Introduction

What is this guide?

This is a guide to provide a systematic process for personal financial planning activities. You can imagine that there is a financial advisor sitting next to you to help you sort out the situation and let you see your own situation and goals. You need to make specific plans based on your own situation.

I did not use the word “financial management” because in the Chinese world, this word has been seriously alienated and its meaning is limited to investment or even a certain type of investment product (for example, people would say buy a bank financial management product). The scope of financial planning is much broader. It is a stepping stone in life and includes everything related to money. The purpose of doing financial planning for yourself is to enable you to take the initiative and not be distracted, so that you can focus on more important things in life.

Who is this guide for?

Anyone seeking to take control of their own financial activities should be able to benefit from this. Although I use the UK as a blueprint, this does not mean that it is only suitable for Chinese people living in the UK who understand Chinese. The policies and regulations of each region and the products on the market may vary, but the core concepts of finance are the same.

This is also part of my application of the Feynman learning method, which is to continuously break down technical content until children can understand it. However, in the real world, financial activities have age requirements for dealing with independent individuals. Here, I assume that the threshold for the readers is at least 16 years old, a blank sheet of paper without any accounts. This is probably the age of high school/vocational high school/apprenticeship, the age when you start to have extensive contact with society and can work, the age when you need to apply for an ID card and prepare for a driver’s license test. This is also the minimum threshold for banks in many places to allow customers to manage their accounts alone, which is regarded as a sign that a person is beginning to be able to take charge of his or her own financial activities.

Why write this guide?

This is my practical attempt to implement the concept of inclusive finance. Inclusive finance emphasizes inclusiveness, hoping to enable people who have not enjoyed financial services before to enjoy modern financial services, and also to enable people who have already had access to financial services to better utilize the wide range of modern financial services. To achieve this goal, in addition to the industry’s technological innovation and development, the cultivation and improvement of the public’s financial literacy is also indispensable.

I hesitated whether to write these contents in English, because I learned all these professional knowledge in English, but I finally decided to present them in Chinese. Because in the Chinese world, there are many related academic exchanges, but there is a lack of content for the general public. There are a few personal “financial management” related contents, but they are scattered. This is also due to the popularity of fragmented reading nowadays. People are more accustomed to watching more timely social media updates. Although the form of pushing content is suitable for monetization, it is not conducive to systematic information presentation, so I decided to use articles with tree-like directories as the main presentation form.

How up-to-date is this guide?

I have full confidence in the timeliness of this guide, so even if you read it many years later, it should still be able to give you enough reference and guidance.

The iteration of specific products in the industry is very fast, while policies and regulations are slower but it is not surprising that they will change after a few years. As for the change in concepts, it is the slowest, and it may even remain stable in the foreseeable future. It is not a big deal for the specific products mentioned in the content to become invalid, because this article is not an absolute product recommendation. If there are places involving policies and regulations, I will try to leave reminders to pay attention to timeliness when writing. As for the change in concepts, this is rare, such as the change from concentrated active investment to concentrated passive investment. If this happens, I will rewrite the specific article.

Consumption

I simply divide personal financial activities into two categories: “consumption” and “investment”. Refer to the catalog. The core part is the personal financial planning process marked with serial numbers, which needs to be read in order. Please read the core process part (serial number 1-4) in the consumption catalog page first, and then read the core process part (serial number 5-8) in the investment catalog page. Some other individual topics without serial number will be updated separately. Those are non-core content for reference when encountered.

1. Fact-finding

The first step of financial planning usually starts with a fact check on you. If you have a family and have consolidated your finances (i.e., planning as a family rather than managing each of your own finances), then the fact check needs to cover the entire family. No one knows your own situation better than you do. Even if you go to a financial advisor for consultation, the first thing they will do is to do a fact check on you. The content of the investigation will be quite detailed, including family situation, career information, etc., but since you are organizing your own situation, these are easy to say. We mainly focus on the assets and liabilities, income and expenditure, which may not be counted in detail in normal times。

First, let’s talk about your assets and liabilities. Here is a brief summary of the average person’s situation: The first part of your assets includes real estate and movable property in the house (furniture, electronic equipment, etc. can be added up to a number, and note that the second-hand transaction price is used instead of the original price). If it is difficult to count, just pick a few obviously valuable large items and add them up. If there are antiques, artworks, jewelry and other valuable movable property, they need to be valued separately. In addition, there are vehicles, boats and other means of transportation (note depreciation). This part of the assets usually lacks liquidity.

The second part of assets is savings, which is a narrower term, usually referring to available deposits in bank accounts, or other similar cash products (money fund holdings, such as Yu’ebao in Alipay). This asset part is usually the most liquid part.

The third part of assets is investment, which refers to the value of your various securities accounts and pension accounts. The liquidity of this part of assets depends on the investment category and the restrictions of the investment account (such as withdrawal restrictions or tax attachments, etc.). This part of assets usually brings you capital appreciation.

In terms of liabilities, it is necessary to list the debt burden of each project, especially the cost. We will look at this part in detail later.

An important thing in fact-finding is to take inventory of accounts. Many people have forgotten bank accounts, securities accounts and pension accounts. In particular, pension accounts are often forgotten due to migration or job hopping. You can search for help services or information provided in your area. For example, in the UK you can use the Pension Tracing Service . In addition, the Pension Dashboard will be launched soon, which can summarize all your pension accounts for you to view.

For young people who are just starting their financial planning journey, the above fact check may be very brief. If they do not inherit very early, most young people’s assets may be limited to a small amount of cash. But it is also worth writing down. You can update your own fact check once a year to fully see your growth.

Maybe for some people who have just started to be independent, they don’t have a bank account yet, so opening an account is the top priority. This is the first step to financial independence, which also applies to new immigrants who plan to start a new life. It should be noted that it is best to open a comprehensive full-function account, which is called a current account in the UK, equivalent to a checking account in the US, or a Class I account in China. If you cannot open an account because your credit has not been established, you can try to cut off the basic bank account with overdraft function. If it still doesn’t work, you can look at the account of a credit union or post office, at least to ensure that the transaction and deposit functions can be used, and other things can be improved later. In addition, it is best not to close your first bank account, because this will be the account with the longest time in your credit history.

Since fact-finding is the first step in financial planning, in practice, when you consult a financial advisor, you will be asked to think about what your financial needs are. We will ignore this part for now and focus on getting ourselves in order first, and then think about this issue later.

