How to Thrive Financially in This Difficult Economic Environment

JC Project Freedom MoneyOwl-Investing

This evening I attended a webinar by MoneyOwl and the topic is “How to thrive financially in this difficult economic environment” presented by Christopher Tan. One key message is to stay invested and remain calm during difficult times.

Stay Invested

I don’t have the presentation slides to show here but Christopher shows that even after considering the Great Financial Crisis and the Great Depression, when you remain invested for more than 15 years, your annual average investment return will be positive.

Emergency Fund

How do we stay invested if we lose our jobs today? If we lose our only source of income today, we need to live our savings. In order not to sell our investment which may be a double whammy if it is underwater, we need to have an emergency fund of at least 6 to 12 months of expenses. We should cut our expenses drastically and try to stretch the emergency fund as long as possible. Just take it as you are having an extended “circuit breaker” or personal lockdown, keep to core expenses only.

Personal Money Equation

Courtesy from Moneyowl’s screenshot – WISE’s Personal Money Equation

One of the key takeaways which I like a lot is the WISE’s Personal Money Equation. The left side of Personal Money Equation requires us to increase or maintain our income, reduce our expenses to maximize the surplus or savings. Christopher explained the Pros and Cons of YOLO’s and FIRE’s Personal Money Equations. YOLO wants to maximize their experiences in life and spend most of the surplus on experiences and not so much on investments for future goals. The FIRE movement guys try to save and scrimp to reduce expenses drastically to create the maximum surplus to invest almost everything for their future goal which is to retire early.

The WISE’s Personal Money Equation is to strike a balance between the earlier both. We need to spend our surplus on purposeful activities to create a purposeful life. We need to be in the now because we do not know whether we will return to our heavenly father the very next day. We cannot predict the future and every day is a blessing to our limited time here.

Worship of Money

When we want to compare and prove our self-worth to others, this may lead us to buy things which we do not need, with the money we don’t have to impress others. Sometimes, we don’t even know them. We will be gripped by money, become a servant to money, and live a life of discontentment.

What is contentment?

We do not crave or have desire over things which we do not have. It is not a passive acceptance of our situation but an active pursuit of what is important in life. It is a conscious choice to enjoy, appreciate what we have while at the same time give up cravings of things which we do not have. It requires us to know what is important to us in our lives and accept the fact that we cannot have everything.

Homework from the Webinar

What are the “brutal facts” that you have to face courageously with faith and deal with it with discipline?
JC: Investment portfolio will have a drawdown of 30-50% throughout the lifetime. We need to remain focus on the end goal and continue to invest whenever we have money.

What are the purposeful activities that you would want to commit your money to do now?
JC: We have allocated funds for our parents to travel with us while they still can do that. They are aging and in a few years’ time, they may not want to travel with us anymore. Likewise, bringing the children to travel is an important thing for us. It is about experiences and memories as a family.

What do you need to start doing now to strengthen the left side of your money equation?
JC: There are other expenses that we can reduce further while we should look at other means to increase the income.

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