Recently a retired Bank of Uganda official was reported as
saying that as an employee it is impossible to plan for your retirement. According
to him the salaries are low and the cost of living is ever rising, making it
impossible to save for the future.
He has managed because he got a hefty gratuity package on
retirement and with that he has put up some rental properties, whose income he
is now living off.
Thankfully this article was buried deep in the paper and
probably got little attention.
As an employee earning a regular salary and wanting to
retire in some comfort, here are my seven recommendations to make this happen –
without stealing.
#7. Change your mind
It all starts between your ears. You need to understand
money and how it works. You can learn this by raw experience or making it a
decision to deliberately go out there and learn how money works. Money has its
own laws and you flout them to your own detriment. Learning how to handle money
is not a God given talent (that’s an excuse not to even try, to roll over and
wallow in your poverty stricken misery).
Earning money is done through selling your labour, while
making money is when you make money work for you.
#6. Think of your life as a balance sheet not as an income
statement
The income statement shows income and expenditures, while
the balance sheet shows assets and liabilities. The income statement decides
your current standard of living the balance sheet determines the sustainability
of that lifestyle.
It’s all very nice to be make more and more money as your
career progresses but to ensure a comfortable retirement it’s not how much you
earn but how much you keep that counts.
The trick is to grow your asset (where your money sweats for
you) column using your income and liabilities, to the point where the income
from your assets overtakes the income from your job.
#5. Saving is good, investing is better
Savings are an addition to your asset column but whereas the
zeros can increase from month to month and year to year, the value of your
money can be eaten up by inflation. Investing is committing money to an asset
class with the hope of getting your money back and with something extra on top.
It takes discipline to save, it takes greater discipline and study to invest.
Google investing.
By the way you save first and spend after, not spend and save
what is left over – there is never anything left over.
#4. Respect the law of compounding
Compounding is when more is built on more. The more you have
the more you can build on it. This does not only apply to money, it applies to
knowledge, friends, business partners.
If you have a thousand shillings earning 10% or sh100 in the bank, next year
you will earn 10% on sh1100 or sh110 and the next year you will earn 10% on
sh1210 or sh121 and on and on and on. In school you learn how to count, then
add and subtract, then multiply and divide, the integrate and differentiate and
on and on. Things build on other things,
Albert Einstein called it the eighth wonder of the world. And even Jesus
said to those who have more will be added into them.
#3. Business is not opening a shop, only
As you grow you asset base, commit to continuous study –
read, talk to mentors, learn from your own experience, to improve your capacity
to spot and take advantage of opportunities around you. Learn how to build a
structure around what you know to make money. It need not be selling second
hand clothes.
#2. Have a long, long term vision
The most financially secure people, those who have learnt
how to make their coins work like slaves, know that money is not for spending
but for making more money. They also plan that their money will be passed down
the generations. No one in their line will lack for shelter, clothing, food and
university fees. When you think beyond your own stomach – finishing your money
before you die, it changes the kind of
business you are in, your ethical standards and your ability to make more and
more money.
#1. Think Kiprotich, not Bolt
The best time to start investing is 20 years ago, the next
best time is now. Assuming an investment that shows a return of 10% a year, it
means you will double your money every eight years. The sooner you get on your
journey the better. Don’t be, seduced by the super quick returns, enthralled by
the yesterday-he-was-broke-today-he-is-a-billionaire tales of tycoons –
yesterday may have been 20 years ago. Focus on what they did to get where they are -- the process, overcoming disappointment,
practicing delayed gratification rather than what they are doing now – own big
mansions, ride in new limos and having little brown things hanging from every
arm, when they have arrived.
Retirement planning is a marathon not a sprint.
