Case Study: Anti-Tips - How NOT to Manage Your Corporate Salary and Benefits

This is a case study about clients of mine – a couple – whose money management story is one I would love to go back and rewrite…?

The good news is that all isn’t lost for them yet.?

I share this because I know how many people sit there and wonder if it’s ‘too late for them to fix things.’ I cannot answer that question here, to be honest.?

But I can help you see the path you do not want to go down, and make a few suggestions for your way forward if you do find yourself where my clients, Joe and Sara, are today.?

Where It Began?

Joe and Sara started working with me when they were in their late 20s. They were young, just married, had no children at the time, and had well-paying corporate jobs in Dubai.?

A few years down the line, Joe got a job offer to move to another Emirate in the UAE. The couple decided to make the move – they had better career prospects there and one of the biggest benefits was that Joe’s company were going to cover their housing.?

They were being given a great place to live on the company’s campus. Convenient, cost-effective, better job, win-win all around.?

This move also meant that their finances eased up enough that they felt comfortable starting a family. Joe and Sara went on to have three kids. Over time, as they got promoted and secured better packages, school fees became a part of those packages. This was a family with a little over $150,000 of annual household income. Some of the major expenses (house rent, school fees) were covered by their companies.?

You’d think they had a great baseline to be able to build financial security, safety nets, savings plans and more. And yet, today, over 15 years down the line, Joe and Sara barely ever have $10,000 set aside to take advantage of an investment opportunity… What went wrong? I’ll explain.?

How Not To Manage Your Money As A Corporate Executive (Couple)?

I’m going to do this slightly differently than my usual case studies. I’m going to share Joe and Sara’s story with you, but wrapped in ‘Anti-Tips’.?

• Anti-Tip No. 1: Don’t live beyond your means?

Joe and Sara lived extravagantly. Extra extravagantly in fact. They had secure jobs and healthy, comfortable paychecks coming in every month. So they had no qualms ‘blowing’ their money. The knew that next pay check was around the corner and would replenish those bank accounts. Over time, they were outspending their earnings. They accumulated lifestyle debt. They took lavish holidays. They drove two fairly expensive cars (while living on campus, barely a kilometer from the office for Joe!). When I say lavish holidays, I mean a $30,000 splurge on a 30-day summer vacation in an exotic location. When, as a household they made a cumulative $150,000 a year, can you see how the math doesn’t add up? That holiday drained them of one-fifth of their income to cover 8% of the year. These extravagant expenses meant that Joe and Sara didn’t have much left over for the important things.?

• Anti-Tip No. 2: Don’t lose sight of the important stuff?

Like education. And life insurance. And long-term savings. Because Joe and Sara shelled out big bucks for experiences and on non-critical lifestyle expenses, they were often short when they needed a pot of money for the big things in life.?

When their son was about four years away from university, they decided to switch him into a bigger, more expensive school. One that they could not essentially afford.?

But the fees weren’t out of reach because their incomes didn’t allow for this outflow – the fees were out of reach because such a large part of their income was going towards frivolous lifestyle expenses, paying off high-interest credit card debt and other unnecessary pockets.?

• Anti-Top No. 3: Don’t bring your advisor in only to clean up your financial messes!?

Joe and Sara had me to turn to as their financial advisor since their late 20s – early on in their careers. And yet, they would often only loop me into financial goings-on AFTER they had gone and made an investment (and lost all the money). Or after they had splurged and accumulated another big chunk of debt.?

And by that point, there’s not so much your financial advisor can do. I could maybe advise them on the best way forward – I could tell them to cut their losses and move on. But I can’t bring back lost money.

Joe and Sara did this often. They’d meet friends for drinks and hear about some new high-yield investment portfolio that gave their friends some big returns. They would decide, essentially in the spur of the moment, that this was a great option for them, too. They’d go ahead and make this investment only to lose everything – the entire sum they invested…?

All because they didn’t understand the investment structure entirely. All without knowing that their risk appetite was not the same as their friend’s.?

And as their financial advisor, I would only hear about this ‘Something that happened last month…’ – I assure you, even the best of the best advisors cannot turn back time to clean up a poorly-made financial move on a client’s part.??

• Anti-Tip No. 4:? Don’t rely on the paycheck?

So far, Joe and Sara haven’t been in that dire (not uncommon) situation where one of them has lost their jobs. But should that happen; should one of them choose to pursue a different career path or give entrepreneurship a shot – they’d be in a financial mess. Joe and Sara are so dependent on that paycheck coming in. They’re so accustomed to ’30-day messes’ that can be cleaned up when their salary hits the bank account, that they’re not prepared for a rainy day.?

It doesn’t matter how stable your company is. Or how stable your job is.?

It doesn’t matter how secure you feel or know you are in your career.?

Plan for the best and prepare for the worst. Get those savings in place. Get your priorities right. Get critical illness cover. Insure your life.?

• Anti-Top No. 5: Don’t think the future is ‘far away’?

Joe and Sara have goals and plans for the future. They don’t plan on retiring in the UAE. They could go back to India, where they are from. And where retired life would be a lot more affordable than the UAE, anyway.?

But they want to retire in Portugal. Have you spotted the challenge? Retiring in Portugal is a retired life in Euros. They would essentially need to 3x their savings efforts in order to afford that. For a couple who’s struggled consistently for 15 years to save, and with retirement getting closer, this is going to be a hard goal to hit.?

The mistake here is one that so many of us are guilty off. We think ‘we’ve got time.’

Some of this might sound extremely basic to you. But that’s just it: Smart, capable people like Joe and Sara forget the basics. Their base-level mistakes cost them heavily in the short and long-term. And as a result, Joe and Sara will probably never really get to retire and enjoy that retired life they’re dreaming off.

Don’t get me wrong – I’m sharing Joe and Sara’s case here, but they’re not unique in their challenges. Most mid-to-high income corporate executive households are guilty of these actions and oversights too.

Most people live life so large and so far beyond their means today telling themselves that ‘Life’s too short’ to live small, life’s too short not to take that holiday, or splurge on that Michelin-star restaurant, or drive the car of your dreams.

It's romantic to live like there’s no tomorrow.

But my question to you is: What if there is a tomorrow? Is it looking good, the way things are going right now??

Note: On June 20th, 25th and 27th, I am hosting a free masterclass series called 'The Corporate Executives Blueprint to Financial Freedom.' If you'd like to dial in your financial future, ensure you are set up to meet all your financial goals, then save your spot here.