Monthly Archives: June 2013

3 Things I Learnt When I Was Researching Medical Insurance

Over the past week, I was busy researching medical insurance for my family. It was a tedious project because there are so many companies offering so many different policies. Contacting the insurance company and study the information provided pose a big challenge to me since I am not in the financial industry. There is something I learnt during the process that I like to share with you all here.

1. Deductible

Deductible is a fixed amount of money you must pay out of your own pocket before you can claim from the medical insurance. That means you take up some risks onto yourself and not pass it all to the insurance company. The incentive for you to do this is lower premium for the medical insurance (sometimes much lower).

2. Co-insurance

Similar to deductible, co-insurance is a percentage of medical bill you need to bear when claiming from insurance company, it could be 10%, 20% depend on the plan you choose. As expected, higher percentage of co-insurance offer lower premium for the insurance policy

3. Cashless VS non cashless

In Malaysia, there are 2 type of medical claim, namely cashless and non-cashless. In the cashless option, you are given a medical card and you probably have no need to pay cash out of pocket if any medical condition/emergency come up. In the non-cashless option, you will have to fork out the money first to pay the bill and then claim them from the insurance company.

Cashless option is not only an option of convenience because it actually helps you to manage your personal finance in a more flexible manner because you do not have to keep a certain amount of money (after co-insurance and deductible) to handle medical condition or emergency. This convenience and flexibility also costs you money, with cashless option came higher premium.

Summary

Although you can enjoy lower premium by taking up the risks and lock up certain amount of money (to handle deductible, co-insurance and non cashless option), but you need to consider how much risk can you take. Things you need to consider here:

– Your current saving

– Your parent health condition

– The long-term cost of the insurance policy

– The long term expected return if you invest your saved premium

Everyone situation is different, and you have to decide for yourself which factor affect you more.

For example, if your parent is healthy and you have a pile of saving, maybe you can consider a higher deductible, co-insurance percentage or even non-cashless option. Another person who just starting to build his saving might need to consider other option instead of the suggestion above.

All being said, the first thing to do before taking up insurance policy would be does some research. There are so many insurance companies around and they all offered different policy. A simple Google search return me with more than 10 companies offering medical insurance and they are all different in price and benefits. I think it will never be a perfect policy but a most suitable policy for your current situation. There is nothing wrong to compare price and benefits offered by various insurance companies in the market now because this is your money and health we are talking about here.

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My Eyesight Improvement Program (Part 1)

I have been shortsighted since the age of 12 and I must I am a bit sick of it and like to have perfect eyesight again. Friends and colleague did recommend the Lasik procedure to me after they went through the procedure. But somehow I am not convinced because I think it make no sense to hurt my eyes again when they are already weaker than eye of people with perfect eyesight.

Recently I came across an eyesight improvement program without using glass and surgery, it is supposed to help improve eyesight with some simple action over long time. A friend of mine introduced it. I am going to start the program tomorrow and record down my progress over the few weeks.

If the program helps in improve my eyesight, I will put up my record here and provide the instructions to help you readers whose eyes are tired from reading all my post in this blog. ^^

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How to Save and Spend Money

It is pretty difficult to not spend any money at all to survive in the world we are in right now. And it is important for us to strike a balance between spending and saving money because most of us does not have unlimited amount of money (who does?).

There is always one more bill that waiting for you to clear every month and you never seem to get ahead of them, instead you seems to getting more and more far behind them. You start to feel frustrate about current situation and lose hope in the future, and you cannot imagine you retirement life (if there is any).

Sometimes, it is very difficult to strike a balance between spend and save money because they always seems conflict with each other. Do a little exercise below and see if helps:

1. Take out 2 pieces of paper, one titled Spend, one titled Save.

2. On the Spend paper, write down the first answer come to mind when you ask yourself “why did I spend money?”.

3. Then continue to question the answer pop up until you run out of answer. E.g. if the answer to “why did I spend money?” is to entertain myself, ask yourself “why I need to entertain myself?”

