Am listening to this pension podcast, I know considering am so far from collecting mine, anyway someone writes in and goes, what is the best advice you can give me? I half expect them to go and say save, put your money away and let it earn interest in a sort of trust but the guy on the other side goes save and invest, this got me thinking about two things;
How do we or should we view retirement? and How should we view saving?
How do we or should we view retirement?
When we consider retirement we shouldn’t consider how we are to survive without employment but rather how we maintain our lifestyle without the existing formal employment. This is key because no one retires and moves from being driven to walking, the transition isn’t funny so retirement to me is the comfort zone under which you can raise your gloves in terms of formal employment but still live the same lifestyle without additional debt, how easy is that is answered in the second question.
What is saving? Contrary to some belief, saving isn’t the putting away of coins on the side so as to accumulate enough to make you acquire something but rather to me saving is the habit of acquiring a missing item simply by setting up the right conditions for you to get it without really accumulating its entire sum. To expound on this let me give you an example, i once owned a Subaru, loved the car, the leather seats the feel on the tarmac, what can i say, incredible, the Japanese really outdid themselves on that car, adjacent to my life was a friend of mine, had known him for sometime and he was in the habit of “switching cars”, not the flashy ones but he always had something to drive, today it was a Toyota, tomorrow it was a Mitsubishi, next day it was a Benz, so I ask him why the constant change and he goes, I upgrade or down grade the car i have depending on the liquidity I expect to have. The hoarder in me couldn’t let go of my Subaru but the reality is that it had been through a lot and was now a pure huge liability, it was costing me more than my monthly rent in the garage monthly.
Back to our question, what is saving? The lesson i picked was that saving is the accumulation of tangible assets (items you OWN and resell for a profit) simply buy partial investment until you own what your target is at 50% of the actual targets cost, let me give you another brief example, i want a plot of land for 50M UGX (20K USD), I have 20M UGX, the reality is even if i bought my plot of 50M i wouldn’t have money to develop it so what do i do, i purchase 3 plots in the 20M as i plan on how to do something constructive, by the time i have accumulated enough extra cash i will be able to sell my 3 plots since they have appreciated i would be able to add on less than 30M to get my 50M plot because three plots can accumulate a larger profit than one huge plot since the rate of appreciation of the 50M plot isn’t the same as that of a 5M plot in terms of profit margins because the 50M plot has fewer buys hence the price doesn’t rise as frequently in the same duration.
The principle is, plan with the little you have to gain and acquire what you need simply by making wise investment that aid the bigger goal, my land broker gets 5M and deposits 1.5M on 3 plots of 30M each with the hope that he can turn them over in a short time hence he stands as an assured intended purchaser with temporary paper work only to skim off profits from the 100% buyers on top of his initial investment.
So retirement is the wise planned saving and accumulation of assets to ensure one can have enough revolving cash to maintain their lifestyle when they feel they would like to stop regular work. An asset in this context is something that generates revenue, a plot of land or a car isn’t an asset since it doesnt’ generate revenue for you.
A wise man once said, advise is that that is sought only to give one confidence to take the actions they have already decided to take. You have the knowledge now you need to plan on how to implement it to increase your asset base. Patience and discipline is the key on top of the ability of one to accept to take risks.