I have posted in January about how I wanted to do debt diet. Fortunately, this one I managed. I have trimmed down my debt and I can proudly say that I am now free of debt. But I have almost no saving.
According to those financial planners' blogs I read (they are on the list of My Daily Reading on the right side of this blog, by the way), the next things I should prepare are:
- Protection (Insurance)
- Emergency Fund
- Education Fund (for my future children)
- Retirement Fund
Now, how much we should prepare for those funds, and what financial products we should buy, they all depend on each of our goals, so what works for me might not work for everybody else.
Note: Now, excuse my English terms in all this financial matters :D The blogs I read are in Indonesian, and I am not familiar with finance terms in English :D
Let's talk about number 1 first in this post: Protection/Insurance according to my family's goals. After quite a long research, we decided that we would have:
- Life insurance for the bread winner (20 year term life)
We will have term life insurance instead of whole life insurance. It needs a lengthy explanation to differentiate them, so Google them if you want to know more. Or maybe someday I will post about them
- Health insurance for both of us, husband and wife
According to our family's goals, we will have a very affordable health insurance when we go back to Indonesia. We will choose the cheapest hospital room available because we realize we don't need a fancy room and because it's what we can afford now.
The importance of having protection/insurance in a Financial Plan is because protection can ensure the implementation of the plan continues to run when undesirable things happen (such as illness, death or an accident).
Image is from here
One option that a lot of insurance agents in Indonesia offer when we need to invest, to have life insurance, and to have health insurance is: Unit Link (a hybrid of investment and protection). However, after reading those financial planners' blogs and after realizing how my own Unit Link investment does not grow much after 5 years, I decided to separate between investment and protection.
On the subject of why Unit Link is not recommended by my goals, you can read (they are all in Indonesian):
- Kenapa Tidak Pada Unitlink (Bagian 1)
- Kenapa Tidak Pada Unitlink (Bagian 2)
- Kenapa Tidak Pada Unitlink (Bagian 3-Habis)
- Asuransi Unit Link vs. Reksadana
Note: I never mean to give difficulty to any insurance agents selling Unit Link. Unit Link just does not suit my goals :)
In the next post I'll discuss about Emergency Fund.