The 4 Important Stages Of Life

Spender Stage (21 - 30)

This is arguably the most awesome stage in our life! The time where almost all experiences are new. Getting our first pay cheque and there are so many things that we need to buy, buy, buy.

The irony of this stage is that while we are spenders, the very first step instead is actually recognizing that mastering the art of saving is key to our future.

There are essentially 3 types of savings:

1. Emergency cash savings (How much is enough?)

2. Liquid cash savings (How do I split my savings into different purposes?)

3. Mid and long term cash savings (what instruments should i consider?)

At this point of time, it is also important to recognize that everyone makes the same singular mistake of assuming that they would be able to be fit and proper to actually be earning an income and continue this savings mode.

That said, while we are mostly healthy and capable, almost immune to diseases and accidents even, we do face a huge problem that if we happen to face such issues. Most of us would have known some friends or family friends who are insurance agents and/or financial consultants and bought some policies along the way, sometimes even from MRT stations and shopping centers.

Question is, with the various policies that we bought, how and when do we know exactly the process of doing the claims and what exactly should we take note of when we want to file the claims from the many policies that we bought from? Should we “forget it” because it is so troublesome?

Accumulator Stage (30 - 65)

At least in Singapore, this is the stage that determines very early where we end up financially. Remember, it is not how much we earn, but how much we accumulate that makes us financially free.

Key question is, what is our purpose of this massive need for accumulation? Would it be for the car that we will purchase? Or the house that we will be signing away 30 years of our lifetime income?

The world of wealth accumulation is laced with poisons because someone must lose money for another to make that money! Yet, if we procrastinate, we have inflation coming after our hard earned money that we endure our silly bosses everyday to earn.

There are essentially 6 basic risk levels of investments.

1. Fixed deposits and Singapore Savings Bond (Cannot beat inflation wor, can consider meh?)

2. Regular savings plans (So long term, why would I even need to do this?)

3. Exchanged Traded Funds (Do we have time to monitor?)

4. Unit Trusts and Funds (What are some proven techniques and easy to follow methodology without me having to pay to attend courses?)

5. Stocks and Equities (Pros and cons of local and over seas financial markets)

6. Property, REITS and Landbanking (Big ticket items and really requires understanding the local property scene?)

7. Leveraged Trading and Alternative Investments Schemes (Is it true this one is can win big but also can lose big time?)

But wait, what do we need to understand about?

1. Inflation

2. Dollar Cost Averaging

3. Staying invested over a long period of time

4. Staying consistent in a volatile market

5. Maintaining our composure and keeping emotions in check, How to overcome this?

Remember we mentioned 10 different angles to protect in the previous life stage? Now is the time to understand, exactly how much is enough and what is over buying and over indulging.

This period of time is when we put our hearts sand souls into building a life and making our mark. We picked up a variety of policies during this period, and if a claims arises, do we really have the time to look into how the policies work?

Retirement Stage (65 - 85)

The fruits of our labor. The time to kick back, chill and enjoy. Sit down and watch grasses grow, play mahjong, have coffee with friends, and maybe take our yacht out once in awhile.

Sorry to burst our bubble, on the contrary, this is the acid test of all our financial decisions in our lifetime.

How do we plan this stage effectively such that when we decide to work in Macdonald’s, it is because we have nothing to do in the afternoon and not because i need to look forward to the pay cheque.

Retirement planning has 3 main components

1. Regulated Tap - this component has another 2 parts comprising off CPF and annuities.

2. Unregulated Tap - this component has multiple parts of different products that yield different risks resulting in different returns. This provides us with the options of having lump sum withdrawals.

3. Luxury Money Tap - this component determines we fly first class or budget airlines.

Legacy Stage

Ever heard of the saying that “Wealth never lasts through three generations?”

Is it because other parents do not know how to bring up sensible and wise kids? Question is are the kids the main problem or is experience in money management the problem? So does this mean we try to leave as little legacy behind as possible? What if something happens to them after we walk out of life?

How could we possibly structure a will or set up a trust to allow effective use of the money we leave behind.