist and there’s no need for one to go through a Financial Needs Analysis to understand one’s priorities and needs.

If you are a Singaporean, you will definitely have read that for the last few years, the newspaper has been stating that most Singaporeans are under-insured by as much as $100k – $200k, given that the average insurance coverage that one should get to protect him/her against unforeseen circumstances like Death, Permanent Disability should be around $450k+…

This Situation Will Not Improve For Years To Come – Financial Planner Version

I was speaking to my ex-colleague some time back and she was highlighting that there’s been a change in the sales requirements (or in their context, the minimum sales amount they need in order to stay in that job). Their requirements would need them to “sell” at least $15,000 (and above) of annual premium, $100,000 (and above) of single premium and around $5,000 of annual premium in Investment Plans…

If you are able to hit these amount and go beyond, you will be look upon by your sales manager and group sales director and you will get rewarded with more perks and benefits. If you are way below these amount, you may lose your job, get invited to a one-to-one sales motivational talk by your manager or be made to attend “sales clinic” to improve your selling skill…

Looking at the range of insurance plans that a Financial Planner can recommend, e.g. a Whole-Life Plan vs Term Insurance Plan and a person who really need some form of insurance coverage, e.g. Critical Illnesses… which of the above plan will the Financial Planner recommend? Make a guess… if you have talked to Planners before, you will definitely see a trend… they will recommend the Whole Life Plan… they know you need the coverage and they will do some planning for you and suggest a minimum sum assured of $100,000.

For a typical 30 years old guy, working and healthy, the average monthly premium for a whole life insurance plan can be at the range of $200/month or $2,400/year. If that guy is not willing, the recommended amount may be reduced by half to a sum assured of $50,000 with an average premium of $1,200/year. The next stage for this Financial Planner is to suggest that this new client should have his yearly review and to increase the coverage (=higher premium) if possible.

Deal is closed and this Financial Planner would just need to find around 11-12 of such similar type of client and he is more or less made it through that sales month…

If we look into another type of Financial Planner who believes in planning for others and would want to plan well, he may suggest that prospect to take on Term Insurance that may cover him for $200k and above for just $30/month (or $360/year). You see the difference in the premium amount and the coverage suggested?

Should the first Financial Planner behave like the second Financial Planner, he would have to find an average of 40 clients (I believe this Financial Planner may just collapse and eventually quit the industry because of over-exhaustion…)

Other Factors Include (Not Ultimately The Whole List):

• Commissions offered for different type of insurance plans
• Lack of Company’s Initiatives to Focus on Term Insurance
• The Titles that Planners Can Receive (if they manage to hit the specific commission mark)

This Situation Will Not Improve For Years To Come – Client Version

It’s still quite a common sight to see that most people do not really like Term Insurance because of the fact that they do not want to keep paying for something that they will not get back eventually despite knowing that for a small premium they are being covered with a significant amount.

Financial Planning is still a Tedious Process to most clients. To do a Full Fact-Finding takes at least an hour or more and most clients are not willing to “think” of what they want, what they have and what they owe and in some cases, planning is done in the manner whereby the Client would suggest a comfortable monthly amount and have the Financial Planner do up the plans for them… so guess which type of plan will the Financial Planner go with??

Some clients still would like to have some kind gestures for taking up insurance plans. Sad but true… To get the most out, Financial Planners cannot depend on plans like Term Insurance to show their appreciation…

Final Note:

As you can see… the root of this problem may not be because of the need to improve Financial Literacy… it can be because of the nature of the whole insurance industry that still focus on the need for sales target and every Financial Planner for themselves (to feed themselves and people who depend on them). There’s also a long way to go for some Clients to get comfortable with buying of Term Insurance and having to understand the importance of going through a Full Fact-Find.

Lastly, the situations explained here are based on my personal feel and may not be the full indication on why most Singaporeans will not get enough insurance coverage. The figures, in terms of sales target and premium, mentioned here may not be the same for every insurance companies as well.

How do you get rich in today’s kind of society without having to take it on your own and going through all the unnecessary mistakes? If you are interested to know how, you can learn from this expert, who is also a New York Bestselling Author – Ramit Sethi.

How To Start Learning From Ramit Sethi

If you are into reading, you can actually get the book written by Ramit Sethi – “I Will Teach You To Be Rich”.