2. Balanced Budget

In this step, we count income and expenditure. The income structure of most people is relatively simple, nothing more than wages, dividends, interest, rent, transfer income such as welfare allowances or pension payments, etc. However, there are many items of expenditure, and there may be dozens or hundreds of consumption records in a month. Some people (especially those who pay attention to personal finance) will keep accounts carefully. Accounting has the most primitive paper and pen work, to spreadsheets and manual input, and then to professional accounting software. Now many electronic wallets or online banking applications will also have built-in expenditure analysis. People have limited energy, and in the long run, they will be lazy if they can, so I recommend a more advanced general program, that is, an application that uses the Open Bank API interface (there are Money Dashboard, Snoop, etc. in the UK, Mint, YNAB, etc. in the US, you can search for similar applications in your local area, which are similar). The general principle is that these financial technology applications will pull your data from different banks (or other institutions, such as credit card providers) through open interfaces, integrate your transaction record data distributed in different institutions into it for analysis, thereby saving you the time of inputting. Please note that these applications cannot operate your bank account transfers, but are in read-only mode. This is also the accounting mode I most recommend. After binding the account, you almost don’t have to do anything. They will automatically analyze the category of each expenditure.

Expenses can be roughly divided into two categories. One is relatively rigid, such as rent, municipal taxes, and energy costs, which are difficult to adjust. The other is eating out, changing to a new phone, which can be adjusted as appropriate. In the past, the view was usually to save as much as possible, especially to reduce discretionary expenses. You may have read some books on personal finance, which give examples like this: If you buy a cup of coffee every morning for $2.5, you will save so much money in a week if you don’t drink it, and so much money in a year. After calculating for decades, the number seems to be not small. So should I give up that cup of coffee in the morning? This idea of ​​saving money was later reflected, because the utility is different for everyone. Maybe some people don’t care if they don’t drink a cup of coffee, but for some people, the cup of coffee (or Coke, the same idea) they buy in the morning is very important and brings happiness. This is an important component that supports his personal quality of life or his expectation of quality of life. If cutting a certain expense makes you very uncomfortable, then try to keep it. Money serves people, not the other way around. Of course you can explore other options, such as whether a coffee machine at home can give you the same benefits and be cheaper than buying one outside, depending on whether you value the cup of coffee purchased at a specific location or just the coffee.

You can review your spending on each item to find the best solution, especially those that are always repeated, such as what is the cheapest way to buy the brand of toilet paper you are used to buying, whether the commuting route to the company can be improved, these will bring you savings in the long run, and some solutions can be reviewed again after a few years to see if they are still the best. In recent years, installment payments have become popular, and this trend deserves attention. The general principle is still not to buy an item just because it offers installment options, but to focus on whether the item itself is needed. It is recommended to only choose interest-free installments, and installments with interest are usually not cost-effective (current interest rates are generally too high).

Some people set a hard budget to constrain themselves, strictly stipulating that they cannot overspend a penny. This is not necessary. As long as you don’t spend lavishly and have good spending habits, your spending should remain roughly stable. Giving yourself some flexibility instead of hard constraints can improve happiness. Ideally, you can have a surplus after deducting your expenses from your income, and then we can use this surplus to make some long-term investments. But for young people, even if it is close to the level of moonlight every month, it is acceptable. Don’t suppress your needs too much and miss the wonderful side of life. Income will slowly increase, but time cannot be reversed. It doesn’t matter if some so-called milestones in life (such as buying a house) come later.

3. Debt management

In this step, we will review our debts. Note that this section only involves debts for personal activities and does not include debts for business activities. If you do not have any debts, you can skip this section. For individuals, except for student loans and residential mortgages, which are very special and worth examining separately according to their own circumstances, other personal loans should be paid off as much as possible. When thinking about paying off debts, you should first list the amounts and costs of various debts. The APR (Annual Percentage Rate) used in loan products in the UK is a penetrating cost, that is, the cost to achieve this financing arrangement, such as handling fees, annual fees, which are not included in the interest, will also be included in the calculation of APR. Therefore, we can see that the APR of credit cards, especially those with annual fees, is terribly high (the APR of American Express Personal Platinum Card in the UK is as high as 448.0%, compared with HSBC’s personal loan APR of 4.90%). This shows that credit cards are obviously not a product suitable for personal financing. Users should try their best to repay the full amount within the interest-free period of the credit card. Note that this UK APR look-through calculation is not a universal practice, so you may need to manually calculate the cost of each debt to determine repayment priority.

The general principle of the repayment plan is to pay off the heaviest debt first (the one with the highest interest rate if there are no other fees) and then pay it off from high to low. But before that, look for solutions that can reduce the interest burden of debt. For example, there is a zero-interest balance transfer card (Balance Transfer), which usually charges a one-time fee of about 2%. Your high-interest debt is transferred to this balance transfer card, which is interest-free for 18 to 36 months. After the interest-free period, interest will be charged. Balance transfer cards also include cash transfer functions, so personal loans can also be transferred to them, and even direct consumption purchases of goods are also OK, which is also interest-free, but it is not recommended. Balance transfer gives you enough buffer to pay off your debt without paying any interest. Of course, the minimum monthly repayment amount is still required. Note that the one-time transfer fee is not necessary. There are often zero-fee products on the market, but the cost is a shorter interest-free period. I recommend choosing a zero-fee product, because if you really can’t pay off all your debts within the interest-free period, you can still apply for another balance transfer card, but it can’t be from the same company. Balance repayment cards are not available in all countries or regions. For example, they are not available in mainland China at present. So if you cannot find a zero-interest plan, you can try to find a low-interest plan that is lower than the interest rate of your current debt.

The above solutions can greatly reduce the extra burden caused by the cost of the loan, that is, the interest, but you still need to be able to repay the principal. If you have difficulty in repayment ability, then you need some other help, especially from the official support policies provided to people in debt. Usually, you can get professional assistance from charities that help people get rid of debt or from the government’s special counseling department. The support policies are different in each region. For example, in the UK, there is a Debt Respite Scheme (DRS or Breathing Space), in which the creditor cannot take any collection action or increase any interest on you within 60 days. Debt Management Plan (DMP), which provides a lower minimum monthly repayment amount. There are also some more serious measures that will affect your credit. Debt Relief Order (DRO), which freezes debt repayments for 12 months and writes off the debt if your financial situation does not improve. Individual Voluntary Arrangement (IVA), which allows repayments at an affordable level within 5 to 6 years, or a one-time affordable repayment, and the remaining debt is written off. Bankruptcy, the cancellation of all non-secured debts.

