Personal Financial Ratios – Know what they are and how they can help you in your Financial Journey.
Financial Planning Tip
When it comes to Financial Planning, have you asked yourself what is more important – Your Needs or Your Wants?
Not too sure what is the difference between the two?
– Your Needs In General
In a general sense, your Needs can be anything from Goods to Services that are necessary for living, e.g. Food, Clothing and Shelter
– Your Needs In Financial Planning
In a Financial Planning sense, your Needs can be setting up an Emergency Fund to providing an Income Replacement in the event of Death, Permanent Disability, Critical Illnesses and even have enough coverage for Hospital & Outpatient Expenses.
– Your Wants In General
In a general sense, your Wants can be anything from Goods to Services that may not be necessary for living, e.g. Toys, Cars, Games and Entertainment.
– Your Wants In Financial Planning
This can be saving enough for a Expensive Car, for a Private Property when you already have a Shelter, and even for a Luxurious Retirement.
Even though the meaning behind a Need and a Want can be quite straightforward like what’s mentioned above, but do you know that when it comes to differentiating and prioritizing one’s needs and wants, many people are still having difficulties?
The Example Of How People View Their Needs And Wants
Financial Planning Tip #4 is to settle your basic Financial Planning needs before even talking about specialist financial services like taxation advice and investment management.
What Are Your Basic Financial Planning Needs?
If you do not know what they are and their priority, there is a simple model for you to remember, as you can refer to the picture below:
So how can you refer to the simple house model above?
Below any of your dream house can be built, you have to have the foundation set up first. So in this case, it will be in terms of your planning for your
- Life Protection for Critical Illness and Disability
- Health Insurance for huge Medical Bills
Why are they important?
Before you can have your luxurious interior design, furniture and such, you have to set up the foundation, the whole structure of the house, the fixtures and fittings first. These are of the highest importance to ensure the stability of the house. The initial cost for setting up these are high and you have to set aside huge amount of commitment before you get to enjoy the rest of the house later.
Therefore the same principle applies to Life Protection and Health Insurance. These two areas are of the highest importance. You can have the highest paid job or the most rewarding business but you have to be physically alive and healthy in order to enjoy all the benefits (moving up the scale to retirement, savings, dreams & ambitions and achievements).
Your Health Has An Impact On Your Financial Planning
One of the common statements that most of my clients will put in front of me, when I would to suggest them to go ahead… Read More »Financial Planning Tip #2: Learn How To Set A Budget