What Is Your Go-Back Fund As Of Today?
Build Wealth, Plan B, Saving For The Future

What Is Your Go-Back Fund As Of Today?

Like me, most people came to Dubai for a good lifestyle, and to make money. Dubai is a city of dreams, I love staying here and my lifestyle in Dubai.

I am sure most expats who stay here, would say the same. But the truth still remains, whether we were born here, or if we came here for a better lifestyle, we all have to leave one day.

Leaving the UAE by choice is a different story, but what if you had to leave for any other reason?

How much money would you go back with? 
What assets have you built as of today? 
I hope you won't be going back with nothing.

What is your go-back fund? Have you thought about it? I hope these questions compelled you to think about this important subject.

Have you started building wealth yet? If yes, are you happy with your progress? If no, what are you waiting for?

Please forward this article to some one who could start building wealth.

Feel free to leave your questions, comments or suggestions below.

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Parents need around Dh1 million to cover lifetime education fees per child
Build Wealth, Saving For College

Parents need around Dh1 million to cover lifetime education fees per child

I came across this shocking article in Gulf News about the amount of money need per child for education fees. 1 million dirhams is more than the price of a Ferrari Maranello. The summary of the Gulf News Article is below.

Have you started saving yet? If not, check this article on ‘The guaranteed savings plan I took for my daughter’

Excerpt from the article in Gulf News

Couples who are still planning to start a family in the UAE need to start saving as soon as possible, with lifetime education costs per person estimated to reach approximately Dh1 million, enough to buy a small flat in Dubai.

Zurich Life has looked at the tuition fees at various schools in the country, as well as the related expenses incurred by parents, and calculated how much a household spends throughout the educational lifetime of a child. The resulting figure is a whopping Dh933,945.

“A typical family with two children could look at spending as much as Dh2 million on education,” said Amrita Sethi, head of marketing and communications for Zurich International Life, Middle East.

“While some employers in the UAE contribute to education costs at primary and secondary level, the majority of people are left having to pay these costs themselves, with 70 per cent of parents funding their child’s university education from day-to-day income,” Sethi said, quoting a research done by HSBC.

The estimated amount of lifetime education expenses is based on current costs and does not include compound interest rates. It covers 14 years of studying, from pre-school, primary school, secondary school to university.

Upfront education fees during pre-school alone could add up to Dh58,693.

By the time the child reaches primary school, parents should prepare to spend about Dh211,382 for a total of six years. At the secondary level, school fees for six years could set a family back another Dh258,315. For university, expenses can vary depending on where the child prefers to study.

UAE-based universities can cost Dh76,492 per year, much higher than the annual fees in the United Kingdom (Dh57,000). For US-bound students, the cost can go higher to Dh84,428 per year.

Then there are related expenses to prepare for when the child goes to university. According to Zurich, basic living expenses, including food, utilities, travel and daily essentials can reach Dh234,551 per student over three years. The figure is based on the average expenses incurred by a student taking up a three-year course in the United Kingdom.

“It’s a huge expense that, without proper savings and financial planning, is very difficult to meet and often at the opportunity cost of planning for other important goals, such as retirement,” added Sethi.

Parents are, therefore, advised to immediately kick start the habit of saving and plan accordingly before school-related expenses pile up.

“Committed financial planning will help families achieve these important saving goals. We are advising parents to start their savings plan today, if they haven’t already. Spread the costs over the long term with the help of a financial advisor and remain disciplined and committed to your plan at all times,” Sethi told Gulf News.

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How many Ferraris are you paying for?
Build Wealth, Saving For College

How many Ferraris are you paying for?

The Ferrari 458 Italia costs $229,825, and the Ferrari California costs $192,000. On an average a Ferrari costs around $200,000.

So what does this have to do with anything, and why am I discussing this on a Financial planning website? Simple.... $200,000 is what it costs today to raise a child and put him/her through a good school and a decent university that will help them be successful in life.

Education Fees in the United States

US university fees make a lot of headlines nowadays, usually involving a string of rather daunting five-digit numbers. According to one report, the average cost of studying at a four-year private (non-profit) university in the US is now US$28,500 per year.

Of course, that’s only the average. At the top end are universities such as Cornell, which in 2011-12 is charging undergraduate fees of $41,541. Additional budget advice includes $7,800 per year for accommodation, $5,354 for food, $800 for books and resources, and $1,630 for other expenses, making a total of $57,125.

