5 Financial Mistakes We Make in Our 30’s

The 30’s are all about major milestones and new priorities – marriage, owning a car, having your own place, and maybe even kids! You are much older, wiser, and eager to leave the money issues of your 20’s behind you. However, there are possibilities of making mistakes that could have repercussions for the years to come down the road. Here are some financial mistakes that you can avoid in your 30’s and invest wisely instead.

1. Making debts a way of life

In your 20’s, you may have had to take on student loans, car loans and credit cards debts. But continuing to rack up debts into your 30’s, especially, that of credit cards and un-affordable mortgage can result in a downward financial spiral that is hard to recover from.

The best habit one can develop in the 30’s is to plan ahead of time and save up so that all of one’s purchases can be paid off with one’s current income and not potential income.

2. No record of daily expenses

Dubai offers both the opportunity to earn and spend. It is what you choose to spend on that matter.

Records of savings and expenditures are always a recommended practice in one’s daily life. Once a month, sit down and look at your bank accounts and credit cards to see where you have spent and how much you have spent. Keeping a close eye on expenses will not only helps you maintain discipline of keeping your outgoings less than your incoming; it will also highlight areas where you might be splurging more than you should. Perhaps, it is time to lower your restaurant bills by cooking more at home! These changes are easier to make when caught well in time before they become part of a lifestyle that is un-affordable.

3. Not saving for retirement

It is recommended that one should save at least 10% of their income for retirement. That is not easy but let that nothing holds you back from saving whatever little you can, now. Saving now matters, even though retirement is far away, because time matters. Time matters because of the magic called “compounding”. Read our blog here to learn more about the cost of delaying savings.

With so many options available for investments, Systematic Investment Plan or SIP is one great investment option where one can invest a fixed amount in a mutual fund scheme at regular intervals. SIP can lead to handsome wealth creation in the long run.

Financial Mistakes

For example

If you invest AED 1,000 a month, with the selected mutual fund scheme unit being AED 10 in the first month, you gain 100 units. The following month, if the unit price drops to AED 9, you gain 111 points and further if the unit price drops to AED 8 the gain would be 125 units. By the investment of AED 3000 over the 3 months, you are allotted 336 units. As per SIP calculator if the entire investment of AED 3000 was done in the first month itself then the units gained would have been just 300.

SIP investments can thus help grow your investments with compounded benefits.

4. Not investing in Insurance

As parents or to be parents, you always want the best for your child(ren), which is natural and healthy.

A lot of your financial and career choices are impacted by your wish to securing your children’s financial security. You know that life is complicated, unpredictable and throws challenges at us when we least expect it. So, while most of us make sure to financially protect our families while alive, we deprioritize protecting our families in case, just in case, something was to happen to us.

Life insurance is a way to protect your family financially in case of your sudden and unexpected demise. The toll of a financial loss will be the last thing affecting your family. The life insurance cover will be a means of steady financial income during hard times when your family is coping with a deep loss. Critical illness insurance and disability insurance are other options that one should consider as these can impact your income-generating ability while you are alive.

5. Letting your professional life to stagnate

In your 30’s, it is necessary to actively invest in your professional development. The pay-scale study shows that 20’s is the time for significant income growth of about 60% but as one moves into the 30’s, one can expect to see a slowdown in salary growth to about 20% over the decade. The reason for this is- additional demands outside of work such as relationships and family obligations. This is why one needs to stay on top of industry trends. One must continue looking for career opportunities and stay prepared for challenges and growth.

Your determination to keep your financial life in order while you are in your 30’s, will lead to your building real wealth that lasts. Any questions? We are happy to help!

Why do I need Critical Illness Cover? I have Medical Insurance

Critical Illness Cover

By Savitha Shetty, Vice President

“Why do I need Critical Illness cover? I have Medical Insurance” This is the typical reaction I get when I ask friends if they have a critical illness cover?

Let’s start with the very basic- What is a critical illness cover? This is a cover that pays out a lump sum (sum assured) when one is diagnosed with a major listed illness. Most of the insurance companies’ critical illness list typically includes about 32 illnesses like cancer, stroke, first heart attack, motor neuron disease, and more.

