Three things that tell if your current life is working
The first is your savings. Any saving that is below 25% is sure to create an unstable life. Worse of all is that you can never achieve financial freedom with this kind of savings. The best way to save is to save at least a quarter of your income and to work towards saving more than you spend. The second is your earning ability. There is no single person with low earning ability who became financially free. Low income and financial freedom do not go together. Thus, you must move from low income to high income to achieve financial freedom. The sad news is most working professionals are low-income earners and they also earn only a single income. A low-income earner is anyone who cannot earn a high income quickly. You are not a low-income earner just because of the amount of income you earn. You are a low-income earner if it took you an enormous amount of time to earn high income. For example, if it took you 15 or 20 years to enter the one millionaire salary bracket. You are a low-income earner even if your current income is high. This is because if you divide N1 million by 15 years, the person has only earned N67,000 per year and less than N260 per day. That is low income. Low-income earners only earn high income with an enormous investment of time. The key to knowing where you belong is to divide your current income by the number of years it took you to build it. If it took more than one or two years to earn N1million you are a low-income earner.
High-income earners don’t function by the length of time they invest, they function by the quality of value they provide. High-income earners focus on creating high value that commands high income. And they earn from multiple sources of income. To become a high-income earner, you must develop high-income skills.
The third is your investing strategy and whether it is moving you towards your desired goal. There are three ways to know whether your strategy is moving you towards your desired goals. The first is motion. Certain investments just create motion. You may have the feeling of making money and you may be making money but you may also lose all the money. Motion-type investments create a lot of noise but they are like treadmills. You are sweating, you are pounding, you are moving but you are not making any meaningful progress. The second is movement. Certain investments create some movement. That is, they take you up sometimes and they take you down sometimes. Movement is only beneficial if it is consistent and heading in the right direction. The third is the progressive movement. This is the type of investment strategy you should have. The progressive movement investing strategies ensures that you make meaningful, consistent, and steady progress towards the direction of your goals. The more progressive movement you make, the sooner you achieve your financial freedom goals.
The end destination marker
The idea of waiting until the last minute to plan for retirement is a poverty idea. Retirement planning and building a solid passive income that can sustain your living standard is no joke. The older you get and the less time you have, the more expensive it becomes. No gratuity payment or huge pension fund can make up for late retirement planning. Thus, time is the only advantage that you have and you must learn to work with time. The best time to begin planning is between ages 40-50 years. By the time you begin to ascend from 50 years, you pay a huge price for late planning. The mistake is then to think that you still have time. Most people think this way because they do not have the slightest idea of the amount of time and resources it would take to create the kind of life that they desire in retirement. It will take roughly 5-15 years depending on your savings and an enormous amount of savings depending on your ambition. Secondly, most people think that their expenses will go down and should fit into pensions. Expenses will not go down in retirement. It will increase and it will take many other forms. If you have the slightest idea of what these expenses will be you would start planning now. So, if the retirement bell has begun ringing in your ears. And you have fears, anxieties, or concerns about retirement, you are not yet prepared and it is time to plan.
Depending on when you plan and how much savings you have there are three possibilities for you. The first is a “downgraded life.” A situation where the quality of your life crashes in retirement. 80% of people end up this way. The second is the “same quality life.” A situation where you maintain the same quality of life after retirement. And the third is the better Life. A situation where you elevate your living standard and create a better life in retirement. The reality is you don’t wish a better life into existence. You design it, plan early for it and work toward achieving it.
To create the same life or a better life in retirement, you need solid cash reserves, a financial freedom investment plan, and a solid passive income. Preferably that which represents the whole or a big part of your current income. That is your monthly passive income in retirement should not be significantly different from your monthly active income before retirement. Without a good amount of time or the ability to earn high income fast, this is a difficult thing to achieve. And without achieving this goal, a downgraded life is imminent.
The truth is the privileged life that you enjoy today will expire after 30 years. I don’t know where you are with your 30 years contract and how many more years you have left. But what I know is that 30years is insufficient to achieve your important goals. And without deliberate and early planning you will not achieve your goals. For example, it takes 16-20 years to fund children’s education. It takes 5-15 years to achieve Financial Freedom. And it takes another length of time to own your own home, build a business and meet other obligations. Without early preparation and the ability to earn from multiple sources, you can’t maintain, sustain or elevate your life in retirement. A descending quality of life after retirement is the greatest contributor to generational poverty.
To learn more about Retirement and how you can enter retirement with financial confidence, you can pre-order the book, ‘The Passive Income Retirement Blueprint – How to Create a Better Life in Retirement than Your Active Career Years’ – by Grace Agada.
The inheritance marker
The fourth poverty marker is the inheritance marker and there are two types of inheritance you can leave behind. The first is assets and the second is liabilities. Everyone leaves something behind. And there are seven elements that constitute assets. And eight elements that constitute liabilities.
The asset inheritance includes a good family Name. Wealth and financial assets. Opportunities and leverage. Rich relationships. Values, traditions, and habits. Passive income assets that keep producing recurring income. And an immortal global legacy.
