Analysis: MAXWELL PHIRI
IN OUR journey towards wealth creation we looked at financial intelligence and financial planning as pathways to successful retirement. This week we look at financial discipline as one of the pathways to retirement.
There are two critical attributes to financial discipline when it comes to preparing for retirement.
The first is having the discipline of doing what you know should be done to be financially successful after retiring through savings. The second, and the one most commonly overlooked, is doing what you know you should not do.
I recently learned that the primary difference between the rich and the poor is their habitual ability to say “no.” The rich always say no all the time. They embody a laser-like focus on their goals and vision.
The rich make critical analysis before spending and mostly end up earning the name like they are mean or greed, do they care? They do not care after all it is their money; they don’t get distracted, even if the distractions are attractive. They do not waste time on activities that are not helping them get closer to their financial freedom.
Always analyse whether what comes your way is likely to incur a cost and negatively affect your retirement or not.
I have known potential retirees who attend kitchen parties weekly, I am not in any way suggesting that attending kitchen parties is wrong, but let us use our mind to determine if some of these social activities deserve to be on our monthly budget.
The same applies to men who want to be part of every musical show in town, sometimes it is necessary to forgo and buy your future through savings.
How do you unleash the power of “no” into your financial life? You do it by strengthening your financial intellect. You must train yourself to not take anything for granted and stop listening to the side of your brain which is controlled by your mind.
The mind is made up of emotions, feelings, desires, likes, dislikes and impulses. Your intellect is that which thinks, reasons, judges, decides and monitors your feelings. Investment decisions made with your mind can lead to financial failure. It’s that simple, successful retirees exercise self-control and do not allow themselves to make financial decisions based on instant gratification.
Financial discipline separates men from boys through savings and investment. Real men hold pillars for the future and sleep like babies with a financial free mind.
It is amazing how most employees get salaries and within two weeks it’s is all spent on luxuries.
Some employees neglect the component of savings for retirement all they know is” china lilala” last weekend after getting paid.
There is nothing wrong with one entertaining themselves but there is everything wrong if it is done at the expense of one’s future.
In Africa we are tired of producing stranded millionaires. We need real millionaires. Remember the future you buy now is cheaper than the future you are likely to buy in future.
If you want to retire successful, it is important to ensure that your plan is materialised.
Financial discipline means self-denial in terms of some of the unnecessary luxuries, and lust desires. There is need to forego some of the pleasures with potential to jeopardise one’s retirement savings plan.
Financial discipline demands that 70 percent of the net income you receive after statutory obligations is yours and the other 30 percent is broken down as follows:
Ten percent should first be paid to the owner of the land whom you are renting from and this is called tithe and if you do not believe in tithe you can do personal or corporate responsibility by donating to an orphanage. What is critical is that 10 percent of your income should exit your life to help someone in need. The scriptures teach us that we are blessed to be a blessing to others.
The other 10 percent should be savings for an emergency fund, this entails that you should have an emergency fund which cover 60 to70 percent of you regular income in the event that the chips go down through the loss of a job or where you incur losses in case of a business,
The last 10 percent should be saved for retirements in a viable investment vehicle, in order to be consistent with savings for retirement it is advisable that you come up with a standing order with your bank which will be an automated deduction from your account. Imagine if you had started this practice with your first salary in life or the first time you initially started receiving your income in your business? Compound interest would have worked for you very well with your 10 percent savings every month, now you are over 40 +years and the 10 percent has been donated to luxuries which do not add value to your retirement plan.
On a consolation note, the good news is that as long as you are breathing you can start to save now!
Investor Warren Buffet one of the richest people in the world said, “Hold the money for the rainy day.
He also advises that once you get your income you save first and spend later not the opposite.
Next time your mind is tempting you to spend…just summon the power of NO!
The author is director-human resources and administration at REA.
Analysis: MAXWELL PHIRI