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I was recently invited to share my thoughts with almost 400 delegates of the 1st Virtual Youth Congress organised by the Rotary Club of Makati Jose P Rizal. It was a mutually meaningful talk based on the feedback of the very engaged attendees and at my end, it was quite inspiring to do my own share of addressing the still prevalent “sandwich generations” among Filipinos.
I call it “sandwhich generation” when children take care of their ageing parents at retirement (because they have not prepared for it financially) while they take care of their obligation to their own family…thereby affecting also their capacity to prepare for their own retirement.
I shared with them my own vision board that I drew 22 years ago. It is a crude representation of the future that I then want but it has served as my guide and the basis for a more comprehensive financial plan that i diligently implement. I am happy to say that all except two goals (we were only blessed with one child and at my age, I can’t bear another one (sigh) and the brand of dream car that I now find impractical to buy).
My crude Vision Board reflecting the future that I want which I drew 22 years ago.
I outlined 4 steps as a guide in preparing one’s road map towards Financial Wellness:
Envision – Know what you want in every stage in your life. Visualise how the future looks like for you. Just the broad strokes.
Plan – Put a price tag to the future that you want. Once you know what you want, you can then determine how much fund you need to build-up between now and the time you need it. The key word is “build-up” which requires you to start early to take advantage of the time horizon where you can grow your money.
Execute – Start putting the elements of your Financial Plan. One thing we discovered about investing is that people generally have a mismatch of their goals and the investment vehicle they use. For example, a young couple wants to start early in setting up the college education plan for their 2-year old child and yet, they put their money in a savings account with little or negligible interest income. A basic principle in investing is that you can take more risks (ie invest in an equity fund that may be more volatile) if you have a longer time horizon.
Track and Review – Our goals and aspirations change so it is important to track and review where we are so far and make the necessary adjustments while we still have time.
I closed by reminding the delegates that their youth is their main advantage and they must not waste it by starting early and making the right choices.
We oftentimes say, life begins at 40 and for some, it means it’s time to get serious with life but do we really start when we are already halfway though life?
“The day you plant the seed, is not the day you eat the fruit.”
Dr. Sanjay Tolani
With life expectancy of 80 years, 40 means we only have 20 more years or 7,300 days to make a difference in either being financially independent in our old age or being a burden to our children, who, by then, would have their own responsibilities to a carry.
Life begins at 40 should mean, we have done a pretty good job at preparing for the best phase in our lives by the time we are halfway through life. Then and only then, can we say, that indeed, life begins at 40.
Look back…have you done what you should have done? Your answer must give you the urgency to either do more or continue what you have started. As Tennessee Williams said, You can be young without money, but you can’t be old without it.
For more appreciation of this concept, watch Dr. Sanjay Tolani’s you tube video on 28,000. It will make you do a reality check just as it did to me. https://youtu.be/hV_rDPEpLEc
We always hear this aspiration in life: “I want to be financially stable” and oftentimes when we probe what this exactly means, we hear answers like: I want to give my family more than what they need, my children will be able to finish the degree they want and live a comfortable life now and in the future.
In a study conducted by the National Economic Development Authority (NEDA) to define the “Life Filipinos Want”, an overwhelming 79.8% said they want a simple and comfortable life and by that, the study revealed, we want to live in a house we own, have a car, being able to have our children finish school, have money for our daily needs and being able to travel occasionally. Filipinos’ aspirations are very family-centered which even includes the ability to take care of our ageing parents reflective of our close family ties (https://youtu.be/WT1mXV8TqN4)
Sad to say though, a lot of us, never get to do all that we aspire for. In the process, we either delay or downgrade our plans and most often than not, it is because we failed to prepare. The good news is the fact that more and more Filipinos are improving the amount of disposable income they have as we progress towards an upper middle-class society. However, we need to change our attitude towards financial planning to truly enjoy the kind of simple and comfortable life we aspire to have.
For a family with children, I include their education as part of the daily needs especially if they are already of school age now and I strongly suggest that a College education fund be set-up while they are young that goes side by side with setting-up your retirement fund. One big mistake that a lot of Filipino parents do is to set aside saving for retirement in favour of setting up our children’s education fund and run the risk of running out of time to build-up enough to become self-sufficient in our old age.
Most Filipinos keep just one account, whether in the bank or investment funds for these 3 requirements so the tendency is we spend for daily or emergency needs what could have been for retirement. To avoid this, we should have 3 different programs for each and make sure you invest or save in funds that match your needs. Short-term needs should be in easily accessible funds while long-term needs (10 years or more) in aggressive funds that offer better returns. A rule of thumb is to set aside 5% of your annual (or monthly) income for education fund (if your children are still very young) and 20% for your retirement fund (to give you more options on what to do and continue to be productive in your golden years); build an emergency fund equal to 6 months of your cost of living and do not touch it unless it is for emergency and full-proof your financial plan by having income protection coverage (ie life insurance and health insurance) ideally 10 times your annual income (there are many insurance products that can give you the security of a big coverage that is easy on your pockets and the younger you are, the lower will your premiums be).
Think about it as having 3 wallets – each serving a specific purpose. You can never over-save or over-invest. Include funding your financial plan in your priorities. You will thank yourself for this.