The Mid Autumn Festival, celebrated in various Asian countries, marks a day on the Chinese Lunar Calendar when the moon shines the brightest and appears the largest. On September 29th this year, families will gather and share mooncakes. As I relish this tradition in a foreign land, it's startling to think that years ago, the child in me would never have envisioned celebrating this festival with my now family an ocean apart from my hometown.
Life's trajectory often deviates from our plotted course. Phrases like "Change is the only constant in life" is familiar to almost every person, yet it's still challenging to fathom the full spectrum of life's uncertainties. Even just four years ago, if someone were to time travel from 2023 and tell me, “Hey, guess what, you’ll be a business owner in 2023!”, I honestly would think that this person was completely out of their minds!
From career pivots, evolving family dynamics, unforeseen health challenges to large-scale disruptions like the 2008 crisis or the 2020 pandemic — life remains beautifully unpredictable. Moreover, our beliefs, values, and priorities are in constant evolution as well.
Given this unpredictability, rigidly optimizing our financial plans is like building a castle on quicksand. The phrase “optimization” is even a bit of an oxymoron. How could you know in the life’s infinite possibilites, you would be optimizing for all possible scenarios? We don’t have Doctor Strange at our disposal, after all.
Instead, the goal is to come up with an "antifragile" financial strategy of some sort.
In practice, these are the ways that you can add more flexibility into your financial plan and be more confident that you have the tools to deal with life’s unknown:
Don’t Underestimate Brokerage Accounts Unlike some retirement accounts where you're bound by age restrictions, brokerage accounts give you a lot more freedom. The best part? You can pull out your funds whenever you need them, without having to worry about penalties. Ideally, we wouldn’t have to pull funds for emergencies from brokerage account as the first stop - that’s the job of emergency funds after all. However, it’s still nice to be able to cover expenses beyond what your emergency fund could, if that was needed. Be it for protection, or an investment for a dream future, brokerage accounts will be there for you.
Avoid High, Long-Term Fixed Commitments Fixed commitments is not something that can be easily adjusted in case of an emergency. Oftentimes, failure to meet these obligations could be met with severe consequences. For examples, even though a 15-year mortgage would save you on quite a bit of interest, it might still be prudent to get the 30-year mortgage. Most 30-year mortgages give you a smaller monthly “obligation” but still allowing you to pay down the principal faster by making additional payments. You can make the same payment as a 15-year mortgage but be able to “retreat” if you hit a snag in your cashflow without any negative consequences. Another example is permanent life insurance. Permanent life insurances, such as whole life insurance or indexed universal life insurance (IUL), are pricier and more complex than a straightforward term life insurance. Alternatively, you can apply the same amount to pay for term insurance and invest the remainder, getting the benefit of growth and protection without fearing forfeiting the insurance when you are not able to pay the high premium.
Have A Robust Emergency Funds Seriously, having that cushion? It's a game-changer. You sleep better knowing you've got a backup for those "oh no" moments, be it an unexpected medical bill or a sudden job loss. I don’t remember exactly who said that, but this quote has stuck with me for a long time: “When you have a sufficient emergency funds, your emergencies just become inconveniences”. The stress relief and ability to be “choosy” when you have the cushion is invaluable, should life throw you a curveball.
Invest in Essential Protections Here's something to ponder—what's going to protect your loved ones if, heaven forbid, something happens to you? That's where things like life insurance and disability in come in. And if you ever get injured and can't work? There's disability income insurance for that. Think of these as your safety nets; they're worth every penny. Due diligence on these products are essential, of course.
Live within Your Means This one's an oldie but goodie. In a world of shiny new gadgets and next-day deliveries, it's tempting to splurge and overly “treat yo self”. But trust me, there's level of serenity knowing that you're living within your means. You're not just thinking of now but also setting yourself up for a more relaxed future. If there ever were to be an event that dries up your income, you’ll have a much lower hurdle to overcome. The same amount of emergency fund, unemployment benefits or other supplemental income could last you longer, giving you crucial time to plan your next steps, and give you the confidence to say “no” to income opportunities that don’t completely fit you.
In the grand, unpredictable theater of life, where we seamlessly merge traditions from one end of the globe to another and where every day can bring a surprise, having financial flexibility can be your secret superpower.
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