There was once a story about a chess game between two grandmasters. The first played very cautious and boring moves.
The other one, who was out to play for a win, was already getting impatient on the situation of the game. Knowing he was rated higher than the other, he played aggressively in haste in order to force a win. However, unknown to him, the other player was just waiting for him to be aggressive and make a blunder. The lower-rated grandmaster won the game.
The loser, still unable to accept his loss, said to the winner, “You won only because you waited for me to commit a mistake.” The winner replied. ”If that is the way to win, then wait!”
Chess is actually a game of wits, nerve and patience. This is a game where one plans and strategizes where to place his pieces to minimize risk and loss while rooting for victory. A small miscalculation can spell the difference between victory and defeat.
Now we have an idea why we were victorious against Spain and disastrous against the Americans in the late 19th century. Just like in chess, a winning player has the risk of losing if he mishandles his position.
In the above story, it is obvious the lower-rated grandmaster was intentionally making safe moves to distract his opponent while keeping his position solid and preparing for an attack if the opportunity arises. Conclusively, there is power in waiting.
In the field of personal finance, waiting has always been said to be related to procrastination. A lot of financial advisors preach about the high cost of waiting. This statement is true if the person does not do anything but wait.
This reminds us of Juan Tamad lying on the ground while waiting for the apple to fall. No matter how we long wait to have a good future, for as long as there is no action on our part, that future will not be realized.
It is a known fact that personal finance is 80-percent behavior and 20-percent knowledge. That explains why even if information abounds, only a few choose to execute the knowledge they acquired. There are a lot of alibis offered, and the most common is “I will think it over.” A simple reason to summarize the alibis is that all are conditioned to spend rather than to save.
The majority finds happiness in immediate gratification of the income received, especially those with the Yolo mindset. One must not forget that time moves forward, and nobody can escape it. Getting old without a retirement fund is similar to playing a losing chess game.
As a chess player, I applied some principles that has helped me in a winning position going into retirement:
1. Save as much as possible. When I started working in 1988, I began with the end in mind. I looked 40 years into the future and decided to save 50 percent of my paycheck.
I spent the remaining amount wisely, making sure that none went to waste. It is hard to start saving, but the fear of an unknown future can propel one to have the habit to save. A lot of times, I pretended (in my mind) that whatever money is in my pocket is my last money so that I will not be tempted to withdraw from my savings account. Saving at an early age can be compared to playing cautious moves in chess at the early stage of the game.
2. List down and analyze expenses. To know where my money is going, I listed my expenses. From the list, I was able to check which expenses I can eliminate so that I can free up cash to boost my savings. In a chess game, some positions will require a player to sacrifice a piece just to gain tempo (momentum) so that he will have the advantage.
3. Invest long term and forget. When I started investing, I forget all about it. I treated investment as an expense. That way, I will not rely on it for the short term need because I invested for my long-term goal. For me to be able to meet my short-term goal, I worked overtime and did some sideline selling to boost my income. Whenever my investments gain in value, I never redeemed because I want my money to compound. A lot of people always think of monthly payout, and the problem with payout is that it prevents money from compounding. At the same time, money from payout ends being spent unwisely. In playing chess, pieces are moved forward to win. When a player is losing, his pieces retreat. A person who redeems the profit of hid long-term investment is similar to a winning chess player who commits blunder and retreats his pieces to a losing position.
4. Be protected. Later in life, I learned the value of protection. I bought myself an insurance to protect my family from financial strain should anything wrong happen to me.
From a person who feared insurance agents, I became believer after I understood its value. It pays to have more than one policy when we go on from one life stage to another.
Just like in a chess game, while playing for a win, it makes sense to protect the King, as well. There is no sense going for the win when the King is exposed to risks from attacks by enemy pieces.
Start your financial journey as soon as you start earning income. Be financially literate. Start investing, then play the waiting game and win later.
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Edmund Lao is Registered Financial Planner of RFP Philippines. To learn more about personal-financial planning, attend the 75th RFP program this April 2019.
To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.