Or if you are into reading from a blog (a highly visited site with about 250,000 readers every month), you can actually head over to his blog which is updated on a regular basis – IWillTeachYouToBeRich.com. You can even subscribe to his Newsletter when you are over there. This may just be a valuable resource to you!

Why There’s A Lot To Learn From Ramit Sethi

Just based on what’s being shared on his blog, there’s a lot to learn and improve on your Financial Education!

You can basically learn tips on Financial Planning like how to:

- Earn More Money

- Buy Your House

- Getting Perks around Your Credit Cards

- Negotiate down on Fees, Insurance, Bills and even on your Salary

- Automate Your Personal Finances

- Start Your Own Business (Valuable Business Tips in this section)

- Understand the Psychology of Money

There are quite a number of articles written on each of these sections so do spend some time reading up on them. And as the blog is updated on a regular basis, you may be surprised to see new information being added (after you thought you have completed a particular session).

Check Out Ramit Sethi Today

If you are serious about managing your money and financial planning, add Ramit Sethi to one of your must-have resources (include this blog as well)!

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I would like to thank Marc for visiting my blog and posting his comment after his read on my posts on the importance of having Mortgage Insurance to protect a Mortgage Bank Loan. If you are interested in reading what I have written on this particular topic, these are the links:

- Mortgage Insurance For Your Mortgage Loan – Part 1 of 3

- Mortgage Insurance For Your Mortgage Loan – Part 2 of 3

- Mortgage Insurance For Your Mortgage Loan – Part 3 of 3

And this is the comment by Marc:

“Hi, it seems from your article that one can purchase a mortgage insurance with a sum assured higher than the loan amount; coverage longer than the loan tenure.

Please elaborate how this insurance can help one in time of need after the loan has been paid up completely.  Doesn’t the insurance lapsed automatically once the loan had been paid up?”

This Is My Reply:

- With Regards To Higher Sum Assured and Longer Coverage Period

Any Mortgage Insurance Application will usually follow the Loan Amount stated in the Official Mortgage Loan Agreement as the Sum Assured and the Loan Tenure for the Coverage Period.

Therefore if you are looking for a higher Sum Assured (as compared to the actual Loan Amount) and/or a longer Coverage Period (as compared to the actual Loan Tenure), the condition is that you have purchased for a Private Property and signed for the Loan Agreement, for e.g. in Year 2011 for a Loan Amount Of $500,000 but… you need only to start paying the monthly loan repayment only in 2013 (that’s two years later)…

And since you have already signed the Loan Agreement in 2011, thus making you liable for it in one way or another right at that moment, the only way to protect yourself is to get the Mortgage Insurance to start protecting yourself straight away in Year 2011.

Because the actual loan repayment starts two years later, you can request for the insurance coverage period to be extended by two more years. You can also request for the Sum Assured to be slightly higher – to match the actual loan amount in 2013.

- With Regards To The Extension For Mortgage Insurance To Serve As A Normal Life Insurance

If you have no intention to clear off your Mortgage Loan earlier and follow the actual loan tenure to clear off your loans, then you may not be able to “convert” your existing Mortgage Insurance to a normal reducing term life insurance.

From some of the clients that I have spoken to, most of them have intentions to pay off their mortgage loan earlier, therefore they have this opportunity to convert their existing Mortgage Insurance into a normal Reducing Term Insurance – as part of their Financial Planning.

Notes:

1. The conversion from Mortgage Insurance is usually to a normal Reducing Term Insurance. If you have 5 years left from on Mortgage Insurance, you will have the same 5 years of remaining coverage on your converted Reducing Term Insurance. Unless the Insurance Company allows for renewal at the end of the 5 years, you can still do so. Similarly, if they have some form of conversion to a Level Term Insurance or Whole Life Insurance, you may request  to do so if you wish.

2. There are many benefits to getting a Mortgage Insurance but do not try to “cheat” an Insurance Company if you do not have any existing Mortgage Loan Agreement. There are some Insurance Agents who may claimed that they can help you to apply and to get a Mortgage Insurance approved without the Loan Agreement, but do note… if there’s a claim and should the Insurance Company not being able to verify the existence of an Official Loan Agreement, the Insurance Company may void the claim… If you are thinking of really doing this… please consult your Financial Planner on the implication and make sure you have every understandings down in writing to protect your interests.

In conclusion, I hope this post has given you a better understanding on how a Mortgage Insurance works to your benefits.

