Financial management does not come with a one-size-fits-all formula; it depends on your circumstances and risk tolerance.

For young individuals such as students without family responsibilities, there is still the opportunity to participate in high-return, high-risk investment opportunities. However, this should be smart investment, not reckless gambling.

For those with families, the dynamic changes. While it is still okay to take risks, it should not jeopardize family finances, including children's education funds. So how to strike the right balance?

Apply the overflow method: Divide into 3 groups.

  1. Living expenses group: Calculate your monthly expenses – whether it's 10, 20 or 30 million. Strive to have enough income to have plenty each month. This excess flows into the next bucket.

  2. Accumulation group: This is a two-tier group. The bottom tier (see image) should have at least 12 months of living expenses for the whole family – a safety net even if you have no income for a year. When this layer is full, the overflow will flow to the Investment Pool.

  3. Investment group: Your wealth potential depends on this group. Even if it doesn't make you rich, it will protect your family. And even if not, your family is still protected by the Living and Accumulating groups.

Monthly surplus flows to the bottom tier of the Accumulation Pool and then directly to the Investment Pool. The amount you keep in this first tier of the Investment Bucket is your choice – I chose this amount to be equal to the first tier of the Accumulation Bucket (12 months of expenses). When the first tier of the Investment Pool is full, the overflow will flow to the second tier, as described.

What happens if investments falter? If you incur losses, the monthly surplus will continue to be rolled over for reinvestment. Once the second tier of the Accumulation Pool is filled, it becomes locked for investments. Refer to the illustration to see how it works.

Eventually, the Accumulation Bucket will grow. Only then will you set aside a small portion for entertainment and enjoyment – ​​traveling, shopping, etc.

The overflow method, customized to your situation, accounts for costs, future security and investment aspirations. It's a dynamic approach that helps you combat losses while accelerating your path to growth.

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