When you are at the top of your game, it is easy to think that what you have now, your brain power, your work ethic, your annual income and all your possession will only get even better as time goes on. There is a risk that you would be lure into a level of complacency, where you will experience lifestyle inflation, spending more as you earned more.
When the music stops playing, that is usually when your world starts crashing down. Often that is when you are retrenched or that you suffer some form of disability or deficiency that stops you from functioning like current, at your absolute best.
When your outlook in life shifts, you may want to take a risky leap, and often you are not able to, because you have not build a financial infrastructure that enables you to.
It is these situations that made us realize that having fundamentally sound money knowledge and being prudent in that area is important.
One example that I came across recently was interesting. Edward Snowden, the person who educated the world on what the NSA were doing with the people’s data, the level of tapping that the US government is carried on their people as well as foreign partners, gave an extensive interview to the Guardian in which he shares something about his lifestyle:
A year after arriving in Moscow, Snowden said he is still learning Russian. He keeps late and solitary hours, effectively living on U.S. time. He does not drink, cooks for himself but doesn’t eat much. “I don’t live in absolute secrecy,” he says. “I live a pretty open life—but at the same time I don’t want to be a celebrity.” He does not work for a Russian organization, yet is financially secure thanks to substantial savings from his years as a well-paid contractor and more recently numerous awards and speaking fees from around the world.
Mr Snowden is probably a top performer amongst top performer, described by peers as genius amongst genius, and is well compensated for what he is able to do. Yet I believe he wouldn’t have been able to plan from the initial onset that the money that he build up will one day be so crucial for him taking such a step.
Without the substantial savings, his ethics and allegiance might be well tested into doing something he does not stand for.
Financial prudence and building up a Wealth Machine that is able to generate a cash flow to give you optionality in life enables us to replicate Mr Snowden’s situation.
If you are hit with an unexpected health problem that cuts short your lucrative working life (because you cannot work as hard) or that you feel trap in a work that there is no easy way to change, having a wealth machine goes a long way to giving you the guts like Mr Snowden to do something more drastic then you normally would.
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