It’s quite a sad moment as I wrote this because I have just overheard that one of my ex-colleagues was fired and asked to resign with immediate effect because of “giving too little” shopping vouchers to the client as one other insurance agent has decided to offer “two times more…”

The Insider Story – The Art Of Giving Shopping Vouchers

I can be honest that the act of giving monetary rebates are not legally correct according to the Insurance Act but we, as Financial Planners, usually do give some form of shopping vouchers to our clients as a form of “thanking them” for taking out time to meet us and to giving us a chance to plan for them, and also that we recognize the fact that there are many other agents out in the market fighting for their business…

And we do recognize that we are not allowed to give direct cash rebates back to the clients and most of the time, they are compensated in the form of shopping vouchers either by a stipulated amount decided by the insurance company or based on personal discretion (usually depending on the commissions received…)

And usually the amount can go higher if the commissions received are high as well… (this is the extent that some Planners will go just to secure their insurance business and to hit their sales target)

This is why being a Financial Planner can be tough at times…

To Those Who Need Financial Planning – Do You Really Need To Have Vouchers?

If I put myself down as a Customer or Client who is keen to look for some form of Proper Financial Planning, I would definitely see these Shopping Vouchers as something “extra” or “a form of appreciation from the Financial Planner”.

This is because to be able to do a proper Financial Planning Review may be tough at times because if a Financial Planner can do a good job in this area, not only can he help me to understand my current financial situations, on how to go ahead and do a proper planning and how to convince myself to set aside a monthly budget to plan for myself and my family….

If there is such a Financial Planner who is able to do so and make me commit to a proper Financial Planning, having to be rewarded with shopping vouchers will seriously be something “extra”…

But for those who are into vouchers… there’s nothing wrong with that because you will be setting aside some hard-earned money every month for the next many years and getting some form of “compensation” is definitely well deserved…

The only thing is that it’s good to express this interest to any Financial Planner and there’s even an opportunity to be introduced to other Planners who are more willing to give up more shopping vouchers in exchange for the business.

In this manner, you can get what you really want… get yourself planned… and will not have to go through the hassle of making it known that the vouchers given are not enough or that other Financial Planners are able/willing to give more… this will definitely save up a lot of time as well!

This is one common question that I have gotten from my clients and if you are one of them who have been asking around for an answer, the answer is a simple yes. But if you are referring to those health insurance, e.g. Shield Plans, you can only have one.

What You Need To Know About Owning Two Or More Same Policy Type

Basically you are not restricted to applying or owning two or more of the same policy type under one or two insurers. But for most insurers, you are only limited to the amount of coverage you are entitled to – and it can be based on your annual income (also quite subjective).

So how does it go? For example, some insurers may limit the amount of death coverage you may get under them up to a maximum limit of 10 – 20 times (or any multiples which you need to check out with your Financial Planner) of your annual income and also based on your current age group. For Total and Permanent Disability coverage, the common limit is around $1 million and likewise for critical illnesses coverage (recommended to verify as well).

That’s why you are not restricted to owning more of the same policy type but only limited to the amount of coverage you have with them. This is also one reason why in your insurance application form, it’s common to see a particular section that will ask you on the total number of insurance policies you have and the total amount of coverage. You may also be asked to provide a copy of your income tax as a proof to your current annual income status – the moment you apply for a certain amount of sum assured.

The Benefits Of Getting More Of The Same Policy Type Under One Or More Insurers

If your Financial Planner has done a financial planning review with you and recommended that you ought to get more insurance coverage but your rejection to him is that you are worried of the above – this particular section will share some light and maybe help to change your mind a little.

This is because there are certain benefits to getting more than one of the same policy type and even under more than one insurer. Benefits like:

1. You Get To Choose How You Want To Claim Or Surrender

I shall touch on the topic of surrendering if you own two Whole Life Insurance Policies. As you are aware that Whole Life Insurance has the savings component and if you start it young and keep it going till your retirement age, you will have generated quite a consistent and good return out from it.

Therefore if you own two of the same policies type and you have reached your retirement age, you get to have a choice of either to keep both as a form of legacy to your next generation or to keep one going for your next generation and to surrender one as a form of supplementing your retirement lifestyle.

That’s why its good to have more than one of the same policy type. Just imagine if you only have that single policy, and you decide to surrender it but you want to leave some legacy, you may not be able to achieve it. Surrendering part of that only policy, you may not get have the best of both world because you will be getting a smaller amount and at the same time, leaving a much little amount behind.

