Understanding the X-Curve.

Just recently while I was on holiday, I heard a friend’s husband died in his sleep. They said he died due to “bangungot” or in actual medical terminology, Acute Pancreatitis. He was about 33-35 years old if I’m not mistaken. Before he died, he managed to put up a successful rolling store business in Mindoro. The business was successful enough for him to afford buying their own house, and own car, and even a few gadgets for his two sons. I am not sure if my friend knows how to manage or operate the business since she was more focused on the kids. She’s a teacher by profession. This sudden and unexpected death prompted me to finish this blog.

During my talks I always mention the X-Curve Concept, and what it means. If you look at the featured photo above, you will see that there are three (3) life stages. There’s the Younger stage, the Intersection (forming the X), and the Older. In the diagram there are two lines, the Blue Line which represents the Money Line, and the Red Line which represents the Responsibility Line.

During our Younger years, when we are most productive we usually have more financial responsibilities and expenses. It’s during this stage when we have Less Money. This stage of the X-Curve is called Man at Work. Most people at this stage tend to spend more time, money and energy on luxuries, than in saving for their future. In an ideal scenario, as we  get older and mature (the point where the two lines intersect), we should already be more focused on accumulating assets for our eventual retirement. This stage is called Man and Money at Work because we should already have some investments and additional income streams during this time, apart from our active employment. The last stage is called Money at Work. Why? Because ideally, by the time we’re in our senior years, we should already be able to retire comfortably and our investments should be able to give us enough funds to replace our active income. It is at this stage where we should already have our own house, and our expenses should be lesser since we no longer have kids that we need to send to school, and all debts have been settled. All that’s left, is to enjoy the sunset of our lives.

Now, it’s great if you’re able to reach a ripe age and retire, but what if you’re still in your 30’s just like by friend’s hubby, and you died all of a sudden? What happens to your family then? What happens if you died too soon? To be honest, if my friend’s husband did not buy enough insurance to replace the family income, I fear the worst for his family. Sure the business was strong when he was alive, but what happens if she can’t run it on her own? Where will they get the funds to support the kids’ education? Their daily needs? I am sure they probably have savings, but how long will that money last?

Life Insurance

Whenever I go out to speak to Filipinos here in the UAE about financial planning, I always make it a point to remind them how important it is to get insured. To get protected against life’s uncertainties, especially if they’re the breadwinner. A lot of Filipinos think it’s a waste of money because they do not stand to benefit from the insurance policy when they die. What most people don’t understand is that the insurance policy isn’t for the benefit of the insured, but for those that will be left behind at the time of his or her death. A Life Insurance policy is meant to ensure that those you leave behind will still be able to live a normal life in the event of your death. It’s not uncommon to hear stories of Filipino families who suffer financially after the death of the breadwinner, and the main reason for that is because the breadwinner didn’t have insurance.

Now what if you didn’t die early, and lived to a ripe age? If you do live to a ripe age then great! But the question now is – are your savings enough for you to live comfortably until you leave this mortal plane? How many Filipino retirees are actually comfortably retired? Does your income now guarantee that you will be able to retire comfortably? If you decide to retire by 50 or 60 years old, do you have enough money to spend for your daily needs and medical expenses for the next 20 years? Are you sure your kids or the relatives that you supported financially will be able to take care of you? Did you know that more than half of the OFWs around the world are not financially prepared for retirement? Some of you are probably thinking that your kids, or the relatives that you supported will be there for you when you grow old, to care for you and provide for you financially. Parents, remember that our kids should not be our Retirement Fund. It is our responsibility to set aside for our own retirement, and we should not be a burden to them. Most people that I have spoken to think that PHP 30-40K a month should be enough to cover their daily needs for the next 20-30 years after they retire. I can guarantee you that this figure will not be enough. This is only good for “surviving”, and not living. Keep in mind that as we grow older, no matter how healthy our lifestyle is, our bodies will no longer function as well as it used to when we were younger. Some, if not most, may even need maintenance medicine, and those usually do not come cheap. This is why it’s very important that during our most productive years we focus on building our retirement nest egg and accumulate assets that will give us multiple passive income streams to allow us to retire comfortably.

As I close, let us all be reminded that all of us, regardless of income and status have been given a common resource, and that is TIME. We can always make more money when we lose some, but time lost cannot be recovered, so let’s use TIME wisely. While we are still strong and capable let’s endeavor to save and invest as much as we can in preparation for our retirement, and while we’re at it, get sufficient insurance coverage as well to make sure that even at the event of our untimely death, there’s enough income replacement to help our loved ones get by. Start early, start now. Save and Invest for your future. Get insured. Keeping in mind that the older you are, the more expensive insurance becomes, and the more difficult it is to get insured.





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