The Blue Roof

 Insanity, one definition (the only one I know!) says, is to do the same things expecting different results! Think about it. You swing the golf club in exactly the same way and hook the ball. You repeat the exact same swing, and you hook the ball. The truth is, as long as you repeat the swing, you will always hook the ball. Makes sense, does it not? So if you keep on with the same swing expecting to slice the ball, then you must be …?

 That is why the saying says: if you want things to change, you have to change! For things to change, you have to do it differently. To do it differently, you have to think differently!

 I hope you agree with that! And that was the introduction!

 When we look at financial freedom and retirement, we normally get only one swing! There is not a repeat. So finding out if the swing we are using is working or not is not so easy. It is make or break. So how do you know that the plan you have for retirement is working or not? Rather important question, this! Do you even HAVE a retirement plan?

 Anyway, how do you know you will be able to retire?

 First step, look at the results from the time you started to the present moment. What have you put in and what is it worth. What can you do with what you currently have? If I can get back to the golf swing, it is not only the moment of impact that determines the flight of the ball, it is the back swing, the down swing and the follow through. Or as somebody told me a long time ago when I took up position behind the ball, you will slice it, I can see from the way you STAND. In other words, the end result is always determined by the sum of all our small actions! And that is why you need to look at your plan and benchmark it as you go along.

 Answer this: I am satisfied with my retirement plan, because …

 You will not get a second swing, but you can look at other people who went before you! What happened to other people who followed the same plan that you are following? Who was successful? What did they do and how does it compare to what you are doing? Are you doing exactly the same? Will it work for you?

 What about people who failed? What did they do? How does your plan differ from what they did?

 Why do I write this post? Because I think too many of us are too optimistic! We think we have the PLAN, when in fact, we are heading over the cliff like a bunch of lemmings! We read and hear about 95% of the population not being able to retire, and we think we are part of the 5%, but there are no facts to substantiate the optimism! When we investigate, we find we are repeating everything that the people who failed did. But we just keep on with the same old thing, and another lemming goes over the cliff, but we just follow in good faith!  We don’t ask what happened to the lemming before us, we just assume he knew the way.  And there goes another lemming, and you are next …

 Insanity is repeating the same action, expecting a different result! How many sane people are there?

Let me share with you a real life case to illustrate why I believe what I do.

 Yesterday a very dear, 73 year old, friend phoned me on the pretext that he wants advice on his short term insurance (I don’t do financial consulting). The short term insurance was not the real issue. His finances, that is what he really wanted to discuss. He is retired and lives on a pension of about 10% per annum of his capital. His medical aid is about 50% of his income and then he holds a part-time job that was downsized earlier this year. With his wife in bad health, his medical aid savings account was depleted by end March.

 Amongst other things, he wanted to know if he should sell his house. He is not making ends meet. And to add insult to injury, yesterday morning his car broke down!

 This is a very sad story, but not unique at all! When he retired, he used the cash portion of his pension to buy the house where he now lives and the rest to buy the pension. It is sad to see how little capital he really accumulated in an employer subsidised pension fund after a lifetime of working. But accumulating capital is not helping him.

 His income is not enough. He cannot do very much to increase his salary. He is already living as frugally as possible. Does he start using his capital to increase his income? How long before he will then have nothing?

 Consider the following:

 Belonging to the pension fund was compulsory. He did not have any choice, and in the end, although it was not a fortune, it was not a bad thing.

 But what would have happened if he bought a rental property 30 years ago? And another property 25 years ago? And another 20 years ago? And another 15 years ago? That is four properties! Well, in the first place, the capital value of the properties would now be worth more than his pension fund! Secondly, I am convinced that the income he derived from the properties would be more than his pension. In other words, with not a lot of effort, he could have doubled his income and wealth.

 Obviously I did not tell him this, but I am sharing it with you, so that you can see the method in my madness, but also why I am so mad!

 Two other things that I told him that you may benefit from:

1. Give power of attorney to your children, so that you don’t end up in a situation where you cannot sign and nobody else can, either.
2. Take two of your children to the bank and give them signing power on your bank accounts.

 I don’t think one can be too young to do this.