I personally consider the cemetery as one of the best places to learn about money. As everyone knows, it is a cemetry is a place where dead people are laid to rest — hopefully in peace as well. But whether you realize it or not, it is also a place where hopes and dreams are buried.
If only the living could ask the dead, “Given a choice, would you rather be dead or alive?” It is safe to say that 99.9% of them would say, “Of course, I’d rather live than die, stupid!”
“Even people who want to go to heaven don’t want to die to get there,” quipped Steve Jobs and rightly so. Majority of us, with all our unfulfilled dreams and wasted life on earth, are ill-prepared to die, let alone uber-afraid for it to happen.
And yet, death happens to us all, often in the most unpredictable ways.
Death is what I consider to be Life’s ultimate equalizer.
- rich or poor
- black or white
- good people or bad people
…at death there is no more distinction.
I’ve live my life long enough — but don’t ask for my age, okay? — to witness the deaths of some people I know. They died young for various reason.
- Stray bullet
- Heart attact
- Vehicular accident
- Dengue – yep, from the infamous mosquito bite
Except maybe for those who died due to cancer, I would say, many of them are caught by surprise. Well, at least, that was my initial reaction when I heard of the unfortunate news about those folks before they come face-to-face with the undertaker.
The Foolish Living And His Money
But quite surprisingly, for those of us who are still alive, we still conduct our affairs as if we are immune from death. Maybe death won’t happen to us. Only to the other guy, right?
I once bumped into this quote in Facebook, “When you are dead, you won’t even know that you are dead. It’s a pain only felt by others. Same thing when you are stupid.”
It’s a stark reminder that the best time to utilize common sense is when we are still alive. Otherwise, it is of no use anymore.
And, speaking about stupidity, it spreads all the way to our Money and Finances. That is, we keep on doing foolish things as if we have all the time in the world to undo our financial mistakes.
Here is a random sampling of these Financial Blunders I keep seeing over and over again.
1. Over-Exposure to Real Estate
For a lot of us Filipinos, when we think about the term “investment” we almost always associate it with either a banking product such as Time Deposit or Real Estate. But for the rich and stupid, many of them are taking it to the extreme: They either put so much money in Time Deposit or they “invest” real estate all over the place.
Ever heard of the term “House Rich and Cash Poor”? It refers to the scenario when someone owns a lot of real estate properties ( houses and land) while almost having nothing to show in the bank account. If you can collect all their real estate holding and compare it with cash, the asset allocation would put properties at 90% and cash at 10%. That’s what I mean by over-exposure to real estate.
This is a Financial Problem waiting to happen. To be precise, I’m talking about the seeming indivisible piece of property that’s causing the rift among heirs and family members when the oldies finally leaves for heaven – or wherever it is they want to go.
In a typical Filipino Family, Real Estate is really the root of all evil, especially when the owner is already dead. Whether the property is just 100 sqm or 100 hectares doesn’t even matter sometimes. When the undertaker does his job, most often, it means trouble for the heirs.
Smart Financial Tip: While you are still alive and kicking — assuming are strong enough to write you signature on paper – it’s better to distribute your real estate among your heirs. And yep, including the Prodigal Son you despise so much.
2. Not Getting Life Insurance
I don’t want to sound like an insurance agent — because really, I’m not — but for the sake of those who are financially dependent on you, please get an adequate Life Insurance coverage.
But Warning: Most insurance agents will try to ram down your throat selling overly expensive and wrong kind of insurance product, that’s not even right for you. Don’t fall for that trap.
The most important thing you need to remember about insurance is this: It’s not for you. It’s for your love ones – the people who are dependent on you for financial support.
Smart Tip: Now, if an agent tries to sell you life insurance and positions it as an investment, kick him/her out immediately. Unless, of course, the insurance agent happens to be your mother, in which case, you should just insist on getting Term Insurance.
“Be careful, and you will save many from the sin of robbing you.”
— Ed Howe
Think about this while you are still alive: “Do you want your kids to go begging in the streets when you are already dead?”
Of course, you still have your parents, brothers, sisters, aunties and uncles, grandma and grandpa. But I can assure you, even if your relatives are closer to being saints, it would really make much difference if you can at least provide your kids with a headstart.
Again, I’m not trying to sell you Life Insurance, so don’t come knocking on my door for a product or company recommendation.
But you should get one simply because you are not superman.
And remember, it’s not for you. It’s for your love ones.
3. Investing In The Wrong Kind of Investments
I’m going to give you a quick tip on how to evaluate a good investment from a bad one.
Here is a checklist with the corresponding questions you need to ask when evaluating an investment:
- Liquidity — Can it be converted to cash easily? Or, do you have to find a buyer in order to cash out?
- Passivity — Does it require special skills, mathematical know-hows, or research works to do?
- Safety — What are the Risk-Reward trade-offs associated with the investment? How stable or volatile is its underlying asset value?
- Income and Growth — What are the prospects of earning from the investment
- Costs and Fees – What are the up-front and on-going or maintenance fees? Even though, there is no such thing as a FREE investment, too much fees could eat out on your investment returns, so pay close attention to this thing.
- Taxation — Are there any tax incentives? Are the Tax Laws favorable to the investors of this kind of investment?
- Convenience — How easy is it to place your investment? How easy is it to take it out?
Not all investments are created equal. Each one of them exhibits different variations of similar investment attributes described above. You’ll have to decide for yourself which one you think helps you meet your investment goal.
I could go on and on with my list, but I think you already get the picture.
When Money Meets Death
One of the most important questions I got from a client was this: “What happens to my investment when I die?”
Sooner or later, we will all have to ask that question.
Perhaps, you have not yet started on any investment. So maybe you can tweak the question a little bit: “What happens to my business/career/real estate when I die?”
I don’t want to sound so financially creepy, but it really helps if you keep that question in mind as you make your investment decisions.