Let us look at two real-life examples that illustrate how this lumpsum payout could have significantly helped these individuals.

Story 1: Mrs. Sultan, an Arab national, was recently diagnosed with breast cancer in 2018. She has an above-average enhanced medical insurance policy which was sufficient to meet her regular medical insurance needs. However, when she got diagnosed with breast cancer the doctor prescribed many tests that aren’t typically covered by most insurance policies. The cost of treatment has now surpassed the available limits on her medical policy. Mrs. Sultan and her family are now digging into their savings to pay for these medical tests. Not only that Mrs. Sultan has young school going kids. Though she received some support from her family, she has had to hire some additional help at home to help take care of kids and manage the household while she is undergoing treatment. The financial stress in addition to the emotional stress of the illness has taken a significant toll on the couple.

A critical illness policy would have saved a lot of the agony, at least the financial ones, for the Sultans.

Story 2: Mr. Majumdar, aged 35 years,was working as one of the Directors at a large financial firm in DIFC. Due to economic stresses the company decided to shut operations in 2010. All employees were made redundant. Back in 2007, I had asked Mr. Majumdar to consider having a critical illness policy but after a lot of back and forth, he concluded that his medical insurance provided him sufficient cover and that he didn’t see the need to buy a critical illness policy.

As destiny would have it Mr. Majumdar was diagnosed with stomach cancer soon after he was made redundant. The timing

 

couldn’t be worse. He had NO MEDICAL INSURANCE to start with; two young kids with one ready to start schooling and; a household living expenses that won’t take a break.

Buying a new medical insurance was not an option as medical insurance gets more expensive when a severe medical condition is already diagnosed. Mr. Majumdar had to depend on social service organizations to fund his cancer treatment and all his savings were exhausted to ensure that his family is comfortable.

Had he CHOSEN TO BUY A CRITICAL ILLNESS policy, the scenario would have been different. He would have been paid a lumpsum (for eg. USD 250,000) as soon as he was diagnosed with cancer. He would have paid for his treatment without having the stress of where money for his treatment would come from. Instead of losing sleep over what has happened, he could have recovered faster, with his savings still intact.

Hope the above real-life stories help answer the question of “Why do I need critical illness cover when I have medical insurance?”

 

*We have disguised the names of the actual persons to protect their privacy

** Premiums will vary depending on every individual’s unique circumstance

How to Save For Your Child’s Education

Child's Education Plan

Raising a child is one of the most beautiful experiences of anyone’s life, but that doesn’t mean it comes without any challenges. One of the major worries that plague the minds of parents is their child’s education.

We can see this trend in the UAE,  as an average family pays close to 365,000 AED for its child’s education from kindergarten to the first four years of college. The survey was done by HSBC, and shockingly, this number is more than double that of the global average.

Studies also show that education costs are on a constant rise at a rate of 7% a year. This is primarily due to the high inflation rates in the education sector. So, by the time a one year child enters college, the cost of education would have increased by over three times the current cost!

The above HSBC study also showed that 84% of the parents believe that their kids will have a bright future. However, in order to secure that bright future, it is more important now than ever, that parents and parents-to-be start saving early for education, as the impact of compounding interest cannot be under-estimated.

Let us walkthrough on how best you can protect your dreams and ambitions for your  little ones :

Step 1: Decide where you want to send your little tot for education

It is hard enough to figure out which school and activities to send your child to so figuring out where your tiny tot will go for college,10 – 18 years from now requires a bit of foresight. However, the alternative, that is the cost of not planning, is immense. As this study by Friends Provident International shows, the variation in the cost of education between let’s say India and the US is over 10 times!

One has to start thinking about whether one wants to send his/her children to their home country or abroad fairly early on to make sufficient provisions for the same.

Step 2: Consider inflation

Now that you have decided (well, sort of decided) where your children will go for their further education, one has to look at specific education inflation rates in each country to assess how fast these costs are growing. For example, in the US historically cost of education doubles almost every 10 years.

