How to manage your cash flow 4-3-2-1 / Protection Planning A-F

    Saving is a virtue. From our early years, we came across several concepts and advices about saving from the older generations. However, along the way we have several misconceptions. From my experience, most people lack approaches and exposure on how to manage individual revenue and expenditure. So, let’s focus into this area while leading a healthy and wealthy lifestyle!

    Firstly, record down your income every month. Income refers to salary, investment’s dividends, business income, rental income and others. For this amount of money, you can get your net income after deducting away your CPF’s contribution.

    For example, if someone’s net income is SGD 5,000, then his income’s allocation will be as follow using the 4-3-2-1 budgeting rule:

                                                              Rule 4-3-2-1 

    40%-SGD 2,000: Personal Expenses 

    Personal expenses include daily expenses like Food, Transport, Groceries, Bills and Entertainment expenses. It should preferably be 40% of our net income. If we can manage well and limit ourselves to this budget, we can reward ourselves for a short get-away holiday or pamper ourselves. However, you must cut down on those unnecessary expenses.

    30%-SGD 1,500: Protection and Money Growth 

    Protection includes several areas such as accident, basic hospital, life and income protection planning. Insurance is the most commonly known solutions and it should preferably be 10% of your net income. The remaining 20% would be distributed in half for money growth. Part of it goes to the mid-term investment, targeting a 3-5% interest while the other half put in the long-term investment to gain an interest of 7% and above.

    20%-SGD 1,000: Loans

    Long-term loans such as the car, housing and education loan should preferably be 20% of our net income. Things to note is for credit card loan, it can only be classified under personal expenses since we used the card to spend on our daily needs most of the time. If your budget is more than this, it may not be a right time to own these assets. If you are debt free you could preserve this budget for investment or planning usage.

    10%-SGD 500: Planning Fund

    For Singles, this budget can be used for personal planning such as Wedding fund, Down payment for BTO, holiday trips, or to set aside as an emergency fund. For married couples, this can be used for children’s education planning, family trips or family funding.

    With that, let’s digress further using the 10% budget for Income protection portion. Sometimes we come across individuals that are over-committing themselves more than what they could afford which resulted in financial distress rather than freedom.

    Let me share with you how to achieve this by distributing this budget across A to F for references.

     Accidental Cover

    -Reimburse the medical fees that caused by accident and consultation with the specialist.

    -Temporary disablement caused by accident, providing you with an income.

    -Unexpected death, lump sum compensation will be given to the family.

    Basic Hospital

    -Private or government’s hospital and medical fees.

    -Medical fees before and after three months from hospitalisation date.

    -Nephrons’ consultant fees and medical fees.

    Critical Illness

    -If you suffer from 30 to 37 severe Critical Illness stages, the pay-out will cover the loss of income needed during recovery phase.

    -Statistically, 70% of the pay-out is caused by cancer and heart-attack and 1/4 of the population suffer from this condition.


    -Whole life disability pay-out used for medical expenses and cover living expenses.

    -Secure income of temporary disability.

    Early Illness

    – If you suffer from early Critical Illness stages, the pay-out will cover the loss of income needed during recovery phase.

    -As this condition is diagnosed earlier and with medical advancement, chances for full recovery is higher.

    Family Protection

    -Providing family income security for the dependants who is relying of the sole breadwinner income which includes, living expenses, liabilities and the ability to support young adolescent till of independence age are well taken care of in the event the sole breadwinner of the family is not around.’m%20interested%20in%20this%20planning’m%20interested%20in%20this%20planning

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