A few decades ago, your parents were exactly where you are today. They had jobs, regular income, a good life and were filled with hopes and dreams. Financial freedom and helping other people were also part of their dreams and they made certain investment efforts hoping to achieve it. But like many other things, their life did not go as planned? Today they have a life that is worse in retirement than their active career life. The big question is would your life go as planned? How many people do you know today whose Life has gone exactly as they planned it? What gives you the confidence that your life will go as planned? And is there a way to know upfront where you would end up at the end of your career?
A few years from now your career will end and your life will end up in a certain place. The big question is where would it be? Will your life end up in financial freedom or financial bondage? Depending on what you do today your life will end up in either of these three places. The first is the same place as your parents-This is where you are dependent on your loved ones but have independent children that can cater for you. The second is a worse place than your parents. This is where you are dependent on other people, but also have children that are dependent on you. And the third is a better place than your parents-this is where you are Independent and self-sufficient in retirement and your children are also independent too. Out of these three-end destinations, you would end up in a certain place. But how do you know where you would end up? And what can you do to end up in a better place than your parents? I will answer both questions in part 1 and 2 of this article.
One of the big misconceptions that make people fail in life is to think that time will change their financial situation. Time never determines your financial success. If it does, more people will be richer in retirement than during their active career life. But research shows that 8 out of 10 people are 80% poorer in retirement than during their active career life. This means that an increase in time does not necessarily mean an increase in financial freedom. What determines your financial freedom is your actions and the quality of the decisions that you make. Your actions more than your desire, good intentions, wishes, hope, or dreams is the biggest determinant of how your life turns out in retirement. Thus, it is possible to predict with accuracy where you would end up in retirement just by looking at what you do today. And it is also possible to change your retirement destination if you do not like what you see today.
Yet rather than take charge of retirement and create a better future most people are held back by fear. The most common of which is the fear of the unknown, a fear that simply exists because people refuse to confront the unknown before retirement. This fear, coupled with the fact that most people only saw the perfect bad example of how not to achieve financial freedom through their parents, make poverty action the default action for most people during their active career life. Only 10% of people have seen a perfect good example of how to achieve financial freedom and the best way to transition from a successful career to an even more successful retirement life.
The challenge with this is that you act according to what you see and know and will only replicate the familiar despite your good intentions. You are also not likely to model or replicate what you do not know or see. Thus, chances are high that you are already replicating some of the poverty actions you saw your parents took while growing up without even realizing it. Yet if you do not unlearn what you saw, observed, and adopted from your parents, your brain will automatically replicate the same actions when real life situations hit. And in due course you will reproduce the same results guaranteed.
The only way to prevent this from happening is to do the three important assessments that I call the “End-destination Financial Freedom Assessment”.
The first assessment is the “Odds of Success” assessment. This is where you compare the advantages and disadvantages you have compared to that of your parents. The only way to have a better retirement future or end up in a better place than your parents is to have more advantages and less disadvantages than they did.
The second assessment is the “Perfect Good Example Assessment”. Right now, you have only been exposed to a perfect bad example of how not to achieve financial freedom. Until you also learn from a perfectly good example, how to achieve financial freedom, you will not achieve it.
The third assessment is the “Action Resemblance assessment”. When you look at the actions, mindsets, and behaviour of your perfect bad example and that of your perfect good example and compare them to your own current actions. Who do you resemble the most? Who you resemble is who you become?
These three assessments combined are what you need to determine your odds of success and whether you would end up in the same place as your parents. In Part 1 of this article, I will cover the first assessment and then I will cover the remaining two assessments in Part 2 of this article.
So, let’s see your odds compared to that of your parents
A job was the main source of income for your parents, and it is the same for you today. However, your parents had a better job/income prospect than you do today. Your parents were lucky to be in an Era where jobs were more than the number of qualified graduates. They were enticed with lucrative job offers like a car, a house, and a juicy employee package from day one. This meant that they were almost overpaid from the beginning and didn’t have to bother about acquiring more degrees to edge competition like you do today. If you had a degree back then, you were in demand. And it helped that they also lived in rural areas, so farming helped subsidize household costs. Yet despite these advantages a lot of them ended up broke in retirement.
