I enjoyed the tips. I was wondering if I could use your cartoon on compound interest for a “Bring your kids to work” chat for kids that are visiting my work?

Thanks!

Joe

2) traditional insurance
They are invested by a fund manager. Some of funds are used to pay claims and expenses, while the others are declared as bonuses.

3) term insurance
They have no cash value, so they are the cheapest. You buy just the protection.

I believe you were talking about just Type 2. But there are Types 1 and 3. If you want to invest your own fund you may choose Type 3. For example, most hospital and surgical insurance plans have no cash value. H&S is the most basic insurance that I think all of us should have at least a basic one. Medical costs can be very high. So, I’d buy one from a country like Singapore, Malaysia, or Thailand if I were a nomad in Southeast Asia most time. Insurance plans in these countries are cheaper than those in Europe and USA. They can cost as little as US$100-200/year. Averagely, that is about US$8-17/m. It’s just coffee money. I don’t think there is any reason to squeeze our budget even on this important financial protection. If I were to squeeze, it’d be on a few Starbucks treats or McDonalds’ meals which are totally optional for me.

For example, the hospital insurance plan I have costs just US$120/year (US$10/m, which could buy me 2 McDonalds’ meals or 2 Starbucks coffee perhaps). It covers 100% (first dollar) of hospital bills in government (restructured) hospitals in Singapore (virtually all of which are JCI-accredited, which means they are all of world-class standard), subject to an Annual Limit of above US$100,000 and Unlimited Lifetime Limit. Additionally, there is a daily hospital cash. I can use it to cover my travelling expenses back to Singapore from, say, Thailand or Malaysia. A return ticket from these countries to Singapore is around US$150. So if I can claim US$50/day of hospitalisation in Singapore, I can cover this cost if I am hospitalised for 3 days or more. I can renew the plan for as long as I live and the premium will increase gradually as my age band increases. I may also claim for Emergency overseas treatments. So, when I finally reach my financial independence like Chris did a few years back, I will keep this plan. If I have any emergency like accidents overseas I may seek treatments, pay the bills first, hen file for a claim with this insurance company. If it’s not an emergency case, I may go back to Singapore to seek treatment at one of these world-class restructured hospitals. I will be assured a high standard of service and I don’t have to worry that my nest egg will be depleted. due to a serious illness that may require repeated treatments.

Even for those who believe in investing on their own. they can buy sufficient term insurance with no cash value or ILP. For example, you should buy enough to cover:
1) Disability (e.g. stroke, paralysis, accident)
2) Long-Term Care (e.g. frailty, dementia)

The above 2 types are particularly important. For nomads without dependants, they may not want to leave behind any estate. But what if you are surviving but bcos you met with an accident, you lose mobility and need to be cared for? Who’s going to pay for the nursing? Or what if you grow old one day and become frail? Research shows that 1 in 3 elderly people in USA will need LTC. So, it’s not an unlucky thing, but common thing, to require LTC.

After buying your LTC and H&S Insurance, as a nomad, you could have more peace of mind. While you are healthy and mobile you can enjoy your travelling. When you are sick, the H&S will not cause you to worry about depleting your retirement nest egg. When you grow old one day or meet with an accident, you can also be assured you have enough coverage to allow you to carry on your life with dignity.

2) After you have been insured sufficiently (your entire human capital value), you should then save regularly.

3) After you save regularly, you should set aside a 6-month Emergency Fund that covers your expenses for 6 months in case you are out of job

4) After your 6-month Emergency Fund, you should invest most money in an equities and bonds, diversified fund regularly. The younger you are, the higher should be the equities allocation. If there is a tax-deductible scheme such as 401 K, use it to your advantage.

5) As your income increases, make sure your expenses don’t increase just as fast. Keep budget low.

6) Once you have accumulated enough assets to become financially independent, and you have no other dependants, consider to relocate to a cheaper location, then retire partially or fully.

7) After you have retired, continue to earn an income, even if it’s a small amount. Consider blogging, writing, teaching, etc. Spend less time to earn money, more time to enjoy what you love to do, such as travelling, and keep your expenses low.

8) If you are holding the citizenship of a country that taxes your worldwide income regardless of your domicile, consider to renounce your original citizenship and acquire another citizenship of a country that treats offshore citizens more fairly. If you do this, always go for government programmes. Don’t be cheated by con artists that offer questionable citizenship programs without official government approval.

9) If you have additional fund beside your retirement income nest egg, consider to invest in a permanent visa of a country you would love to spend most time in. Examples include Malaysia (at least US$45K for retirees) and the Philippines (at least US$50k for retirees). Your money will be invested in stocks or band deposits and the investment must be maintained for you to keep the visa. It gives you rights to live in the country permanently and enjoy the low-cost healthcare services, housing and other services.

10) Of course, your retirement nest egg should be invested in a financial centre with sound financial regulatory framework, strong currency, political stability and consistent budget surplus. Avoid countries with huge debts and budget deficits. Their governments may be forced to depreciate their currency or increase taxation.