Liability inheritance includes dependent spouse and children dumped on other family members without accompanying financial provisions. Unplanned burial and funeral expenses. Uninsured debt and contracts leading to huge financial stress. Poorly run businesses that no one wants to inherit or well-run businesses with no trained successor. Real estate Investment that are liabilities and money sinkholes than assets. Outstanding medical bills. A Bad name and reputation. And No clear after-death plan that shows what should happen after death or where important documents is located.
If you are going to end poverty in your life and family. You must choose not to add to the liability side of things but to continuously increase your asset base and leave a good inheritance behind.
Factors that perpetuate poverty in families
There are certain factors that encourage poverty in families. To end poverty, you must desist from practising them.
Toxic generosity that spends financial freedom money
Perhaps one of the greatest factors that can delay your financial success is toxic generosity. Toxic generosity is any kind of generosity that puts the welfare of others ahead of your own financial welfare. Healthy generosity does not sacrifice your own financial security. It creates a healthy balance between your needs and the needs of other people. Thus, it is not generosity that is bad. It is the type of generosity that is synonymous with self-sacrifice, self-abandonment, and self-neglect that is bad. This kind of generosity is not only toxic to you it is toxic to the people that you will depend on in retirement.
People who practice toxic generosity never achieve financial freedom. Take a look at the people who practice this kind of generosity in your own family and see where they are today. I can assure you they are nowhere near financial freedom. You need to be generous. But you also need to keep your generosity within budget. You need to fix it at a level that does not sacrifice your own financial security. And you need to prioritize your own freedom first so you can spend the rest of your life helping other people.
I used to practice toxic generosity and here is my story.
I grew up not being your typical favourite child. I was different, strong-willed, visionary, and challenged the status quo. A complete opposite of my brother and sister who were easy to deal with and were more compliant. So, I struggled for many years to gain acceptance and liking and I tried to be like them. After many years of trying without success. I came up with a plan and the plan was simple. I will work hard and become the successful one in the family. And then I will use my success to buy the liking and acceptance that I needed. All I needed to do was to become the family’s run-to-person for solving financial problems. Needn’t I tell you that I almost died. But thank God I was delivered from my own ignorance. If you saw me then when I was practising toxic generosity. All you would see is the external display of generosity. What you would not see is the motive, driver, and agenda behind the generosity.
A lot of people are trapped in this kind of generosity. They are generous for their own personal reasons. And reasons that have to do with brokenness and not growth. Thus, everyone is generous for a reason. And there is no such thing as complete selfless generosity. Most toxic generosity is tied to an unresolved emotional wound.
So, if you find that you have a high tendency for sacrificial giving. Check again, to see what you are trying to heal, avoid or gain. A healthy person has control over their emotions and has resolved their internal neediness for approval. Until you become this person it will be hard to say NO to toxic generosity.
Toxic generosity is thus sickness and not health. It is sickness because it comes from an unhealthy internal place. It seeks to manipulate people. And it expects something in return. It also destroys you in the process as you become bitter and resentful.
The key to healthy generosity is to achieve financial freedom first so you can help other people on a sustainable basis. It is also to model wealthy people and not average people. Wealthy people increase internal generosity to themselves first before external generosity. They fast-track the achievement of their goals and then build an enormous amount of wealth that can fund generosity for life. Poor people use their limited resources to fund generosity and then time and resources run out on them. They end up becoming the ones in need of generosity at the end of the day.
Your no. 1 obligation is to first deliver yourself from poverty. Only then can you truly deliver others. The other thing to note is that a job income is too weak a source of income to deliver people from poverty. To help other people and lift them out of poverty you need a more powerful type of income. The only source of income with this kind of power is business income. A successful business can lift an entire family out of poverty. Until you build this kind of business, keep external generosity within healthy limits.
One of the things that can destroy your financial success is the accumulation of material possessions at the expense of your freedom. Most working professionals appear richer than they actually are. They wear their wealth and decorate their houses with them. You will not achieve financial freedom if you act this way. Rather than materialism, pursue financial freedom first. Financial freedom sets you free and once you are free you can acquire any material possession that you want. This is what the wealthy do and what you must do if you want to achieve financial freedom. If you put materialism before freedom chances are high you will not make a better life in retirement.
The key is to let your savings and investments wear your wealth.
About the author
Grace Agada is the most sought-after Financial Planning expert in the country and is quoted frequently in leading Newspapers, magazines, and blogs. Grace is a Renowned Keynote Speaker, Author, and Column Contributor in Punch Newspaper, This Day Newspaper, Vanguard newspaper, Business Day Newspaper, Leadership Newspaper, The Tribune Newspaper, and Online Platforms like Nairametrics, Proshare, and Bellanaija. Grace is the Founder of “The University of Wealth” The author of “The Financial Freedom MBA Program”, “The Better Life in Retirement Planning Blueprint” and “The Wealthy Business Blueprint”. Grace is on a mission to shrink the middle class and populate the upper class. She has been featured on BBC Africa. Business Day TV. Inspiration FM. and inside Naijatv. And she consults for Numerous Top Organizations, Company Directors, CEOs, Senior Executives, and High-Income Professionals.