Reflections

I know I've not been blogging for some time, so here's my feeble attempt to do that.

Blogging has always been a reflection of myself. Though I've not been writing, I've always been reflecting. So, maybe this blog article will just log in some of the things that I've been thinking about since the myriad things I reflect are too short to exist as an individual article by itself.


1. Most dominantly on my mind is how to make more money. Ya, I sure know how it sounds like. But that's the truth. I'm still trying to meet my 50k target by this year end, and am most happy to say that for my target set per month, I managed to do it. But it's getting tougher and tougher to do that. Hey, setting a goal is the first part. Relentlessly pursuing it is the next part. Who ever said it's going to be easy?

Sometimes the only motivation for me to keep doing work at the pace I'm doing is the elusive utopia that I won't be doing this forever and I'll be financially free from the burdens I'm carrying now. I need to remind myself why the hell am I saving for.


2. Time and money. I need to leverage my time more. I NEED to earn more but work less. I know it can be done and I just need more time to do it. That would be one big goal settled, if I managed to pull it off successfully. This will really seriously accelerate my goals of being financially free.


3. Endowment plans... I always try to separate my insurance from investment. For example, I never try to use whole life as an instrument for investing and will not compare the returns of whole life to say a fund returns. I've no intention to cash out my whole life policy to get the cash returns (though it's good to have an option if I have to) hence will not launch into the big debate about buy term invest the rest philosophy.

What I want to say is that endowment plans does have its uses as a savings plan. Endowment plans have a lock in period, maybe like 10, 15, 20, 25 yrs, which you have to pay premiums for a certain period (like maybe for 5 yrs only). I think a typical endowment policy will give returns of like 3-4% projected. But for planning purposes, I suggest taking a look at just the guaranteed part. If you put in 50k in premiums, if I get back say 70k guaranteed, I'm fine. Any extra coming from non-guaranteed part is bonus to me.

Ever though this will severely underestimate the returns from endowment policy, it will prevent disappointment when the policy matures in the 10-25 yrs later. I'm trying to protect the downside here, because while investment returns can yield higher (maybe 6-10% pa?), investment returns are non-guaranteed at all. Can I bear the consequences of not being able to meet my savings target?

So, if I have a child today and want to save up for the education needs of say 70k in 20 yrs time, perhaps I will subdivide the 70k savings target into two. The first will be dumped into endowment but looking only at the guaranteed part only. The second will be to do my own investment.

To illustrate, I'll do 60% in endowment, meaning 42k. I'll go hunting for an endowment that gives me 42k guaranteed in 20 yrs time. Then for the remaining 40% (28k), I'll do my own investment. I just need to start off with around 9k (8,730 to be exact) and earn a compounded annual growth rate of 6%. I think that can be reasonably achievable.



Mega downside: I'm in heaven, but at least with the endowment policy that I bought, it can still continue saving after I'm gone. You can get a lump sum payment...that's the best I can do. Love you, kiddo, will be watching over you from up here. Take care of mummy.


Super downside: Daddy can't work after the accident. At least with the waiver of premium, the endowment policy can still carry on. Sorry kiddo, you might have to borrow some money.


Downside: I lost all my 9k and I have a shortfall of 28k. Hey, daddy tried his best, I'm sorry kiddo, you have to loan the remaining 28k yourself. At least daddy can sponsor you 42k of your fees, representing 60% of the amount you need. Be thankful.


Upside: I have more than 70k because the endowment gave me an extra 3% returns and my own investment generated 10% returns. Hey kiddo, you can keep the money to start your own little venture and own stock investing.



I'll rather protect my downside. It'll be sucky not to be able to give your child a good education. I'll seek to minimize my maximum regret.


~I'm not a financial advisor. If you act after reading this personal ranting about my life, you seriously need to find a qualified one. Run, don't walk.