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In my 40s, married with kids? What would AK do?

Wednesday, August 20, 2014

To do better, one way is to invest for higher returns but at the same time we want to have some measure of stability. This is quite natural.

As we age and take on more responsibilities, including getting married and having children, we might start looking at things differently. 

Quite suddenly, we might not feel so carefree. 

Of course, we want to provide our loved ones with a better life too.

We fear that one wrong move on our part, we might jeopardise not only our future but the futures of those who are dependent on us. Again, it is quite natural to feel this way.

For people who have fallen along the way, it could be really difficult to get back up to continue the journey. 

I know because it happened to me before too but such is life and we simply have to soldier on. 

We only lose when we stop trying.

My way might not be your way.
However, we will find our cup of tea.

So, to someone in his 40s, married with young kids, who lost lots of money in his investments before and who is trying to find his way now, it could be quite a stressful process. 

Add multiple leveraged investment properties, some of them co-investments, and it could create a feeling of being stretched too thin, like spreading a little butter over too much bread, as Bilbo Baggins would say.

Here, I share a recent reply to a reader:

Actually, it is really a coincidence that you should be writing to me at this juncture because I have been invited to give a talk for a "recovery group" next week. 

It is for a group of people who lost a lot of money in stocks and are feeling somewhat demoralised...

... when bad things happen to anyone, there has to be closure. It is like a wound that needs to heal but it should heal properly. 

To have proper closure, we have to examine what went wrong and if there is some way we can grow to accept it and grow stronger in the process. 

Not an easy process which is why many who fell never recover.

You might remember that I have a blog post on how building an income portfolio is like building a house. 

So, if a bad thing should happen and the house was destroyed, what do we do? Go without a house? No, of course not. 

We build another house. This time, try to make sure that the foundation is stronger. Maybe, even install some earthquake proof technology.

Bad things happen sometimes.

So, I would say that we want to take care of the basics first:

1. Have an emergency fund ready, enough to cover fixed expenses for 12 to 24 months. In your case, this should include the many mortgage payments for your many properties as well. 

2. Make sure you have necessary insurance in place. H&S, Critical Illnesses, Disability and Term Life. Term Life should cover the remaining mortgages of your properties and your dependents' needs till they graduate from tertiary education. Ask your insurance agent about reducing Term policies for the mortgages. Yes, they exist.

3. Plan for retirement and that is where your investment properties possibly fit in. If you feel that you are over-exposed and are uncomfortable, reduce your exposure. Losing sleep over anything is a bad idea.

4. I like the CPF-SA and I have maxed it out years ago. I do not know of any other instrument that will give me a risk free return of 4 to 5% per annum. As a tool for retirement funding, this is as easy as it gets.

5. Any excess money then can go into a war chest to wait for opportunities.

Like with anything, start from the ground up. 

Financial planning and investing for a better future? 

Much of it is about staying grounded and having a peace of mind.

I hope that this blog post has provided food for thought and if you should have opinions which you would like to share, please feel free to do so in the comments section.

Related posts:
1. Building an income portfolio is like building a house.
2. The best insurance to have in life.
3. Achieving financial freedom is a family affair.
4. How to upsize $100K to $225K in 20 years?
5. Thoughts on financial security for Singaporeans.


Unknown said...

Pre-emptive measures to prevent a personal financial melt-down is always the best defense. However, once a meltdown has taken place, being honest with oneself is the best stance.

Firstly, a recovery is not likely to be a bounce-back. People who can fully recover their lost wealth and move to higher plains is the minority. It is better to move away from 'wealth creation' to 'income creation' so as to secure some measure of well-being for the family. Forget even about building a new house. Renting is not a modest aspiration if that is the best option to put rice and eggs on the dining table.

Secondly, Hillary Clinton has a good piece of advice. Recently, she criticised Obama with a classic rejoinder “You know, when you’re down on yourself, and when you are hunkering down and pulling back, you’re not going to make any better decisions than when you were aggressively, belligerently putting yourself forward." I would take her advice and apply it to the recovery process. I would make more time to introspect, review and above all improve my hearing skills. A good pair of ears helps more than a clipped tongue in a 'recovery' process.

My 2 cents worth.

AK71 said...

Hi dorshii,

I think we might not be thinking of a house in the same way but I get your drift. :)

It is all down to being pragmatic and doing what will give us security first. Some things matter more than others. Deal with those first.

Unknown said...

Hi AK71:)
Yes, you got my drift. 要务实,脚踏实地地做人,干活后才制梦。

Siew Mun said...

I got 4 children (16,15,13 and 8 years old) damn siong to manage finances, while keeping everyone happy and contented. I am following my late father's last words to me is 'Take good care of your finaances' who passed away 5 months ago.

I am awaiting eagerly to monetize the enbloc of my apartment, though market is soft now.

AK71 said...

Hi Siew Mun,

Wow! 4 children! Our country thank you. :)

Also, I salute you. If I had 4 kids, I am not sure that I would be able to achieve financial freedom so early in life. Being honest here.

Sounds like you are going to have a little windfall soon.


AK71 said...

In reply to a reader, AK said:

Hi Mark,

You have to understand why we buy life insurance. It is to make sure that our dependents will not be helpless if we pass on. As long as we have dependents, we need life insurance. It is that simple. :)

In our old age, chances are that we would not have dependents anymore. So, we don't need life insurance in our old age. Also, if we are retired without an income, it becomes a terrible burden to pay for life insurance (that we don't need).

If we have dependents in our old age, well, hopefully, we have passive income by then to take care of this need. Plan ahead. ;)

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