4. Do the step 2 and 3 for the Save paper.

5. Most of the time, the final answer should be quite close meaning to each other (healthy vs lively or happy vs enjoy).

6. While looking at this 2 papers side by side, checking that feeling written on it, observe how your feeling changed when you are reading them.

7. Tell yourself that spending and saving are both aiming for the same end result, after this session both of them will combine together so well, working together so well to help you achieve better financial habit, help you gain more focus on achieve your purpose and erase those internal conflict in you when you are making a purchase decision.

This little technique has helped me to increase my saving rate and clear my debt. And I hope it can help you achieve better (or suitable) balance with your spending and saving too. Let me know if it helps.

Thanks for reading

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3 Things You Can Do In 5 Minutes That Improve Your Finance Immediately

I see finance as the most challenging part in our retirement journey (maybe because I don’t have a million of them yet.) In our current world, we still need some money no matter how frugal you are because this is how the system works. Beside money, we are now lacking of time to do anything and I think I will just take 5 minutes of your time to share what I think can improve your finance.

1. Calculate your total net worth

Spend 5 minutes to calculate how much have you accumulated over all your working years so far. If you still have debt (student loan/credit card bill/mortgage/other loan), you might be in negative net worth. For me, this is an easy exercise because all I need to do now is to look at my bank account and I can know my net worth immediately. Being aware of how much money I have helps me make better purchase decision and also my progress towards my retirement number.

Things could be complicated if you holds much more investment tools than me, but isn’t that a good news?

2. Get a free/profitable hobby

My hobbies used to be very expensive (at least according to my current standard). I spent a lot of money on buying book (but not reading enough of them), I also spent a lot on sport equipment like sport shoe, badminton racket/string, roller blade although I only play badminton fortnightly, run maybe once a month and I don’t know how the roller blade works.

After I get to know the blog of early retirement extreme, I get a few ideas from the blog about creating free (or profitable) and enjoyable hobby. Nowadays I spent more time reading than buying books (library is a great source), making full use of my running shoe now (run 2-3 per week), starting a blog (this one, it cost some money but I view it as a investment for me to learn about how to manage a blog as a business).

3. Get started at financial education

Property, stock, business, antique, painting, etc… There are so many investment choices available on the market now and it is confusing for me. I first learn about index fund through Mr Money Mustache blog and Early Retirement Extreme blog, it sounds like a reasonable choice t me. But I also agree with what is written by Jacob on his ERE blog about investment, we should understand investment enough first before we put in our hard earned money into it.

I have received many recommendations of books and online course about investment from few forum posts I posted. You might want to check them out if you are interested.

Although I start this post with things you can do in 5 minutes that helps your finance but I think every item listed above require time and effort to learn. I think the time line for me will be 5 to 8 years based on my current saving rate.

Let me know what you think is the next important thing during your retirement after you have taken care of your finance.

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4 Pillars of Early Retirement

The journey to your early retirement doesn’t have to be complicated, and sometimes it doesn’t require big change to your life. You simply be more aware of the decisions you made and doing more and better the things you have done right so far. Basically there are 4 pillars you need to take care of before and during your retirement:

1. Income Generating Ability

Money plays a very important part in your everyday life nowadays. Gone are the days where human can survive on the land they reside on and the environment around them. Unless you inherited a big pile of money, we all need to start from the same starting line when come to generate income.

If you were like me, you would be working for a company serving their customer. For the most of us, this the primary way for us to generate income. As saving rate is very important when we talk about retire early, the amount of income you are able to generate every month directly affecting your pace.

For example, it will be easier for a person who earning $120K per year to achieve 80% saving rate compare to another person whose annual earning is $24K. Although monthly income plays a very big role in determines the speed you get to your retirement, there are 3 other crucial pillars in life you need to develop.

2. Investment/Money Management Skill

I recall from some book I read before that financial education is very important in today world. Although I don’t agree his condemn on saving money, his words make some sense about getting ourselves financially educated. Currently I am reading few books recommend by people in this forum post, there are a few online free courses on investment and money management too.

