Why Do You Need Life Insurance – Part 2

This is part two of a two-part series where we shall be tackling the reasons why you should get your life insured and how it could secure yours and your family’s financial future.

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Sickness, Accident and Disability Coverage
Does your family have a history of hereditary critical illnesses like certain type of cancers? Many insurance plans include add-ons, otherwise known as riders, that offers coverage not only on your life but during SAD (Sickness, Accident and Disability) events. These add ons usually give lump sum payouts once you’re diagnosed with critical illnesses or encountered accidents and you would need substantial amount of money to pay for hospital and therapy expenses. Critical illness benefits usually already covers a wide range of illnesses like common cancers, kidney failure, loss of hearing or sight, heart diseases, etc. A total disability rider could also already cover your insurance charges on times when you become permanently disabled and could not afford to pay for your insurance premiums, you don’t have to continue paying anymore but still be insured. I know it’s hard to talk about topics like critical illnesses and disability but this is important as this would give you PEACE OF MIND and would provide your family the FINANCIAL HELP just in case events like these happen. It’s always BETTER TO BE PREPARED.

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Your Children’s Education
Once of the joys of being a parent is being able to send your children to school.
College tuition fees and other miscellaneous expenses increase every year and many of the parents of college-aged children struggle to keep up. Well you don’t have to struggle anymore as many insurance plans already enable you to start investing early for your children’s future. There’s a type of insurance plan, VUL or Variable Universal Life, that is already tied up with investment and I strongly suggest that you get yourself one for your children’s college expenses. Basically, what this policy does is it set asides a part of your premiums to invest, this investment may grow to a significant amount that would help in your child’s education expenses. What if something happens to you before your child reaches college? Because this plan is still life insurance, the insurance proceeds will help pay for your child’s education.
So what you’re doing here is MAKING SURE your child gets through COLLEGE.

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Forced Savings
Because of your so many priorities and wants, most of the time investing and saving take a backseat. As mentioned above, a VUL or Variable Universal Life is an insurance+investment combo which not only could provide financial coverage during untoward health events and death but also forces you to set aside of your earnings into an investment fund. The key word here is FORCED. The amount that you would otherwise spend in things that you don’t really need as diverted into investment that could help you in the long term. It’s the gift of FINANCIAL FREEDOM to YOUR FUTURE SELF.

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Retirement
You can’t work forever.
After decades of the tiring daily grind, the last thing you’d like to worry about on your first day of retirement is how to survive for the rest of your life because you don’t have anything left in the bank. Go on a trip out of town or out of the country, take a walk in the beach or just lounge around all day, your call because you started early with your VUL policy you have enough to get through retirement and still a lot in excess to enjoy the fruits of the dozens of years of hard work. It all comes down to what you want to do, spend everything today and have nothing during retirement or start the habit of investing and look forward to a happy life when you retire.

You don’t have to start big. As small as 1500 a month or that’s 33 a day for only 10 years, you could already insure yourself and invest! Your investment could grow to 1.4 million pesos when retirement comes. (Computation is based on a policy for a 30-year old female with 700,000 life coverage with Accidental Death Benefit with Total Disability Benefit and premium payments for 10 years and with 10% annual investment increase (growth varies and not guaranteed), actual computation may differ due to certain factors such as but not limited to age, gender and health conditions).

Are there anything discussed in this post that you could relate to?
Do you need help in starting your journey towards financial security?
We might be able to help, drop us a message or call us through +639175005625 or leave your contact below and one of our licensed financial and insurance advisors will get in touch with you to discuss and build a custom financial plan that you could follow to achieve financial security for you and your family.

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Why Do You Need Life Insurance – Part 1

In this two-part series, we shall be tackling the reasons why you should get your life insured and how it could secure yours and your family’s financial future.

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Income Continuation
When you are a working parent with children dependent on your income or still single but the family’s breadwinner, you can’t afford to die. Well, unless your life is insured. In your absence, the income that your family is totally dependent on will stop and that’s when your life insurance proceeds kicks in. For example, if your dependent’s expenses is about 20000 pesos a month, a 2 Million life coverage will provide for them for over 8 years after you’re gone! That should give them enough time to emotionally recover from your demise but shouldn’t have to worry about the financial setbacks of you going away.

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Mortgage Redemption Insurance
Most banks require you to purchase MRI or Mortgage Redemption Insurance equivalent to the loaned amount before they release the loan proceeds. This is for the bank’s and your beneficiaries’ protection in the event of your demise. The insurance proceeds will pay out the remaining payable loan and will enable your beneficiaries to transfer the house/condominium in their name without the burden of taking over the loan payments.

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Estate Tax
All the properties and other assets, including cash deposits, you’ve accumulated throughout your lifetime don’t just get transferred under your family’s name after you die. They have to pay the government estate taxes equivalent to up to 20% of the total estate that you left behind. You beneficiaries may be able to immediately claim your insurance proceeds and use them to pay for the estate taxes. In the absence of life insurance, your family must shell out the estate taxes on their own and may be forced to sell assets at a discount just to raise the required tax payment.

There, beyond the horizon, is your retirement.

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It’s start as a soft whisper during your early working years, a gentle reminder when you started your family and slowly creeping dread when you reach middle age. Retirement comes for those who reached the age but you don’t have to dread it, it should be something that you look forward to; after decades of backbreaking work this is the time that you seat back and enjoy the fruits of your long labor. Well, that is, if you planted something.

