There are only three kinds of life you can have at the end of your active career life. The first and most common is the low-quality life. You create this life when you retire to passive income that is less than the income that currently sustains you. The second is the Same Quality Life. You create this life when you maintain the same quality of life by retiring to passive income that is worth the same income that sustains you now. And the third is the Wealthy Retirement Life. This is where you create a life in retirement that is bigger and better than your active career life.
Assuming you are to choose from these three lives, which of them would give you a Restful retirement life? Which would make you an asset in retirement and which will make you a liability? The answer is for you to decide. But if you are ever going to maintain the same quality of life as you do now in retirement you must create passive income that is at least the same size as your current income package. Failure to achieve this is what makes people suffer from the financial disease I call “The Rich Dad, Poor Dad, The Same Dad Syndrome”– A disease condition where children watch their Dads move from a rich and admirable lifestyle to a poor and deplorable lifestyle within the same lifetime. If you must escape this disease, you must stop doing what the middle-class do with their money and start doing what the upper class do with their income.
What the middle and upper-class do with income
One of the big differences between the middle and upper class is what they do with their income. No income is stationary so when you earn income you must use it. But how you use your income will determine where you end up in retirement. When the middle class earn income, they convert most of it into riches. They buy income consuming rich symbols like the latest car, a luxury home, expensive Gadgets and pay expensive school fees. All these make them appear rich but in truth, they are poor people with a temporary high-income paycheck most of whom can go broke in 60days without income. Building and maintaining a rich lifestyle cost money and is an income consuming activity.
Thus, at the end of a 30year high-income career, the middle-class end up with memories of their high-income paycheck long spent, money they cannot account for and rich symbols that are liabilities rather than assets. The biggest mistake the middle class make is that they fail to create the source of their riches-the stable income. And because their riches must be sustained by earned income, they keep working to earn the next paycheck. Unfortunately, the retirement clock stops ticking, and when it’s time 80% of them take a deep dive downward.
The upper-class use their income differently. They convert most of their earned income into wealth. Wealth is different from riches in that wealth is primarily derived from what you own and control and not what you do. What you do gives you earned income. Earned income get spent and is 100% mobile. Wealth is more stable and permanent. Thus if your livelihood is primarily derived from earned income you will have to keep working to sustain it. Thankfully the upper-class solves this problem. To cancel the need for ongoing work the upper-class use their earned income to create and buy income-producing assets that produces both present and future incomes. And then use that income to create their rich lifestyle. Since they own and control their own income-producing assets (Wealth), retirement is no longer a threat to them.
So how do you create your own wealth and enjoy a restful retirement life?
To create your own wealth, you need to do three things.
The first is to own your own passive income-producing assets. The second is for your assets to produce the size of passive income that can give you self-sufficiency in retirement. And the third is for your passive income to maintain its value throughout retirement and preserve your purchasing power.
Owning your own passive income-producing assets
All investment assets produce some level of passive income, but not all assets produce the kind and size of passive income that can sustain you in retirement. The only asset that fits as a retirement income producer are those assets that have the advantages that your current income has, but not the disadvantages. All income sources have advantages and disadvantages and your goal is to end up with a retirement income that carries more advantages. For example, your salary is regular, safe, consistent, and readily available in cash at the end of the month-that is its advantage. But its disadvantage is that it requires hard labor, only reaches its peak after sacrificing your youthful life, it is difficult to multiply without multiplying your back breaking workload and it has an expiry date.
To choose a suitable retirement income source you need assets that carry the advantages salary carries without the disadvantages. The correct asset class must have some of what I call the Perfect Retirement Income Attributes. It must produce both present and future income and must last for a lifetime. It must be 100% passive and must not require ongoing work, maintenance or further investment once matured. It must be difficult to lose and free from market fluctuation and volatility. It must be Liquid in nature and easily accessible when needed-Your life runs on liquid cash and not assets. And it must have the capacity to produce passive income that can give you self-sufficiency. The more stable, and guaranteed your passive income the more restful your retirement life will be.
Achieving self-sufficiency in retirement
Not all size of income can give you self-sufficiency in retirement. You achieve self-sufficiency when you have passive income that can pay your bills, take care for your loved ones, help you pursue your dreams and goals and engage in charitable activities. Any size of income that prevents you from doing these is insufficient. Thus, owning passive income producing assets alone is not the answer. The key is to own assets that can produce the size of passive income that can give you financial freedom. The closest size of income that can give you financial freedom is the income that is currently sustaining your life. The even better size is income that can give you the boldness to hands-off your current job without financial fears. To build this size of passive income you must save big, make your savings fail proof and convert your savings to income producing assets and not riches. You must also resolve to stick to a zero lose investment strategy-where you can have a consistent uninterrupted progress and where your investing success cannot be undone. The truth is without self-sufficiency you will become a liability in retirement.
Protecting the value of your income and purchasing power
The income that you earn today has a high value in today’s market and would be sufficient for you for the first few years of retirement. But earning today’s income 10 or 15 years from now is a disaster. Your income will lose its value and you will gently slip from an independent person to a dependent person. Thus, achieving self-sufficient might be a great start but what is even greater is maintaining your self-sufficiency throughout retirement. To maintain your self-sufficiency throughout retirement you must create a system that regularly or occasionally infuse and increases your main income. Constantly increasing your income in ways that keep you ahead of the market is the most effective way to preserve your purchasing power in retirement.
If you want to have a Restful Retirement life and want to know how to carry your current income into retirement, we can help you. Send an email to firstname.lastname@example.org.
About the author
Grace Agada is the most sought-after Financial Freedom Expert in Nigeria. She is a renowned Author, Financial Freedom Advisor and Keynote Speaker. Grace is Popularly known as the Queen of Financial Freedom, the Breadwinner’s Advocate and the Middle-Class to Upper-Class Mentor. Her goal is to help working professionals and breadwinners move their success and livelihood from a paycheck to their own solid passive Income sources. Grace is the Author of three books and possibly the most widely read financial articles. Her articles are spread across seven national newspapers and four of the most popular Nigerian Blogs. Grace is also the Founder of the University of Wealth, The Rich Retirement Life Quarterly Publication, The Wealth Creator Quarterly Report, and the Wealthy Business Blueprint Program. Grace has been featured on BBC Africa. Business Day TV. Inspiration FM. and inside Naijatv. And she consults for Numerous Top Organizations, Company Directors, CEOs, C-Suite Executives, and High-Income Professionals. To connect with Grace, send an email to email@example.com