How Do I Determine How Much Insurance I need?

"Too much insurance is a Waste; too little is a Disaster."

Since you will neither want to waste nor put your family in a disaster situation, it is important to determine your insurance needs accurately. This is where you need the service of a professional financial planner or a well-trained insurance intermediary, who have a variety of methods to help calculate your needs.

There are both General and Life Insurance needs. Protecting your house against fire and your car against accidents are but two common instances of general insurance needs. In the case of life insurance, probably one of the most common uses is for income replacement purpose and family cash need protection when breadwinner dies.

Families need survival income and funds for immediate uses when death, disability or critical illness occurs to the breadwinner. Apart from the need to replace the breadwinner's income, the following are some expenditures that increases the cash needs of a family:

1) Final expenses - Medical treatment and consultation prior to death, funeral expenses,

2) Estate settlement expenses - Legal fees and related disbursement (to obtain Grant of Probate / Letter of Administration), final income taxes, stamp duty for transfer of properties, general expenses incurred by Executor when administering your estate etc.

3) Outstanding financial commitments on mortgage loans, motor hire purchase, credit cards,etc.

4) Family household expenses - Calculated up to the time the youngest child complete higher education.

5) Spouse survival income- Calculated up to the average mortality

6) Children's higher education needs - Timing of the funding is important, as is who to hold the funds in trust to ensure that is properly utilized.

Do You NEED Financial Planning??

Checklist below will help you determine if you Need in Financial Planning. If your answer is "YES" to any of the situation below, you probably Need Financial Planning:

• You are earning a decent monthly income but you lose control of where your money goes every month.
• You have not examined your tax affairs thoroughly and would like to know if you can minimize your tax payable.
• You have numerous bank loans and /or outstanding credit cards' balances and your finances are in a mess.
• You are concerned of your family's financial needs if you are unexpectedly disable or die.
• You are concerned about the high cost of medical treatment.
• You are too busy to handle your own investments and want to entrust your savings to a professional.
• You are planning for your children's higher education of your choice.
• You want a comfortable retirement but do not know how much you need or how to save and invest to meet the need.
• You want to leave a legacy of good family values by distributing your wealth in a responsible manner to your loved ones.

Base Lending Rate (BLR) Unchange

The Base Lending Rate has finalized remain at 6.30% (OPR 2.75%), Bank Negara Malaysia (BNM) left borrowing cost unchanged yesterday as expected but warned it have to manage the rising amount building up in the domestic financial system.


The central bank said the level is consistent with its assessment of economic growth and inflation prospects. It was a market-anticipated move, which is expecting hiking cycle to start in its next March 11 meeting. 


Source: Business Time

Understand Types Of Risk!

Risk is the potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable outcome). The notion implies that a choice having an influence on the outcome exists (or existed). Potential losses themselves may also be called "risks". Almost any human endeavour carries some risk, but some are much more risky then others.


1) General Market Risks
    - These are daily market fluctuations caused by the demand and supply situation, which in turn are caused by factors such as : economic conditions, unstable political situations, investor sentiments.


2) Inflation Risks
    - This risk will directly affect funds that are placed into those asset classes that are not inflation-hedged, like Fixed  Deposits and Bonds.


3) Liquidity Risks
    - This type of risks occurs in asset classes where there are not many buyers and sellers that are readily available , like Real Properties.
     
4) Default Risks
    - This risk is where the borrowers are not able to repay the principal amount or the interest. Bonds are particularly vulnerable to this risk.


5) Foreign Currency Risks
   - This risk occurs when we invest in overseas or offshore investment, where the currency that we invest in weakens against the currency that we originally invested.


6) Estate Shrinkage Risks
    - There is always the risk that a person dies suddenly whilst in the midst of "playing the investment game". There may be a severe market downturn that can adversely affect the value of the investment at time of death.
   