3. Life Skill

Time is money. If you have a lot of money (like few millions dollar), you can really buy your way to your retirement. If you are normal person like me, you will need to invest some effort to learn skill that enhance your life without spending money (or maybe little money).

In my view, cooking skill being one of them. Other skills that I deem essential are cycling, various house improvement skill (paint your house, plumbing, flooring, appliance installment, etc…) and planting(grow your own natural food, good idea?).

4. Frugality

This is one of the trickiest pillars that hold your early retirement. With frugality (whatever your definition is for this word) in place, you won’t need as much income to fund your retirement. I am pretty confident I am doing quite well in this pillar. My expense last month is as below:

Rent: 8.51%

Parent: 8.76%

Food: 7.09%

Transportation: 3.55%

Credit card bill (2 more months to go!): 6.17%

Change to RM: 3.55%

Others: 0.5%

Saving (all going to loan repayment): 61.78%

I foresee my expense will go lower after I pay off my credit card bill and personal loan from my sister (thanks sis!). My transportation cost will go down also if I successfully execute my experiment.

So, I estimate my expense structure will be:

Rent: 9.22%

Parent: 8.76%

Food: 7.09%

Transportation: 1.77%

Change to RM: 3.55%

Saving: 69.61%

I am pretty happy with my progress now (retiring in 8.5 years sounds really good.^^). But I want to go further. I hope to achieve 80% saving rate and retire 3 years earlier. My focus now will be on increase my income because I think I have nothing to shave from current expense structure now and the only way to increase my saving rate now will be either increase my income or create another auto pilot income source.

Now is your turn to make decision. Decide which path you want to take to increase your saving rate and have more freedom now.

 

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How I free up more time for myself

Time, the only element in our live that has an uncertain and finite supply. Nobody know how many time we have on earth and we all glad to have more free time for ourselves to relax, gather with our loved one or complete some personal project.

I finished the book “4 hours work week” few weeks ago and I am hooked with the idea of “information diet” explained in the book. The idea of information diet is that we as modern human has access to overwhelming source of information, and we are capable to search millions of related information source with Google. With information overload came stress and inaction, we need to spend time and energy to filter this huge source of information and we are not taking action because we thought there will be always another better source of information floating around the web. Then we continue to surf the web for few more hours for more information before we realized the first few are enough for us. By the time we had enough of information, we are exhausted and lazy to take any action.

How to reduce your information diet? It works about the same way how we should plan our diet if we want to eat healthy.

1. Don’t starve yourself

Like how a healthy diet should be, when you start to taking care of your information diet, you don’t starve yourself from every single source of information. I don’t know about you, but that didn’t work for me. When I start to take note of what information I consume daily, I realized I spent quite a bit of time on newspaper,email and Facebook post every day. And I shut myself from all those source from second day onward. By third day I already craving for all those information I used to consume every few minute. So, reduce gradually, don’t go for the extreme the first day.

2. Avoid the junk information

Junk information not only refer to those giving you wrong fact but also those provide you no value to improve your life. Everyone has different definition what is junk information means to them. For me, I am not interested in some celebrity wear a new clothes for the new season or some star starting a new relationship with another star. I also not very interested in those “offer” available either in real world or online(think groupon).

Information that means junk to me might not apply to other people. For someone working in showbiz/magazine business, celebrity gossip could mean very different thing to them. That is their job to report every single little thing of celebrity to boost readership.

So, find out what information is junk to your life and avoid them like crazy.

 

3. Have a schedule

Batch processing is a good way to use your time more efficiently. I deleted my gmail and Facebook account from my smart phone to preserve my attention currency. Without Gmail or Facebook notification every few minutes, I can focus more on the things on hand and complete it in shorter time.

Nowadays I process my email at the end of the day. I normally delete those useless spam or promotional ads, archive those email that does not need my attention immediately( and unlikely need my attention too in the future). I normally keep less than 10 email in my inbox and sometime less than 5 email.

 

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