The policy names of different countries are different, so you can search the local website yourself, but the core means is nothing more than helping debtors get a breathing space and trying their best to repay. If they are unable to repay, they can write off the debt. This shows that money problems are solvable and will not force people into desperation. This is also the value orientation of modern civilized society. So don’t isolate yourself when you are in debt. Keep communicating with the outside world and seek appropriate help. Don’t commit suicide because of it.

Another point worth noting is the cost of implementing debt relief programs. Generally speaking, people who are already deeply in debt should not be charged fees that they cannot afford, so the above programs are basically free or very cheap (tens of pounds), and personal bankruptcy, which has the highest administrative costs, is also clearly marked at 680 pounds. The only exception is IVA, because it may be necessary to cooperate with bankrupts, which will involve commissions, so there have been scandals in the UK before. Companies engaged in IVA commercially try their best to promote IVA as a solution, regardless of whether it is suitable for the debtor, because only this solution can they benefit greatly, and other solutions are not profitable or even lose money. So when choosing a solution, try to choose a charity or government agency, and a solution with a clear price for the administrative costs involved, and avoid commercial companies or solutions with commissions.

In addition, the above are all about personal debts. Business debts need to be isolated from individuals, maintain composure, do not sign unlimited personal guarantees, and act in accordance with business rules .

4. Financial security

Financial security is the most important part of financial planning. Security comes from three aspects: one is provided by the state, the second is provided by the employer, and the third is prepared by oneself. The part provided by the state is a bottom-line measure for people in trouble. The coverage is usually wide, but it can only provide the minimum survival security. The part provided by the employer is very uncertain. I believe that few people choose a job based entirely on the number of sick leave wages provided by the employer. Since the security benefits attached to the job are usually not the decisive factor for joining the job, and they will be lost if you change jobs, they can only be icing on the cake. The financial security prepared by yourself is the reliance in the face of risks. There are two means, one is to configure insurance, and the other is cash savings. In this section, we will mainly discuss insurance. Insurance is used to target risks, so we need to identify what kind of risks will have a great impact on ourselves. Next, let’s take a look at the risks that need to be concerned about the most and the insurance to deal with them. Note that the following are all insurance types rather than specific products, and the following are all insurance in a narrow sense. Sometimes some of the bottom-line benefits provided by the state may also be called certain insurance, which is not the same as the commercial insurance mentioned below.

1. Risk of short-term loss of income

The insurance to deal with this risk is called “Accident, Sickness and Unemployment insurance” (ASU). ASU is very easy to understand, that is, it provides you with income support when you encounter an accident, illness or unemployment. It may be a pre-specified amount or a percentage of your previous income. Please note that unemployment only counts if you are laid off, not if you quit your job. Self-employed people can also take out insurance, especially for those who have no income to work. This insurance can provide great comfort. The income is calculated based on the profit of the previous period. Generally, some additional materials need to be submitted, but it also does not count if you close your business voluntarily. If you encounter lifelong damage, ASU will also provide a one-time lump sum payment.

This insurance pays for up to two years, and you can choose a shorter period to reduce the premium. However, this is already a relatively cheap insurance product, but the perceived value of this insurance is very high, so employers often provide group ASU as an employee benefit. It is also sold widely, but some places sell the unemployment item separately, so be careful to distinguish. ASU has a lower-level alternative called “Mortgage Payment Protection Insurance” (MPPI). This is very similar to ASU, that is, when you have an accident, illness or unemployment, MPPI will pay your mortgage for you. Mortgage is the most important monthly bill for many people. Many people will buy MPPI when arranging a mortgage, so it is very easy to sell, but MPPI is linked to the mortgage and only pays for the mortgage expenses, so in my opinion it is not as good as ASU, which is not linked to the mortgage.

2. Risk of long-term loss of income

The insurance to deal with this risk is called “income protection insurance” (IPI). In previous years, the annual meeting of the insurance industry has always reflected on the low market penetration of IPI, so this insurance needs to be widely popularized to the public. This insurance is not available everywhere, and some places may not call it this name, so you need to search it yourself, and grasp its core – if you lose your ability to work, then this insurance can provide long-term replacement income until recovery, death, or a certain specified age (generally the age of receiving the state pension, SPA in the UK, currently 67 years old, and now often set at 70 years old).

The above may seem a bit complicated. For example, if you become paralyzed and lose your ability to work at the age of 20, IPI can provide you with replacement income until you are 70 years old! This is a bit similar to the ASU mentioned above, the difference is that it is a long-term insurance, and the insurance company has no right to cancel the policy . This means that if you are in danger, the insurance company starts to pay you and then you recover. The policy is still valid and cannot be cancelled by the insurance company, and you can still claim for compensation if you are in danger in the future. Note that IPI does not include unemployment, because there is moral hazard involved. What if you are laid off and you say you can’t find a job for decades? Therefore, IPI does not cover the risk of unemployment, and ASU covers a maximum of two years, which is enough time for you to find a new job.

Replacement income is generally 50% to 70% of pre-tax salary (the lower the ratio, the lower the premium). Note that this is only the calculation base. The essence of replacement income is insurance compensation, so it is fully tax-free. So the difference between the money you get and the money you paid after tax is not much. There is a group version of IPI that pays much higher than 70%, but that is actually a compensation to the employer, and then the employer will pay you, so you have to pay taxes as before. In addition, IPI can be linked to inflation, so you don’t have to worry too much about not having enough money after many years. Of course, this option will increase the premium.

The delay period of IPI, that is, the waiting period for the start of compensation, is usually longer, but it can be combined with the time of your full sick leave salary (13 weeks, 26 weeks, etc.), as well as the time of the ASU compensation mentioned above (the delay period of ASU may be only a few days), and then the IPI compensation. Because IPI is mainly used to solve long-term problems of loss of income that may last for decades. For self-employed people, it has the option of starting to pay on the first day, but this will increase the premium. Considering that this is already a relatively expensive insurance product, there is an option to consider back to the first day of payment (Back to Day One Cover). There will also be a waiting period, but the payment will be backdated to the first day. This option is cheaper than the previous immediate payment.

Let’s take a look at the coverage of IPI for loss of ability to work. There are three situations, own occupation, suitable occupation, and all occupations. Own occupation means that you are unable to engage in the original occupation. Suitable occupation means that you are unable to engage in an occupation that is suitable for your training experience or education. All occupations means that you are unable to engage in any occupation. Obviously, the first category has the largest coverage. For example, if you were originally a diver, but now you can only work as an office clerk due to injury or illness, under the definition of the first category of protection, this is also considered loss of ability to work. Of course, choosing such coverage is also the most expensive, but it is still the most recommended choice. In addition, if you are engaged in unpaid work (the compensation standard will be calculated separately), such as a volunteer or a housewife, then the assessment is generally based on the daily activities that can be completed. For example, whether you can dress, eat, and go to the bathroom independently.

