THE X- CURVE CONCEPT
Laws of Decreasing Wealth and Decreasing Responsibility
The X-Curve shows the relationship between taking care of your responsibility while building your wealth. The theory states that over time, a person's responsibility decreases and their wealth increases. The X-Curve involves two curves that run to opposite directions during your life time.
The Wealth Curve
When you're younger, you are still at the early stages of building your wealth. Normally, you don't have money. Then as time passes, you start to save and invest which increase your wealth- this can be seen in how your wealth curve rising.
The wealth curve is your investment curve. Hopefully when you get older, you will have enough money set aside and invest so that you will still earn even when you need to stop working.
The Responsibility Curve
When you are younger and starting a new family, the level of responsibility is high. You and your spouse have big job roles to fulfill such as becoming parents and having babies, pay bills, among others. These are obligations that both of you must fulfill whether you live or die.
In the early stages of building a family, the need for insurance protection is quite high as well. But as your children grow up and your mortgage matures, you reduce your debts. The level of your responsibility then decreases.
The X-Curve provide a clear approach for building your financial foundation. You'll be motivated to save, invest, and accumulate your assets faster, so you can reduce your debt, mortgage and liability sooner. When you decrease your responsibility for the mortgage, that means that you can focus more on other things such as college funding and retirement, fulfilling your responsibility, and reducing your insurance needs.
In life 2 outcomes can happen to you:
Either you live too long or die too soon. In any event, you should protect yourself and your family's future
1. Have a high protection when you are younger. It will take care of your family- children, college education, mortgage and debt if something happens to you.
2.Save as much as you can take care of your future.
Caution: There is a growing number of people who have more debt as they grow older. Instead of reducing their mortgage many people buy bigger houses and take care on bigger mortgages. And of course, some may have more children if the remarry.
As a result, they still have high responsibility and therefore high protection needs even when they get older.By understanding the X-CURVE concept, you may want to decrease your responsibility by increasing your savings so that you move toward a debt- free, happier life.
The Two Important Questions You Need To Ask Yourself
There are two sets of important questions that you need to address:
1. What if you die too soon? Who will take care of your family?
2. What if you live too long? Who will take care of you?
Here are the solutions:
-If you die too soon, Life insurance will take care of your family.-If you live too long, Investment and Long- term Care will take care of you.
The 3 major Financial Needs
1. Income Protection/ Life insurance
This will protect your family if you die too soon. Life insurance protection can help you replace your income, help finance your children's education, pay estate tax, pay debts etc. instantly.
2. Investment
This is the answer if you live too long. This will generate continuing income for you when you retire. It is your money working for you.
3. Long- Term Healthcare
This is the answer to your healthcare needs when you retire or get old. How comfortable your health care situation will be after you turn age 60 depends on the decision you make today.
PROTECT YOUR SELF, BUILD YOUR WEALTH!
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