Top Things to Know

Who doesn't want to be rich?

But let's face it, getting rich hard and fast if one or more of the following conditions applies:

• You're not an investment banker or venture capitalist.
• You're trying too hard to live like one.
• You started a family and had the cutest darned kids.
• Like me, you persist in living in one of the highest-cost, highest-taxed places in the world.

Being financially independent, however, isn't out of the question. And once you achieve that, you've laid the groundwork for living well.

In fact, there's no point thinking about rich until you have a sound financial plan.

A sound financial plan doesn't have anything (or at least not much) to do with how much you make or the savings you have. Any financial planner will tell you they've had high-income clients who, given free rein, spend themselves into the ground.

Broadly speaking, a sound financial plan means being able to meet your financial obligations. How solidly your PLAN is, you'll be depends on how you define "meeting your financial obligations." You may be able to pay the minimum on your credit card bill, but being able to pay off the whole balance every month reduces your financial risk.

For long-term financial plan, though, you'll need more than just enough to pay your bills today. You'll need protections in place to keep you and your savings saved when a costly crisis hits.

To make sure you're the only thing fleet-of-foot in your life, here are four ways to lay a solid financial foundation.

Build a cushion

For life's pricey annoyances, there isn't MasterCard. There is an emergency fund.

It's a hassle to build if you don't have one, but you'll be glad you did next time your transmission sputters or you got retrench.

I recommend setting up a high-yielding bank account dedicated exclusively to Emergency Money. An Emergency Fund should be around 6 months of your most recent drawn pay.
To fund it, besides curbing spending where you can, you might deposit:

• A bonus or financial gift from a relative.
• A small amount from your paycheck every month.
• Money you get back from a flexible spending account, a transportation reimbursement account or an insurance claim.
• Your Bonus. I am sure your company have year end bonus. That ranges from 1-3 months of your month pay. If your fixed monthly expenses don't change, you might be able to set aside one paycheck a year.

And please if it is not an emergency, do not use it! This fund is not for year end overseas trip and your other expensive dreams.Once you complete accumulating your Emergency Fund, then you can start to set up your other funds.

Live on less than you make

Set at least 10 percent of your gross income for retirement savings which can be invested to gain potential high Returns.

Then live on 90 percent of your take-home pay and bank the rest for shorter-term savings goals like a down payment or vacation.

If you can be discipline enough (it will be hard to do - I know, I live in Singapore), don't let your debts (including mortgage or rent, credit card bills, loan payments, etc.) exceed 36 percent of your gross income, less if possible.

Adopt a pay-go, pay-off strategy

With a few exceptions, don't charge more than you can afford to pay off in full every month. Ideally, the only debt you should carry from month to month should be mortgage debt and student loan debt, the interest on which may be deducted on your tax return and which represent investments that can pay off later (your home and your education).

For new homeowners who can't afford to pay outright to furnish their first place, I suggests asking the furniture store if there is a 0-percent interest policy for one year. Then be sure to pay off the entire amount charged before the year is out. Otherwise, you'll get hit with deferred interest.

Pay off high-interest credit card debt as soon as possible, diverting some of the money set for savings if need be to do it. It makes little sense to pay 15-plus percent interest on credit card debt when you're only earning between 4 percent and 8 percent on your savings.

Take cover

A health crisis can be a fast lane to debt if you don't have health insurance. But so, too, can long periods of disability unless you have disability insurance.

At a minimum, you want to have short-term disability benefits covering 100 percent of your gross pay for three months, and at least 60 percent to 70 percent of your pay for longer term disability.

If you're the main breadwinner in your family, i would suggests bumping up your long-term disability payments as close to 100 percent of your pay as possible. And do take note Insurers aren't likely to offer policies that cover the full 100 percent, but having something is always better than having nothing at all.

As for life insurance, if you're the main breadwinner and have young kids, you might consider getting a term life policy which is less expensive than whole life -- worth 7 to 10 times your annual salary, or whatever your calculate your kids will need to get them through college and what your surviving spouse will need until then and thereafter.

I will cover more on the types of insurance later.hope you find this first post of mine Informative.