The Cold, Heartless Financial Tool called the X-Curve, and How to Cope with it

Have you ever heard the X-curve concept before? Experts on the matter say it is indispensable; you won’t have a feasible financial plan without it.

The X-Curve diagram makes it easier for a financial planner to explain why a client needs insurance and investments. It’s a sure-fire way illustration on how to prevent bankruptcy and shield your life savings from emergencies.

When you encounter the X-curve from a financial advisor, you will be presented with an age-line drawn on an X-axis. The line indicates your current age and target retirement age. The line on the Y-axis plots your level of financial responsibility.

The basic premise is that wealth is inversely proportional to your active financial responsibility. Ideally, as we age, we reduce the amount of active income we get (you don’t want to work as hard as you can in your 50s or 60s, do you?). To compensate, you should have been invested sufficiently so that the money you earn in your senior years comes from passive income.

According to the X-curve theory, what we want to avoid is not having enough retirement money because of insufficient long-term income-earning investments. Worse yet, you failed to take care of your family.


I could not trace whether the X-curve concept came from—whether it was designed specifically for the insurance industry. Maybe, a financial guru just simply found it uncomplicated in charting your life in terms of the time value of money.

What I know is that the International Marketing Group (IMG) and its U.S. counterpart, the World Financial Group (WFG), have used it as an integral part of its financial education. They would drill X-Curve in your head every day and every hour until it becomes part of your life.

I’m pretty sure the X-curve has been distributed a million times over by those of us in the financial planning industry. Despite this, I am baffled to hear that the concept has made little effect on Filipinos. Only 10% of the population are investors.

As much as the X-curve has inspired people to act now, it has also equally elicited a new form of procrastination—wait-and-invest-later mindset caused by personal financial constraints, the fear of risks, or the belief that investing requires a high barrier of entry.

Is procrastination the primary culprit as to why the X-curve doesn’t pan out for you?

Is being risk-averse or the barrier of entry into investing enough to explain the failure of the X-curve?

I think these are easy explanations because they’re based on the familiar patterns of the low investing habits of Filipinos.

But they don’t really explain why, despite having more cash in hand, a lot of us will still delay investments. Truthfully, this requires a more exotic explanation than just procrastination and fear.

In practice, the X-curve has a joker in the pack—and it’s human emotions. Emotions are unpredictable and cannot be plotted in a graph. They certainly don’t jive with the X-curve.

A perfect X-curve expects an artificial outcome. Technically, the only way you can successfully follow your financial plan of maximum savings and Zero Responsibility is for you to become a machine!

The common mistake is that financial planners use the X-curve concept to heighten emotions and create a sense of urgency. This often backfires. Against expectations of perfect execution, the mind will refer to its defense mechanism, prompting delay, rather than action.

Perhaps, the right way to think of the X-curve is to look at it beyond its face value. It’s more than a graph to distinguish when you should buy your insurances. It should be thought of as a mental guide to understanding how to reach your targets using your present resources.

Your goal is to make the X-curve work for you—this means adjusting it according to what’s comfortable to you. One way to do this is to create long and short-term X-curves. Long term X-curves are generally obscure—so just put that in the background of your mind for now. Today, what matters is your short term X-curves.

Short-term gives you small wins. A consistent number of small wins then generates momentum; and before you know it, you’ve reached your long term targets. With this method, the X-curve is equally valuable in planning your future for the next year or next month.

Nonetheless, creating two X-curves does not strike out your emotions (still that damn joker in the pack!). Sure, you would say that you would follow the plan right now. But the other side of you (the Id to your Superego) would slither back to procrastination and fear.

From this point, the only recourse is to have grit and some hustle. What I am adding to this statement is that grit/hustle can get more kick if you hot-wire your behavior.

I am, of course, talking about visualization. Some of the most successful athletes and business people make it a habit to carry a mental image of achieving their goal.

There’s no pseudo-science behind visualization really, it’s just a way of tricking your brain into directing it to a specific action. Visualization, when practiced with feelings, injects you with the natural feel-good chemicals (serotonin and endorphins) into your system, making you feel good about your action plans.

Your brain receives information through senses or through thoughts without distinguishing them. So what you visualize is a method of feeding your brain with information that it will work on. If you feed it with negative thoughts (such as your X-curve plan is impossible), then it will process it toward procrastination or defeat.

If you feed your brain with positive thoughts of abundance, of living in financial security, of traveling the world, then it will process motivation and grit.

A classic experiment involving visualization was conducted by psychologists at the University of Chicago. They divided a dozen basketball players into three groups. Group A had to practice their shots on the free-throw line for thirty days; the second group was to sit out and do nothing; while the third was asked to make their free throw shots for thirty days simply by envisioning them.

When the results came back, the first group improved their shots by 24%, while the second group recorded 0% or negative. Surprisingly, the third group had logged in an impressive 23% improvement.

This is not saying that you should replace action by daydreaming all the time. But when you have a mental image of your success, feel it, you feed yourself the confidence to your action.

Without it, can you really cope with the cold expectations of X-curve day-in and day-out? I doubt it. Can you save money and invest like a machine? Surely not. Or shall we just lapse into procrastination and fear—with a little bit of hopeful abandon—because we are human after all?

I would like to believe that the X-curve is more useful during the moments you try, as best you could, to reach the end. And that means being happy and contented by the mere fact that you accomplish your small weekly/monthly goals. By this practice, you will find your sweet spot in that heartless X-curve diagram—and still call yourself human.

7 thoughts on “The Cold, Heartless Financial Tool called the X-Curve, and How to Cope with it

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