Child's Education Plan

Step 3: Start saving!

Armed with the savings goal, there are various tools available in the market to safeguard your child’s education.

  • One can put aside certain amounts from salaries on a regular basis in diversified assets such as stocks and bonds. Discpline is the key as there is always temptation to withdraw the monies and use the funds for other short to medium term needs;
  • There are various savings plan offered by insurance companies such as Zurich International Life, Friends Provident Interntionaletc which allow for investments in diversified portfolios in a systematic manner. The maturity amount of these plans are typically excluded from taxation, giving you tax benefits in the long run.
  • Various governments have schemes to help their citizens save for education (example 529 plans for US citizens). These schemes typically offer tax benefits.

When making a decision of which set of options to choose, carefully evaluate the cost of investment, your risk appetite and whether the returns compensate you for the risk you are taking.

Step 4: Protect your savings!

Life is uncertain, that goes without saying. All the planning and savings takes a parent only so far. When it comes to a child’s education, one should hope for the best but plan for the worst.

For as long as you are alive, you will diligently save for your child. However, if you were to fall critically ill or die, without a safety net protecting your income, your child’s future will be in jeopardy. It is always advisable to protect your income(s) via a term life or a whole of life insurance plan.

Expert advice

Opting for an education savings plan will help your child in his/her education but it is not sufficient. lt lacks the complete coverage that can only be offered by combining the savings plan with insurance coverage. Hence, we recommend the purchase of a term life insurance plan in addition to a child education plan to offer your child the complete financial protection they deserve.

Choose wisely as different insurance companies offer different options to the consumer. Take the time to review plans and discuss their pros and cons. We are happy to sit down with you and share our experience and knowledge and guide you on your journey to safeguard your child’s future.

Please leave us a message at New Age Insurance Brokers and we will be more than happy to help.

Living Longer: Blessing or a Curse

Old Couple

From fresh organic breakfasts to fat-free lunches, the millennial’s are moving towards a healthier lifestyle. In addition to the precautionary measures taken by the general population, advancement in science and technology in the field of healthcare has led to an increase in the life expectancy. As per WHO, “Today, for the first time in history, most people can expect to live into their 60s and beyond”. However, good physical health cannot be considered the only determinant for making long life a blessing.

In our golden years, incomes are uncertain, but expenses are certain. We are more susceptible to ailments like Arthritis, Heart diseases or Osteoporosis, and hence being able to pay for the same ensures that the golden years are indeed golden. With Governments scraping off or decreasing the pension funds, retirement planning is no longer optional but necessary.

Retirement Planning Helps You to Be Prepared

While we are advancing in health care, artificial intelligence is not far in the race. With a single machine replacing a chunk of manual labor, the possibility of us turning to the chapter of retirement a little earlier than expected is high. Interestingly, most people do not invest sufficiently for retirement with a hope that governments or children will pay for the same. However, planning should be done keeping the worst-case scenario in mind while hoping for the best.

While imagining retirement, most of us dream of sitting in a comfortable lawn chair with a beautiful view, whilst sipping tea with our loved ones. And to aid this dream, we save a portion of our income in a savings account and hope to live off of it in the years to come. However, with the ever-increasing standards of living and inflation rates, these savings might not last as long as one had hoped. Growing old in a lonely setting accompanied by poor health is not attractive.

Tips and Tricks for Retirement Planning

Start saving early: Planning for retirement is mostly about a good start. The best-case scenario is early planning and saving because the earlier you invest, the better you will be down the line. So start now. Not tomorrow or on your next birthday but now. The retirement phase may seem distant but saving for it now saves you from the bumpy ride.

Every penny counts: Take out a proportion of your monthly profit or salary separately to be saved for your retirement. This amount can end up in significant numbers once you reach your golden years.

Health is wealth: Health is wealth and one should never take it for granted. Maintain good health and take care of your physical and mental fitness. Improved health will save you some hefty medical bills in future and allow you to enjoy your retirement years.

Expert help matters: While you are still earning, consult a financial advisor for an easy financial audit to ensure that you are ready for the expenses for crucial and mandatory events ahead in life. This may include planning about heavy expenses for marriage or child education.

