FinanceCents.com

This is the first of many posts I will be writing on why some people come out of each bust looking much better and why others come out worse and even back to square one.

Rich, Wealthy and Well Heeled is where many have set as a life goal.

While it may seem like reaching this goal is very much about luck and intelligence, it actually has more to do with a proper plan.

Let’s start with the Safe/Comfortable/Rich triangle which has been part of my sharing with friends. Being in the Safe level means having food to eat and a roof over your head - basic necessities. Being in the Comfortable level means having a car, a property, the ability to buy luxury goods and go on holidays. Comfortable is where most people in Singapore are at. And being Rich is when you have that much wealth that you have to distribute it in the right places to maintain that level of wealth, failure which will demote one to the Comfortable or even the Safe level again.

Hmm why do some people just get up there so much faster…

The answer lies in the all so elusive Financial base shown in the triangle above. The base is made up of the following:
i. Education
ii. Job - Main Source of Income(very important note people)
iii. Savings - 6 months of your monthly living expenses(or is it? i will discuss this in the next post)
iv. Investments - simple instruments like fixed deposits, stocks and bonds(or maybe not so simple)
v. Insurance - essential for risk transfer and for any financial plan to work

I would say folks with a strong base will be able to ride out a recession better and most importantly grab opportunities which during the next upturn will allow them to move closer to the Rich level.

Unfortunately our schools today do not teach us how to build and manage a financial base. As in all triangles and pyramids, they all have strong solid bases on which they sit on and build up.

Sometimes the difference between you and the bloke next to you is $50,000 which allowed him to buy that property that last went on en-bloc.

In the next few posts we will discuss how to build and manage that base, so stay tuned!

Is the base of your pyramid well-covered?

Other stuff you’ll be interested in

• Here’s how that Ah Beng became richer than you
• Wah, investments got 10% returns - shiok ah!
• Is your kid sending 25,000 SMSes a month?
• Survive the recession financially!
• The Almost Complete Goondu’s Guide to Buying a HDB Flat in Singapore (Part 2)