They say the pain of discipline weighs ounces while the pain of regret weighs tonnes.
Ever felt like all you did was spend a lot of money in your twenties?
Yeah, me too.
When I look back at all the things I did in my twenties, it really makes me wonder what I was thinking.
I spent money as soon as it got into my hands. To be fair, I invested in some stock during the various IPO’s but hey!….
I strongly believe I could have done a lot better.
Do you feel the same way?
I saw these steps developed by Dylin Redling to help young people set themselves up for successful retirement,
and I tweaked it a bit to reflect current reality, especially in this part of the world.
Let’s get into them, shall we?
#1 — Know your numbers
Get in the habit of tracking your income, spending, assets, and liabilities. Put your numbers in a spreadsheet and update them regularly. You should know your monthly net Income and your net worth like the back of your hand.
Your monthly net income is what you have left after you deduct routine expenses and your net worth is the value of your assets, minus the total of all liabilities. Put another way, net worth is what you own minus what you owe.
As much as you can, avoid keeping what you own in cash. When you keep money in cash, you stand the risk of losing value to inflationary pressures and currency depreciation.
Also, try to keep what you owe to a minimum. The only exception should be if what you owe is invested in a value creating asset.
#2 — Figure out your target retirement goal
This might seem far-fetched, but I’ve learned that if you don’t set a baseline standard for what you want in your life, you’ll find it easy to slip into behaviour and attitudes or a quality of life that’s far below what you desire
To figure out your target retirement goal, CNN Money recommends you plan to have 12 times your income by retirement.
Now, I admit that might be tough, because you need to consider the economic environment you live in. You’ll need to consider metrics such as inflation rates, interest rates and volatility of currency to calculate reasonable income estimates that might even come close to working.
So my advice is, calculate your average annual income in dollars or pounds (preferably current income so it’s reasonable) and shoot for 12-15 times that at retirement.
#3 — Learn how to make your money work for you
It’s not about what you earn but how much you preserve. If we really plan to stop trading time for money, we need to learn how to put our money to work for us.
There are quite a number of resources that provide guidance on how to invest, how to make investment decisions and how to invest in certain asset classes; books, online resources, workshops etc.
I’ll be compiling all the books that have really helped me learn on my investment journey and I’ll share soon.
However, the truth is, I’ve learned a lot more by simply actively investing with the members of my investment club.
So, my advice is find a group of people who are like-minded and learn together. Start an investment club and begin to actively take investment decisions.
That’s the best way to learn really.
You may attend workshops but never put what you learn into practice if you don’t find a way to hold yourself accountable.
Let’s plan to get ahead of the game by making these lessons work.
We move further together.
Have a good weekend.