Insurance companies usually divide IPI insured groups into four categories, because different groups of people have different chances of losing their ability to work. The first is pure office work; the second is light physical activities without danger, such as store clerks; the third is physical activities without danger, such as butchers; the fourth is physical activities with danger. The premiums rise in turn, but this is only a rough classification. Each insurance company will have its own set of occupational classification lists. Maybe your occupation is considered heavy physical labor in Company A but light physical labor in Company B. You can use this vague space to inquire about quotes from different insurance companies.

Another problem that the insured may face is that they may not want to work even though they have recovered. Insurance companies usually set up incentive measures in IPI. Generally, they are called rehabilitation benefit and proportional benefit. Rehabilitation benefit means that when you have recovered but cannot go back to your original job full-time (for example, you can only work 50% of the working hours and receive 50% of the salary), you may choose not to go back because it is better to continue to receive money from the insurance company. If there is a clause for rehabilitation benefit, then your compensation will not disappear completely if you go back to receive 50% of the salary, but will only decrease by 50%. Proportional benefit means that you cannot go back to your original job (for example, due to intensity), but you can choose a job that consumes less and you can afford. The salary for this job may be much lower, and the insurance salary will continue to pay part of it. Both of these mean that you will not completely lose the compensation because of returning to work. Insurance companies always hope that you can go back to work. Such incentive measures can reduce part of their expenses. At the same time, being able to recover and go back to do something is beneficial to society and the insured themselves. It does not refer to compensation, but to creating value and mental health.

IPI is the most important financial protection configuration in my opinion, because the expenses that may last for decades are impossible for most people to cover with their previous savings. As mentioned before, IPI is not sold in all regions. Even if it is sold, it is not a well-marketed insurance product, so many people may not have heard of it. Therefore, you may need to look carefully or consult a local professional insurance broker. You can also see if there is a low-end version of IPI, such as one that may only pay out for five to ten years but can guarantee renewal, and the premium should be much lower. If you can’t find it, there is an alternative option, which is critical illness insurance (CIC). This insurance product is very well marketed, so it is easier to find in various places. It will be analyzed at the end of this section.

3. Risk of not being able to fulfill financial commitments due to death

Life Assurance is the most common insurance on the market. Unlike other risk events, a car may or may not be stolen, a house may or may not catch fire, but death is inevitable. Therefore, life insurance uses the word Assurance, which is subtly different from the word Insurance used in other insurances. To put it bluntly, what we need to deal with is the risk of death coming too early so that we cannot fulfill our financial commitments. If you are a very young single person with no dependents, then you don’t actually need life insurance. If you have a small family and a mortgage, then a life insurance policy can provide protection for the living. Life insurance is mainly divided into term life insurance and whole life insurance. Among them, some whole life insurance is purely for protection like term life insurance, while some are for investment purposes. Life insurance with investment attributes will be discussed separately in the topic under the investment column.

Life insurance (limited to the type of protection) is very easy to understand and is also the cheapest type of insurance. If young people have a need, then term life insurance is usually enough. When you are financially well-off, you can consider whole life insurance and whole life insurance with investment attributes. I remember that the monthly premium for term life insurance I bought when I was in my twenties was only a little over one pound. Whole life insurance with the same terms is usually more expensive than term life insurance, for obvious reasons. Whole life insurance will definitely pay out, but term life insurance will not. If it is a dual-income family, it is usually the best choice to insure both and pay out on the first death event (Joint Life First Death).

In terms of the insured amount, there are increasing, fixed and decreasing amounts. Increasing amounts are not very meaningful for term life insurance, but they are worth considering for whole life insurance. The most common term life insurance is fixed and decreasing amounts. There are three common types of decreasing term life insurance. The first is Gift inter vivos, which is a seven-year decreasing amount life insurance used to pay UK inheritance tax. The amount is reduced according to the declining formula, because gifts given within seven years of life in the UK will be subject to inheritance tax in the event of the donor’s death. The second is Family Income Benefit (FIB), which is paid in the form of monthly income. For example, if you buy a 15-year FIB when your child is three years old until he or she is eighteen years old, if you die when the child is eight years old, the compensation will continue for ten years. If you die when the child is sixteen years old, the compensation will continue for two years, and the total amount will be reduced. The third is Mortgage Protection Insurance (MPI). Please note that this is not the same as the previous MPPI. MPI means that the mortgage will be paid off when you die, which is based on your repayment of principal and interest, that is, the total amount of your mortgage is gradually reduced, so it is combined with a reducing amount life insurance. If you are only paying the interest on your mortgage, then fixed amount life insurance is a more suitable choice.

The Death in Service Benefit (DIS) provided by the employer is a very common employee benefit, which is usually calculated as a multiple of the salary. The higher the multiple means the higher the insurance coverage (and the more generous the employer). If you have a stable job, DIS can be taken into consideration when taking out insurance. For example, if your mortgage is $500,000 and your DIS is $200,000, then the insurance coverage only needs to be $300,000, which should save you some premiums. Note that “employment period” does not mean working hours. As long as you are employed, you can get compensation for death during non-working hours due to non-work reasons. In fact, it can be regarded as a life insurance policy.

Terminal illness benefit (TIB) is an important option, usually included in the terms. If it is an optional option, it is recommended to select it. TIB means that if the doctor believes that your survival period is within 18 months (or within 12 months, depending on the terms), then you can receive the compensation and spend it freely, such as using it to fulfill some wishes, etc. Technically speaking, this is equivalent to extending your insurance period. For example, if your term insurance expires tomorrow, and you suddenly get a doctor’s diagnosis today, you can still receive the compensation. If there is no TIB, your insurance will actually expire and become invalid according to the development of the situation, because you will not die today. In addition, if you survive the survival period, you will not be asked to return the compensation you received. However, it is worth noting that the compensation received during your lifetime will be included in your estate statistics, while the compensation received after death may not be.

Most life insurance management websites now have a one-click trust creation button, which means you have to put the policy into a trust. There are many benefits. The compensation will not be included in your estate statistics, which means you do not need to pay inheritance tax of 40% of the insured amount, and the executor of the estate does not need to obtain probate, which means that the compensation money can be used immediately by the family. At the same time, putting the life insurance policy into a trust can also isolate debt collection, which are all convenient benefits.

