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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Be Unrealistic To Retire Early

I am a fan of early retirement extreme, its idea of retiring early in 5 years by pump up saving rate to 80%, equips ourselves with various life skill and making the suitable life style choice sounds pretty solid and doable to me.

Retire in 5 years?
However, I do understand that what I am going to embarks sound foreign to maybe 99 or even 99.5% of the population in Singapore. My conversation with friends about this idea of retire early always came back with questions like “can it be done?” ”What are you going to do with all those free time if you succeed?” “Working is very important, retire early is just being lazy.”

Another common objection I received is the living cost is so high nowadays, you can forget about retire without a high paying job. I must say I agree to certain degree that living cost is high in a country like Singapore, but I do believe that are ways for us to reduce our living cost to the minimum without sacrifice the quality of life.

Learn Life Skills
It is helpful to learn things like cooking a simple meal, mend the pant or bag instead of buying a new one, cycling to get groceries instead of driving or making effective DIY cleaning product from low cost ingredient. As you growing your life skillset, you will realize you don’t need that much money as before because you don’t need to spend money to buy solution for every problem you encounter in life.

Another added side benefit might be the increased fitness level when you cycling or walking more than before. You are using your arm and your leg power now to transport your groceries instead of car, and lets admit that life is easier when you are stronger and healthy. You moved faster, complete work efficiently, and recover from sickness (if you still fall sick) earlier.

Getting Ready
It is not easy to be retiring early. Depends on your situation, you might need to get ready for the changes coming your way if you decided this retirement deal sounds good to you. In my opinion, first thing came to mind when talking about retirement would be the finance resource. Where is the money going to come from? Personally I prefer index fund or big stable stock that give out dividend. The reason why I prefer those two investment vehicles is because they are truly passive and might have a higher chance that give me stable income source when I retire. Property in Singapore is crazy right now, and people with a middle class salary like me are priced out from that market. It is the playground for the rich.

Another thing you might want to prepare yourself would be the noise from people all around you and most probably the one closest to you. Because this early retirement extreme idea is still in its very early stage, not many people has heard of it and believed it can be done. So be prepared for doubts, excitement and enlightenments that coming your way. If you managed to convince one of them that this is an excellent idea, you can always refer them to this site for more information.

Find A Support Group
Of course, when you are just getting started on your journey to early retirement, it is important to get support from people who believed in what you believed and doing what you are going to do. There are many forums around the Internet that packed with people like you and me who either achieved early retirement or still on their way to it. One of the forum I frequent is ERE forum, I like communicate with people there, discussing about our progress, getting encouragement from people there when I cleared my debt, reduced my food cost or giving away my stuff.

Choose Things That Excite You
I am reading the four-hour workweek book from Timothy Ferriss now, and I like one of the ideas he mentioned in his book. If you are not getting ahead or having the success you think you should be getting, maybe you have been asking yourself the wrong question. Asking yourself “What do you want?” or “What are your goals?” and thinking hard for the answer obviously not working for you right now. Instead of using ambiguous questions to confuse yourself further, maybe you can ask yourself “What would excites you?” or “What would brings you the most joy?” Is it bringing up your children? Is it the project you are working on right now? Or is it a place you have been dreaming to spend your time there?

Everyone’s answer is different. For me, being able to spend my time reading my favorite history book, trying new recipe and baking cake certainly bring me joy. My current job also gives me many opportunities to learn new technology and the colleagues around are all very helpful and sometimes inspiring. However, for most of the people, their choice will be picking up more activities to fill up their free time when they are free from their job. But this does not means that you need to quit your job immediately when you achieve financial independence. If you really love your job and you think that is a good way for you to contribute to the society, keep up the good job at your job and continue to give your best to the company. I have met few people who really love their job, and they can talk about their job all day long, promoting their company as the greatest company in the world. To me, that is a blessing.

