The Stage of Maximum Financial Development- Excerpts of the book "Finance for dad"

This message that I received by e-mail applies very well to both, parents who are in this stage and sons/daughters who are at the end of the second and the beginning of the third stage.

The Flight of the Hawk

Once upon the time, one king received two little hawks as a gift and he gave them to a falconry teacher to train them. After a few months, the teacher told the king that one of the hawks was perfect, but that he didn’t know what was happening to the other one: it didn’t move from the branch he was placed on the day he brought it. The king called folk healers and witch doctors to check the hawk, but nobody could make the bird fly. So, then he assigned such mission to the members of the court, but nothing happened. The following day, the monarch saw through the window that the bird remained still immobile. He decided then to communicate this issue to the people of the town and he offered a reward to those who could make the bird fly. The morning after, he saw the hawk flying agilely through the gardens. The king said to his court: “Bring me the author of such miracle!” His court quickly brought in a farmer. The king asked him: “Did you make the hawk fly?” “How did you do it?” “Are you a magician?” Intimidated, the farmer replied: “it was easy, your majesty. I just cut the branch and the hawk flew. He realized it had wings and… it flew away”.

What basic financial planning is required during the fourth stage?

The fourth stage, between the 46 and 55 years of age, is the one of maximum financial development, in which you will arrive at the pinnacle of your career and will begin to see the fruits of the cultural legacy that has been sown in your children. You should have a good position in your company or a successful business. Your children are going through the transition from the first to the second stage and they are supported by the values and traditions you’ve taught them. Upon completion of their academic preparation they will be ready to fend for themselves, you can consider that you’ve done your job; now let them fly away. During this period, your income should continue growing at a slower pace than the previous one, but in a steady way until reaching the peak. Then, towards the mid or the end of the period, it will start going down. Your expenses will follow a similar performance: high at the beginning, since you will have to face the time when your children have higher monetary demands, but later it will start to decrease as they finish their academic preparation and start generating their own revenue. You will have to manage your finances very efficiently so that you can maintain a perfect balance between your income, expenses and surplus reserve for saving and investing.

What are the essential assets during the fourth stage?

46 years old. You should have, at least, five essential assets: education, connections, creditworthiness, vehicle and, of course, your home; a home that you and your partner bought with such joy, the foundation of your quality of life, and the support of your happiness. Your improvement program continues, especially in relation to the financial and investing area. You have attended a couple of seminars about this topic and you now are prepared to negotiate with sales agents of insurance policies and investment companies that have begun to contact you in the later years. Your creditworthiness must be impeccable. Your bank has even offered you a platinum credit card. You don’t need it, but you accept it to enter the VIP lounges at airports. It is nice to know that your bank has you in such high esteem! Your friends/connections remain firm. They are probably venture partners, both commercially as well as socially. You have different means of transportation. Obviously, you and your partner will have appropriate vehicles to your selfprivileged status. In your case, it is no longer a cheap car you bought with a loan, now you have a powerful sports car. You don’t need it, but you feel good with it. You were able to buy without making sacrifices in your budget and you are thoroughly enjoying it. That is good! With regard to your children, they have been getting the cars that you and your partner have replaced. Don’t forget to tell them that this car is a loan.

-What’s next?

Buy a bigger home. The family has certainly grown and you need more space. But you already know how to cope with the bank and other details. Make use of the calculator to assess your new acquisition. You already have the necessary essential assets; now you can think about some luxuries. Those that are not necessary, but help you to have a more pleasant life: a boat, photography equipment, canvas and brushes and any other assets that could be part of your recreation. If you can do this without sacrificing any other areas of your plan, then go ahead. Do it. Enjoy yourself!

What insurance plan do you require during the fourth stage?

There won’t be many changes during this stage in the area of insurances. Your children are growing up, but they are still dependent. You should still be protected by policies for all common contingencies. Your main task in this part is to keep your policies valid.