In the UK, due to the existence of the Equality Act, insurance premiums cannot take gender differences into account. In other words, as a man, buying insurance that uses the death table as the actuarial basis is actually taking advantage of women, because men have a shorter life expectancy than women, but both sexes pay the same premium, which is equivalent to a discount for men. Women will get a bargain on insurance that uses the disease table as the actuarial basis. Relatively speaking, disease-related insurance is more expensive, so women get a bigger discount.

In summary, the above three types of insurance are the core of financial security (if you are in a life stage without financial commitment, you only need the first two types, ASU and IPI), to provide long-term and short-term income security for yourself. Of course, this is for most readers living in countries with universal free medical insurance. If you are in the United States or mainland China, you also need to make a guarantee for possible medical expenses, because the cost may be particularly huge.

4. Risks of Paying Medical Bills

The insurance that covers this risk is called Private Medical Insurance (PMI). For people who live in areas that don’t provide universal free healthcare, this insurance is basically a necessity, so I don’t need to remind you again. Note that unlike the previous payment-type insurance, PMI is a reimbursement-type insurance, which means it only covers your actual medical expenses and cannot give you more. PMI is also one of the employee benefits provided by many employers, so it is worth double-checking whether you are covered.

This is a rather expensive insurance in areas without free medical care, so some people in good health choose not to buy PMI and leave it to fate. Note that there is a key point in this insurance clause called the deductible (that is, the part you need to pay before it reimburses you, and it will be reimbursed after reaching this threshold). Generally speaking, the lower the deductible, that is, the less you need to pay out of pocket, the higher the premium. For people in good health, you can reduce the premium paid by increasing the deductible, which becomes less expensive, so it is still strongly recommended to configure it. After all, the core of this insurance is not to deal with the risk that you cannot afford the first ten thousand, but to deal with the risk that you may not be able to pay tens or even hundreds of millions later.

For areas with universal free healthcare, such as the UK, PMI is still available, but it has become a relatively cheap insurance product. The reason why this insurance still has a market is that it is difficult for the healthcare system to strike a balance between price, quality and speed. Developed countries usually choose the first two, cheap and high quality, but speed is not necessarily guaranteed. In particular, the pandemic has caused a medical run that has lengthened waiting times, so PMI can provide a fast-track access to medical treatment or technical examinations (such as CT), which would have to be paid for without PMI. Therefore, for people who particularly value a quick recovery, such as self-employed owners, PMI is a valuable option. Employers also want employees to return to work quickly, so PMI is also common in employee benefits. Some people also care about privacy, or need flexibility in medical treatment time, so PMI is also worth considering. In general, in areas with free healthcare, PMI is an optional option, and it still depends on personal needs whether to choose to configure it. For quality of life considerations, I personally highly recommend configuring it if you have the ability to configure it.

Risk of five critical illnesses

The insurance to deal with this risk is called “Critical Illness Cover” (CIC). CIC will pay a lump sum if you are diagnosed with a disease on the critical illness list and successfully survive the pre-specified survival period. Although CIC is related to the disease, it is generally not used to pay medical expenses. Medical expenses are reimbursed by PMI in areas without free medical insurance. CIC is generally used to pay living expenses because people with critical illnesses are generally unable to work.

As mentioned before, if IPI is not available in your area, then CIC is an alternative. Note that because CIC is a lump sum payment and not a continuous cash flow like IPI, living on CIC payments for a long time will require a certain degree of advance planning. But if there is IPI, IPI has a wider coverage. Because critical illness can make you unable to work, but there are more than just critical illnesses that can make you unable to work. For example, mental health problems, some chronic diseases, and some pain that does not meet the critical standard can make people unable to work, or at least unable to do their original work. IPI covers these situations, but CIC cannot.

In the case of IPI, CIC is not necessary but can be used as a supplement. Because the disease may bring some other expenses besides treatment, such as the purchase of auxiliary equipment such as wheelchairs, barrier-free renovation of houses (widening of stairs and ramps, etc.), temporary caregiver expenses, and some wishes that you want to fulfill, etc. In addition to the long delay period of IPI, a small amount of CIC can provide supplements in these cases.

Regarding the list of critical illnesses, the lists of different insurance companies are different and you can compare them yourself. It is worth pointing out that the fact that Company A has more critical illnesses than Company B does not necessarily mean that Company A’s CIC is better. This is because the probability of contracting different diseases is different. The probability of contracting ten or twenty rare diseases combined is probably not as high as the probability of contracting a common disease. This is worth noting when you compare the lists of critical illnesses of different companies. Common diseases are more valuable than those that you have never heard of.

The survival period is usually specified in the terms and conditions, and you must survive the survival period to receive compensation. The most common period is 14 to 30 days, the shorter the better. Many CICs are now sold together with life insurance. If the CIC conditions are met first, CIC will pay, and then the life insurance portion will no longer be paid when you die later. Some insurance policies will provide an optional clause that allows the insured to buy back life insurance (Life Cover Buy-back). This is a very valuable option and is recommended. Because after a critical illness is diagnosed, life insurance is very difficult to obtain, or the premium is extremely expensive. At this time, buying back life insurance under the original conditions is very useful.

When CIC is sold together with life insurance, the policy can also be placed in a trust, but it must be placed separately from the trust of the life insurance policy (Split Trust). The reason is that the compensation of life insurance is for others, and the insured himself does not enjoy it, that is, he is not included in the beneficiary of the trust, so the compensation will not be included in the estate statistics. The compensation of CIC is for the insured to use himself, so a separate trust is set up and the beneficiary is set as himself.

In conclusion, the above five types of insurance (3+2) constitute complete financial protection. Depending on the level of protection in the area where you live, two or three types may be enough in an ideal situation. They provide us with not only financial protection, but also the confidence to invest.

invest

In the early years, the term savings was used to describe the process of individuals regularly taking out small amounts of money for capital accumulation, such as depositing money into a bank account. Investment is usually the use of existing one-time capital to achieve capital appreciation or income growth, such as securities trading. Today, the distinction between savings and investment is becoming less and less obvious. One of the main reasons is that with the development of technology, investment can also be carried out on a very small scale, and some savings products also have huge one-time payments. Therefore, the description of investment in the guide also applies to savings, that is, they can be treated the same unless the difference is specifically stated.

5. Cash savings

Previously, in the section on financial security, we talked about two ways to deal with risks: insurance configuration and cash savings. The insurance part is pure consumption, with monthly premium payments, while the cash savings part is an investment. There are many names for this money, such as Rainy Day Fund, Emergency Reserve Account, Fuck You Money, etc. Here we will call it a reserve fund, and just grasp its core, a deposit with high liquidity to deal with unexpected situations. From the perspective of our entire investment portfolio, this money can be regarded as a cash position in our investment portfolio.

