Building Your Financial House

Today, let’s talk about constructing your Financial House. I would emphasize more on the Foundation and that would inevitably point to Insurance. Yes it is.

Many of us would have possessed at least a policy each, from as young as 1 month old onwards. With the recent development in the insurance industry, some babies would have gotten their policies while they were still in the mothers’ womb. Regardless of when and what, I’m glad to know that most of you had taken steps to do the right thing, i.e. to secure your lifestyle and financial future. I congratulate you!

I continue hearing from people, whom I come into contact with, about how much one really need to insure for?  How many policies should one own? Many have doubts over the benefits of insurance as opposed to the cost of insurance paid. The list goes on and on….

I would like to believe that all policies are good when it is for the right purpose. Bear in mind that Insurance = Protection. Please do not start calculating the ROI (Return on Investment). If you want investment, go for the right investment vehicle. The role an Insurance policy plays is to take over your risk (the risk you insured for), if not all, part of it, for a premium which you pay.  It is something like having a spare wheel in your car boot. You don’t need it everyday or time. You don’t even as much as glance at it. For some, you don’t even need it for years! But, just in case, you have a puncture or a flat, you know you have a spare wheel, there and then, to use so that you could continue your journey to your destination. You don’t calculate the ROI for your wheels, do you?

Take my word…I have continuously witnessed and heard from others, the invaluable benefits that this little contract (policy document is indeed a contract) offer to many families. When things go very wrong, the next thing people ask has always been, “I wonder if he has insurance” not ” I wonder if he has investment/real properties/business/etc.” Have you ever encountered this situation before?

Let’s take you to building your Financial House now, if you haven’t done it yet. I must give credit to my good friend, Danny Y. who first shared this Financial House model with me. I find this simple to understand and so does everyone I shared this with. I hope you’ll like it too.

With financial constraint, go back to basics. In constructing the “Financial House“, we take care of its foundation first. As any architect would tell you, before you build your dream home, make sure your foundation is strong first. Your health, income and lifestyle protection formed your foundation. The tools used to solve this is your Medical (Hospitalisation & Surgical), Personal Accident (if you travel around a lot) and Critical Illness (long-term/expensive medical care) insurance policies. If you already them, that’s brilliant! If not, it is alright to start with a smaller-sized policy. Remember that this is a long-term commitment. Therefore, it is most important for you to be honest and start with something you can afford. You can add on later, if health permits.  Always secure the health policies (medical and critical illness) first because they go through stringent underwriting process. It very much depends on your current health condition and medical history.

If you have more surpluses, you can start to construct your pillars and that being your savings for Retirement. Your ceiling would be Children’s Education (when you start having children) and finally your roof  i.e. Other Investment Goal.

Do have a policy review every year or when there is a major change to your financial landscape. Keep in touch with your advisor or financial planner. A good partnership between client and advisor has always been a two-way relationship. Everyone plays a pro-active role to ensure that this partnership works for long-term.

That wraps up all I want to share with you about building your financial house.

Take care and may you have a wonderful day ahead.

~ Alice

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