That means one year alone would cost significantly more than the average US annual salary, which was less than $40,000 in 2010. Multiply by four for the full course and, for most people at least, going to university in the US starts to look about as realistic as crashing at the White House while you look for a place of your own.

Education Fees in the United Kingdom

The United Kingdom is not cheap either when it comes to University Fees. Compared to the US, the fees are about 15% lower but still quite high.

Tuition fees for international students (2011)

Subject£ Sterling
Humanities and Social Sciences£9,000–£10,800
Sciences and Engineering£10,200–£13,800
Clinical subjects£23,200–£26,000
  • Some international students may be exempt.

So if you have two kids, you have just bought yourself two Ferrari's worth of education costs.

How are you preparing to secure your child's future?

Sources -

  1. US University Fees
  2. UK University Fees

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Ms. Penny Wise and Mr. Prokrass Tinator
Build Wealth

Ms. Penny Wise and Mr. Prokrass Tinator – The Power of Compound Growth

The Power of Regular savings & Compound Growth

If you have read my book – ‘Creating, Preserving, Distributing Wealth’, you will have read the definition of ‘Wealth’. Wealth is defined in terms of ‘time’ as in how long your money will last you at a given rate of spending.

Accumulating wealth is simple but not easy and it starts with a mind-shift. The mind shift is about saving money first and then spending the remaining. It’s quite simple.

You will have to make some sacrifices, some hard decisions on whether you want to live ‘Pay-check to pay-check’ or be wealthy.

So, here’s an example of how simple regular savings can work wonders with the power of compounded growth.

Ms. Penny Wise and Mr. Prokrass Tinator

This is a story shared with me by my old boss John McNicholas. It illustrates the power and effect of starting to save early enough in life.

Ms. Penny Wise was a 21-year old woman who knew little about making money. When she was young, her father had taught her the importance of regular savings and putting money aside for a rainy day. So, following his advice, as soon as she got a job, she started saving $300 per month and invested it as well. Her investment vehicle gave her 7% growth per annum which was not fantastic by any measure but she was happy with it.

Mr. Prokrass Tinator, her neighbour was a 21-year old as well. He was never taught about saving money, and he always lived for the day. He decided to  live the good life and party till he was 31. At 31 he started to save $300 per month, the same as Ms. Penny Wise and invested it in the same way with 7% growth.

Pennywise

As you can see from the table above, he was never able to catchup with Ms. Penny Wise even after saving for three times the period.

When are you going to start using the ‘Power of Regular Savings & Compound Growth’, to your advantage?

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Zurich Insurance Dubai
Build Wealth

How to Increase Your Savings in Dubai

Savings in DubaiIf you earn Dh20,000 per month and have no money left in your account by month end, you are likely to retire from the UAE no better off than a tea boy.

Yes this is the sad truth for thousands of expats who come here with dreams of making big money, only to end up broke with hardly any savings to write home about, after years spent on living the high life or lured by shopping festivals and discount offers.

Those who succumb to the temptation to upgrade — to a nicer car, a bigger villa, pricier signature items — are in effect trading their present for a bad future, experts say.

Follow below mentioned steps to increase your savings

  •  Consider saving as a mandatory expense
  •  Open a savings account that’s harder to get to than your checking account
  •  Systematically (monthly) save to that isolated account on a regular basis
  •  Pair your raises with increase in savings
  •  Set milestones with rewards
  •  Write down expenses in three to six-month goals
  •  See where your money is going (A daily coffee may cost you only Dh12, but if you add that up over a one-year period, this could set you off Dh5,400)

Before buying electronics, jewellery or fashion items on impulse, wait 30 days (you might realize you don’t need those things at all. This could save you thousands by the end of the year).

No one complains of having money in the bank. But if you buy a new phone/item during a promotion, you may regret it soon afterwards.

Have a question or comment? Feel free to leave one below.

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Build Wealth, Saving For College

Education Plan – Dos and Don’t s

When doing finan­cial plan­ning, one of the most impor­tant top­ics of dis­cus­sion is how to create the right education plan for your child..

The cost of edu­ca­tion is on the rise, advanc­ing far in excess of the infla­tion rate. There­fore, it is essen­tial to plan for the future by starting an education plan for your children as soon as possible.

