Use the Wealth Pool to Manage Our Money

- Monthly salary of 5000, debts of over ten thousand, how to cope with the heavy burden?

- Working for 5 years, still no savings, how to break through?

- Planning to study abroad, high tuition fees, how to manage?

These questions may seem diverse, but they all boil down to one issue: what to do when money is not enough?

The answer is: that we need to establish a financial management system that can adapt to changing circumstances. We can use the "Wealth Pool" model to assist with this.

The Wealth Pool consists of four different pools:

① Cash Pool - ② Insurance Pool - ③ Goal Pool - ④ Investment Pool.

Don't underestimate the order, as it represents the sequence for planning wealth. Let's explain each one in order:

Cash Pool

The Cash Pool contains all our current assets that can be accessed at any time.

First and foremost, it should cover our daily expenses, such as food, housing, transportation, etc.

Therefore, the most important factors for this money are safety and flexibility. It is advisable to keep it in money market funds or other liquid investments for easy access.

Additionally, the Cash Pool should also include a portion of emergency funds, at least enough to cover 3-6 months of living expenses. The main purpose is to address unexpected situations such as job changes or medical treatments.

In times when there is no stable source of income, emergency funds can provide a buffer.

Insurance Pool

Without proper insurance coverage, a major illness or accident can potentially wipe out our hard-earned wealth.

Therefore, it is important to allocate funds for insurance coverage as early as possible.

For the average person, allocating 5%-8% of annual household income can help acquire adequate coverage for accident insurance, critical illness insurance, life insurance, and medical insurance. It's important to prioritize sufficient coverage rather than focusing on returns.

This expenditure allows for relatively comprehensive protection without putting too much pressure on family finances.

Goal Pool

Think carefully about your life. Besides daily expenses, do you have any specific goals for the future that require financial support? For example, preparing for professional certification or saving for a down payment on a house within three years. The Goal Pool is designed to meet these specific needs, and its key purpose is to enable early financial planning.

How can the Goal Pool be utilized effectively? You can start with the end in mind:

1) Define specific target expenditures and timing for the next five years.

2) Seek suitable financial products with appropriate returns and terms, gradually accumulating funds.

The value of the Goal Pool is to ensure that you can confidently handle transition periods in life.

Investment Pool

Unlike the previous pools, the intention here is not to spend the money but to continuously generate investment returns.

These funds are intended for long-term growth, such as retirement planning or long-term (5 years or more) education savings for children.

Common investment options for the Investment Pool include:

- Stocks

- Stock-related investments (including index funds) and mixed funds

- Gold or oil investments

- Long-term financial products (5 years or more)

- Real estate investment and so on.

Here are 2 reminders:

1) It is crucial to allocate funds to each pool in the correct order. Prioritizing investment returns before securing the first three pools is a mistake.

2) The establishment of the Wealth Pool does not require a one-time effort. It can be done gradually, starting with the "emergency funds" in the Cash Pool and accumulating over time. Ensuring a surplus in monthly income is more important than anything else.