The second layer of The Smart Money Formula is to guard your money against four common scenarios. Some of these are unexpected financial losses that cause emotional distress, but the great secret of rich people is that if you prepare for the unexpected, you’ll have less stress. Remember – the only unexpected part about “unexpected expenses or losses” is the timing. Things like taxation and illness are a certain part of life – the only uncertain part is when they’ll occur.
3. Retrenchment / Going Out-Of-Business
4. Permanent Disability & Major Illness
Scenario 1: Taxation
It is good to pay taxes. Paying taxes means that we pool our resources together for the betterment of the nation and the society. However, being Smart About My Money means that you want to do your due diligence and not pay more than you are required to. So, how much do you know of the tax laws to protect yourself financially?
SOLUTION: Have a tax accountant go through your Personal (and Business) Financial Statement.
Scenario 2: Hospitalisation
Being in hospital is the furthest thing in our minds. Yet, you can’t be 100% certain of avoiding illnesses that may require a prolonged hospital stay. If that situation arises, you have two risks:
- Income Loss (especially for self-employed)
- Hospital Expenses
Even if you have government-linked medical coverage that covers part of the hospital expenses, is it enough? There are also “deductibles and co-insurance” that you have to pay, not to mention follow-up doctor visits, etc.
Also, instead of worrying about disease, start taking charge of your health! Reducing your stress by achieving Financial Freedom can help in that regard, along with the usual advice about eating healthy foods and exercising.
SOLUTION: Have a Hospitalization Income insurance coverage.
Scenario 3: Retrenchment (if you are in a JOB) or Going Out-of-Business (if you are in a business)
A job is a transaction between your boss and you and it must meet 2 conditions simultaneously.
- You must have time to trade for your boss’s money
- Your boss must have money to trade for your time
So, if you are having a health challenge or family challenge and can’t work, you’ll quickly no longer have a job. Likewise, if your boss does not do well in his business, you will no longer have a job. So, it is important that you continue to protect your current lifestyle for at least 6 months while searching for a new JOB.
And if you own your own business, economic downturn or market changes can also make you go-out-of-business any time.
So, it is important that you have a Security Fund that can afford your lifestyle for 6 months.
SOLUTION: Open a “forced” savings account and transfer 5% of your income to this account every month automatically.
Scenario 4: Permanent Disability & Major Illness
Of course we hope this won’t ever happen. However, according to current health trends, the facts are clear.
- 1 in 2 men will develop cancer in his lifetime
- Cardiovascular disease is the number one killer among women
- 1 in 10 people over the age of 65 are affected by Alzheimer
- The chance of developing invasive breast cancer during a woman’s lifetime is 1 in 8
And this does not include a list of more than 30 critical illnesses.
SOLUTION: Make sure you are covered by “Permanent Disability + Critical Illness” insurance coverage, Hospital Income insurance coverage, AND open a “forced” saving account.
Guarding Your Time is just as Important
Have you heard of “Time is Money”? That is absolutely true. Whether you are poor or you are rich, you have the same 24 hours that everybody has. Neither the Rich has an extra minute nor the Poor has a minute less. It is how you use your time that determines your financial future.
Also, there is a myth out there that “It takes Money to Make Money”. It is true that having more Money means that you can invest more of your money to generate more cash. So, what if you don’t have much money now?
Then, you invest time!
For example, in a real estate workshop that I attended, the trainer taught how one can invest in property with no money down. Say, you have a friend who has a lot of money but not much time. You can invest your time for a no-brainer property deal. Then, your friend can put in his money and both of you co-own the property and split the rental profits (after the mortgage loan). Why would your friend be willing to put his money down instead of splitting the initial down payment with you? This is because he would not have known about this deal without you investing the time to look for one. Sounds good?
MORE MONEY GUARD EDUCATION
Note: These are topics that I am planning to write. If you are interested in any of these topics, contact me so that I will write that topic first.
Health | Smart About My Money