I read LP's blog post on redundancy and it triggered the geek in me to blog about Finance redundancy. Pardon me as I will be using some IT terms and concept but I will try to keep it simple for non IT readers. Every IT guy knows that Redundancy is very important when designing and building a system, and is usually broken down into Hardware (e.g. servers, network switches etc) and Software (e.g. clustering, vmotion etc). When I designed my financial plan, I have also incorporated some sort of redundancy into it unknowingly (职业病). The hardware in my financial plan refers to my cash and any physical items of value e.g. jewelry, watch etc and the software refers to my lifestyle, insurance etc. I agree with LP that disasters usually occur one after another if not together (祸不单行). Take for an example a very possible scenario that has been playing in my mind. What if both my parents fall sick? The medical expenses will be huge and my cash (hardware) will be severely tested. I have an emergency fund but it is meant to cover basic expenses only. While I can always use it to cover my parents bills, it is definitely not going to last long. Hence a few years back, I set up an emergency fund for my parents. Think of it as a personal Medisave for them except that I cannot match CPF 6% risk free interest. In addition, I also 'force' my parents to contribute a token sum each month. Most companies use a combination of hardware and software to achieve redundancy. Some may ask why do we need software? The simple reason is cost. Hardware is very expensive as compared to software. In my case, to save up enough to cover my parent's hospital bills is going to be a tall order and I have to complement it with insurance (software). A software cannot run without a hardware. While I've an Integrated Shield plan to cover the bulk of the medical bills, I will still need cash to pay for the deductible and co-insurance. This will come from my parent's emergency fund. Even with both hardware and software in place, no IT company will be able to guarantee 100% redundancy. This is where customer's expectations come into play and in my case my parent's expectations. I've discussed with my parents and they are fine with a B1 ward in a government hospital. A B1 ward makes sense because 1) Anything lower than a B1 ward will mean wasting my money on a private shield plan and 2) a B1 ward will offer almost the same benefits of a private hospital but at a lot less. Take flying for an example, I may not be able to afford business class but premium economy isn't too shabby either. I'm afraid this isn't the end of it. In IT we always talk about multiple redundancies. In my case, I will look at using my parent's as well as my own CPF Medisave to reduce the amount of cash I have to pay. I will also be improving my software by increasing my top up into my Dad's CPF Medisave to take advantage of the extra 1% interest. I still have many doomsday scenarios running in my head 'credit' again to my job, but I'm not going to lose sleep over this because I know that if it really happens, at least I will not be totally 'defenseless'. If you have something similar to share, I would love to hear from you and how you prepare for it.