As I’ve been telling people for the past 30 years in the Does it Pencil courses, each of us should have an aspiration to “retire” one day. And if we can retire rich, all the better. Sounds simple and is simple, but not very many people get there.
How come?
Just like there are people who measure the attention of goldfish and just like there are people who can tell us how long it will take the world to be eaten my A.I., I’m sure there are people who measure why some of us don’t retire rich. But for me it comes down to one word that really: clarity. Clarity is the basis of most of what we manifest in life from love to friendships to retirement. If I’ve learned nothing else after 61 years of wandering around the planet, it’s this: people who know what they want usually get it.
Words Matter
This is a blog, I am a writer, and words matter. So what is “retirement” anyway? When you look it up, retirement is defined as follows, “the action or fact of leaving one’s job and ceasing to work”. I disagree. Retirement doesn’t mean you have to stop working, retirement means you no longer have to spend your human energy to get money to survive. Instead you could spend your whole day playing golf. I don’t know why you would, but you could because you wouldn’t have to spend your human energy to get money to survive.
Then we move to the second word – rich. When you Google, “the definition of rich”, here’s what you get: having a great deal of money or assets; wealthy: That’s getting closer, but how much is “a great deal”?
The Quest for Clarity
The next thing we need to think about in our quest for clarity is the 3 stages of life – beginning, middle and end. It’s a metaphor for your whole life, but in this context we’re talking about your work life and your retirement. In the beginning of your work life you have to learn how to do something to get money. In the middle of your life you do that something to get the money, and in the end hopefully you have enough things that pay you, so you don’t have to get up everyday and spend your human energy to get money to survive.
It actually is pretty simple.
More Clarity
Now we need to clarify two more things: the types of things we will accumulate, and the risks associated with them. As you move through the beginning and middle of your life toward your retirement, you should always be assessing two things: what you’re going to accumulate and the risks you will take to get it. In the beginning and middle of your life you should collect things that will appreciate. Why? Because things that appreciate will one day be big enough to pay you a monthly stipend. In the beginning and middle you should also take more risk. Why? Because in the earlier parts of your life, you have longer to live to make up for the mistakes you will make. For example, if you’re into real estate, buy land when you’re young and turn it into apartments when you’re old. Buy appreciating stocks, then turn them into bonds and annuities.
To summarize
1. Think of your work life as beginning, middle, end. You’re trying to get to the “end” part having collected enough stuff that pays you, so you don’t have to spend your human energy making money to survive.
2. When you’re younger, collect things that will be worth more later (appreciate).
3. When you’re older, turn the appreciated things into cash flow things that will pay you every month (cash flow).
And one more thing…
4. When you get to the end part, make sure you spend less every month that you take in. I know, “duh” you say, but you’d be amazed at how many of us spend more than we take in or just break even. Young people (beginning, middle) tend to worry less about what they’re spending and more about what they’re making, and old people (middle, end) tend to worry more about how much they’re spending than how much they’re making. It’s true.
Oh wait one more thing (again)…sorry…
5. The sooner you start the better. If you’re in your 70’s + and you haven’t started yet, check out “Powerball”. If you’re in your 20’s – 30’s, learn about something called “The Rule of 72” and “compound interest”. And of course, tell everyone you know that take Does it Pencil because it’s probably the best financial education most of us will ever get.
OK, now I’m done.
Good luck and have a good week.
Joe Still
2023.09.10
Cite
“Men do not desire merely to be rich, but to be richer than other men.”
– John Stuart Mill: Essay on Social Freedom