So, living longer is a blessing, provided you have planned your life accordingly. Invest in retirement planning while you are young and enjoy old age with a peace of mind!

Car Insurance in Dubai: What You Need To Know!

Owning a vehicle is not a luxury anymore, but a necessity. Especially in a place like Dubai, where the daily commute is largely in a motorized vehicle. Dubai is also a place where luxury and exotic vehicles are large in numbers. For the safety of all on the roads, the UAE government has mandated by law that a vehicle owner must have motor insurance coverage.

The process of picking the policy that suits your needs can be a tedious one. But don’t let this drive you to conclude on just any insurance plan. We will help you understand the basics of car insurance, the different legal clauses and optional coverages. Read on to find out more about their classifications, and you can get yourselves the right coverage at the right price!

Understanding car insurance in Dubai

For starters, car insurance companies in Dubai offer plans in two variants:

Third-party insurance: A third-party insurance package covers the regulatory requirements. This inexpensive plan covers for the injuries and damages that are inflicted on the other party. One must take note that this plan will not cover the policy owner. Hence it makes for a cheaper and an affordable plan.

Comprehensive plan: If third-party coverage is the bare minimum, then a comprehensive plan is the highest level you can get in terms of coverage. This type of cover will provide financial help for you as well as the other party involved in case of an accident. Moreover, the coverage doesn’t stop there, as comprehensive plans also cover for fire, theft, and personal accidents, etc.

What do you need to get started?

Getting yourself insured also comes with a bit of paperwork that you need to sort out. The first of which is the actual registration. For a normal insurance sign-up process in Dubai, the following documents are required.

1) Copy of your driver’s license
2) Copy of the vehicle registration (Proforma Invoice and Vehicle Clearance Certificate if it is a new car)
3) Emirates identity card

Know how your premium is calculated

An insurance plan will require you to pay a premium. However, not everyone is treated equally when it comes to insurance premiums. The amount you pay as premium changes with a variety of factors. Your age, experience and the types of coverage are a few factors that determine the overall premium price. Let us list out a few of the most used metrics to gauge premiums.

    • Driver’s age: If the driver’s age is below twenty-five, the insurance premium tends to be high.
    • Price of the car: Costlier cars incur pricy premiums.
    • Car specs: A new car with a lot of safety features will have lower premium rates.
    • Experience: The more experienced the driver, the less will be the premium.
    • Off-road Coverage: If you want off-road coverage for your vehicle, it adds to the price.
    • GCC coverage: If you travel within GCC countries, you can opt for GCC coverage, which ups the premium prices.
    • Breakdown coverage: Having added assistance like breakdown coverage will further increase the premium.
    • Rent a car option: Having this option enables you to get around in case your car is in the garage for repairs due to an accident.

    Switching to a new insurance company? Claim that bonus!

    If you are moving to a new insurance company, you can present a “no claims certificate” to the new insurance provider to get discounts on the annual premium. You can obtain a “no claims certificate” from your current insurance provider.

    Off-road insurance

    If you wish to take your multi-utility vehicle to the sand dunes, ensure that you get off-road coverage. Off-road coverage comes as an extra in insurance policies. So, if a breakdown or an accident were to happen off the road, you would not be spending money from your own pocket. Off-road coverage is highly recommended in case if you have bought your vehicle to do some off-roading.

    Emergency services

    It can be a daunting experience when you are stranded on a roadside due to a flat tire, low fuel or any other unforeseen reasons. But did you know that you can call your insurance company to take care of such things for you? Opt for emergency services to help you get out of tricky situations on the road.

    Let us take care of you!

    Now that you are armed with this knowledge, we can help you secure the right coverage that suits your needs.

    New Age Insurance Brokers has relationships with over 25 insurance companies, and our team of motor insurance experts can help you choose the right kind of plan that is tailor-madeto your requirements. We screen insurance plans from the plethora of car insurance companies in Dubai and strive to give you the best coverage you need at the right price! Call us now at 04-3573378 to speak to an agent.