2. You Get To Have Different Claim Process From Different Insurers

In terms of claim process, you may get different views from different insurers. That’s why by having more than one policy type can be to your benefits because should there be a claim, and one insurer decides to reject the claim for some reasons, you still can try out the other insurer who may just approve it. In this manner, instead of getting into a dilemma, you get some solutions out from a tight situation.

3. You Get To Enjoy Some Form Of Rate Of Growth

Some insurers are from different countries and therefore most of their assets and investment strategies are implemented in their own country. And different financial markets may not generate the same rate of return as compared to the others – one market may not experience growth but the other market may.

That’s why, maybe in terms of getting different Endowment Savings plan from more than one insurers, you may get to gain some benefits out from doing so. Rather than having to go through a few years of poor investment returns and complaining that other insurance company is doing better, why not, be someone who may be affected by this but still can look forward to something good from the insurance company that’s doing well.

In conclusion, you can definitely own more of the same policy type under one or more insurers but only limited to the amount of insurance coverage and there are also benefits out from owning them as well. What is being listed above is just a few of those many benefits which is best discussed with your Financial Planner.

If you have been one of those who have the above issues, I hope that this post can give you a clearer picture!

There was quite a bit of hu-has on my Facebook’s news feed with lots of unhappiness that the CPF’s Minimum Sum has increased from $123,000 to $131,000 and that many more people will not be able to take their hard-earned money out from their CPF accounts and these money will eventually be “taken away” from them…

Be assured that the “taken away” part will not be the case as I have seen many of my clients who have reached their draw-down age, did not reach the Minimum Sum and are still able to take out their money.

I will not be dedicating this post to how you will be drawing your CPF money when you reach the draw-down age or explain what you need to do if you are unable to reach the Minimum Sum. But rather, I will explain the rationale behind the annual increment of the Minimum Sum from the Financial Planning Point of View.

Proper Planning For Retirement – The Concept Behind The Minimum Sum

If you are truly concerned about planning for your Retirement, a Financial Advisor would usually sit down with you and work out the numbers. For instance, to plan for your Retirement, you would need to know a few numbers like

• How much you would like to have and to spend each month and in today’s dollar
• How long you would like to have these sum of money
• What is your feel for the average rate of inflation

An Example To Illustrate The Above

Mr. X is currently 30 and would like to retire at the age of 65. He would like to have $3000 (in today’s dollar) each month during his retirement and would like to enjoy this form of income for 20 years. His feel of the rate of inflation is around 4%.

In total, he would need to have $3000 x 12 x 20years = $720,000. But because of the presence of inflation which means things will get more and more expensive and your same amount of money, e.g. $10 will not buy the same amount of thing in the future as compared to today.

Therefore if Mr X’s Retirement Planning is to factor in the rate of inflation, the actual amount that he really need to have when he is 65 years old is around $2.8 million. For those who know how to use a Financial Calculator, I have used n = 35, i = 4%, PV = 720,000 and solving for FV.

Mr X would really need to work hard and save hard in order to reach that $2.8 million to enjoy a comfortable retirement. And Mr X would need to do so, starting from today or else the amount that he needs to save up will get more and more.

This Is What The CPF Minimum Sum Is Trying To Do

A monthly sum has been computed to ensure that every Singaporeans will have enough to last through their retirement. But because of inflation, the computed monthly amount will increase with each year. These increments will add onto the Final Sum (the total of the monthly amounts) that’s quite equivalent to the Minimum Sum amount.

But why was the Minimum Sum set to be at the age of 55 and not the statutory Retirement Age? In my personal opinion (sorry I did not do any research on this area) is that there’s minimum Interest which will help to compound the Minimum Sum set aside at age 55 and this will help to give that member the amount that he/she will need to retire properly.

Proper Financial Planning Is Never Easy

As you can see, doing a proper financial planning for yourself is never easy. Just as you thought that what you need at your Retirement Age is supposed to be X amount but after taking into accounts – factor like Inflation, the amount needed is even higher and the amount that you start saving is higher as well.

This is why you need to pay attention to each area of your Financial Planning and get things sorted out and proper planning to start as soon as possible.

With lots of information available online you can always get started on your own but if you are having problems or issues, do consult a qualified and professional Financial Advisor.

So start planning today!

