3 Important Purchases You Can’t Afford Not To Make
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You can perhaps go without that Chanel winter edition bag, or those Nike shoes, or the new iPhone 15. Nothing is really going to happen if you do not own them.
But, there are some important purchases in life, which you shouldn’t go without. Without them, you could be heading down a visible path of a financial nightmare for you, and your family too.
1. Insurance protection
Medical conditions and deaths are never expected. Being covered by insurance helps keep your family financially safe and sound if something happens to you. If you have a family who depends on your income, then you should consider getting either one of these insurance, if not all.
Find the right medical insurance
There are various types of insurance policy that cater to different people. The most common insurance that everyone should get is a medical insurance.
A dialysis session cost at least RM250 today, all it takes is one serious sickness can cause one to go into bankruptcy. Insurance is to protect our finances, if we are financially secure.
Life insurance to protect your dependents
Life insurance is best for those who have dependents, like a stay-at-home spouse and/or school-going children. If you do not have other assets that will protect your dependents in the event of your death or complete loss of income, then life insurance is your best bet.
The sum insured is not meant to support your loved ones forever, but to at least give them enough time to pick themselves up and establish a channel of income in your absence. A common rule of thumb is that a life insurance policy should cover up to 7-10 times, the insured individual’s annual income.
Review your policies regularly
Other types of insurance also include personal accident insurance, home insurance, car insurance, and travel insurance.
Once you have purchased an insurance policy, make sure to periodically review your coverage, especially when you have a significant life event (e.g. birth of a child, death of a family member) and make sure that it adequately meets your financial needs.
A common mistake that people make is to be underinsured. For example, if a portion of your insurance proceeds are to be used for your child’s tertiary education, the more children you have, the more insurance coverage you will require.
Another common mistake is to be over-insured. The extra money you spend on premiums could be used for other things. That is why it is important for you to get a full financial picture so you can gauge the right amount and the type of coverage that is suitable for your specific needs.
Often, just a few ringgit a day is all you need to provide your loved ones with plenty of financial protection.
2. Invest to protect your financial future
Investing can be daunting and sounds complicated to most, so it’s no wonder some avoid it altogether. Plus, people think if you don’t have a big lump sum to invest, it’s not worth it. But that’s not true. You can still kick-start your investment with just an initial start-up amount of RM1,000 and be on your way to making gains. What kind of investments should you invest in largely depends on your goal, its time frame and your risk tolerance level.
Having a lot of cash doesn’t make you richer, in fact it makes you poorer. Cash is best kept as emergency savings for unexpected or short-term needs. This is because if you leave cash as it is, it is subject to inflation. RM10,000 today may not be able to buy the same amount of things 10 years later. However, a RM10,000 invested today can grow to RM 34,674.45 if you invest in an investment providing 6% interest compounded interest and RM1,200 additional investment annually.
Whether you choose to invest a small amount regularly or put a lump sum into it, it is always better than not protecting your financial future at all.
3. Plan your succession with a will/wasiat
A will is a legal document in which you declare your wishes for your loved ones and how to distribute your hard-earned assets after you pass on. Since death is a taboo subject, many have the impression that a will is only written by people who are dying soon, very old or have a lot of assets. This is totally not true as everyone needs to write a will.
It is hard to imagine your life ending unexpectedly when you barely have wrinkles, but writing a will should still be on the top of your to-do list in your 30s. You don’t need to be Bill Gates-rich to plan for what happens when you are no more.
Write a will to provide for your beneficiaries
If you die without a will, the law decides who gets what regardless of your wishes or your family’s needs. By having a will, you can provide for your beneficiaries in the manner you prefer instead. This is especially important for people with minor dependents (children below 18 years old).
It will help to avoid any frustrations, delay, legal conflicts, family disputes, extra cost and stress when the assets of the deceased are distributed. Without a will, your family may even face a long delay in obtaining their rightful inheritance. Preparing a will helps spare your family from unnecessary heartache, emotional stress and extra expenses in the future. If there are minors, a will can keep your wealth safe until the minor reaches adulthood.
For those who have assets like properties in other countries, it is also advisable to have separate will for each country to avoid any obstacles or delays.
Wasiat writing to ensure loved ones are taken care
Muslims in Malaysia are governed by the faraid or Islamic law of inheritance which determines how their estate should be distributed upon their death.
Under Islamic law, two thirds (2/3) of the a deceased’s assets belong to the heirs according to the Faraid Law. The remaining 1/3 of the unadministered assets after deduction of liabilities can be distributed in a wasiat. This portion can be willed to a non beneficiary who is not entitled to anything under Faraid Law.
In addition to a basic will, be sure you have an attorney to make legal decisions on your behalf and the will document to even specify how you want your digital assets (social media profiles, digital photos, etc) to be handled.
