The Real REAL score between VUL vs Term + Mutual Fund

My officemate approached me one day and consulted about VULs. Fact #1: Most people don’t know how to analyze when it comes to insurance coverage.

Tip # 1: if you want to finish RICH, take charge of your finances.

Financial life is not all about saving, it’s also about investing.

I asked her if she has the illustration of benefits and she showed me the PDF emailed to her by the agent. I studied the file and came up with my own excel sheet.

Disclaimer: Some of the details of the given illustration of benefits were hidden for the protection of the seller. If you find something similar to this, that may have only been a coincidence.

Assumptions and Considerations:

•       The Proposed Plan Holder is a 34 years old non smoker.
•       Policy Premium is P24,000.00
•       Although the VUL involved should be paid until age 99, I only considered until age 65.
•       Only the Living Benefit was compared.
•       Interest rate used for the VUL was that of illustrated. The interest rate in Term + Mutual Fund is at 10% (same as that of the illustrated in VUL.) Fact #2: VULs and any other investment companies DO NOT guarantee returns. This is for illustration purposes ONLY.

VUL				Term + Mutual Fund
Age	Premium	Living Benefit		Insurance	MF	Living Benefit
35	24000	35		4,813	19,187	21,106
36	24000	74		6,651	17,349	42,300
37	24000	11,984		6,651	17,349	65,614
38	24000	29,176		6,651	17,349	91,259
39	24000	49,938		6,651	17,349	119,469
40	24000	74,589		6,651	17,349	150,500
41	24000	101,280		10,017	13,983	180,931
42	24000	130,116		10,017	13,983	214,406
43	24000	161,333		10,017	13,983	251,228
44	24000	195,091		10,017	13,983	291,732
45	24000	231,625		10,017	13,983	336,286
46	24000	271,134		14,854	9,146	379,975
47	24000	313,898		14,854	9,146	428,034
48	24000	360,182		14,854	9,146	480,898
49	24000	410,302		14,854	9,146	539,048
50	24000	464,562		14,854	9,146	603,013
51	24000	523,299		22,971	1029	664,447
52	24000	586,807		22,971	1029	732,023
53	24000	655,427		22,971	1029	806,357
54	24000	729,495		22,971	1029	888,125
55	24000					976,937
56	24000					1,074,631
57	24000					1,182,094
58	24000					1,300,304
59	24000					1,430,334
60	24000	1,313,714				1,573,367
61	24000					1,730,704
62	24000					1,903,775
63	24000					2,094,152
64	24000					2,303,567
65	24000	2,048,849				2,533,924.03

Comparison:

1.       Comparing the living benefit, it is EVIDENT that all throughout, my officemate will get better returns if she combines the Term Insurance with a Mutual Fund.
2.      On the VUL, my officemate will still continue to pay even after age 55 but will still get lower return. On the other hand, even if my officemate will stop paying for the insurance [Please NOTE: I don’t believe that a person needs a WHOLE LIFE insurance.] the Mutual Fund will still keep accumulating still beating the return of the VUL. Please refer to the Living Benefit at the age of 65.
3.       Even if the insurance cost increases for the Term (Age 51-54) please note that the living benefit STILL beats that of the VUL.

My opinion and recommendation to my friend:

1.        Finance is all about the numbers game. If you are lazy to compute and compare, you might be losing millions in a span of “how-many” years.
2.       This is just for illustration purposes only. I just presented here the facts that I know. And I don’t believe that a person needs whole life insurance. 
3.       The insurance component is an actual product.
4.       A 35 year-old should be able to save Php24,000.00 a year provided that he/she is working. That is equivalent to 1 month pay.
5.       With all the expenses in the family, how can I afford to save P24,000.00 a year? Simple. Your 13^th month pay will suffice.
6.         Hassle on claiming? Hmm. Not for me. J

Disclaimer: This is not rocket science. 

Till next time. ^_^

5 Tings to do with your 13th Month Pay

Booyah! I’m sure everybody is counting the days because we (yes I’m included) are all excited for our 13^th month pay. After all those hard works and overtimes we are finally getting what we arbitrarily call “simbolo ng pagyaman.”

But before you spend your 13^th month pay, let’s do some reality check first. I have here some few things that you can do with your bonus in order to increase your financial stability.

1.  Donate some

The value is giving is very important when you want to gain financial stability. It gives you the sense of fulfillment and sense of humility. As a suggestion you can give alms to the beggars, donate to the church and the charity and give some cash gifts to your families.

 2. Save 20% for your emergency fund

The essence of having a cushion fund or emergency fund is widely discussed in my blogs because I believe that this fund is as important as having life insurance. So every time you receive money put away some for this.

       3. Pay your consumer debt

Have you been naughty these past few months with your credit card? Well I guess this is the right time to pay up every single centavo that you owe from the credit card company. Trust me, there’s nothing more liberating than not acquiring consumer debt. J

       4. Get a health insurance

Life insurance is a very common knowledge in the Philippines nowadays while health insurance maybe a subject that needs wider audience. If you have company health insurance then well and good but if the company does not provide then I suggest you need to get one on your own.