So how much reserve should be prepared? This question varies from person to person. If you have a complete insurance configuration, live in an area with perfect social security, and have a stable job, you should not need too much reserve. Otherwise, you can increase the reserve. The configuration of reserve funds is often measured by how many months of expenditure it is equivalent to. On average, the most common choice is to have a reserve equivalent to six months of expenditure. Although there is no definitive lower limit for reserve funds, there is an upper limit, which should be limited to the equivalent of one year’s expenditure.

Some people may find it strange. Shouldn’t the reserve fund be as much as possible? This is not the case, because this money has a high requirement for liquidity. This means that it can only be invested in some cash products, such as bank deposits and money market funds, which have fast turnover and quick deposit and withdrawal. And these categories are difficult to outperform inflation, which means that this money will gradually depreciate over time. Suppose you save a reserve fund worth five or ten years of expenses. When it is your turn to use it, you will not be able to use it for five or ten years. There is also an example given in the financial security section. The risk event of losing the ability to work may last for decades. It is unlikely that you will save decades of expenses in advance, not to mention that if inflation is considered, the money will definitely not be used for decades. So when dealing with risks, especially for risk events of more than one year, our means are always insurance, and we must first ensure that the insurance is fully configured. This is why the reserve fund does not need to be configured for more than one year’s expenses at most.

Bank deposits are the most common cash investment direction. Although reserve funds require high liquidity, this does not mean that the money must be placed in a current account. Some savings accounts will have some restrictive conditions attached, such as limiting the number of withdrawals (such as twice a month), or requiring advance notice for withdrawals, or fixed deposits but allowing withdrawals with penalty interest, etc. The interest on these restrictive savings accounts will be higher than the interest on current accounts that allow deposits to be withdrawn at any time. With a stable life, the actual frequency of use of reserve funds should be very low. Therefore, you can consider using these restrictive savings accounts. Even if you cannot outperform inflation, you can get closer to inflation, which will reduce the rate at which your reserve funds depreciate.

If you want to increase your investment income, you can use maturity mismatching. This is because although we need higher liquidity, we do not need all the liquidity at once. For example, for a one-year time deposit account (or treasury bonds and other time-limited accounts), divide the reserve fund into twelve parts (if you are too lazy to manage, six or four parts will also work), and then the part invested this month will expire this month next year, and the part invested next month will expire next month next year, and so on, and invest one part every month. First of all, the longer term will definitely have higher returns and have a chance to catch up with inflation. Secondly, when you may need to use the reserve fund, such as a certain month next year, there will definitely be a part that expires and can be used at that time. Note that this is assuming that you do not need to use all the reserve funds when you withdraw them, but only need to use one month’s share, and then use the expired ones month by month.

The UK also has a Premium Bond backed by the Treasury, which is completely principal-protected and can be bought and sold at will on NS&I. It is also the choice of many older generations to give gifts to their grandchildren. This bond does not pay interest. Every pound of bond purchased is equivalent to a lottery ticket entering the prize pool. The prize ranges from 25 pounds to 1 million pounds. The prize is completely tax-free, and people with high tax rates do not have to pay interest tax. Note that unlike the lottery, this does not consume the principal if you do not win the prize, and you can still participate in the next draw, so it is also particularly suitable for people who like to buy lottery tickets regularly. Each person can buy a maximum of 50,000 pounds, which is not much but should be enough to cover the reserve funds of most groups. Each region can check whether there are special products available locally, such as similar products in Ireland (Prize Bond). Reserve funds do not necessarily have to be bank deposits.

6. Preparation

Looking back at our situation at this stage in the process, we already have a good idea of ​​our financial situation, we have a surplus every month, we have full insurance and a reserve fund. After doing all of the above, your life can be said to be in good order. Next, we can think about what our financial needs are.

Demands can be divided into two categories. One is risk event prevention, such as hoping that when you encounter an accident, your family will not be affected, your family will still be taken care of, and you will not be in debt, and you will have medical insurance, etc. We have carefully considered this type of demand in the financial protection link, and there will be no problem as long as the insurance configuration is complete. The other type is wishes, such as wanting to retire at a certain age (how many years in advance), wanting to prepare for the future education expenses of children or grandchildren, wanting to travel around the world with your partner, etc. Everyone’s wishes are different, so we can’t exhaust them here, but generally speaking, you will need a sum of money at some point in the future. For this type of demand, we mainly focus on the time span.

Short-term wishes, such as buying a house in the next two or three years, mainly rely on your current monthly surplus and savings. Due to time constraints, you may not be able to achieve significant capital growth, but you can generally keep up with inflation and preserve capital. The usual choice is a product with a higher risk than cash investment but a shorter term, such as structured deposits, bonds (pure bond funds).

If the time to achieve your goal is long, then long-term capital appreciation can be a goal, even for those who have not yet decided on a goal. Long-term capital appreciation requires holding equity assets, that is, stocks. Your surplus will be invested for the long term, which will be discussed in detail in the next section. Before we start long-term investment, there are some other things we can do.

First, the pension account. Most employers in most regions have plans to match your pension contributions (for example, the UK stipulates that the minimum employer match is 3% of the employee’s pre-tax salary, and the employer can set a higher amount on its own). Please make sure to take the full employer match amount , which is completely free money. This operation should slightly reduce your monthly income, but it is very cost-effective in the long run. If you are still far from retirement, then the investment in the pension account can be all equity assets, because you won’t be able to use it for many years anyway, and the fluctuations in the account have nothing to do with you. You don’t have to check the pension account frequently to worry about the fluctuations in the net value.

The other part is the debt. At this stage, your personal debt should only include student loans and residential mortgages. The rest should have been paid off in the debt management step. If not, then it should obviously be paid off as soon as possible. If you have student loans, then you need to calculate whether you should pay them off. This loan operates more like a tax in many areas. You will be required to repay it only when your income exceeds a certain threshold. It may also be written off after a fixed number of years. Therefore, early repayment may not be cost-effective. It depends on the specific situation of your plan. There are usually student loan calculators on the Internet for you to use. You can carefully calculate how to deal with it more cost-effectively.