Your options are slimmer today. You live in a time where degrees are a commodity. Regardless of the school you attended and the degree you have you practically need to beg to get or keep a job. You are also more likely to be underpaid from day one with no juicy perk like your parents. Worst of all is that the fierce job competition forces you to acquire more degrees, spending more money on tuition, and achieving financial independence at a later age. Your cost of living is also higher as you live in more urban areas and lack a subsidizing system for your household cost. Thus, compared to your parents your odds of achieving financial freedom are slimmer. Unless you find a way to increase your odds your chances are worse than that of your parents.
Savings is what you would look like in retirement when your paycheck is gone. Yet it seems like your parents saved more money than you do now. And here is how I know.
Your parents had more children and dependents than you do today, yet they were able to train them all debt-free. Not many people used debt back then, but today debt is mainstream. Your parents were also able to achieve major financial goals early and debt-free too. They bought their cars debt-free, built their houses debt free and trained their children debt-free. Today we do everything with debt because over 75% of people only save 5-10% of their income. They send their children to school on loan, buy a car on loan, rent a house on loan, buy electronics on loan, and build a house on loan. We have become a loan infested society reducing any chance of achieving financial freedom.
Your parents also had a better retirement savings plan. Most of them retired with income that is the same as the last salary they earned before retirement. Today retirement plans at best represent only 20% of your salary. Without big portion savings and the ability to augment pension income your financial freedom dream is a mirage.
If savings is what you looked like in retirement, investing is what sustains you in retirement. Thus, there were two main investments our parents deed and understood during their career life and these are also the investments that you do today. There are real estate and Children education. But your parents have certain advantages that you do not have. First, they could send their children to affordable public schools, enjoy free education, and were not peer-pressured into sending their children abroad. Today Some parents spend a major part of their 15-20 years income on education even though these educations are useless without a job. Parents today seem to be enriching the schools than they are enriching their own financial future. They are also putting themselves in more debt through homeownership. A personal home is a non-income producing asset and the best way to own it is debt-free. While a home is important, it will not pay your bills in retirement.
Children Independence and Value System
Your Children are your greatest investment, yet our parents seem to have done a better job investing in children than we do today. At the core of their career was time dedicated to bringing up resilient, strong, and respectful children. A disciplined, moral-based, and religious-based training approach was used. An approach not entirely perfect but produced resilient, disciplined, and respectful children with strong moral and family values. Today in the bid to soften this training approach, we have mass-produced fragile children that are dependent, entitled and can break under pressure. Yet, the world we live in is neither soft nor easy. The worst thing we have done is dilute their value system by sending them abroad.
Today’s children are likely to be strangers in their home country and strangers in their base country. They are unlikely to return home after school and be present for their parents in their old age. Parental care will be done majorly via skype and zoom. And real estate assets will be abandoned, sold, or left to strangers. Even so their chances of success in their base country where they are treated as second class citizens is limited.
Truth be told, you have way more disadvantages than your parents. While this generation has succeeded in increasing their cost and disadvantage, they have done little to optimize their advantage. And until you optimize your advantage you will end up in the same place or even a worse place than your parents.
To learn more about ‘How you can end up in a Better Place than Your Parents’ watch out for Part 2 of this article.
About The Author.
Grace Agada is the most sought-after Financial Freedom Expert in Nigeria. She is a renowned Author, Financial Freedom Advisor and Keynote Speaker. Grace is Popularly known as the Queen of Financial Freedom, the Breadwinner’s Advocate and the Middle-Class to Upper-Class Mentor. Her goal is to help working professionals and breadwinners move their success and livelihood from a paycheck to their own solid passive Income. Grace is the Author of three books and possibly the most widely read financial articles. Her articles are spread across seven national newspapers and four of the most popular Nigerian Blogs. Grace is also the Founder of the University of Wealth, The Rich Retirement Life Quarterly Publication, The Wealth Creator Quarterly Report, and the Wealthy Business Blueprint Program. Grace has been featured on BBC Africa. Business Day TV. Inspiration FM. and inside Naijatv. And she consults for Numerous Top Organizations, Company Directors, CEOs, C-Suite Executives, and High-Income Professionals. To connect with Grace, send an email to firstname.lastname@example.org