Are you in danger?
The parable of the boiling frog goes as follows (it isn’t true apparently, but makes for a good story): if you throw a frog into boiling water it will jump out immediately, saving its life, but if you put the frog in water and heat it up slowly it won’t notice the danger before it dies.
People are the same.
It’s not that bad… yet
Most people go through life without noticing that they could easily improve their situation if they noticed how bad it was.
The person who is eating a bit too much and not exercising enough. Today they are slightly overweight, in ten years’ time they will be obese.
The person who isn’t getting enough sleep. Today they feel a bit sleepy, in ten years’ time their career, family life, and health could all be negatively affected.
The person who doesn’t enjoy their job. Today it’s fine and pays the bills, in ten years’ time they will hate it and it will be too late to change careers
Financial boiling water
There are a few financial issues that are easy to sort out but catastrophic if left unaddressed:
- spending all your money or borrowing
- not investing your savings
- not having necessary insurance
- not having a plan for retirement
If you are spending all your income, or (gasp) more than your income you are heading in the wrong direction. Most people are going to need to save at least 10-20% of their income over their lifetime if they want to have any kind of retirement. Not doing so either means you’re going to have to save even more later to make up for it, or you’ll have to keep working well past retirement age, or you’re going to face poverty.
If you are not investing your savings they are going to be losing value to inflation. In the past we were somewhat shielded from this living in Japan, but no more. Just go to the supermarket and see how prices have risen in the last few years. If your savings are sitting in cash you need to find a way to invest them so that they are growing over time, not shrinking.
Insurance protects you from catastrophic outcomes. Not having it means that one piece of bad luck could bankrupt you or worse. If you drive, you need to have unlimited third party insurance. If you have people who depend on you for their financial necessities, you need to have term life insurance.
Not thinking about retirement early enough to make a difference is the final big mistake. Figuring out what retirement might look like, what you need to do to get there, and and taking steps to make it a reality is not hard to do now, but will get harder and harder the longer you leave it.
How about you?
Are you a frog metaphorically being cooked in your current financial habits? How many of the four critical omissions are you making?
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I was a frog in a slowly warming pan until you poured a load of scalding water in and I jumped out.
Love it.
The little town I lived in in korea had a small bar that served frogs–washtub of live frogs over one way, and a pot of boiling water on a nearby table. When someone wanted frogs, the lady would use tongs to pick out a frog and drop it the pot. They’d kick once, but I never saw one make it out alive. They were then grilled over 練炭/rentan, those round briquettes with the holes.
That image is far too vivid!
Nice to have confirmation the story isn’t real I guess…