First Time Line
The first time line is where you start from: when your parents brought you up as a baby to a young adult. You do not have much responsibility.
Second Time Line
The second time line is where your responsibilities begin to grow. In addition if you are married, you will automatically have two additional time lines besides the one you already have. If you decide to remain single then you will have only one extra time line in addition to yours – your parents’ timeliness. Being able to identify the resources available at each stage of your time line is extremely important. In your busyness to make a living or even trying to make ends meet, it might have left you with very little time and option to consider engaging a Strategic Financial Coach & Mentor.
Nonetheless, how well you engage your life game and surf the waves of challenges depend largely on your ability to stay relevant and informed of the changing marketplace and environment. Once you get yourself disconnected to the F.L.O.W (Financial Lifestyle Organised Well), you will find yourself being easily swept into the stagnant pond of irrelevance and be soon out-dated and victimised. When that happens, it will be detrimental to your financial well-being.
Let our advance worrying become advance thinking and planning.
-Sir Winston Churchill
Knowing your formula from the start is an important part of your financial planning process. Are you familiar with financial planning formulas? Do not simply take chances or try your luck.
“Success is not for the chosen few; Success is chosen by few.”
If you desire to be successful, you ought to start, and never compromise on your decision.
A quick recap on the formulas:
Use the formulas to establish your current and future financial positions.
– If you are in Gen X and should you be disabled – what will the formula to keeping you in a financially good state be?
– If you have died in an air crash – what will the formula to ensuring continued financial security for your family be?
– To establish your net worth – what formula will you use?
– If you wanted to find out your cash flow – what would be the formulas to apply?
Working with the formulas will lead you to consider and contemplate your income model. Generally, there are three income models:
– Employment Income
– Investment Income
– Business Income
Being able to establish the right income model is paramount to your success in the different stages of your life and at the various checkpoints of your timeline.
For example, if you do not transfer some of your employment or business income to an IGA portfolio, chances are you may not be able to create sufficient investment income in the future. The next chapter will provide you more insight into this strategy.
It is not how much you earn that is important.
Rather, it is how much you keep.
There are generally 3 types of income:
1. Employment Income (EI)
2. Investment Income (II)
3. Business Income (BI)
Most young adults derive their income from the Employment Income model. There is nothing wrong with it but if you truly desire to achieve financial independence you must be disciplined and systematically transfer part of your earned income to an investment portfolio to create future streams of investment income. Without creating an investment portfolio while you are still working, there is simply no way you can move from Man @ Work to Money @ Work in the future.
Let’s visit the 3 income models.
This category of income is the most common among all income earners. The method of deriving this income is from Man @ Work. The vulnerability of this income model lies in the need for you to keep working in order to keep the Employment Income stream flowing. While you are engaging on this income model, it is prudent to start allocating up to 30% of your Employment Income to an IGA Portfolio so that over the long term, the IGA Portfolio can generate sufficient investment Income – to replace the Employment Income. When you are able to do that, you have arrived at an important checkpoint in your timeline – Financial Independence. It is from this point onwards that you can choose to work because you want to and not because you have to.
On the other hand, should you ignore the importance and need to allocate a certain portion of your Employment Income into the IGA Portfolio to generate Investment Income in the future, you are putting yourself in peril. There will come a time when you are no longer able to work – either in situations when you reach the retirement age or worst still, by circumstances of retrenchment and displacement. Start creating an IGA Portfolio today – to buy some hope for yourself in the future.
Investment Income is generated from the IGA Portfolio (Income Generating Assets Portfolio). This is an important portfolio to be established by every one of us. Without this strategic portfolio, you can never achieve financial freedom or financial independence. Once established, it will give you a sense of accomplishment and purpose. This is where you can generate income through Money @ Work, Your IGA Portfolio can be established with regular flows of savings from the EI (Employment Income) or BI (Business Income). However, many have failed in maintaining this strategic financial portfolio. They have been caught by the trap of chasing after a lifestyle that they cannot afford to maintain. They did not have a disciplined and systematic method of building the important portfolio over the long term.
It is getting more common to see an increasing trend of employed individuals exploring the viability of starting their own businesses, while still keeping their employment. For some, it is an excellent option – if they can cope with the demands of running a business and keeping their job. This has also to be done in an acceptable and ethical manner. But for many, it often proves too taxing for them to maintain the balance of commitment and quality on both engagements. Business often comes across as lucrative in providing a greater potential for wealth accumulation. While it is an avenue opened to all, not every one may have what it takes to succeed in this demanding method of creating wealth – the pressure, risks, hard work, ability, talents, business networks, advisory teams, the competitive edge, the financial reserves and several other factors. However, once a well-operated and proven system has been established, this business will provide you will an extremely profitable platform to generate a good stream of income which will help achieve your many lifetime financial plans, goals and dreams. Viable and manageable businesses can also be part of your IGA Portfolio. Yet, being able to generate a good income simply from business itself does not entail you to financial success.
As the saying goes, “It is not how much you earn that is important, it is how much you keep that matters.” Only by having a disciplined and systematic method of savings and wealth accumulation will you establish an IGA Portfolio.
Knowing where to park your savings and how to structure your IGA Portfolio, is an important and integral part of prudent financial management. If you are able to strategically allocate and manage your savings and capital in your IGA Portfolio, you will soon be able to see your IGA Portfolio generate a steady stream of income high enough to help you achieve all your financial goals and allow you to retire comfortably. By retirement, I do not mean that you stop work completely but rather, you are able to choose to work because you want to and not because you have to.
– Is the Strategic Financial Coach and Mentor well-versed with economic data, inflation, interest rate? Has he provided enough liquidity for your strategy?
“No one plans to fail; we just fail to plan.”