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Cash makeover

By on February 1, 2011

Photo © Elena Derevtsova

 

Question:

We are a young Japanese-American couple in our early thirties and have a 2-year-old son and our own careers. The two of us used to be pretty much good savers and we did a lot of stock buying with the cash we have stashed away in the last five years. Sadly, we have lost most of what we have worked for due to the market crash. We still have not given up on our dream of being able to knock off some twenty years from now. How we can work on that efficiently if we have student loans and credit card debts to clear is still a work in progress. In order for us to get a jumpstart on our goal, what advice can you give?

 

Answer:

I will tell you the basics. You have a million chances of bouncing back to where you started if you act now.

 

Assets

The most important asset in your life now is your ability to earn. Try to invest in it and get the maximum earnings you can to increase your salaries. Take additional jobs if necessary. Work on yourselves while you are at your peak marketable age. As an idea, you may want to take online classes or an MBA degree that can bump up your earning potential by twenty percent. Look for careers where you can gain a giant leap from where you are now.

 

Acquiring real estate assets may be a way to hedge funds but then you want to be very sure of the immediate and future returns. Where, why, what and how to buy are serious questions you need to look into carefully if owning one now is to suit your purpose. Seeking funding from a bank may be the most popular option but if you can help it, try to look for less risk, less interest schemes through a relative.

 

Creativity

Not all people are born creative but if one of you have an idea that will add to your monthly cash flow, explore the possibilites. One of you can perhaps design a website, do a video or make an e-shopping site of products or services you think you can sell. Maybe you can publish a best seller book or be a super wedding planner in Japan. The possibilities are limitless.

 

Paying off loans

Retiring early requires working double at your peak earning age. The future value of your savings also count in the equation. Rather than deferring the loan term of your student loans and credit card debts, you will want to finish off all interest-accumulating debts and desisting from taking on more.

 

Shopping

Don’t buy on impulse. Be frugal about spending money by buying only the items you will need immediately. Stocking up on groceries saves you money only if you consume them before you buy again. This rarely happens for some. Keep tab of receipts and purchases. Review them periodically and cut costs where excessive. Keep to the budget.

 

Family

Compared to the US, raising a kid in Tokyo is still a more expensive option if you are contemplating on having your son at tend an international school. Weigh the pros and cons and align your decision to what you want to achieve in the twenty years timeline you have.

 

Mindset

A famous financial coach Robert Kiyosaki once said “Delayed gratification is a sign of emotional intelligence. The ‘poor’ mindset wants everything NOW – capital gains. An emotionally mature investor understands delayed gratitude from cash flowing investments.” Choose your investment with utmost care.

 

And lastly, keep sane and on top of all your decisions. The last thing you want to happen is suffer from depression. Good luck on your goal.

 

Daphne Weber is a financial consultant at Morgan Stanley.

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