Five Cents Ten Cents

Posted: 16 Apr 2008 02:17 AM CDT

The music video by the Japanese Pop group Orange Range aptly titled, “Sayonara” shows how a couple’s life changes when he is suddenly taken from his girlfriend. It’s a sad and yet sweet video because the tone of the video, whilst being sad in the beginning, is positive towards the end.

Watching “Sayonara” makes me think about my own mortality even as I undertake this journey towards financial freedom. I know that all I have achieved through living within my means, saving and investing and growing my means can come to naught if I do not take action to protect my means.

What does protecting your means refer to?

Protecting your means is to talk about the risk of the greatest income producing asset, YOURSELF, being taken away from this earth through acts of God, nature of man. One of my readers, DSEA, through his insightful comment gave me another perspective on financial freedom, i.e. I also need to consider the need to protect my means even as I strive towards the three core pillars of financial freedom.

So financial freedom can be seen in the following bubbl.us map:

Flickr photo by Panzergrenadier.

Ways to protecting your means

To protect your means largely involve insurance. You can insure against death, total permanent disability and ill-health. You can mitigate the risks but you cannot totally eliminate them. That is the concept of insurance or transferring some of the risks through paying of premiums to insurers who do risk pooling.

Protecting your means can also involve diversification of your assets. Thus, one of the key concepts of financial freedom is to grow your passive income which also helps you mitigate the loss of active or earned income should something happen to you. Diversifying can cover having assets in different classes that are not correlated to each other in terms of performance.

I am not an expert on insurance and would refer you to thefinance.sg where you can read about financial advisors and even ex-CEO of NTUC Income whose blog is also among those aggregated by Derek.

The main thing I learnt about insurance was to differentiate it from investment. You buy insurance to mitigate risk and provide cover. You invest to earn returns and avoid hybrid products because of the costs and overheads.

Another way to protect your means is to give it away to appropriate parties when the time comes. You can bequeath your assets to your loved ones through a will and avoid letting your assets end up those that you do not intend to bequeath to. Because my daughter was just born and is celebrating her 5th week here, I find that my perspective on life has changed dramatically. It is a paradigm shift because I know now that even if I cannot bring my net worth to me into the next world, I can give it all away to my spouse and my baby girl.

Before saying “Sayonara”

We have to say “Sayonara” one day. The Gahmen believes most of us will last beyond 85 years of age. Some of us believe otherwise. No matter what you believe, do consider ways to protect your means even as it grows and helps you move towards your goal of financial freedom.

Be well and prosper.