Analysis: MAXWELL PHIRI
IF YOU don’t know where you’re going, any road will get you there (Lewis Carroll.)
Planning for retirement is key; you cannot assume that someone will take care of you once you retire. That is archaic; you need to plan, plan and plan for your retirement.
You should be the chief executive officer of your retirement and this can only be achieved if you come up with goals towards your retirement. I have always said that you cannot score a ball into the net without a goalpost, even if you are a good player.
This entails that you can be a good money-spinner, but without a final target called retirement, you will end up being destitute. In this case, a detailed plan for your retirement is not optional. As the saying goes, “The devil is in the details.”
These details can sabotage your retirement. We need to plan for the unforeseen, think about the “what if’s” and be careful to consider every aspect of what retirement entails to successfully budget for your retirement years.
Money doesn’t grow on trees. anything good happens after midnight, you have to work for your retirement and there is no magic about it, but only hard work and being focused on your dream retirement. I have summarised some takeaways from Robert Kiyosaki on planning for retirement and this is what he says about planning for retirement.
1) Retirement does not mean not working; it means freedom. A lot of people think it’s not working, which sounds awesome enough. Imagine if you had the choice of whether or not to work another day in your life. Imagine if your retirement savings were growing automatically, and always keeping ahead of inflation
That’s what freedom looks like. You can spend time doing things that you enjoy, and even working in a job that you love. The pressure of making a monthly paycheck isn’t there anymore because your retirement savings is your paycheck.
This is why saving for retirement, and saving early, is so important!
Kiyosaki makes a great analogy. Your retirement is like planting a tree. You water it for years, and then suddenly it doesn’t need you anymore. The roots have grown deep and healthy. Later, that same tree will provide shade for you!
2) Money without financial intelligence is money soon gone. We hear stories of lottery winners getting millions one day, only to be dead broke a few years later. How does that happen? It’s because they thought they could keep spending without end! They didn’t understand how to spend their money wisely, which is financial intelligence.
Kiyosaki says that “if you want to be rich, you need to be financially literate”. This means knowing the difference between an asset and a liability (things that can make money for you vs. things that make you spend money). Reading a really good finance book like Rich Dad, Poor Dad can help us become financially literate.
3. Focus on buying assets and not liabilities. Kiyosaki says that an asset is something that puts money into your pocket. A liability is something that takes money out of your pocket. A lot of people think that a car is an asset because it’s a thing of value.
Cars take money out of your pocket in the form of car payments, taxes, fuel, repairs, etc. They don’t put money in your pocket like other assets can (stocks for example). Also, we all know that cars decrease in value over time (a new car can lose nearly 25 percent of the price you pay the moment you drive it off!) Focus on buying things that will bring you money, like investments, as opposed to buying liabilities.
4. Acquire assets that you know and love. Kiyosaki says that if you don’t love it, you won’t take care of it. He buys real estate because he loves buildings and land. He could spend all day shopping for them, and therefore he knows a lot about them (where to find the good deals, etc).
Buy assets that you first understand, and second that you love. Real estate may not be my passion, but I love stocks. I could research stocks all day, so that’s what I choose to invest in. Don’t invest in anything that you don’t fully understand, and seek to understand it by learning about it!
5. People who avoid failure also avoid success. Kiyosaki talks about never meeting a rich person who didn’t at one time or another lose money. We’re all scared to lose money, and sometimes we let that fear drive our financial decisions. Kiyosaki’s solution to that fear is “If you hate risk and worry… start early”. He means that if investing in the stock market scares you, start investing young so that you have plenty of time to overcome setbacks in the economy.
In losing, you also learn something and can make better financial decisions over time. He also brings up a good point, “I’ve noticed that winning usually follows losing.” We may have lost some money in 2008, but perhaps our investments have recovered now. We have to stay focused on winning long term.
Planning for retirement is personal and it’s never too late, you can start now! Remember, my goal is to ensure that you do not just retire but you retire smiling.
The author, director – human resources and administration at the Rural Electrification Authority, is a seasoned pension advisor.
Analysis: MAXWELL PHIRI