X-CURVE FINANCIAL CONCEPT DISSECTED

Let me share to you a concept we called the X- Curve, this concept basically simplifies our personal financial planning. 

Lets start with this line and call it our age line, the left side will be our  younger years and right as our older years. Now, during our younger years which probably where we at now. This is the point in time where we usually have huge responsibility, and also the point in time where we usually work so hard for the money, our paycheck or income usually goes to these responsibilities and basic needs such as food, shelter, clothing. About this time also we start to build our own family, we get married  have children and for that we oftentimes acquire Debt, Loans and mortgages. Education for our children is also part of that big responsibility, same as family health care of course. 

The red curve line as shown is our responsibility line which should decrease the older we get. Ideally, our responsibility such as debt, mortgages, children education should have been fulfilled by this time to such that we have no more responsibility other than our basic needs. During our younger years, usually we have no savings because as I said, at this point in time we have big responsibility and that our income are often enough to cope up with this responsibilities. The green curve line as shown is our wealth or saving  line, ideally, our wealth if we build it wisely and correctly should increase over time. And when we get older, we would want to have big savings. At this point in time, what we wanted is that money should already be working for us. Meaning, we live on interest, exceedingly enough to cover our basic needs such as food, shelter and clothing. Even more than enough to cover our retirement, healthcare and should already be debt free. 

Going back to our younger years, at this time, we are less secure. As life is full of uncertainty, anything could happen along the way, we could lose our job or get sick. That is why we need to create an emergency fund that will serve as our contingency plan whenever those kind of situation occur. As recommended by most financial adviser, 3-6 months of our salary should be our emergency fund. And this fund should be easy to liquidate. 

Another problem while in the process of building wealth are facing the so called two "if's" of life. What if, we die to soon? Most often than not, we are building our wealth not for us but for those who matters to us. And in that sense while we are building our wealth, if we don't get a protection not for ourselves but for them and something unfortunate happen to us, we might just end up defeating our own purpose . We should make sure then, that the life of those people who matter to us if something unfortunate happen should still continue as we intended it to be, after all, they are our strong emotional reason why we have strong desire to be truly rich. Unless of course, we intended to be rich for our sake alone, in that case, it's pointless to get an insurance because, though you are insured, who's going to benefit if we already perish ? Right? We came in to this world with nothing and surely, the only certain in this life is that we will also exit empty handed. No argument with that for sure. 

Another "if" of life is what if we live to long? This time we should have prepared a long term  investment. If we are to invest long term, it is important to consider economic factors such as Inflation and interest rate, because if we don't consider this factors especially inflation rate and invest with a return less than this rate, our investment intended for long term will depreciate overtime. Therefore, choose investment vehicle that will yield higher rate than inflation rate, and I'm pretty sure bank is not among of them. 

Long term investment is intended for us to be secure and cover ourselves  from  our living expenses after our retirement exceedingly enough so that we don't disturb the financial planning of those people who matters around us. Lucky for us, if our children have more than enough to cover for our living expenses. But if they are struggling financially, we might end up in the home for the aged, telling others about our wits, exploits, experiences and profession during our younger years and yet, all but history and at the end of the day, we still can't cover our own expenses. We don't want that to happen, right?

Basically, the X-curve tells us to work hard now and relax later. It doesn't mean we deprived ourselves from enjoying sometime.  But at least, keep track our expenses and know our priorities. One question though, do you think this is the reality now? Well, for some, Yes! Those were the wealthy people who realize early how to build wealth wisely and correctly over time. Most often than not, like what I said earlier, our senior citizen at the age where they are force to retire have no enough money to cover for their living expenses especially healthcare. Do you agree that if we live to long our health will eventually fade? Do you also agree that health care will be a very big chunk on our living expenses when we get old? Who do you want to pay for it? Do you want to depend on our  children later on? Do you expect that your responsibility now to your children financially be returned later on as if your children owe you?  For me, I will never view my responsibility to them as such and, I definitely don't want to disturb their personal financial planning just because I cannot cover my own expenses. It's definitely better for me to take care of myself financially later on. But, how Am I going to that? 

This is where the IMG's 6 steps to financial security comes to play.