Another special debt is the residential mortgage, specifically the mortgage on the house you currently live in. If you suddenly receive an inheritance or gift, many people are struggling with whether to invest or use it to repay the loan. First of all, the monthly mortgage repayment usually has a great impact on your monthly cash flow. If you have very little monthly surplus, then repaying the loan can increase your monthly disposable money, so repaying the loan should be given priority. In particular, this assumes that your repayment period remains unchanged. If the total amount of the loan decreases but the time remains the same, you will have to pay less each month. If the monthly repayment remains unchanged, and a large repayment reduces the total amount of the loan, the repayment time will be shortened, which is another matter. If you use it for investment, the long-term return of the US stock market is about 7%, and we use this as a benchmark. Your return is 7% minus your mortgage interest. In theory, if the mortgage interest is less than 7%, you should be able to get a spread, but the market return is a long-term average, which is uncertain, while the mortgage interest is certain, so we need a safety margin. For the safety margin, I usually cut it in half, that is, 7% is cut in half to 3.5%. If your mortgage interest rate exceeds 3.5%, it is safer to pay off the mortgage first.

7. Long-term investment

After the preparations in the previous links, we can finally start long-term oriented investment. Due to the temptation of capital return, some people may skip the previous links and start investing directly, which is not a rational behavior. Because long-term investment, especially equity assets like we advocate holding, is very volatile. Many Chinese, especially those from mainland China, have the habit of hard work and keep a close eye on the market every day. A common consequence is that they can’t hold on. Because the money used for investment could have been used for other purposes, the paper loss will seriously affect the holder’s mood and cause him to exit the market. So the previous financial security mentioned that complete insurance configuration is the basis of our investment. Only when the rise and fall of the money you use for long-term investment does not affect your life, you have the opportunity to let go of your worries and let the market rules play a role, and then let your investment bring you returns in the long run. The common saying is that you can accept it if you lose all the stocks you invest. In fact, as long as you diversify your investments, it is unlikely that every company will become worthless, but a sharp pullback in a bear market is possible. Long-term means that we must be patient and let our investments go through the bull and bear cycles, so you must ensure that you have completed the previous steps and then use the surplus that you don’t need in the short term for long-term investment. The amount of money is not important. What is important is that you may not need it for a long time, preferably more than ten years, more than sixteen years is even better, and the minimum is more than five years.

First, let’s introduce the most important equation of investment:

Net Return = Gross Return – Tax – Fee

Our goal is to maximize net profit, so the following three factors will be discussed in the order of their impact on the size of net profit.

1. Tax

To maximize net income, this is the biggest secret. Especially for ordinary people, the factor that affects net income the most is usually not gross income but tax. Many people may wonder, because gross income is the minus and tax is the subtrahend, so it should be gross income that has the greatest impact on net income? The reason is that although tax is a subtrahend, it is not necessarily a positive number. It may be a negative number, and two negatives equal a positive number, which means that it can actually be added to net income.

Taxes are controlled by the government, which means that when the government wants to guide you to invest in something, it will introduce preferential measures for that investment. The most common one is that pension accounts will receive tax credits. Vice versa, the government will introduce punitive tax measures to discourage you from making certain investments, such as the additional tax burden on real estate in capital gains tax. If you want to get tax benefits, then when you invest, you first need to deposit the investment money into a tax-favored account, and then according to the rules of the account, you hold specific assets such as stocks and bonds in the account. We call this special account a tax wrapper. You can think of it as a special sealed container that can hold different assets. There are also many ordinary investment accounts on the market that do not have any tax benefits, that is, ordinary containers to hold assets. Obviously, you should give priority to special containers.

Next, let’s analyze the tax envelope. Different countries and regions have countless tax benefits, and policies change very quickly, so here we provide a “front, middle, and back” analysis framework to analyze the situation in your own region. Generally, the tax treatment of an account can be divided into three stages: front, middle, and back. “Front” refers to the treatment you get when you put money into the account at the beginning, “middle” refers to the treatment when the money is running in the account (such as appreciation or dividends), and “back” refers to the treatment when you take the money out of the account.

Take the UK pension account as an example. The investment is refunded according to the marginal tax rate of income tax (the higher your marginal tax rate is, the more you earn, but the minimum refund is at least 20%). That is, even if you don’t pay taxes at all and are in the zero tax rate zone, if you invest 2,880 pounds into the pension account, it will be regarded as 3,600 pounds. It is equivalent to making money for nothing. The capital appreciation and dividends of the pension are not taxed when it is running. When the pension is withdrawn, the first 25% is tax-free, and the remaining 75% is taxed according to the personal marginal tax rate (at that time, you will not work, so the marginal tax rate will be very low or even zero).

Let’s take a look at the UK’s Lifetime ISA. When you invest, the government immediately rewards you with 25% (which can be regarded as a 20% tax refund). When you run it, you don’t have to pay taxes on the asset appreciation and dividends, and you don’t have to pay taxes when you withdraw it. Assuming that the gross income and expenses are both zero, your net income is directly 25%. Of course, such a good thing has restrictions. Each person can invest a maximum of 4,000 pounds per year, which means that each person can earn a maximum of 1,000 pounds in government rewards per year. Of course, this 5,000 pounds can also enjoy the benefits of capital growth. For ordinary ISAs other than Lifetime ISAs, there is no reward for investing, and there is no tax on running and withdrawing, up to 20,000 pounds a year. Obviously, if you want to invest in this tax envelope, you have to use after-tax money. This is a very simple and easy-to-understand tax envelope. You can search for “ISA equivalent in XX” to find similar accounts in your local area, but you should also pay attention to the differences.

The above examples are for illustration only. You can use the before, during and after analysis framework to compare the pros and cons of accounts with different tax treatments in your area. Generally speaking, the greater the discount, the more restrictive terms are usually accompanied. For example, the pension account has an age limit for withdrawal, but the ordinary ISA does not. Pay special attention to accounts that can turn the tax item into a negative number. Like the example above, it is easy to earn dozens of points just by tax, compared to the gross return item, it takes a lot of effort to increase a few points.

2. Gross Revenue

For ordinary people, there is a consensus on how to maximize gross returns without spending any effort. It is a very simple six-word mantra – fixed investment in index funds . Let me explain the terms below. First of all, fixed investment means regular investment. Note that the amount of investment can change due to your own situation. For example, if your recent surplus has decreased, it is okay to invest less. If you suddenly inherit a large sum of money, it is okay to invest more. It is an acceptable reason to prioritize your own life before making long-term investments. But as a non-professional, it is best not to change the amount of your investment because of your judgment of the market, that is, it is best not to change the investment amount because you think the market is good or bad. The benefits of insisting on fixed investment to average costs are obvious, but the benefits of not timing are not so obvious. It is true that there are indeed people in this world who can make profits by timing, but for the vast majority of ordinary people, not timing is a more appropriate approach. This is also the reason why I recommend passive investment (index funds) rather than active investment. It saves you the energy of studying fund managers and other miscellaneous matters, and you don’t need to subscribe to daily news briefings. Just focus on getting the average market return and do your main business well at ordinary times. This is a method suitable for most people.

