Sunday 13th March, 2005


Now for financial independence

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Money Matters
with Raziah Ahmed

In 1947, a Bedouin boy chanced upon the Dead Sea Scrolls, and first used the exquisite leather to make straps for his sandals. The Scrolls were penned by a reclusive Jewish sect, the Essenes, who had escaped to cave dwelling in search of truth.

Our quest for financial independence is intricately tied to our innate and personal quest for truth. The problem is that hungry bellies and uneducated youth do not lend themselves to diligent search in the realm of Maslow’s uppermost needs strata: esteem and self actualisation.

Hence the urgency to teach our young people the virtues of self-application and planning.

To recount, today we at are Step 10 in the 14-Step plan to financial independence.

The previous steps were: 1. Personal data collection, 2. Goals and objectives, 3. Issues and problems, 4. Assumptions, 5. Net worth, 6. Cash flow management, 7. Taxes, 8. Risk management and 9. Investments.

Step 10 is Financial Independence. What is necessary for you to become financially independent? Calculate your needs to pay for education, retirement income, and special needs eg long-term health care for your self or aged parent.

The new mortality tables indicate that average life expectancy is now age 120. Factoring the scourge of Aids, which the ILO predicts will damage the younger labour force significantly, it may be that we have a rising median age for the population. That is, that the average age would be older than today’s average, coupled with a longevity that is greater than past averages.

Another factoid is the dual income family. The challenges of the dual income family are threefold: more consumerism, more income taxes and social security contributions to pay, and having less time to manage both financial planning and quality family time.

A third challenge is the increasing volatility of economic and social conditions. Interest rates have fallen in the past three years, rather like a traditional bread recipe in a bread machine. The base rates used to calculate economic indicators have been altered, shouting different figures at us, more attractive ones I might add!

And concurrently, our savings are being threatened by the kidnappers. These guys represent an underground economy, which if not altered by drastic intervention, will “tief out” our savings, as people mortgage house and everything else, to pay up or else!

These are troublesome issues that must force us to continuously monitor and adjust out plans, when circumstances change.

In projecting our future needs, the matter of Group Life and Group Health insurance must be considered. Many persons make the error of counting these plans as their own.

Group insurance is a one-year renewable term insurance plan, which you leave behind, when you move on to another job, or retire. You cannot count it as yours! They are company benefits, which will expire sooner or later.

You will need to have your own personal Critical Illness insurance policy, or dollars set aside to take you from retirement to age 70 at least. Please note that the cost of acquiring critical illness at age 60, when your group plan expires, is prohibitive, to say the least! You must get the supplemental personal critical illness or dread disease cover, when you are young enough to warrant a low premium.

Money for education is another big-ticket item. You will need in the vicinity of TT$100,000 for a university education locally, or the same amount in US$, for a foreign first degree—the bill just catapulted 6.3 times over, at today’s rates.

In truth, cave dwelling is not an option, unless you can afford the accouterments attributed to the villain, Bin Ladin, in his alleged underground operative.

n Raziah Ahmed is a Registered Financial Consultant.

©2004-2005 Trinidad Publishing Company Limited

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