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Middle earner plan
What I would expect from a "middle earner" plan is: PRISM
- By Sean Kelleher, Special to Gulf News
- Published: 23:47 January 9, 2009
Dubai: What I would expect from a "middle earner" plan is: PRISM
P= Protection. What happens if the bread winner loses his/her job or dies? The first priority of the "middle earner" is to protect the family from the threat of dying too soon. Sounds morbid and boring but it is simply the very best advice. Period.
R= Retirement. What happens if the bread-winner doesn't save enough money into a retirement pot? Dying too late (exhausting savings) is the second threat. The more this position is covered the more "content" the bread-winner" should be.
The current opportunity for regular savings/pension schemes is fantastic. Prices are at record lows, the heroic assumption is that markets must recover making the timing absolutely brilliant for regular savings schemes. The point to note: don't expect valuations to be brilliant for a couple of years.
I= Investment, which only make sense if you have PRS covered.
M = mortgages and building a "roof-over-the-head".
Assuming we have the "middle earner" focused on PRISM, today's realities mean that the most important aspect of PRISM is the S bit.
S = Savings. Put another way: Cash Management. The two key parts of cash management are: Debt Management. Along with the rest of the world from global government; hedge funds and the HNW- first step: cut credit. At a negative 24% per annum; every dirham invested in credit card debt is a big step forward for the overall balance sheet.
Savings: In the UAE with deposit rates at 6 to 7% p.a; I can't see why the "middle earner" would want to take risk for returns that may or may not be real. The key point on savings is to ensure that the middle-earner can survive a job-loss. The first step is to set up a cash savings target of six months salary.
The writer is Chairman of Financial Partners and Mondial
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