Category: Financial Advisory
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IT is often said that one must dream big if you want to achieve something in life. But I must say that the bigger the dream, the likely that it will keep you up at night.

Too often in my professional career-consulting clients, I personally witnessed how having BIG dreams can make or break someones fortune. Ive learned that having ambitious dreams can be risky, dangerous even. This is due to the sentimental and emotional value attached to our personal dreams, which can manifest into irrational decision-making. Even the normally pragmatic individuals are not spared from this affliction.

It is therefore vital to be aware of what it would cost you to pursue your dreams, lest you find yourself in a financial nightmare instead.

Here are a several examples of potential financial nightmares:

My dream is to retire early so that I can enjoy better quality of life

Theres a noticeable growing trend of people aspiring to leave their full-time employment in their 40s.

This is entirely achievable if you have planned ahead to ensure that your income is still able to fund your desired lifestyle. It is when you do not have a plan on what to do once you stop working that raises the red flag.

Most people make the mistake of overestimating the ability of their accumulated assets to see them through the rest of their lives. However, the expected return on investment (ROI) on your savings and investments might be lower than projected, unplanned medical costs could emerge. If you have children studying overseas, any devaluation of the local currency could spell disaster. You could end up digging into your reserves to make up for any unexpected rise in costs.

Before you know it, your retirement nest egg begins to dwindle and what was initially projected to last you until the ripe old age of 85, is now only sufficient until you reach 70. By then it will be too late to scrounge for alternatives to make up for the shortfall.

In 2009, Mr A, aged 33 then, came to us with a dream to retire at the age of 50. At first glance, his income of RM630,000 per annum and a total net worth of almost RM2mil looked impressive (See Figure 1). However, after a detailed analysis of his entire financial situation, he was stunned to hear that if he were to stop working at age 50, his assets would only last him until age 63 when he had expected to be self-sufficient until his 80s.

Fortunately, Mr A took our advice and continued working while growing his net worth with our support. Upon his annual financial review in 2015, his net worth had doubled and if he chose to retire at age 43, his assets would last him till he reached age 82 (See Figure 2). What a big difference the additional six years of money optimisation made to his financial roadmap! Had he proceeded with his retirement dream earlier without improving on his current wealth growing strategy, he would be in a financial predicament.

My dream is to have my children attend international school in order to give them a more wholesome educational experience

More and more middle-class Malaysians are opting to give their children private education for a myriad of reasons.

I see this decision as a strictly personal choice. As parents, we want whats best for our children. It becomes a matter of concern when it is done at the expense of our own retirement security.

Given the various flexible payment schemes offered by private education institutions nowadays, tuition fees suddenly seem affordable and manageable. Some may even view it as something that could be added into the monthly expenditure without feeling much financial strain.

What you dont see is the long-term impact of diverting funds meant for long-term investment into private education fees which is very likely to exceed the million ringgit mark by the time your child graduates from university.

You will be in your 50s by then, with a few more years to retirement. You have essentially missed more than a decade of growing and compounding your nest egg. You may have given your child a dream education but as a result, your retirement plans have been compromised. Instead of comfortably retiring as you have planned, you are forced to continue working to make up for lost time.

A client of ours is doing just that. An established medical practitioner, he chose to send his two children to an international school over three decades ago, spending on average RM100,000 per annum per child comprising school fees, extra tuition and other enrichment classes. Now, in his 70s, he is still unable to retire. As shocking as it may seem, this is the reality of the situation.

My dream is to own a property overseas

It may be the latest trend to invest in properties in London, Sydney, Melbourne or in other major cities internationally for a host of reasons: to facilitate emigrating for retirement, to reap capital investment gains in a booming property market overseas, to lock in funds in a stronger currency market or even in anticipation of children pursuing education there.

I believe the majority of investors who are attracted to the above proposition are, in fact, relying on assumptions regarding the overseas property, such as attractive rental yields, ease of finding tenants and appreciation of property value.

The moment one or more of these assumptions fail to materialise, the property owner is going to find himself in a situation where he has to draw on his reserves to sustain the property in hopes of recovering his investment. Adding to that, there are a host of other costs in the form of taxes, upkeep of the property, legal fees, currency exchange issues, property managers fees and before you know it, you realise that you have bitten off more than you can chew.

A recent case in point is where a client of ours bought a property in the UK last year and at the time when payment was due, the ringgit had hit a record low. Forced to make the currency conversion anyway, he found himself paying RM500,000 more solely due to the adverse exchange rate!

If theres any take-home advice regarding property investment, it would be this sustaining the foreign property could end up eroding the value of your other assets. The once enticing dream of being a proud owner of an overseas property may turn into your worst financial nightmare.

In conclusion: Dream but with eyes wide open

People often make decisions based on their inert desire for a better quality of life for themselves and their loved ones. But these decisions could come at a huge price if one lacks the necessary planning and foresight.

There is nothing wrong with having dreams; it is what drives us to improve and better ourselves. However, from the numerous cases that we have come across, the reality is that big dreams require a comprehensive evaluation of its impact to your overall financial position.

Having proper financial advice will allow you to find the best way to achieve those dreams without compromising on your financial security. Having the right financial adviser working hand in hand with you to bring these dreams to fruition may be one of the best decisions you could ever make for yourself. At times, the financial adviser may need to bring you back down to earth to appreciate your true financial situation and perhaps propose a more realistic alternative.

It is better to put a dream on hold then to rush headlong into it and risk the consequences later on. Your dreams have the power to change your life; how the ending unfolds depend entirely on the right moves you make today.

Yap Ming Hui (This email address is being protected from spambots. You need JavaScript enabled to view it.) is a bestselling author, TV personality, columnist and coach on money optimisation. He heads Whitman Independent Advisors, a licensed independent financial advisory firm which has helped people to optimise their wealth and achieve financial freedom since 2000. For more information, please visit his website