Financial Risk Management – Stop, Look and Listen
【Personal Finance Series】
Photo courtesy/Pan Huating
▲The author is teaching comprehensive financial planning and asset allocation courses.
In the past, the Chinese world was influenced by the traditional thinking of "having more children and grandchildren means more blessings", so every household was filled with children and grandchildren, and there was also a culture of red and white envelopes with a strong human touch. Whenever family members have any weddings, funerals, weddings, or celebrations, they always send red and white envelopes to each other to show courtesy and help each other. These traditional cultures have caused the Chinese to lack financial management and risk concepts. Growing up, there were no classes on financial management in schools. Most of the financial management knowledge and concepts came from the family of origin and were acquired through various channels after entering society, such as newspapers and magazines, financial management lectures, or experience gained through spending money oneself.
With the changes of the times, many factors have had a great impact on traditional culture, affecting the Chinese people's lack of understanding and operation of long-term financial planning. Therefore, correctly tailored financial planning and risk control for individuals, families, and families has become a top priority.
Here, readers are guided to stop, watch and listen to financial planning: stop and review what factors make modern family or personal financial management so important; look at the importance and categories of insurance financial management; listen to the analysis and analysis of a financial planner suggestion.
Reasons for needing long-term financial planning
1. The impact of declining birthrate
As a result of the declining birthrate, the number of people in the family who can bear financial responsibility has decreased. If you have to support your parents, in the past when you had more children, the average amount shared by each child was smaller; but now you only have one or two children, the burden on each child is greater, and there are fewer people to discuss the difficulties! Not to mention the situation when parents are sick or even bedridden for a long time. In recent years, the proportion of DINKs (couples who do not have children) and unmarried people has increased, and they need to make complete preparations and plans for themselves.
2. Progress in biochemical technology and medical technology
In recent years, due to high industrialization and air pollution, natural ecology has been changed, global warming, land and environment have been destroyed, resulting in various diseases and injuries; and the rapid changes in science and technology and medical technology have allowed many diseases to be effectively controlled or prolong their onset; Cancer, which used to be called a terminal disease, can now be almost effectively controlled as long as it is detected and treated early. Human life span is generally extended. Under Taiwan's current health insurance system, many medical treatments must be paid for by themselves. Many people spend an increasing proportion of their retirement funds on medical expenses, causing great fear and loss of security for themselves and their families. The situation in Europe and the United States is similar.
3. Extended life expectancy leads to an increase in the average remaining life after retirement
The motto for retirement has recently become popular in Taiwanese society: "Income is interrupted but expenses continue." In the past, when Taiwan was an agricultural society, there was no concept of retirement. You had your own land to grow vegetables and raise chickens, and you could just live your life by selling your excess at the market or exchanging some daily necessities. Once upon a time, land became less and less and money became more and more difficult to earn. There were many people who could live to be over eighty or ninety years old after retiring at the age of sixty. There was even a situation where the time from retirement to leaving the world exceeded the time to actually work and make money. , not to mention the costs of starting to face illness or needing care. As a result, people are forced to postpone retirement, and the situation of second or multiple jobs is becoming increasingly serious.
4. Long-term care will be another tsunami in Taiwan
According to government statistics, there were approximately 760,000 disabled people in Taiwan in 2015, and it is expected that the number of disabled people will reach 1.2 million in 2031. So far, the average number of disabled people has been bedridden for seven years and four months. Although the government is aware of its seriousness, policies seem to be unable to keep up with the rapid increase in the disabled population. A disabled person needs long-term care by a dedicated person while he is bedridden. Is the family ready to make a large amount of savings to pay for long-term care?
5. Diversification of financial products, popularization of credit cards, and use of leverage principles to operate money
I once raised a question for discussion in an adult financial management class: "What is the biggest difference in financial management between rich people and poor people?" Almost all the students answered in unison: "Rich people use money to make money; poor people only use money to make money." You can borrow money to make money.” The same question was asked in another youth financial management course. Most of these young students responded: “Rich people first save hard, care about using every dollar and don’t waste it, and then save it. When you have a lot of money, you buy a house first; but when you don’t have a house, you buy a car first.” These two completely different responses made me think about what happened to young friends when they were growing up. The original correct concept, combined with the desire for quick success, accumulation of wealth, and the continuous placement marketing of financial institutions, led to borrowing money, using high leverage principles, and a one-time turnaround mentality to manage finances. As a result, instead of managing the money, we ended up with more debts, and even Debts to support debts.
6. Personal self-awareness and diversity of work styles
The declining birthrate and information explosion have resulted in different interpretations of education and information. Everyone has their own ideas and consciousness. In addition, with the advancement of science and technology, the development of the Internet, people can start their own businesses, achieve their careers through e-commerce platforms, or become migrant workers or return to work. The township has created local culture, small-scale agricultural industries, etc., forming a diversified work pattern. Some self-employed people or working people often do not participate in health insurance, labor insurance or social security insurance due to unstable income. They face severe pension shortages when they retire, and the entire family falls into the dilemma of poverty and borrowing to survive.