Funds are collective investment plans in the broadest sense. Various forms of collective investment plans allow small investors to participate in high-cost investments. For example, index funds track the companies in the index components. Although in theory you can buy all the stocks in the index components yourself, it is cumbersome and expensive, and it is far better to buy index funds directly. Among index funds, those broad-based index funds that can represent the market are more recommended, especially exchange-traded funds (ETFs), which have the lowest fees and the best liquidity.

It is worth mentioning that many people have a preference for the industry they are in when investing because they are more familiar with it. However, from the perspective of risk diversification, you should not concentrate your investments in the industry where you work. Otherwise, if the industry is in recession, it will affect both your work income and investment.

3. Fees

Fees here refer to all the expenses involved in implementing an investment arrangement. Unfortunately, unlike taxes, fees can be negative. What we need to do is to minimize fees. From the perspective of the investment process, the fees that may be involved include: investment advisor fees (if it is a full-power investment, there are also fees for the investment manager), investment platform fees (it may be the advisor’s own platform or a third-party platform), account management fees, asset transaction fees, and asset management fees (such as fund management fees). This does not include commissions based on investment performance, which can be seen in some unpopular investments. If it is a more popular investment, these fees can add up to about 3% or even more of the investment value.

The biggest part of these fees is the first item, the advisory fee, and the last item, the asset management fee. Because these two items are generally charged in proportion to the value of the investment held, while other fees are generally fixed fees. In other words, if you invest on your own without an advisor, you can save at least 1% to 1.5% in fees. If you do passive investment as mentioned above, then it is not necessary to find an advisor. If you invest in ETFs, the management fee can be further reduced to below 1% and close to 0%, and the transaction fee is also extremely low, which is much cheaper than active funds, which can save another 1% to 1.5% in fees.

Less is more. Achieving market returns in the least labor-intensive way with the lowest cost is, in my opinion, the most suitable investment method for most people.

Finally, let me mention a technical issue. A few years ago, the EU introduced rules aimed at strengthening the protection of retail investors. The intention was good, but one side effect was that European investors could no longer buy ETFs listed in the United States. This is because American ETFs do not intend to comply with European rules at their own expense, such as writing Key Information Documents (KID). As a result, a new business was born, which is to replicate the star ETFs on the other side of the ocean in Europe, give them a UCITS package, and then sell them to European retail investors. UCITS means Undertakings for Collective Investment in Transferable Securities. The meaning of the abbreviation is secondary. The important thing is that as long as the fund carries this word, it is equivalent to being stamped and certified to meet the EU’s protection standards for retail investors. Note that even if the UK leaves the EU, the regulatory authorities have retained the UCITS rule book and maintained UCITS fund access.

At present, most of the star ETFs in the United States have sister versions in Europe, that is, they have UCITS underlying funds for purchase, and the correlation coefficient with the original ETF is 1.0. This at least solves the problem of the availability of U.S. stock ETFs for European investors. The bad news is that due to the issue of compliance costs, the management fee of UCITS ETFs is much higher than that of the U.S. version. But fortunately, the management fee of the ETF itself is extremely low, so it is still low in absolute terms. For British investors, both U.S. ETFs and UCITS ETFs can be purchased, so they may encounter a difficult choice. The U.S. version has higher taxes and is a little more complicated, with lower management fees and higher transaction fees. The UCITS version is the opposite. But the biggest advantage of UCITS funds is that they can be put into ISAs, so that dividends and capital gains are tax-free, while the U.S. version cannot. So I suggest using the ISA quota to put UCITS ETFs first, and after the ISA quota is used up every year, the general investment account (GIA) can be selected according to personal circumstances.

8. Get on track

In addition to returns, there are two other aspects worth considering. The first is asset security. If you live in a region with capital controls, such as Russia or mainland China, you should prioritize the outflow of funds. Investing in a region with capital controls is like dancing in shackles. Although A-shares are not recommended, if you really want to invest in A-shares, you can invest overseas. Using the $50,000 quota for yourself and your immediate family members, it is enough for ordinary people to take a portion out every year.

The second is the ethical considerations in investment. People hope that their investments can create more social value and be morally justified. This consideration is especially important for young people. Previously, it was believed that ESG (Environmental, Social and Governance) investing would affect returns because it narrowed the range of companies to choose from. Later, people found that companies that act in accordance with ESG principles performed better in the long run. My main concern about this is that this concept has been over-hyped, just like the Internet concept at the turn of the 21st century. Everyone wants to get involved in it to increase their appeal, just like adding “.com” to the end of the company. There are also “Green Wash” (from whitewashing) scandals now. So for now, I don’t recommend paying too much attention to companies or indices that boast about their ESG components. You need to put in a lot of extra effort to study whether their claims are true. Referring to previous history, over time, embracing the Internet has become a standard feature of today’s business model without having to mention it deliberately. Today, you don’t deliberately examine this aspect of a company when you invest, and I believe that ESG will be the same in the future.

Finally, let’s summarize. Your financial situation is in good order now. You have a reserve fund, complete insurance, and have set aside funds to meet short-term goals. There is still a surplus left for long-term investment. Ideally, you should have filled the annual quota of the mainstream tax envelope in your area, and your assets are gradually growing in investment accounts and pension accounts. From this perspective, you have entered the ranks of the top 1% of financially sound people. You have completed the things that must be done, and there are still some things that can be done but are not urgent, such as pensions and inheritance taxes, which can be considered separately later.

If you are lucky enough to become wealthy, the planning and arrangements in the above process will be enough to get you through a long period of time without having to find another consultant. At least it is okay to skip the private bank stage. The next step is to consider a multi-family office and then advance to a single family office. Tax planning becomes more and more important as your assets grow. Other matters, such as wills and agent arrangements, are also worth paying attention to, which will be discussed separately.

Some people only spent 20 minutes reading to get to this point, while others spent 20 years of hard work. Whether you are the former or the latter, you are worthy of congratulations for getting to this point, and the rest will be fine if you let it go. I believe that financial problems will no longer be an obstacle in your life but a helper. You are on the right track and can do what you want to do with confidence. The core process of your own financial planning ends here. Thank you for reading.