183. You alone are responsible for your retirement (Building Finance Intuition Series)

#MakingBetterDecisions, #Goals,?#focusonwhatmatters , #Wealth, #Careers

“You cannot escape the responsibility of tomorrow by evading it today.” - Abraham Lincoln

Recently, a friend visited me after a long gap. Apart from catching up, he also wanted me to review his personal finances.

My friend has excellent worldly qualifications – he did his college from one of the premier most colleges in India and has a reasonably enviable career journey. He is a runner and is well acquainted with Yoga practices. With this background one could be forgiven to expect his personal finances to be in good order. Well, his finances are OK for now. But, in my estimation, without an explicit, conscious and well directed plan, I doubt if he will be able to meet his most important goals. Interestingly, this is not a result of his disregard to personal finance. He has been saving and investing money with military precision for a few years now. But sometimes, including in his case, doing a little bit of good may hold you back from doing the required amount of good.

This is not the first time that I have seen an otherwise smart, intelligent, well-rounded individual who is not exactly on top of his personal finances. Ironically, what it really takes to sort one’s personal finances is rather simple. It is really no rocket science at all.

I can’t profess to be an expert on this paradox but I believe that one oft overlooked causative factor is apathy. Apathy because many do not find the effort of sorting personal finances engaging (or worse, exciting!).

“No one gets away with anything, ever, so take responsibility for your own life.” - Jordan Peterson

One falls into a false lull or comfort that one is doing a good thing even when in reality that thing is not good enough. This is somewhat like a chain smoker reducing the number of cigarettes that he smokes from 20 a day to 10 a day. Reducing smoking by half is still not good enough. The only way out is a paradigm shift, not incremental improvement. You are either on this side of the fence or the other. To further concretize this, let us say a person’s monthly expenses are Rs 100,000 per month and take-home income is Rs 150,000 per month. That person is used to channeling all his monthly savings into bank deposits and thinking that this puts him on course for a good retirement. One fine day, a friend tells him that fixed deposits do not grow money fast enough and that he should seriously consider investing in equity mutual or index funds. Similar to this example, I know a number of people who set aside some allocation to equity funds and then thought that their finances are sorted. Such allocations will matter only when they are done at the right level. In case of minor allocations like putting aside Rs 5000 per month by the hypothetical person above is just not good enough.

Not all paths lead to your destination. Just because you picked a neat and well paved road does not mean that you will reach your destination. Even if you were to take the right road, you are still to go at a certain speed to reach the destination in time. Taking responsibility for your finances is a critical step in getting on to the right path and then sustaining your journey.

“If you own this story you get to write the ending.” - Brené Brown

Taking responsibility, by itself, may seem like a benign stance but it holds potential for compounding effect. You will start to make the right adjustments, do the right things, continually learn and improve. No matter how much you try to push your teenage children to study for the exams, only when they realize that doing well in exams is important for them, will results start to show.

A good number of retired people that I have seen are mostly dependent on their children for their finances. I do know a few who are able to get by comfortably owing to the guaranteed government pensions that they (or their spouses) are entitled to. Only a small number of them are able to live off of their nest eggs that they created for themselves. Today, surely, guaranteed pension seems to be a relic of the past era. I’m not sure how much would today’s children be accepting responsibility of their retired parents’ finances. This makes me wonder if many from current generation may struggle financially when they retire. Hopefully my apprehension is misplaced. But, even if children are willing or wanting to support their parents financially, will they be able to afford to? I do not know but I doubt it.

While my views may suffer from the lack of a “statistically-significant” grade database, from the number of cases I have seen so far, I do feel somewhat concerned for the future – specifically in terms of the ticking of the metaphorical “retirement” time bomb. From the posts I read on the social dynamics in the US, this concern seems to have already materialized there.

Of course, I do believe in the ingenuity of human race to overcome all kinds of problems. My only contention is how can one solve a problem of such large magnitude without taking responsibility to solve it.

Bottomline

“The future is up for grabs. It belongs to any and all who will take the risk and accept the responsibility of consciously creating the future they want.” - Robert Anton Wilson

Ironically, the retirement problem can be addressed rather simply. It starts with taking ownership of your future. Your retirement is not the responsibility of your children, parents, employers or governments – it is yours alone. Steps to financial growth are rather simple – healthy earnings (for the large part, this is not really an issue today), healthy savings rate, suitable investment strategy, disciplined execution of the strategy and healthy dose of patience & perseverance.

***************************

Thanks for taking time to read this article. In this newsletter, I share my learnings that could help you improve your decisions and make meaningful progress on your goals. I try to share stuff that I have personally experienced or experimented with. If you find this newsletter worthwhile and if you do not mind it, please do consider sharing it with others.

I spend most of my time helping people make better decisions, build financial intuition and build great careers.

To follow me on LinkedIn, click here

Making Better Decisions Newsletter on LinkedIn