It’s quite obvious but most of the time it’s needed to be said: the best time to prepare for retirement is when you’re still young and able.

You may ask “How much would I need for retirement?”

Get an estimate of your annual expenses, for example, if you spend for yourself 20,000 pesos a month, that equates to 240,000 a year.

Factor in the inflation and the number of years until your target retirement age. If you’re 30 years old now and you plan to retire by age 65, you still have 35 years to prepare. Let’s say the average inflation would be 3% per year, you could get your annual retirement expense at age 65 by this formula:

retirement annual expenses = present annual expense X (1 + inflation rate) ^ years until retirement

retirement annual expenses = 240000 (1 + 0.03) ^ 35

retirement annual expenses = Php675,327

and that’s only for 1 year! Nobody could tell how much long we shall live after retirement but say we prepare for 15 years of retirement. You could still factor in the inflation but to simplify let’s just multiply this number by 15. That’s about Php10,130,000.

Before we continue please note that you left your mouth opened in surprise. Pakisara muna, besh.

That’s only an estimate as your lifestyle may change as the years go by or you adjust your retirement age so it could be a constant changing value but why we’re doing this is because you need a target number, something you will aspire to achieve and I feel you if you’re shocked and overwhelmed but this should not deter you to start planning for this. Fortunately, there is a lot of ways you could prepare. You could build your retirement fund by regularly investing part what you earn now and in the future you’ll realise that 10M is very possible.

Now you know your “Magic Number”, how do you get there?

 

Petsa De Peligro

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So it’s a few days before the next payday but you’re already broke. You look into the deepest parts of the pockets of your jeans: bus tickets, movie passes, receipt from last week’s coffee run. No loose change, nada. White chocolate mocha, dinner buffet, midnight screenings all seems so appetizing now but all of these are in the backseat, on top of your list is this all too familiar problem that not surprisingly appears once of twice a month – where to get enough change to afford a trip to work? What’s for lunch? Hangin, inhale exhale na lang. About your fare back home? That’s what office best friends are for, assuming he’s not stuck in the same rut.

Petsa De Peligro is here and you’re wishing it’s over.

Don’t blame it on your pay that it didn’t come more often or your pay’s too low for your needs.

Blame yourself.

If you don’t change your spending habits I’m sorry to tell you that Petsa De Peligro will haunt you back a few days before your next payday. Fortunately though it doesn’t really take a lot to totally avoid dark days like these. Just a few small tweaks here and there in your spending habits could totally erase Petsas de Peligro in your calendar… Forever.

Why don’t you give the following a try and be surprised how it’ll make your financial life better:

Wake Up Earlier Than Usual

Wake up 30 minutes earlier than usual and you have enough time to cook for yourself breakfast and lunch baon. This way you won’t have an excuse to splurge on fastfood meals just because you’re running late. Yes, even fastfood is splurging, anything that you’re unnecessarily spending on is splurging. An easy 100 pesos slashed from your breakfast and lunch spending by adjusting your alarm.

Wake up an hour earlier than usual and you’ll be able to leave your home earlier and skip the heavy traffic that comes with the morning rush. What could have been a 250 pesos cab ride is now just 20 pesos bus ride. You just saved 180 pesos, beshy.

That adds up to about 6000 pesos a month!

Mental Note: You Don’t Earn More During Paydays

Nope, check it with the payroll department and they will nod in agreement, you don’t get more because it’s payday. So why do spend more? Because you deserve it after a couple of weeks of hard work? That’s BS. You only feel the need to pamper yourself because during the days leading to this glorious payday, you’re struggling and you feel so undernourished because you spent all your money faster than you need to, with reckless abandon on the previous payday. Get it? It’s a vicious cycle that would only stop if you treat every single working day the same. If you really want to reward yourself I suggest that you save up for a vacation where you could exhale all the negativity and recharge your spirits for the work days ahead.

It Doesn’t Taste Better Because It’s Pricier

It’s all in the mind babe. Get your mug, run to the pantry and fix yourself a good cup of coffee. If you’re lucky enough coffee is free where you work but if it isn’t then buy yourself a nice 3in1 coffee, which would set you back less than 10 pesos. Coffee doesn’t have to be expensive to be tasty. If you’re wondering why coffee shops charge you more, it’s because of the ambience and not unless they let you bring a piece of furniture home it’s not really worth the pesos you’ve worked your butt off. If you really insist that coffee tastes better from them then buy their beans instead. Have the beans ground to your liking and make yourself a cup of coffee at home. Dim the lights in your living room, suot ka ng sweater tapos hawakan mo yung red mug with both your hands then look out the window while drinking your joe para may ambiance. Your bank account will thank you for this.

10 pesos instant coffee vs 150 pesos designer coffee – Instant coffee wins by about 3000 pesos a month; that’s 36000 pesos per year!

Same goes for a lot of things. If you could find cheaper alternatives to things you need and want without sacrificing quality then by all means buy them. Don’t pay someone big money for things you have time to do yourself, like making coffee; be practical.

In conclusion, the keyword to avoid Petsa De Peligro is discipline. You should adjust your spending lifestyle with how much you need not with how much earn. Financially free people spend way below their means so if you’re spending more than what you earn then you’ve got some work to do, buddy.