There are two key elements that will determine how fast you run out of money in retirement. These two elements are the keys to lasting financial success.
The first element is Income and the second element is Savings. Income is the element that brings money into your life, while savings is the element that keeps money in your life. And it is also the seed for Financial Independence.
Yet millions of people every year give savings the least attention during their active career years. It is as though they forget that their saving is what they will depend on in retirement. These people spend their lives working hard for other people and do little on their savings. They end up struggling in retirement.
If you want to experience a restful retirement, you must keep big portions of your income as savings for yourself. And do so early enough so you can gain financial freedom and help other people.
So how many people do it this way? Only a few. The majority of people prepare for retirement in the exact opposite way. They focus their resources and attention on other people and work on projects that last as long as their active career years, only to run out of time and money, when they are ready to focus on themselves. It is the abandonment of savings until later that makes retirement a dreadful experience for many people.
So what can you do?
The answer is, it depends.
It depends on where you are right now, how hungry you are for success, and whether you are ready to take immediate action. But regardless of where you are right now or what you choose to do today, know that millions of people have gone ahead of you. And at least 95% of them have lost their high-quality life in retirement. They have descended from a prestigious life to a life of financial pain scrambling for a meager monthly stipend.
If you do not want to end up this way, you must brace up for success and create the kind of life you desire in retirement. Almost all success stories that I know, started when someone reached that point of “enough is enough.” So, maybe right now is your enough moment. Let me show you how you can take the steps forward.
There are three things you can do to never worry about money in retirement again;
- The first thing is to replace your retirement income. While your job can retire, your income must never retire.
- The second is to identify and focus on the 20% action, that will make a dramatic difference in your retirement life.
- The third is to find the money you need, to fund your dream retirement life.
Let me explain each of these points explicitly.
First, you must replace your retiring income with a non-retiring income. There are two kinds of income that do not retire. The first is Investment Income, and the second is Business Income. Replacing your retiring income with an investment or business income is important, because the major difference between you today and in retirement, is the absence of a high active income. If you replace this income with a non-retiring income, you will have a smooth transition into retirement.
Unfortunately, the majority of people only have their pension incomes to depend on. The income from pension is less than 20% of your current salary, and depending on pension means crashing the quality of your life to fit into a small budget in retirement. Pension as of today does not last for a lifetime, you are likely to run out of money if you live longer than the pension managers envisaged. If you are lucky to have a few other investments to depend on, you must make sure these investments mimic some of the characteristics of your current active income. They must be stable, consistent, regular, and difficult to lose. The key to success in retirement is to find ways to replace your retiring income and to do it in such a way that gives you peace of mind.
The second thing you must do is focus on the 20% action that will give you peace and independence the fastest. There are three areas to focus on if you want to experience a blissful retirement. The first area is Income. You need both short-term income security and Lifetime income security. Short-term income security will take care of your needs and emergencies, and long-term income security will sustain you for life.
The second thing you need is a residential home of your own or some sort of rental provision that does not stress you. One of the biggest capital expense that frustrates most people is rent. The sooner you take care of this expense, the more stable and stress-free your retirement will be.
The third area is Health. Health crises can destroy any amount of wealth. It is in fact the biggest destroyer of wealth. Knowing what to do to heal your body, stay healthy, fit, and productive, is critical for success in retirement.
Finally, the third thing you must do is find the money to fund your dream retirement life. It is rare that you find a person who already has all they need for retirement. Often, four things are in short supply for most people. The first is time; most people are already out of time and must find ways to achieve their retirement goals within the limited time that they have. The second is money; which is always in short supply for most people, and they must find ways to generate more income for themselves. The third is relationships; some money problems can be easily and quickly solved with the right relationships. Most people lack the kind of relationships that will take them to the next level. The fourth and final thing is business skills.
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Shifting from employee to business owner requires growth in three key areas. First is the ability to solve problems with little resources. The second is the ability to inspire and convince people to give you money, in exchange for your goods and services; especially when you are not known or popular, and do so at zero or little cost. The third is the ability to find, initiate, and nurture the critical relationships you need to move to the next level in your financial life. These three skills are critical if you must succeed in life and business.
Perhaps you are thinking to yourself, “How can I do all these? I need a blueprint to start.” We can help you. To learn more about us and how we can help you, send an email to [email protected]
Retirement is a continuation of life and not the end of the good life. You have invested your whole life making the lives of other people work. It is time to make your own life work and enjoy a blissful retirement.
Grace Agada is The Senior Financial Happiness Director @ Create Solid Wealth. She is an Author, Column Contributor in Six National Newspapers, Writer at BellaNaija, and Trainer with a mission to help working-class professionals and CEOs become more financially successful. To learn more about Grace and how she can help you, send an email to [email protected]