Some Financial Advice


At different stages of our adult lives we will have different levels of disposable income as well as different needs. Hence, what we spend our disposable incomes on will depend on the stage of life that we are at. How much to spend on a particular item depends on how much you can afford.

At the beginning of our careers, it would be prudent to buy health insurance unless you are working for somebody and your employer provides insurance. 

If you plan to have a family in the future, it would be good if you buy life insurance beforehand as the premium is cheaper when you are younger. Note, life insurance has a cash value. When you don't need a life insurance anymore such as when all your kids have grown up and you have enough savings and investments to support you for the rest of your life, you can surrender your life insurance for its cash value.

After insurance, the next thing that you should save for is an emergency fund. The size of the emergency fund depends on how much money you can afford to put into the fund. Ideally, it should be enough to cover your expenses during the duration of the emergency. If an emergency does happen and you are able to recover from it, replenish your emergency fund in preparation for the next emergency. 

The next thing to save for is the downpayment for your abode. I suggest to buy a house that is sufficient for your family's needs so that it is easier to pay back the loan and keep your home in case of any financial difficulty. Also, take the longest payment period to minimize your monthly installments. What you save on the installment you can invest. When you forsee that your income may become less stable and smaller, you may want to consider refinancing your loan, or pay off a part or the remainder of your loan to further reduce or eliminate your mortgage payments.

If you have kids, buy an educational plan for them as early as possible. The premium is cheaper the younger the child. However, if you are a savvy investor and can get returns that are bigger than those of the educational plan, it would be wiser to invest for your child's education instead of buying an educational plan.

The last thing to save for is retirement. It isn't enough just to save money for retirement because inflation will reduce the purchasing power of your savings each year. You have to invest and aim to get returns above the inflation rate. While your income is stable what you should aim for is capital growth. When you foresee that your income will become less stable and smaller, what you should aim for is passive income to supplement your other sources of income. Learn about investing and the different types of financial instruments that can give you capital growth or passive income or both. 

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