As a par­ent of a naughty 4-year old, the first thing I did when he was born was to start an education plan to help me save for the higher education fees that I would have to bear around 18-20 years later.

I started the education plan with the pur­pose of having a dis­ci­plined monthly com­mit­ment – an assur­ance, that by the time my son is of ter­tiary edu­ca­tion age, there will be a sum ready for him to pur­sue fur­ther stud­ies, whether locally or overseas.

When to start your child’s education plan

Some may ask how soon they should start the plan­ning process. The sim­ple answer is as soon as pos­si­ble.

Starting an edu­ca­tion plan­ involves an invest­ment strat­egy that specif­i­cally addresses the edu­ca­tional needs of your chil­dren. It’s impor­tant to start sav­ing early to reduce the funds required by tak­ing advan­tage of the power of com­pound­ing over time.

Important Factors to consider when starting your child’s education plan

Plan ahead when starting an education plan 

Designing the right edu­ca­tion plan­ is a long-drawn process; the time period could range from 15 to 20 years. Start to pri­ori­tise your finances early to give your­self a head-­start. This allows you to ben­e­fit from the com­pound­ing effect of money and the flex­i­bil­ity to change course accord­ing to your lifestyle changes.

Your invest­ments will also ride out the volatil­ity of dif­fer­ent mar­ket cycles over a longer period.For exam­ple, my wife and I started our son’s edu­ca­tion plan even before the birth of our son, and we worked out the finances and the amount that would be needed to fund his future edu­ca­tion. We took into con­sid­er­a­tion whether we wanted a local or over­seas education. We had to rework our pri­or­i­ties and expenses to cater for this change.

Invest­ment options for your education plan. 

One of the most pop­u­lar choices among young parents is to buy an endow­ment education plan. This is a prod­uct that cov­ers two objec­tives – sav­ings and pro­tec­tion.

For exam­ple, a 30-year-old par­ent plans to buy a 20-year edu­ca­tion plan for his new­born baby boy. His monthly pre­mium of about $450 (for sum assured of $100,000) would poten­tially bring him an approx­i­mate pol­icy matu­rity value of $200,000. Even if this par­ent is to just set aside $100 each month towards such a plan for 20 years, it is likely to gen­er­ate a pol­icy matu­rity value of approx­i­mately $40,000 – enough to cover tuition fees in a local university.

On the other hand, par­ents who are savvy with finances will con­sider starting an education plan that par­tic­i­pat­es in the equity mar­ket for a poten­tially higher upside. Some will go for high div­i­dend stock while oth­ers look to cap­i­tal growth. Regular savings plans with offshore funds can cater to those who wish to par­tic­i­pate in the mar­ket with­out hav­ing to actively man­age the port­fo­lio.

Cou­pled with a protection/savings and invest­ment strat­egy, this can be an ideal choice for par­ents to achieve their goals. There­fore, early plan­ning pro­vides flex­i­bil­ity and the oppor­tu­nity to opti­mise risk return on the strat­egy cho­sen. We chose a savings/protection education plan while putting aside funds to invest reg­u­larly in the mar­ket in a few hand-picked high-dividend stocks.

Protect your education plan.

Many couples overlook the protection aspect when starting their child’s education plan. Life is about eventualities and risk. The risk of dying to soon and leaving your family to fend for themselves and the risk of living too long and having to save for your expenses. While the savings education plan takes care of the ‘living too long problem’, parents should take out a separate term insurance that ensures that their children can have the best education even if they are not around or die too soon for any reason.

Being dis­ci­plined with the education plan. 

Not every fam­ily can afford to invest a lump sum to finance a child’s edu­ca­tion years down the road. There­fore, hav­ing the dis­ci­pline to save on a monthly basis, often through a reg­u­lar savings/investment plan, is a good strat­egy to begin with. Stay focused as it is often easy to find excuses to dip into the sav­ings if you do not have a ded­i­cated account or strategy.

There is a sense of com­fort and peace of mind know­ing that children can secure their pre­ferred edu­ca­tion choices down the road. All it takes is early plan­ning, a com­fort­able and real­is­tic sav­ings and invest­ment strat­egy, and more impor­tantly, dis­ci­pline in keep­ing to the finan­cial com­mit­ments set aside for the edu­ca­tion plan.

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