Save ($18,000) and have better H&S insurance for parents?

I had a conversation with a friend recently on why he should get the best H&S plan he could afford for his parents:







AK: I think you can easily afford the premium.

F: OMG! It is more than $5,000 a year for the two of them.

AK: Well, you make $120,000 a year. That is like 4% of your annual income. That is not too much to pay for peace of mind.

F: That is a lot of money to me.

AK: For most middle class families, that is a lot of money, not just to you.

F: It would mean some serious cutting back of expenses.

AK: It shouldn't be that difficult. Maybe, instead of spending $10,000 on that annual family vacation, keep to a budget of $5,000 instead. Thailand is really a nice vacation destination.

F: Let me discuss this with my wife.

AK: Well, tell her that insurance premium is something you can budget for. If your parents should be warded in a private hospital for some reason, you might get a shocker of a bill when you see how little Medishield's share of the bill actually is.

F: How much is it?

AK: From experience? Less than 10%. Imagine a bill of $15,000 and Medishield pays only $1,000, for example.

F: That little?

AK: Yup. I am not saying that your parents will stay in private hospitals but I am just saying that it could happen.

F: Yes, of course...

AK: These things are hard to predict and if they should happen, we want to be prepared. That is where a good H&S comes in. At least, with insurance premiums, you know how much money you have to set aside each year. Like I said, it is about having peace of mind.

F: You are right. We can include the insurance premiums in our household budget more easily than anticipating a bomb of a hospital bill... I need to discuss this with my wife...

This friend of mine stays in a condominium and has a big mortgage to service. He also drives a European make MPV.

I understand that, like many other middle class families in Singapore, the children also go for myriad enrichment classes.

An annual holiday at the end of the year is also a must for the family.

So, I can quite understand why he thinks that having to pay more than $5,000 in insurance premium a year for his parents is a big financial burden although his salary is definitely way above average.

There are many things in life which will compete for our limited financial resources.

However, when we think rationally, we would be able to tell which of these items should really have priority in our lives.

Related to this, I shared in another blog post how a reader in his 40s made some changes in his lifestyle. In making the changes, he managed to save an additional $18,000 a year. That is quite a bit of money to any middle class family. (See related post number 2 below.)

This blog's title has $18,000 in brackets. This is because all our circumstances are different. The extent to which we are willing to cut back on expenses will also be different.

Some might be able to save more than others, whether it is a matter of will or ability. It is about conserving financial resources and diverting them to the things that really matter more.







I believe that if my friend is able to make some adjustments in his lifestyle, he would have enough savings to pay for the higher H&S insurance premium for his old folks at home. I feel that it is the prudent thing to do.

If you are like my friend, this might have provided you with some food for thought.

Related posts:
1. Enhanced Incomeshield for my mom.
2. How to have a comfortable retirement?
3. How to have children and retire comfortably?

AK might nibble at King Wan Corp. Ltd.

The past few years were characterised by very low interest rates as money supply was ramped up by the U.S. Federal Reserves. Many businesses and individuals probably benefited from this. However, interest rates cannot stay so low for too long.

In preparation for an environment of higher interest rates, I have mentioned a few times before that I am on the lookout for businesses which are net cash or have very low gearing. I would also like to have them pay regular and meaningful dividends. I said the same thing too during an interview I gave recently.

To this end, together with a handful of companies, I have also been keeping an eye on King Wan which is a company introduced to me by Solace, a guest blogger here in ASSI, some time ago. Solace also wrote a very good piece on King Wan then and I have appended the link at the end of this blog.

Of course, it is not enough that a business is in a net cash position or has low gearing. That only represents balance sheet strength. We should also want the company to have earnings visibility.

King Wan is in a net cash position and it also has an order book that would provide earnings visibility until 2018. Just like how I like Hock Lian Seng's order book which provides earnings visibility until 2020, I like the health of King Wan's order book too.

As I invest primarily for income, I am also attracted to King Wan because they pay dividends regularly. A DPS of about 1.5c per year seems undemanding given their more normalised EPS of about 2c.

What do I mean by normalised EPS?

Well, I know that King Wan made quite a bit of money from savvy investments which gave them extraordinary gains at times but it is the health of their core businesses' which is more important in helping to determine sustainability of their dividend payouts.

So, at a price of 30c a share, for example, a 1.5c DPS, representing a pay out ratio of 75%, gives us a dividend yield of 5%. Doesn't sound too bad, right? Then, why did I not buy some of its stock?

Well, as I shared with Solace in a chat before, I have a certain amount of money to be allocated and, after some thought, I decided to put King Wan in the same category as Hock Lian Seng which comparatively gave a higher dividend yield with a lower payout ratio of about 40%.

Am I going to invest in King Wan now, I asked myself, as Hock Lian Seng's stock price has shot through the roof? Why not a nibble?

OK, if Mr. Market should give me a better offer, I might.

Related post:
Tea with Solace: King Wan Corp. Ltd.

The lowest income tax payable in many years (YA 2015).

I just did my income tax filing for Year of Assessment 2015. 

Yes, I am always quite early, preferring to get it out of the way ASAP.

My estimated income tax payable has reached a new low.

I have shared some ways which could help us pay less income tax before and I have included the links at the end of this blog.

This year, the government, to celebrate SG50, is allowing all qualifying donations a tax deduction of 300% of the donation amounts in 2015. 

This is up from 250% in recent years.





As we journey towards financial freedom, let us not forget the less fortunate. 

Do good and pay less income tax? Why not? 

I am sure all of us can find a charitable cause that we support in 2015.

Reference:
What type of donation is tax deductible?





So, how much is my estimated income tax payable for YA 2015?

Estimated income tax payable is $772.14.

Related posts:
1. Ways to reduce income tax. (YA 2013)
2. Double your income but not your tax. (YA 2014)
3. One of the most noble things we can do.