This is true and sad!

I just met up with a client who is urgently interested to get a medical insurance plan because the company is offering some form of cash rebates (as a form of encouragement) when any of their employees decide to “upgrade” themselves.

The outcome is that I still went ahead with the application because the client does need that medical insurance because he does not even have the basic medishield plan under the CPF Board. This is despite the fact that the client still feels that it’s not a must to have that medical insurance because he is still young and that nothing will ever happened!

But I do hope that after my fair bit of explanation and persuasion, the client will still hold on to that insurance after the rebate is given…

If You Belong To This Category Of People…

There is nothing wrong if you belong to this category of people and to enjoy the rebates from the company. But as a Financial Planner, I do wish to highlight the rationale behind the company’s decision to offer the rebates and the importance of getting yourself well-covered adequately and early.

Rationale Behind The Rebates

There are still many people who are unaware of the importance of doing a proper Financial Planning and getting themselves covered adequately under an insurance plan. Therefore the rationale behind the rebates is to encourage their employees to be actively involved in knowing what they are covered and how to get covered.

This is precisely what happened to this client. He does not even know what are the insurance plans that he has till date. He even got mixed up that his Dependent Protection Scheme (DPS) has always been his Medishield Plan.

Because of this rebate, he decides to look for me as his Financial Planner and has all his insurance plans reviewed. Though there’s no financial needs analysis done for him, at least at that meeting, he does got himself covered under a proper medical insurance (which I believe is a must-have for everybody, irregardless of how much you do not trust insurance)!

There’s Certain Level Of Importance Behind An Insurance Plan

It does not matter how much you may not like Insurance, but there’s a certain level of importance of getting it. For instance, you can never be prepared on when a certain form of illness may just strike. You can have around $100,000 saved up but what happened if you need a medical treatment that costs $200,000 – that’s where your medical insurance will come in handy.

A Medical Insurance will help to take care majority of the $200,000 treatment cost and at the same time, you still get to keep most of your $100,000 for other areas of concern like Retirement. Even if you say that you still do need to pay – what I can really say is that the premiums you pay for your medical insurance will never exceed the $100,000 and is just a fraction of it. No claim at the end of the day? Congrats! And you still do get a peace of mind knowing that you have something that’s covering you in case of any emergency.

Feeling the pinch of paying? Then all I can say is that have you done any investments or some form of savings that’s helping your $100,000 to grow and to offset the premiums that are paid?

Insurance Is Not What You Get When You Need It The Most

Insurance is not like a type of medication that a doctor will prescribe to you when you need it the most or when you are willing to pay any high price just to get it.

Insurance works on the basis of combined efforts – having healthy customers pooling their contributions and when there’s really a time to help, the insurance company will make use of these pooled resources and together from the investments it has made from them to help out.

Therefore if an insurance company does allow you to get the insurance when you need it the most, it would mean that the insurance company has to make use of the pooled resources immediately – and what happened if there’s a lot of such similar cases? The Insurance Company may just have to force the healthy customers to make more contributions just to sustain the payout! This is not fair but you also do need to know that it takes time for any form of investments to bear fruit!

A Few Good Reasons To Get Your Insurance Done Early

Before I end off this post, I would like to share a few good reasons of buying your insurance plans early:

1. You get to enjoy paying a lower rate of premium – for plans like Whole Life and Term Insurance
2. You get to enjoy higher rate of return from investments and savings plan – you allow more time to do compounding on your returns
3. Because you are healthy and you get your insurance plans early – Insurance Company will take on the risk should your health really turn worse in the future.
4. You have lesser risk of getting rejected or loaded with extra premiums because of a slight change of health at the point of application (because of work, age and stress) and the Insurance Company feels that you have a certain level of health risk.
5. You are not certain what may just happened in the future. Getting your insurance done early will give you a better peace of mind while you work on other important areas of your life.

Would you like to have better self-management of your money so that you have enough to save for retirement, invest, play & pamper, and at the same time doing your part to contribute to the charity on a regular basis?

If you do, you can actually make sure of this Six Account Strategy that I have learned from T. Harv Eker’s brilliant book called, The Secrets Of A Millionaire Mind.

Why Should You And I Make Use Of This Strategy?

My personal experience from what I learned from most people, who have just received their bring-home income and including my own, is that the money will be used to pay off most of outstanding bills and loans, settle and pay for any necessities and the rest is kept in the bank account (if any is left, of course).

