Here is my first attempt dedicating a single post (my replies) to the comments that you have posted in this blog. Also big thanks for taking the time to read the posts and spending some time on this site! Hope this blog has helped you in some manner of Financial Planning and most importantly – Make You Want To Plan Today!
Special Thanks To Andre Of Beginning With Finance For The 4 Comments!
Today, I am lucky enough to have Andre Of Beginning With Finance to contribute 4 of his personal comments to some of my posts and in the comments, he actually raised some good questions (this guy is serious about Planning His Finances) which I intend to post my replies through this post.
Meanwhile do click over to his Blog and read up some tips on managing your Finances!
Answering His Comments…
1. My Post: Have You Started Your Retirement Planning? His Comment: Hey Dexter, 2% for Inflation Is Actually Low? Is It Better To Over-State The Inflation Rate While Planning For Retirement?
My Reply: 2% for inflation is seriously low. The actual inflation rate is on the average of 4 – 5%. To over-state the inflation rate while planning for retirement would definitely be better and you would get more realistic results.
But if you have done the calculations yourself (which I have did), I would need to set aside $600/month for the next 37 years in order to achieve a comfortable retirement income of $2000/month. If I have done up a higher inflation rate, it would only mean that I have to set aside a much higher (than $600/month) which may be beyond my means and also that I may not be that committed to do so.
My personal feel is that if you are able to and are actually setting aside more than $600/month as an average Singaporean (earning around $2500/month) despite having to succumb to temptation of life – entertainment, gadgets, good food, holiday trips, handphone bills and parents’ allowances, is actually a remarkable feat in reality!
Therefore there’s nothing wrong to plan with inflation rate of 2%, as long as you know the fact that you need to really save is most important! Also do note that when stuffs are actually becoming more expensive over the years, there are still some lucky breaks e.g. Chicken Rice are mostly selling for $3 per plate (due to inflation) now, there are some outlets that are still willing to sell for $1.50 to $2.50. Lesser Meat but still fills your tummy!
Key Pointers: Do know that there’s inflation in reality. And you need to save no matter what! Be comfortable with your committed and regular savings!
2. My Post: You Are Unhealthy For Your Insurance… What Happen Now? Part 2 of 2. His Comment: Hey Dexter, How About Migraine and/or Hep B? Thanks!
My Reply: Migraine is usually very common among Working Adults and Hardworking Students in Singapore. I am having one now while typing this. But till date I have not come across any life insurance applications whereby the cases got rejected or with any certain loading.
There’s certain complications related to Migraine like Stroke or cetain level of Disability and unless the risks are confirmed by a doctor – there could be exclusion to the Total And Permanent Disability benefit.
For Hep B, I have came across a few applications whereby my Clients are Hep B carriers. They happen to get it due to some contaminated seafood.
For the purpose of applications, they are required to go for the Liver Function Test and Hepatitis B Screening Test With E-Antigen and Alphafetoprotein. As long as you ace both tests, there’s usually no complications to your life insurance application. But for Medical Insurance application, be prepared to face with an exclusion on any treatments that’s related to Hep B.
Key Pointers: It’s always good to keep yourself healthy and fit! If you are suffering from any of the above, do consult your doctors on how to improve from it. Most importantly get your Financial Planning done before any changes to health!
3. My Post: Do You Want To Know What’s Your Money Worth in Twenty Years Time? His Comment: Hey Dexter, Savings Plans Are Not Really Hedge Against Inflation. Am I Right?
My Reply: Local Banks’ Savings Plans that offer 0.125% to 0.3% interest rate is never a hedge against inflation (anything that’s less than 4-5% is not a hedge). For the purpose of Financial Planning, do not take inflation seriously (my personal opinion)!
The introduction of inflation is to educate you that you need to put your money into instruments that can generate a higher return (higher or on par with inflation) so that you will not lose the value of your money.
My suggestion is that you need to disclipine yourself into having a Saving Habit, and when you do save, you save and do not spend that money on stuff that’s not beneficial to you. It’s that little by little of saving that make you rich (in some sense). And when you have done up a lump sum, you can see what wonders it may do for you!
Note: Have you noticed that Local Banks offer a higher interest rate on higher lump sum of deposits?
Key Pointers: Inflation is there to make sure you put your savings that will generate a higher return. There’s nothing wrong with having just a normal savings plan. Only criteria is that you save and not spend it all later!
4. My Post: Financial Planning Tip #4: Settle Your Basic Financial Planning. His Comment: Great Post, Especially The Illustration Of Financial Planning Is Like Building A House!
My Reply: Thanks! To those of you who know me personally as your Financial Planner, you will know that I am academically trained as a Civil Engineer. So the concept of building a house is closely related to Financial Planning.
Whether you build up the house from Top-Down or Bottom-Up, for the House to be safe, you need to have a Solid Foundation. In Financial Planning sense, you need to do up (the foundation) your Critical Illness Planning, Survivors’ Planning, Health Insurance adequately before you work into other areas of doing Savings and Retirement Planning.
Do note that by not doing the foundation well, however well you have done for your Wealth Accumulation or Retirement Planning may just go to waste when unforeseen circumstance like Serious Illness strike you hard and suck your income and savings dry!
Key Pointers: Understand your priority. Do not just do partial planning and neglect the rest. Secure your foundation first and venture out from there! You will have a better future!
With the comments and my replies, I hope I have given you a clearer picture. Do remember that whatever queries you may have it’s best to discuss personally with your Financial Planner. Thanks (0nce again) to Andre for the comments!