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A Running Experiment

In preparation to the free travel coming up in the June 2013, I am thinking can I reduce my transportation expense to the extreme, zero. So, my zero transportation cost plan run like this:

1. Wake up as usual time around 6 to 6.30am
2. Instead of doing my run in the morning, I switch it to early MRT ride. Cost incur: $0
3. Move my running schedule to evening time when I am off from work.
4. Run from office to home in the evening. Cost incur: $0

So, I opened up my internet browser and type in google maps to check the distance from my home to my office. The number came up to 14.2km, not bad but it is a bit out of my usual running distance. My usual running distance is about 3 to 5km and it took me about 25 to 40 minutes to complete that distance. I started to have doubt on this distance….

I started my experiment yesterday when I was going back home from the office. With just wallet, phone and water in my bag, I started my running journey home. The result was not great, I am almost punctured after 30 odd minutes of running. And it is close to impossible to run at Little India area because there is simply too many people there. After Little India, came a smooth journey from Boon Keng to Potong Pasir.

The up and down slope from Potong Pasir all the way till Serangoon slowed me down a lot. I was not out of breadth, my leg were too tired to carry on the journey. Every MRT station suddenly look so tempting and attractive every time I ran pass them. I keep thinking to myself, “what a stupid idea to conduct this kind of experiment, I should just take out my Ez link and take the bus or ride the MRT.” Luckily there is another voice keep reminding me that I should finish this goal since there is no pain or discomfort encountered.

So, step by step I ran through that 14.2km from office to my home, it took me 1 hour and 56 minutes to complete the journey. Surprisingly, I was not very thirsty when I completed the journey, I guessed that 500ml water I brought along with me for the 14.2km was enough to hydrate my body. I drank 2 more glass of plain water last night to make sure the body have enough water.

Another thing I noticed when I woke up this morning is my body and leg was pretty much recovered. There is still a bit tiredness and laziness to get up (who isn’t?) but it was very much manageable. I clocked another 4.27km this evening so I think I am pretty much on my way to complete my 150km ran by the end of the year goal (actually I think I can increase this goal).

While it was manageable for me, I don’t recommend everyone go try this experiment, I for one will reduce the size of the experiment. My future plan for this will be:

1. Wake up as usual time around 6 to 6.30am
2. Instead of doing my run in the morning, I switch it to early MRT ride. Cost incur: $0
3. Move my running schedule to evening time when I am off from work.
4. Run about 5km in the evening, either align earlier or run 5km first. Cost incur: $some

This plan will not reduce the transportation cost to $0, it will cut at least 50% and more so when my fitness level increase. My main concern still with the time spent on this activity, with normal transportation, I spent about 1 hour to get home by bus/MRT. I was thinking if I can get home by leg in 1 hour and 30 minutes, it might worthwhile to do this because I usually spend about half an hour exercise anyway. Hopefully this plan will eventually build up my stamina and strength to improve my timing.

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A Financial Question That Cannot Solve With Financial Solution

If you shop around credit card market frequent enough, you will see many balance transfer offer from the banks. The basic idea of balance transfer is help you “save” on the interest you might need to pay on the balance you have in your credit card. Instead of label bank as evil money sucking machine, let us focus on the problem itself, why is the balance there in the first place.

I have been reading a lot of personal finance blog when I was searching for ways to clear my student loan and have received many ways to manage debts. Some suggested paying off the smallest loan first, some suggested paying off the loan with the highest interest rate. They all are decent advice that either make emotional sense or financial sense after you incurred the debt. What are missing is why are we in those debt in the first place.

Lack of information
I made my first loan commitment decision when I was 21 years old. The loan application form came together with my university admission form. The offer was an good opportunity for me at that time to receive tertiary education and secure a better future. I was able to complete my education with that loan in 3 years and went into job market with a degree scroll in my hand.

What I am missing when I graduated from the school was student loan also a form of debt, it bears interest rate and costing me more than $100 a month when I was paying $200 per month to the bank. I was ignorant and totally ignoring the fact that “$200 per month” is costing me a lot in long run. At the same time I received advice from relative and friend saying student loan is good debt and since its interest rate is so low, there is no rush to pay off that loan. This definitely not a good advice among all the advices I received over the year.

Back to the credit card balance scenario, I believe most of the people have realized what credit card offered was not free money, it bears interest rate and the interest rate is very high, up to 28%. We should view it as a convenient tool to pay for our purchase rather than free money from bank. Making just the minimum payment per month is not acceptable at all because with the finance charge and future purchase you are going to make, it will cost you three arms and four legs to pay off that debt.