Read how Paul and I got our long term health insurance here.

       5. Get a life insurance

As mentioned, life insurance is very common here in the Philippines but most Filipinos do not have proper insurance nor have knowledge on how to compute for the right coverage. Still having coverage is still better than not having at all. I suggest you divert some of your bonus to get a life insurance. Better talk to a financial planner first so that together you can compute how much protection you need.

It is always nice to have the latest gadgets, best outfits, cool entertainment system and the likes especially during the holiday season. But we should not forget about our financial stability in exchange of the pretty little things we can do without. 

Advance Merry Christmas! J

Preparing for Emergencies

Fix the roof while the sun is shining!

Something struck me when I came across a post in the social networking site that a friend was confined in a hospital because of a serious illness. It’s good though that my friend has a medical card provided by the company that she can use at times like these.

I know I should not solely rely on office health cards because they are just temporary. Lucky for us our companies offer great medical benefits as long as we are working for them. I think an employee should also look into that company benefit when accepting employment offers.

Temporarily, we hold on to our medical cards as a source of our hospitalization fund but in the long run we have to have a lifetime hospitalization cushion especially that the illnesses will be there during our sunset days.

Paul and I already prepared for this event by investing our money on a long term health care called Kaiser. The company name is Kaiser International Healthgroup that operates here in the Philippines. The idea is, you save for your future medical needs today and relax in the future. The setup works fine for us since we really have to prepare for those inevitable events.

The setup goes this way. We paid up the policy for 5 years [we are both done now.] Then we wait for 10 years before we can en-cash the policy face value. Yep there is an option to en-cash the policy face value. But if we don’t like to then the company will continue to manage our money and compound it every year. We can also en-cash some amount from the fund without the company asking for particulars. Meaning we can use it for travel, house repair or anything we would like to in the future. Sounds good isn’t it? J

I highly encourage everyone to do the same. It doesn’t matter what company you choose to invest, as long as you’ve done background check. And don’t wait till you are ready. You will never be ready. Just fill up the forms and invest. Time is of the essence.

Happy investing. ^_^

My Most Precious You-cannot-be-sick Fund

I don’t usually file for a sick leave unless I feel so terrible that going to the office feels tormenting. I feel like I lost more knowledge when I get absent so I better go to the office and maintain a solid knowledge base.

Not getting sick has benefits and one of them is my “You-cannot-be-sick” fund. I am expecting to receive it on November and I already have something in mind for that fund.

Nope I will not save it. Nope I will not invest it. Nope this will not go to my emergency fund.

This serves as my reward for not incurring absences so I better use it to buy what I want.

Yes, this is how I reward myself. And it works for me.

Paul will not have to worry about our finances because we have set aside ample amount every month to cover for needs and wants. And we have agreed that our bonuses will not be bounded by our house rules. It will be our own discretion if we will contribute it to the house fund or not.

It’s like saving my sick-fund every month then at the end of the Fiscal year the company gives it to the employee and do as they please. Hurray Hurray for a beautiful day! :D

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Update: Sept 25, 2013: Forgive me because this is a late post. I already bought something from my "You-cannot-be-sick" fund.

Till then.^_^

How to get by with 150Php

Every working wife should know how to reduce expenses and increase savings.

As a part of everyday life, my husband and I are committed to reducing our expenses so that we can divert our hard-earned money to more satisfying experiences. We love to travel!

I am keeping my part of the deal by spending only 150Php a day. I know it would be a challenge since there are a lot of nice things a wife could think of. But since I have committed to help my husband build our “dream” house, then I also need to cut off unnecessary expenses. How I do it? Details are listed below.

• The power of commute – I take the public transport every day. We could have afforded to buy a car but we are delaying it because we would like to invest our money to more important things. I am not saying that a car is not important. But in our case it is still manageable to commute. Daily commute – 80Php
•  Lunch box – I work hard to really get something healthy so I opted to bring my own lunch. The fact that I know what’s inside my dish truly sets the standards. Daily expense – 0Php
•  Avoid malls – Malls are there to temp me to spend. So as much as possible I stay away from malls. If there are times that I want to buy something, I deduct it from my monthly allowance.
• Snacks – I usually have my fix by visiting the grocery store near my workplace. The fact that it is cheaper and I can get to choose what I want from a variety is a plus. Daily expense – I keep it under 50Php.
• Coffee – I really don’t fancy coffee shops so I’m not spending much on this. We have a free flowing coffee in my workplace so I get my coffee from there. It’s still the same coffee anyway. J

After a day’s work, I get satisfaction from the fact that I spent less than 150Php. I know that I could use my money in buying our tickets to our next destination or experience something new. I could also save the money and give it to the needy when necessary.

Btw, don’t get me wrong. I also splurge money on my travels. So I get the reward of my sacrifices from time to time. Catch my travels and escapades here. 

Don’t forget to invest for the future also. Just don’t overdo it. It’s not hard to enjoy today at the same time prepare for the future. 

Till next time. ^_^