I met up with an ex-colleague last week.
My tale of meet ups let me know that they would usually come in bunches. But they are purely coincidental. We try to find patterns where there usually isn’t.
My ex-colleague wanted to carry on a previous conversation we have about money. The last time we actually message was about 2 years ago. We would usually meet up with another ex-colleague of mine. The three of us happen to be mutual friends, joint up awkwardly due to mutual circumstances.
“Sure, I am open to meeting up. We can do it next week or…. I think this Friday I am likely available as well.”
“I think it is better if we meet up this week.”
Whoa. I was taken aback how urgent this seem to look. I hope there isn’t anything bad happening with the family.
I found out there was nothing of that sort when we met up for dinner on Friday.
Rather, she told me that.. this was not the last time we had such money conversations. The first conversation was probably almost 6 years ago in 2019. All these remain as conversations.
I give her space to think (because people need space and its not my money).
And life happens.
So 6 years later, she is 37 and not 31 already.
Sooooooooo much time seem to have passed but what seems to be the worry?
We discussed a lot of things but it boils down to something rather simple:
I have some life goals. I would be glad if I have taken care of these life goals 6 years ago. But now I am older, and I have not taken care of them. And I am running out of time.
You replace my friend with yourself and you might see similarities there.
Taking care of life goals usually means funding them to a certain degree or making sure that for all your money, are you funding the goals adequately?
“I see my dad going in and out of hospital and I see first hand what happens if I don’t eat right and take care of myself well.”
Sometimes I wonder if we at Providend or Havend actually deconstruct the process how people make decisions and whether there are evergreen patterns. I think we know pretty early that many can pay attention to our content and be inaction, or take action in their own way.
Whatever discomfort, if there are any discomfort they will start compounding. Eventually the discomfort will be so significant that it will push them to take action.
In the past, they cannot get past the hurdle of paying other people to do things… they think they can do themselves. So they do it on their own.
Discomfort exists in different forms. It can be for some reason you are not getting the returns. You keep shifting between investments but not getting anywhere. You would like to invest this way and you tried but you don’t have the time. Basically, there is an ideal financial setup in your mind, but you just could not get it right.
The value is alleviating this discomfort. This can be a promise. I think our challenging is delivering on the promise.
The discomfort builds and builds and so the value of advise also builds and builds until you buay tahan and you need to get it solve because time is running out.
I can detect that my friend finds her setup to be so primitive and backward. She “only” has $550,000 in one bank account, $150,000 in CPF SA, $250,000 in CPF OA and nothing else.
I can think of many worse off position than this. We all feel guilty because we think that we achieved less than we should or when compared to others. The danger is when we blame ourselves and we find ourselves shameful.
My job is to tell her that many would exchange their financial position to be in hers genuinely.
A blank piece of paper that you can draw a beautiful picture is better than one with a lot of things scribble on it. You have to first fxxking try to erase it first.
I shared with her a few things:
- She has reached CPF FRS. This means that she has the equivalent of a flat $1,400 monthly income by the time she is 65 till she die. If she self-manage to take care of inflation, she has the equivalent of $1,000 monthly income.
- The excess money of about $200,000 in her OA will be accessible at 55. That can be considered together with the rest of her $550,000 in one portfolio that the money can come out at different time periods. Although that would not be accessible for 18 years.
- If we use two simple rules of thumb of 2.5%, 3% safe withdrawal rate, this will give her an idea about the inflation-adjusted income potential of her $750,000 if she allocate them well:
- 2.5%: 750,000 x 2.5% = $18,750 annually or $1,560 monthly. Tenure is 60 years or to perpetual.
- 3.0%: 750,000 x 3.0% = $22,500 annually or $1,875 monthly. Long tenure, conservative but doesn’t cover the most disastrous sequences.
- Now that we have a few numbers ($1k, $1.4k, $1.5k, $1.8k in income), her exercise is to figure out how much her lifestyle today, in the future will cost. The more she can be introspective so that she can connect what she really wants (which is security) with the lifestyle she wants, the more she can get what she wants.
- I personally think that knowing how much of what you find important is covered by your current income (which is derive from your assets), gives people some degree of stability then telling people a yes or no.
- I showed her a basic bank, portfolio account routing framework, the spirit behind it so that she can better compartmentalize her spending, but also easily tell how much she has in her income portfolio next time. All she has to do is start creating one savings account.
I think that is the start for now.
Conversations will remain as conversations. Ideas remains as ideas. Until you do something about it.
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Kyith is the Owner and Sole Writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, firmer wealth foundations, how to have a Passive investment strategy, know more about investing in REITs and the nuts and bolts of Active Investing.
Readers also follow Kyith to learn how to plan well for Financial Security and Financial Independence.
Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Insurance Start-up Havend. All opinions on Investment Moats are his own and does not represent the views of Providend.
You can view Kyith's current portfolio here, which uses his Free Google Stock Portfolio Tracker.
His investment broker of choice is Interactive Brokers, which allows him to invest in securities from different exchanges all over the world, at very low commission rates, without custodian fees, near spot currency rates.
You can read more about Kyith here.