 

Planning Your Estate

According to Wikipedia, Estate planning is the process of anticipating and arranging for the disposal of an estate. Estate planning typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses. Guardians are often designated for minor children and beneficiaries in incapacity. 


There are many tools in estate planning. Some of them are:-
1) Wills
A will or testament is a legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provides for the transfer of his/her property at death. For the devolution of property not disposed of by will, see inheritance and intestacy.


2) Trusts
This is an arrangement where a trustee is appointed to hold property for loved ones (Beneficiary) or other purposes. The person who set up the trust is known as the "Settlor" and the terms he can spell out for the trustee to management the trust is called "Trust Deed". There are many forms of trusts, Testamentary Trust, Living Trust, Implied Trust, Express Trust, Constructive Trust, etc..which can be formed to meet various need of people.


3) Life Insurance
Life Insurance is an excellent tool for providing liquidity to one's estate, for the replacement of income and for those who wish to create a sizable estate with a small outlay. By nominating the spouse and/or children (if the testator is married), or the parent (if testator is unmarried), a trust is created in favor of the nominees. The death proceeds is a separate estate and is out of reach of his creditors in the case of bankruptcy.

FUNDING Needs To Reach RM 100,000..

Invest Horizon	Investment Return			Financial Goal
	2.50%		8%
5 years	88,835		68,058	$100,000
10 years	78,120		46,320	$100,000
20 years	61,027		21,455	$100,000

From table above, we can clearly seen the funding needs to reach $ 100,000. Let's say if you are putting the money in Fixed Deposit for only 2.5% yearly interest income compare with an investment tools for instance Unit Trust - Managed Fund for average yearly return 8%. For the 3 different investment horizon, the effort put in a high investment return is rather small compare with low yearly return investment tools. So, be a Smart" Investors" and choose the realistic investment tools for your investment portfolio, so that you are able to reach your financial goal more faster.

Another important point is- you need to begin investing early and effectively, the power of compound effect enable you to accumulate your wealth , let the money work hard for you ! Happy Investing !

How Do The Rich Escape from Rat Race ?

Accordingly to Wikipedia, rat race is a term used for an endless, self-defeating or pointless pursuit. It is just like a rat trying to escape whilst running around a maze or in a wheel.


The increased image of work as a "rat race" in modern world has led many to question their own attitudes towards work and seek a more harmonious Work-life balance. Many believe that long work hours, unpaid overtime, stressful jobs, time spent commuting, less time for traditional family life, has led to a generally unhappier workforce to enjoy the benefits of increased economic prosperity and a higher standard of living.


So, if you work minimum 8 hours a day and trade your time for paycheck in order to pay bills, there is a high possibility that you are caught in rat race.



The rich who is financially successful do not trade their time for money. Conversely, the rich leverage on other people money and time to make money.
Instead of working hard for money, the rich ensure money working hard for them through investment.

Property investors leverage on other people money by borrowing from banks to purchase properties or assets. They rent out the properties and have the tenants pay off the loans. Other than getting the tenants to pay off their assets, the property investors make even more money when their assets appreciate in value. Property investors leverage on other people money to make money.

Business owners like Bill Gates leverage on other people time by hiring employees to work for them. Investors, who invest in stock market, leverage on business owners and employees time to make money for them through capital gain from stocks.




Can An Average Ordinary Person ESCAPE From Rat Race?

Absolutely Yes!

No doubt it is difficult to leave our comfort zone and risking the secure regular paychecks to pay off our bills. We need to take the first step and action to start somewhere. We need to change our mentality and reprogram our minds to mirror the millionaire minds.

At the same time, we have to start financial planning and saving to accumulate capital. Acquire the skills to generate passive income. Learn how to invest in assets like properties, stock market or own and run businesses.

As our assets growing which in return generating more money, more money will increase our capability to increase the number or size of assets. The same “money working hard” cycle repeats by itself until such time that we no longer need to trade our time for money where we can live, work, play and give freely.

Congratulations! That’s the time that we are out of rat race and achieve financial freedom!