Your Sense of Safety Might Cost You MILLIONS$$

What does “being safe” mean to you?

Do you feel safe when you have HK$2,000,000 sitting in your current account? Or is HK$ 50,000 enough there?

Do you feel safe if you own the apartment you’re living in and religiously pay mortgages? Or do you feel safer renting a small flat and using the money to build a balanced portfolio for the next 30 years?

YOUR NEED FOR THE SENSE OF SAFETY MIGHT COST YOU MILLIONS

There is no right or wrong answer, it’s just a feeling that might be influenced by how you’re brought up or past experiences. But to those who prefer to hoard money and things around you, beware that your “feeling of safety” might cost you millions without you knowing!

2 COMMON EXTREME GROUPS: HOARDERS VS. SEXY INVESTORS

There are 2 common concepts when it comes to money management in Hong Kong, which are in the extremes: “Hoarders” & “Sexy Investor Wannabes”.

1. “Hoarders”: They only trust cash in their current accounts. Their entire portfolio is there, with nil diversified investments.

• Putting money in banks is the same as keeping cash in a tin box under your bed. It’s not doing anything but losing value thanks to the ever-increasing inflation. Do you know how much global food prices have risen between 1990 and 2022? 2.67 times (reference by Deloitte here)! It means that $100 today would only be worth $37.5 in 30 years.
• Moreover, the longer this “dead” money sits, the more earning opportunities from every penny are lost.

2. “Sexy Investor Wannabes”: They go all-in into high-risk investments without a system or strategy in place, often leaving no emergency cash in their bank accounts.

• Not everyone can look as sexy as Leonardo DiCaprio in The Great Gatsby movie, and do US$90 billion trades every second. If we put all of our hard-earned money into high-risk investment vehicles, we are not leaving any buffer for market volatility or other mistakes to happen.
• When the investment prices (e.g. stock price, real estate) are low, they are often very hesitant to sell these assets even when they urgently need money to cover their day-to-day expenses. This puts them in a constant emotional struggle, which can lead to long-term extreme high mental pressures.

What happens in the long run, say 20-30 years? Both groups will probably be completely annihilated - hoarders might get defeated by inflation or currency risks; the sexy-investors-wannabes might gamble everything away.

SATISFY THE “FEELING OF SAFETY” WISELY

Putting all emotions aside, let’s sit and zoom out a bit. Imagine you’re 20 years older now. What are your top 3 worries? Mark them down and be sure to have a plan to address them now. Procrastination will only cost us even more because of lost opportunities and inflations.

Our worries are often coming from unexpected bad happenings and the unforeseeable future… basically, things that we can’t control. But we can prepare a buffer for these areas now to make them kind of controllable when the worst happens. We don’t need to hoard all of the money for the next 30 years in our bank account. We can smartly allocate them as if we assign our teams of staff to work for us 24/7 (we are the boss!). Set up an auto system for each of these “departments”, and then you’ll have your ass covered:

1. Short-Term Emergency Cash - sufficient to cover your basic expenses for 6 months.
2. Long-Term Passive Income - steady monthly income for your (early) retirement, that lasts for a minimum of 25 years.
3. Ways to beat inflation - healthy and balanced portfolio with regular reviews and adjustment systems in place

“FLEXIBILITY” IS COSTLY

Remember, “safety” is just a feeling, and we don’t need all of our money to sit in our tin box at home to satisfy this safety craving. There is a high cost for “flexibility”:

• Not enough discipline to save or invest, letting emotions take over and not reaching long-term life goals or retirement goals
• Let money be “dead” and not investing

DELAY AT YOUR OWN COST

“Procrastination is like a credit card: It’s a lot of fun until you get the bill.” ~ Christopher Parker

If you have properly “staffed” your “company’s operation” as above, I’m sure that you’ll feel a lot safer and settled because you have tackled your biggest worries now and in the future. Get in touch if you would like some assistance in setting up a system that’s suitable for your goals via this link.

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If you are interested in learning more about our retirement & life planning process, you can visit this page.

This article originally appeared on GraceChan.co .

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