OUR precious time on Earth should be about much more than slogging for a living and scrounging for money to pay mounting bills and debts. The great Olympian Jesse Owens, who won four gold medals in the 1936 Berlin Olympics — thus famously upsetting the racist, evil, abhorrent, and genocidal Adolph Hitler through the African American's stunning victories in the 100m, 200m, long jump, and 4 x 100m relay — proved the falsehood of so-called Aryan white supremacy.
It was this black Champion of champions who once observed:
"We all have dreams. But in order to make dreams come into reality, it takes an awful lot of determination, dedication, self-discipline, and effort."
In our day and age of saccharine-tongued motivational speakers sprouting up in every city and spewing cliches, Owens' words may seem obvious. Yet, the lessons he succinctly shared generously were painfully hard-won by him, and perennially applicable by us IF only we dare pay the astronomical price of success.
You see, even for the vast majority of us who never will be Olympic athletes, Owens' bulls-eye assessment of the need for determination, dedication, self-discipline, and effort — to cause diaphanous dreams to coalesce into robust reality — is 100 per cent accurate.
So, bearing in mind Owens' truth, and continuing my lessons from last week's Money Thoughts column (which you may access at www.nst.com.my/authors/rajen-devadason), let's take a firm grip on the determination, dedication, self-discipline, and effort each of us must exert to significantly better manage our finances.
In this context and for that purpose, we'll map the three financial planning dimensions — Wealth Protection (WP), Wealth Accumulation (WA), and Wealth Distribution (WD) — to these five distinct Seasons of Human Life:
SEASON 1
Young adulthood — 25 to 35 years old
Primary dimensions to focus on: WP and WA
Secondary: WD
Elaboration:
If in early adulthood, as we start working, we begin to economically support our parents and later our fledgling family, then protecting our earning potential through insurance is vital. We should also begin saving money prudently to deal with life's inevitable emergencies.
Writing a will is not yet a priority but getting a first iteration done early would be shrewd.
SEASON 2
Prime middle decades — 35 to 65 years old
Primary: WA, WP, WD
Secondary: None
Elaboration:
Investing aggressively for financial goals like kids' tertiary education and our own retirement becomes crucial. At this stage, we also need to expand our insurance cover to protect us from health challenges down the road. The earlier we buy critical illness, and hospital and surgical insurance coverage, the cheaper those policies will be. And sorting out a comprehensive will would be prudent.
SEASON 3
Retirement Phase One — 65 to 75 years old
Primary: WD, WA
Secondary: WP
Elaboration:
At this late stage, all WD initiatives should be formalised. Furthermore, during this initial phase of retirement we are likely to be strong enough to still travel and finally have time to see the world. But these holidays can blow a massive crater in the retirement nest eggs of most people, unless their previous WA initiatives also included creating privately funded pensions through passive income generating portfolios.
Considering the need for top-up life and medical insurance may also make sense during this season, but doing so earlier will undoubtedly — in hindsight — prove to be far more cost effective.
SEASON 4
Retirement Phase Two — 75 to 85 years old
Primary: WD
Secondary: WP, WA
Elaboration:
In this season, traveling will grow less frequent. All WD documents MUST be in place. The opportunities to buy affordable insurance will evaporate. And the current focus of WA-created portfolios from seasons past will be to comfortably fund these years of, shall we say, physical deceleration.
SEASON 5
Closing months or years — 85 to 90 years old and older
Primary: WD
Secondary: None
Elaboration:
All life on Earth comes to an end.
The best way to close this chapter of existence is to surround ourselves with loving family and friends. So, as we mull over what we wish to accomplish with the residual assets we leave behind, we may want to refine those wishes already legally recorded in a preceding will, and — for the minority of individuals wealthy enough to have established private trusts — to schedule final meetings with trusted estate planners to ensure our plans will be carried out precisely as we wish.
All of this is too much to take in and act on at one go.
Therefore, save this column (both physically and electronically) to refer to intermittently as you age and evolve from season to season.
Caveat: Chances are, if you confer with other licensed financial planners, consultants and financial intermediaries, they will have marginally different views on the age-specific bands I've outlined above. That's fine.
We're all different and, most importantly, we do not know in advance how long we will live here on Earth.
But just because we don't know that for sure is not a reason for us to abdicate our responsibility of planning for the inevitable changes time's arrow — which zooms from the past to the future at a subjectively accelerating rate — will trigger as we age, hopefully as gracefully as possible.
© 2024 Rajen Devadason
Rajen Devadason, CFP, is a securities commission-licensed Financial Planner, professional speaker and author. Read his free articles at www.FreeCoolArticles.com; he may be connected with on LinkedIn at www.linkedin.com/in/rajendevadason, or via rajen@RajenDevadason.com. You may also follow him on Twitter @Rajen Devadason and on YouTube (Rajen Devadason).