Importance and types of insurance planning
“Invest in different places, or in several places, for you do not know what misfortune you may encounter in this world.” (Ecclesiastes 11:2, Modern Chinese Translation)
The Chinese have a traditional habit of saving money. They love to save after graduating from school and having income. Many insurance practitioners take advantage of this and offer savings insurance in various interest rates and currencies. Some insurances do not meet the needs of customers, but are forced to be sold by a small number of insurance practitioners for the benefit of themselves and the company. As a result, many people hold negative views on insurance products and insurance brokers. In fact, they do not understand the true impact of insurance mechanisms on financial management. importance. From the perspective of a professional financial planner, the sequence of safe and customized personal, family and family financial planning and insurance purchase is roughly as follows:
1. Lifelong medical care, life-long surgery, life-long cancer prevention, accident insurance, actual payment and premium exemption
All medical planning is very realistically related to age and health status. Young people have cheap insurance premiums and are relatively healthy. However, there are factors such as riding motorcycles, traveling with friends, working hard for work, and liking to take risks. Therefore, you must make a complete medical insurance plan first, otherwise you may not be able to fully recover if you have an accident. When you are ill, not only are you unable to commit your love to your family, but your parents' retirement funds are often exhausted, and you may even be unable to purchase any medical insurance for life.
2. Life insurance planning
Do you need to plan for life insurance protection and how much amount should you plan for? The answer is that it must be decided based on personal responsibility. Parents, wives, children, company leaders, etc. have different responsibilities, and planning should be discussed and planned based on the amount of responsibility, length of responsibility, and budget.
3. Short, medium and long-term financial planning
Financial planning depends on age, responsibilities, income, self-realization, dreams and God's will in our lives. Insurance planning should be different if we are single, married, have children (several children) or need to take care of parents, etc. Whether there is a need for marriage, house purchase, children's education, filial piety fund, entrepreneurial fund, emergency reserve fund, retirement fund, etc. is different for everyone and must be planned accordingly.
4. Long-term care planning
For the Chinese, the cost of long-term care is a bottomless pit and the last dignity in a person's life. Currently, the monthly cost of nursing care institutions in Taiwan ranges from approximately NT$30,000 to NT$60,000. Since it exceeds the monthly working income of many people, it is the wisest choice to transfer this risk to an insurance company through insurance planning as early as possible.
5. Endless pension planning
Not everyone will naturally have a long-term and sufficient pension after retirement until death. Although the government has made great efforts to allow workers to join labor insurance, rural insurance, public insurance, military insurance, etc. according to different statuses, or to allow non-workers to actively participate in national pension insurance to ensure that people have pensions after retirement, even if they have pensions, they are not available. It must be enough to meet monthly expenses. Especially when there is no complete set of lifelong medical insurance, long-term care insurance, etc., the pension has to bear all medical and long-term support expenses. This often causes many elderly people to worry about insufficient savings and save money to live. As a result, Creating a vicious cycle of malnutrition.
6. Implement business risk planning
If you are an entrepreneur, doctor, or run a restaurant, restaurant, logistics industry, etc., when an employee drives a car and injures someone, or even causes death; a nurse gives the wrong injection or uses the wrong medicine; there is a fire in the kitchen, the customer has diarrhea, or the customer is in the business premises In order to avoid legal disputes when a fall or other accident occurs, operators and responsible persons should transfer all risks to different insurance product plans to protect the safety of their assets.
7. Wealth Management Planning
It is a wise choice for high-net-worth groups to tailor their financial planning and allocation in advance according to their own needs. It is a wise choice to have long-term plans and make gifts and estate planning through insurance products within the legal scope.
Finally, friends are encouraged to take stock of their income and expenses, whether they have insurance plans, and whether the order and content of existing insurance plans are correct? When facing financial and insurance products, remember: you must abide by the three principles of not being forced, not being sold, and tailor-made. In the next few articles, we will carefully analyze various insurance products so that our money can be used in correct insurance planning and become God's faithful and good stewards.
▲The author works as a lecturer and consultant at the Silver Resources and Human Resources Center.
Author profile
Pan Huating, CEO of Taiwan's Antai Insurance Brokers Company, holds international financial planner and psychological counselor certificates, and is a teacher at the Joshua School of Management of the Chinese Boaz Association. He loves life and devotes himself wholeheartedly to domestic and foreign gospel ministries, serving the disadvantaged in rural areas and poverty alleviation projects. He also participates in the ministries of entrepreneurs achieving kingdom enterprises and the Great Commission, and using his life to influence lives.