Everywhere you look, it seems like people have good lives and appear wealthy from a young age, making many wonder if they are falling behind others. This leads to chasing quick wealth-building methods, like sprinting at full speed to reach the finish line as fast as possible.
But life doesn't always end at the finish line. Financial planning and life planning are like running a marathon, where the key is who can sustain their pace longest and maintain their own rhythm to reach the end steadily.
. Therefore, planning finances year by year is necessary but may not be enough to live the life you want. So, how long should financial planning extend to be sufficient?
The answer recommended by many financial planners is “Plan until the last day of your life.” This is based on the average life expectancy, which for Thai people has increased to 80–90 years. If you are 30, this means you should consider your finances over the next 50–60 years to ensure that "money doesn’t run out before your lifetime ends."
It sounds like a long road to run, but the advantage is that we have time for money to work for us! And possibly needing less principal as well. For example, if we save 1,000 baht per month and invest with an average annual return of 10%, consistently every month, it will take 23 years to reach 1 million baht. The interesting point is we only contribute 276,000 baht in principal; the rest grows from interest and time invested.
(If the average return is 5% per year, saving 1,000 baht monthly will take 33 years to reach 1 million baht, with 396,000 baht in principal.)
Many wonder what to invest in to achieve an average 10% annual return. Nowadays, many talk about the S&P 500 index, which includes many large U.S. companies and has provided over 10% average annual returns over the past 30 years. This could be one option for gradual investment, but you should study further before buying since this will be your long-term savings repository.
Importantly, we must choose to invest in assets that outpace inflation. For example, if we only deposit money in a savings account with a current interest rate of about 1.8% per year, this is insufficient to beat rising inflation. Therefore, a long-term plan should include a portfolio of growth assets such as stocks or mutual funds, according to the risk you can tolerate.
Investment is already long-term, but our life is longer than investment periods, so we must consider things comprehensively.
Thus, we also need to prepare backup plans and life insurance. .
First, “Emergency fund” Consider your monthly expenses: food, transportation, family care, essential purchases, debts, etc. Then multiply by 3 to 6 months. For example, if you spend 20,000 baht per month, you should have an emergency fund of 60,000 to 120,000 baht, kept somewhere accessible for unexpected events.
Why have this lump sum? Even marathon runners can stumble, and life can too. If you lose your job, face a flood, or other emergencies requiring quick cash, lacking an emergency fund may force you to use credit cards with interest rates up to 16% per year, leading to large debts that take a long time to repay.
Second, “Health and accident insurance” We only have one body. Even with the best care, illness and accidents can happen, potentially impacting the life we planned. Medical costs are rising (some hospital stays can cost 18,000 baht per night). Having insurance helps ease these financial burdens.
However, having the highest coverage isn’t always best, as premiums rise accordingly. If you choose good insurance but cannot afford it long-term, you may lapse on payments. Therefore, select coverage that balances risk and fits your overall financial plan.
Ultimately, life planning is like running a marathon where we must prepare and conserve strength to reach the finish. Strength alone may not suffice; we might need money or support tools to ease our journey so we can move forward happily, not just finish the race.
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