Have you ever skydived before?

According to friends who have done it, skydiving can be an unforgettable, once-in a lifetime experience. The excitement and anticipation that you feel upon your first flight, when you don’t know what to expect, is something they talk about. As the place slowly climbs up to 5,000, 10,000, and finally 15,000 feet, this same anticipation quickly becomes fearful and trepidation.

Your instructor will tell you when the plane is at its lowest point. As you approach the door, your blood pressure drops as you stare at the empty space below. You hear the engine hum suddenly and your instructor shouts “JUMP!” Before you know it you are accelerating 200 km/h towards the ground, screaming and wondering what you did to yourself.

As you fall, you realize that it is not like you are dropping. It feels as if you’re floating in the air. Your instructor will pull the cord before you can get the hang of it. Everything becomes more calm when the parachute opens. You glide down to the ground, taking in all the beauty and enjoying the views around you.

You feel adrenaline coursing through you and your face shines brighter than the noon sun when you land. It was the best moment of your life, and you want to repeat it again.

It sounds like fun, right? It is, I am certain — 100%.

Imagine jumping from the plane and falling to 2,000 feet. Now it’s time to deploy your parachutist. Your instructor pulls on the cord to discover that the parachute is not working. Your instructor is now alarmed. This is the first time this has ever happened to him. He pulls the cord to activate the reserve chute, but it fails to deploy. He is now in panic mode. You both have no working parachutes and will be on the ground in 10 seconds.

Now what?

How will you feel when you know both parachutes are malfunctioning?

Fear, horror, shock. The all-encompassing terror that no one can save you from when you finally fall to the ground.

Your financial parachutes

Because we always have a reserve chute and a parachute, we enjoy skydiving. It’s our favorite experience! The moment you lose your parachut, the once-happy feeling of freefalling through air becomes a frightening suicide jump.

Skydiving requires two parachutes. This badass jumped 25,000ft without one. Legend has it that he was able to fall so quickly to the ground because he had steel balls.

You will also need two parachutes if you plan to invest. Why? Because the stock market is unpredictable and volatile, particularly in the short-term. Parachutes will be there if the stock market plunges into freefall so that you are not forced out of your stocks in the worst case scenario.

Which parachutes should you use?

Parachute 1: Save

You must have at least six months worth of expenses in savings. If your monthly household expenses average $5,000, you should save at least:

$5,000 x 6 = $30,000

This basically means that if you are unable to work or lose your main source income unexpectedly, you can still cover your household expenses for the next six months. If you are more conservative, you can save up to 12 month if you have a one-year buffer.

It is not a good idea to find yourself in a position where you are in dire need of money and have to sell your investments to make a profit. This is because you did not save enough for a rainy-day.

Parachute 2: Get insured

Your second parachut is to ensure you are fully insured Insurance is like a reserve chute. You never plan to use it, but you are glad you have it!

Insurance is essential because disasters can strike at any moment. We may not have enough money to cover major emergencies or our income loss .

If you have a heart attack, and need open heart bypass surgery in Singapore , your cost could rise to $45,000. You also have to consider the cost of ongoing treatment and medication. This can lead to a crisis for not only you but your family members as well.

If you have dependents, make sure you are covered for death, critical illness, permanent disability, hospitalisation and hospitalization. Mortgage insurance will protect your home loan if you are unable to pay your obligations. This will ensure that your family has a place to call home.

Because it all depends on the individual, I cannot give advice about what or how much you should insure. (That’s up to your insurance advisor). But get insured if necessary.

Whole life vs. term

Another question that is frequently asked is whether you should get whole or term life insurance. What is the difference?

Term insurance protects you from an unfortunate event and costs you a premium. You will receive the amount assured if the event occurs. You do not get any cash back for all premiums paid at the end of your term. You pay a lower premium for the sum insured. However, your premiums could rise as you get older if your policy is renewed.

Whole-life insurance protects your entire life against unfortunate events. You pay a fixed premium. The premiums can be accumulated and earn interest, just like savings. You will receive either the sum assured (or your accumulated cash value, whichever is greater). The advantage of the event not being triggered is that you can keep your accumulated cash value. However, you will pay a higher premium for the amount assured. You may also have to pay fees if your policy is cancelled too soon.

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