Financial Expectation and Life Experience
Posted on December 11th, 2009 in Uncategorized | 6 Comments »
Life would be pretty pointless if you didn’t have a few good ones.
Expectations are an important driving force. They motivate many actions. You go to a movie because you expect to enjoy it. You buy a particular house because you expect to live happily there and to be able to afford it. Plans and provisions for the future are dictated by what is expected to happen. No expectations, no preparation, no successful future.
Try these
You will either die prematurely or retire one day. Most people who have made it to your age will live long enough to grow old and retire.
EXPECT IT TO HAPPEN SOON
When you were young you could not even envisage middle age. Now you are galloping hell-bent towards it, if not already there. The past went by in the blink of an eye and retirement will arrive just as quickly.
EXPECT IT TO BE YOUR PROBLEM
On the day that you retire, you will probably own the most that You will ever have. From there onwards it will be up to you to ensure that you do not exhaust your finances by spending too Much too soon.
Do not expect your employer’s retirement fund to support you at the level you will be used to
Have a look at the amount in your retirement fund right now and see how many years of your current salary that represents. As the years go by the figure will increase, making things look less bad.
If all goes well to retirement however, there will be only four to six years‘ salary in the fund at that time.
It will take some serious cuts in living standard to enable anyone to live for 25 years on six years salary. Right now, could you live on 30% of your current income? At best, that is what you will have to do after taking inflation into account.
DO NOT EXPECT MIRACLES FROM YOUR INVESTMENTS
Over the long term the average decent investment earns a few percent above the inflation rate. You might be lucky and do better but don’t count on it. Some people insist that their broker is the greatest whiz that ever walked and will continue to make fabulous investments forever. If you feel that way, think again.
It requires knowledge and ability for an investor to get it right a lot of the time. A large helping of luck is required to do so all the time. It sometimes happens but there is no particular reason why it should happen to you. After 20 or so years of ever growing markets investment looked easy. However, the downturn at the end of the millenium shattered the life of many a pensioner and the image of many a brilliant speculator.
EXPECT TO SACRIFICE PART OF YOUR LIFESTYLE
Each bit sacrificed now will help to preserve a degree of comfort later. You get nothing for nothing.
Expectations are great but what must be done? It’s simple.
Between now and retirement accumulate as much wealth as possible, dispose of all debts and of course, do not incur any new ones. From retirement onwards adjust your living standard to suit the financial resources that you have actually managed to accumulate.
Easy hey?
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