All these are usually done on a irregular amount and inconsistent basis, do you agree as well?

- For Investment And Education Opportunities

For example, if there’s a good (as in really, really positive and good potential) investment or education opportunity that may just come up to you, you may keep asking yourself whether you should go for it and leave a slight cut on your bank account or use it for other personal uses… For most people after this much of pondering and thinking that using the money for other personal uses is better, this one chance may just slip away and never appear!

Such case did appear to me, in one particular case of stock investment where there’s a strong potential growth of at least 20 – 30% capital gain. I do have the money to invest but… I wanted to use that money to spend on some latest Tech Gadgets. So at the end of the day, I did not invest or spend on any Gadgets (because the better ones are coming up, again!). The stock grew and it was too late for me to go into it!

- For Retirement Planning And Charity Giving

Likewise for Retirement Planning, most people do not concentrate much on this particular section of planning and rather spend most of their money on other areas. They only plan and invest towards the last few years of their working life and hope that miracles will happen at the end of it! Usually, such things will never happen to the mass majority!

I am a believer of Charity Giving and I would try to donate to my charity choice once I have the spare cash. I would like to do it on a regular basis but I am, like any other normal person, that these donations should be spent on other uses. And to side-track, do you know that by giving away a bit of what you have to help others, you will get “rewarded” (not just in monetary sense) many times back? That’s why many millionaires are requesting people to step out and do their part in charity giving.

So if you did face such situations before (which I did) and you would like to have a way out, you should try on T. Harv Eker’s Six Jars System today!

How Does T. Harv Eker’s Six Jars System Work?

In general, you need to have so-called six accounts (i.e. actual bank savings accounts or some form of Excel Sheet tracking) to separate your bring-home income.

And under the Six Jars System, you should have these accounts and the percentage of your bring-home income in it:

1. Financial Freedom Account (10%) – This account is meant for your Investment Purposes. Making sure your money works hard for you! Please do not try to use this money to try on the lottery. The money in this account is meant to go into good investments like Stocks, Unit Trusts, Properties or any assets that will give you a significant rate of return as compared to the usual bank savings account rate. Any dividends can be re-invested or to go into your Long-Term Savings Account.

2. Play Account (10%) - Entertainment, Pampering your Loved Ones, Eat Your Heart Out and/or Small Bit Of Gambling will come from this account. And a good thing of this account is that you can spend every single bit of the money! Do not try to accumulate for the next month unless you are planning for a holiday! So just find means and ways to spend it and have no regrets!

3. Education Account (10%) - Seminars, Talks, Books and Magazines are good source of knowledge that will better financially educate yourself. For example, to know how  to choose good stocks in the long run, you will need to know the basics of choosing and investing into a good company (like Warren Buffett) or when to buy-and-sell or buy-and-hold your stocks, all these will need some form of education. Therefore spend the money from this account on some good education courses to upgrade yourself!

4. Long Term Savings Account (10%) - Planning for Retirement does not take you much efforts, just 10% of your bring-home income and let the magic of compounding returns and time work on to increase your net worth in this account. This account should not consist of any high-risk component because you have your Investment Account to take care of it. There are many good considerations for your Long Term Savings Account and you can make use of your Education Account to educate yourself on it!

5. Giving Account (10%) - As mentioned earlier, it’s always good to give back to Society and to help those who need it because I believe that if you do that on a regular basis, you will be “rewarded” in many areas back. Find a good charity with a good cause and donate on a regular basis!

6. Necessities (50%) – Your Basic Food Expenses, Transportation, Bills, Loans, Insurance Premiums, or anything that you need to pay back will come from this account.

The Benefits Of Following This 6 Jars System Strategy

• By having this six accounts, you have a clearer picture of your current financial standings. For example, after taking care of the first 5 accounts and you realize that you have not enough for the last account, it means you have to find ways to increase your income or to cut down on some unnecessary necessities.
• You will not miss any good opportunities because you have the necessary accounts to take care of them. For e.g. you find a new investment opportunity but you do not really understand the nature, you can invest in a good course and go into it when you are ready!
• Never have to think and ponder so much! If your accounts have enough to go into any good opportunities and that you have verified that they are good, you can simply just go for it!

To educate yourself better, you can learn from the self-made millionaire himself, T. Harv Eker and his products:

• Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth
• Secrets of the Millionaire Mind Cards