OUR choices define us. We all need to balance our wants, desires and cravings of today against our aspirations, dreams and yearnings for tomorrow.
Is it better to spend a lot of money in our youth only to face general lack and paucity of resources when we're old, or vice versa? Common sense tells us that from the perspective of sound financial planning, it's wiser to exercise restraint in our younger decades so we don't run out of money in our waning years. Almost all of us acknowledge that truth… in our heads.
But — and this is a gargantuan 'but' — there's often a yawning chasm between the way we know we should behave and what we actually do. All of us experience this in every crucial facet of life.
For instance, when it comes to our lifelong physical wellbeing almost all of us wish we lugged around less flab and sported more muscle. That's a universally shared desire.
Yet all of us know how to lose fat and get ripped: eat and sleep better; drink a lot more water; and exercise in a balanced fashion with emphasis on aerobic, resistance and flexibility training. All this is common knowledge.
And yet… sigh! And yet, we almost always don't do what we're supposed to do for our long-term benefit. Instead, we often choose self-destructive behaviours that make us feel good in the short-term, such as eating junk food, sleeping late, under-hydrating and avoiding exercise.
QUANTUM LEAP
Can you, by extension, see the disturbing parallels with our personal finances? To help you do so, consider this:
In the last 23 years, since 1998, and more so in the last 13 years, since 2008, our fixed deposit or FD rates in Malaysia have been falling, which is terrible news for savers and retirees. Indeed, this retirement-crushing phenomenon has caused regular people to need to:
1. Accept responsibility for their own financial education and prowess; and
2. Learn about financial planning and its three component dimensions: wealth protection, wealth accumulation and wealth distribution.
For most of us, our needed self-education quantum leap is to move from merely understanding the basics of simple savings to learning about prudent GWS (grow-wealth-slowly) investing principles to protect ourselves and our families from destructive GRQ (get-rich-quick) schemes.
Therefore, I recommend a combination of DIY self-study and professional guidance.
ACT ON YOUR KNOWLEDGE
To get started, help yourself to the more than 300 Money Thoughts columns I've written, thus far, for the New Sunday Times at
www.nst.com.my/authors/rajen-devadason. I suggest you begin by browsing the webpage and picking columns that cover facets of financial planning you're most interested in. Read and study those, take down notes, make up your mind, and then act.
Later, those who are serious about financial success may identify three to five licensed financial planners to interview in a bid to identify one to help you develop financial discipline and to guide you through the steps needed to move from where you are today to where you hope to be in perhaps 10 to 40 years.
For those in Malaysia, an excellent resource is the Smart Finance website developed in tandem with the Financial Planning Association of Malaysia.
Visit https://smartfinance.my/planners and type in your state, make a shortlist of candidates based on their expertise and your perception of their compatibility with your personality and needs, take notes and draft a list of questions for each of them.
BECOMING SELF-SUFFICIENT
I've just told you what to do to raise your odds of succeeding financially in the coming decades. But just as most people know how to grow healthier and fitter yet never act on their knowledge, I'm sure most people reading this won't take action to beef up their finances. It's just how we're wired. Sometimes we're our own worst enemies. So, consider this:
If we know with utmost certainty we will die young, it makes sense for us to spend lots of money, save and invest very little, and have one amazing party until our Earthly life is snuffed out. But, based on statistics and the law of large numbers, humanity is living longer with each passing generation.
It is therefore sensible for us to control our expenses earlier rather than later on in life to accumulate a pile of wealth to sustain our families and ourselves in the (likely) long decades ahead.
Eighteenth century English writer Samuel Johnson wrote: "Poverty is a great enemy of human happiness; it certainly destroys liberty and it makes some virtues impracticable, and others extremely difficult."
Often referred to as Dr Johnson, he has been described by the Oxford Dictionary of National Biography as "… arguably the most distinguished man of letters in English history".
Given the academic rigour that went into the creation of the ODNB, we should assume hyperbole was kept to a minimum. Bottom line: Johnson was a genius worth listening to. So, let's consider what else he had to say about lack: "The inevitable consequence of poverty is dependence."
That's a truth every competent financial planner worldwide knows because it is the foundation stone of retirement planning aimed at making us self-sufficient in the years ahead.
Now you know it, too, but what will you do with this newfound knowledge?
Sit or act on it?
© 2021 Rajen Devadason
Rajen Devadason, CFP, is a 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 Clubhouse (Rajen Devadason).