| Prepare for Worst-Case Scenario Milan Doshi narrates an urban cautionary tale for our times
When working out their financial goals for the future, I noticed that many people make the grave mistake of Hoping for the Best and they are totally Unprepared for the Worst. Many people automatically presume that they will be working for the same company for many more years or their existing businesses will continue to flourish in the future. Due to globalization and the internet, the world today has become a lot more inter-connected as well as volatile. Product cum technology life-spans and economic cycles are becoming much shorter. This ultimately results in companies as well as career or job life-spans being reduced as well. The number of years you spent building up your career skill set can easily get outdated if you don’t make it a point to continuously invest in upgrading yourself. Bob’s Story Let me share the story of a friend of mine, Bob, aged 45 years, who was the Senior Vice President of the subsidiary of a local public listed company. Bob had worked for the same company for over 15 years and he was expecting to continue working for the same company till he retires at the age 55. Bob was earning more than RM15,000 per month and had settled into his comfort zone. When setting his financial goals, he made the grave mistake of assuming that he would be working for the same company, be entitled to a company car and travel allowances, and enjoying a certain salary increment every year as well as being entitled to purchase his parent company’s shares at a attractive discount every year. He didn’t realize it but he was making the grave mistake of Hoping for the Best and he was ill prepared for any worst-case scenarios. About two years ago, Bob’s subsidiary was sold off to a Singapore listed company. In Mergers and Acquisitions, it’s common for the company taking over to start putting their own systems and people into the senior and middle management levels. This can only be achieved by letting go of the current senior staff as it’s harder to teach “an old dog new tricks” and much easier to hire a new dog instead. Guess who needed to start looking for another job? It was poor Bob! Bob was extremely lucky to receive an attractive severance package of 12 months salary. Being in his mid forties, he had tremendous problems looking for another job that offered the same salary and benefits package as his previous company. Eventually after 6 long anguished months, he had no choice but to take up a job that only paid half his last drawn paycheck with no added benefits. Suddenly, Bob’s future financial plans were thrown into disarray. His two teenagers had to forgo their dreams and plans to further their education overseas. They had to make do by studying at local universities. Assume the Reverse One of the things that I strongly emphasize during my financial consultations with many people is to assume the reverse i.e. Always Be Financially Prepared for the Worst and then Hope for the Best that any potential worst-case scenario never happens. My suggestion is to challenge yourself and assume that in the next 2-3 years, either your or your spouse’s earned income will be zero. Assume worst-case scenarios such as your skills have become outdated, your company has closed down, you encounter ill health and can’t work anymore, your business becomes too competitive, there is a global recession, etc. If ever such an event were to happen in the future, what do you need to do today especially with regards to Money Management and Investments? If you are prepared and something unfortunate does happen, you would be able to sail through the bad times much more easily compared to many people who are caught unprepared. Some of the ways of being prepared are: 1. Continuously invest in your career and/or business skill set so that they don’t get outdated. 2. Keep Networking both within and out of your industry. It’s a known fact that Who You Know is a lot More Important than What You Know. Meeting the right person at the right point in your life can totally change things around. 3. Never stay with the same department or company for more than 5 years as you will get complacent and fall into your comfort zone. Make it a career goal to move every 5 years. With each move, you will force yourself to get used to new ways of doing things and working with new people. 4. Gradually build up a second source of earned or business income in your spare time. It could be a part-time business, internet marketing or being an agent for insurance, unit trust or real estate. In a worst case scenario like the case of Bob, your second income source can be easily developed into your primary income source. 5. Besides a second income source, try developing multi streams of income from different sources. It’s extremely important to focus and do one thing at a time. Once a new stream is on auto-pilot, move on to the next one. 6. If you are doing well, simplify your lifestyle, save money and invest the surpluses wisely to generate passive income. One of the best, stable and predictable sources of passive income is Rental Income. This will entail taking some investment risks which many people are afraid of. As long as you buy in good locations with high occupancy rates that are easy to rent out (<> By being mentally, emotionally and financially prepared in advance for any worst- case scenarios, you will be able to face them confidently if they ever do come up compared with people who are often caught with their pants down. All you need to do then is hope and pray it never happens. | 
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