Practical Ways to be Wealthier
In our complex world of financial options and endless possibilities it is really no wonder that people get confused. This can often lead to decisions which have undesirable or unfortunate consequences.
One of the key principles which is as old as the hills is ‘keep it simple stupid’ (KISS). In our advanced technological world it is often acknowledged that people can suffer from information overload. It is a great thing to keep as up to date as possible about many different aspects of life. However, information overload can make people feel they have access to sophisticated solutions which are actually not right for them in a practical sense.
Many people see a doctor and get a diagnosis for whatever appears to be wrong. They then look this up on the internet and end up with an extorted vision of what is likely to happen to them; frequently assuming they are going to die. This is an example of too much information which is actually inappropriate.
When it comes to finance, people research the internet and are misinformed or misconstrue what is appropriate for them. They feel that undertaking complex investment strategies is easy and simple. This is not so.
Boil it all down to the essence of what you want to achieve and the KISS principle is actually the best approach and strategy.
Most expats are financially alone in that they have no welfare state or government to rely on when it comes to support later in life or when they are sick or unemployed. It is therefore essential that they create a reserve that they can fall back on in tough times. A rule of thumb is to have approximately six months living costs available to you at almost any time. If you do not have such a “rainy day fund” you will be wise to motivate yourself and save toward that achievement. A simple bank savings account is best for this. You will not earn much interest today but the point here is to have available liquidity if you need it.
When you start to get into that habit you will see how easy it can be and that will motivate you to save even more. Make a budget for your ongoing expenses and see how much excess you have from your income. Save this ore even more if you can. One habit I heard about was someone who quit smoking and then religiously saved the amount he would have spent on cigarettes. It soon accumulated and he was really pleased. Save as much as you can. It will spur you on to save more and more.
Once you have accumulated your rainy day fund it may be time to look at projected longer term budgets. Saving to buy that home, a car, your dream boat or even just the anticipated cost of educating the children when the time comes.
Ultimately you will also be looking at your retirement and for these types of savings the longer term structured plans available today can be excellent investment vehicles. When taken to their scheduled conclusion they are usually very successful. The help of dollar cost averaging and compounding growth are phenomena which make them effective. Many have meaningful bonuses so look carefully for the right plan for you.
When any of these come to a conclusion you will have a lump sum of proceeds which can be invested into longer term plans designed to accommodate single sums and make them grow whilst being able to withdraw income from them.
The lump sum could even be used to purchase an investment property which will offer you capital growth and inflating income for the long term. A tenant will pay your mortgage for you and then you will have a valuable asset and receive the income, free to do whatever you want with it. Properties are excellent long term investment strategies and make a very meaningful part of your retirement plan.
As well as creating an income for you to use whilst you are in retirement, property also leaves a legacy estate for your beneficiaries, whoever they may be. A property asset which is growing in value and creates an income is going to be a very welcome inheritance for anyone.
The retirement plan which is right for you depends on your own circumstances. Whilst the overall strategy of all expats in creating this plan is very similar the detail is usually different because each of us is dissimilar from each other and unique in ourselves in so many ways.
Whilst the car, boat or other events mentioned earlier can be a giveaway our retirement plan is not something we can do without. If you fail to plan for this you are really planning to fail. What will then become of you during your golden years? There will be much regret but also a great deal of hardship.
If you continue to save and invest you will be working toward that retirement plan goal. As you get more into the habit and create a nest egg and investments you will be wise to forward project and try to estimate what your requirements might be in retirement. That will allow you to be much more of an expert.
Do not forget one very important principle. That is protection. Many people do not realise that their most valuable asset is their power to earn. If you lost this because of terrible sickness, accident or even death, what would become of your loved ones and even you if you have to be cared for? It is therefore very important to ensure that you have that protection in place.
Using all these steps and starting with the KISS principle you can gradually become an expert to yourself in your own field of personal wealth creation and management. But remember that it is best to begin very simply and not try to run before you can walk.
Questions to the author can be directed to PFS International Consultants Co. Ltd. on +66 (0) 2653 1971 or email to firstname.lastname@example.org.
Andrew Wood has been an expat in Asia for 35 years and is Executive Director with PFS International Consultants Co. Ltd.. He has been writing Net Worth articles for six years and has made a significant contribution to the PFS library of financial service articles dating back over nine years. These articles which cover the complete A-Z of financial planning are available to readers on request.