So, if you are feeling you are not getting ahead in your debt management, it might be helpful to filter the information you receive and really plan something that working for you and you only. But I think the universal solution to debt is always pay it off as fast as possible and no excuse should be made.

Brainwashed by marketing
We are all influenced by marketing at various level and I believed nobody can escaped from it. The question we need to ask ourselves is whether the product presented to us really helps us in the long term or it just give us a sense of excitement for 3 days before we get bored of it.

I experienced this process with my iPad 2 purchased 10 months ago. It gave me maybe up to a week of excitement for owning it and I rarely use it nowadays because I mostly works my stuff on my laptop. I believed I am not the only one who with this experience because I read so many buyer remorse review on the web and from my friend.

It is very difficult to avoid marketing or advertisement in today world. They are everywhere wherever you go. One of the method I like to use now is delay my purchase decision. Put the items you intend to buy into a wish list and wait for 3 days (or whatever numbers of days that works for you). If your desire and justification is still strong after 3 days, and you have fully understand the benefit from that product, it should worth your money and effort.

Lack of planning
Things happens. If we view our life as a long period of time, things happens. It might be an accident, illness, job loss or opportunity. Whatever it is, it require fund, sometimes a lot of fund. Insurance in this case is a must for all of us (unless you are so poor that you don’t ever know where your next meal is). The idea of insurance is to insure us against financial disaster we are unable to take it. For example major illness or serious accident that take away our ability to work and costing us a huge amount of money.

Other than insurance, an emergency fund should be save up to handle any less intense incident happens in life. For example job loss or some other unexpected family expense. The size of the emergency fund vary among each individual due to different lifestyle but a fund with size equals to 6 months of your salary should be enough yo tide you over those unexpected incident.

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How A Team Works

Recently, I keep hearing the word team work, in my professional life and my private life. So, I got interested to observe how a successful works and this opportunity came just when I am ready. I just came back from a basketball game and brought back some points with me how a successful teaworks.

1.  Common goal
There must be a common goal for the team. Normally it is victory for a basketball team, a deal for the sales team, a group of performing students for the teachers or a group of happy customer for a restaurant. The reason why I say normally is because it can be very difficult sometimes to decide on the common goal. Everyone has their own agenda and the common goal that the top level people set might not be engaging so well with the people from a lower level. Ever in a simpler situation like a basketball game, everyone had different purpose. Victory might not be the common goal, might it is a social gathering or just an occasion for a weekly exercise.

So, common goal is the first step.

2. What is in for me
Next, we need to consider what is the trigger for each member in the team. Using the basketball team example, it might be the feeling of winning that motive the team member or the bonding that attract the team members.

One of the things I observed is the people in charge seems to think that people will just come together and work together to achieve the team goal. It never happen. There is a need for someone in the team that communicate the benefit every player can get if the team goal is achieved.

3. Sharing information
This part came naturally when a team is forming up. Sharing or exchange of information would start among the team member. I have played basketball for almost 18 years now, but every time I still can learn something from each individual on the game, be it their technique, their organisation skill or their drive to win.

Exchange of information have the benefit of equip the team members with the knowledge or technique they didn’t know before. Sharing information like how to recover after a game or how to do a pick and roll during the game can be very useful because sometime a team member will just present it at another angle that we didn’t know before.

4. Communicate frequently
During the game, frequent communication is very important. It serve as a link between each team member knowing how well is the team doing. A simple reminder shouting who should be in charge of which opponent is useful to ensure every member in the team knowing what should they do during the game.

Frequent communication also helps the team members to get to know each other better. By knowing personality, playing style of another person is helpful during the game because you will expect less surprise from him and you will know how to work with him to win the game.

5. Review
Review after the game give us an opportunity to look at the mistakes we made during the game. What strategy or tactic that is causing our mistake or failure? Is it because the players were still new as a team to fully understand each other? Or is it because there is some conflict among the players? This is a good time to talk about all this while preparing for the next game.

So, how’s your team performing?

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