By: Mark Frentz
www.akerahomes.com
mfrentz@akerahomes.com
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If you are like the average Canadian I have something extremely important you need to know: You don’t really want to retire with a lot of money regardless of what you think.
Now, this may sound harsh, but it's true. Today's post will focus on priorities and my hope is that, over time, your retirement will become a higher priority than it currently is.
The are very few people reading this post who will fall into a different category; those who truly desire to retire well in every way (not simply with money, but also strong relationships with family and friends, feeling healthy and strong, and a leader in your field). For the second group... I would recommend not even reading this post because you're well beyond it and you will simply read what you've already known for quite some time.
How can you work to quickly destroy your dreams of retiring well? I'll focus in this post to change your mind, even if just a little bit, in order to provide you with something better now and in the future.
7 ways to quickly ruin your retirement at a young age:
1. Finance a new car
The reason this is a killer is that you take on terrible debt on a depreciating asset that keeps you stuck for years and addicted to ‘new stuff’. Owning a car costs way more than simply the monthly instalments and gas. Insurance and loss of value (both of which cost even more if it is new vehicle), wear and tear, winter tires, car washes, and many other small expenses that creep up cost a significant amount on a monthly basis. The fact is that a vehicle is always much more expensive than the advertised payments and drain your bank account each and every month.
Solutions?
Buy a less expensive used vehicle with cash. Don’t have enough cash? Don’t buy it.
Move closer to work and walk, ride a bike, or take public transit to work until you have enough cash to purchase a vehicle.
2. Rent OR purchase a home to live in by yourself or with only your immediate family
A mortgage is never an investment. At best it is a savings plan. When young it is best maximize your ability to invest rather than get stuck in a place with a large family. If you disagree with whether or not a house you live in is an investment, simply take time to read authors who specialize in investing in real estate. Robert Kiyosaki’s rule of thumb is: anything that costs you money each month is a liability and anything that puts money into your pocket each month is an investment. In other words… mortgage, taxes, insurance, maintenance, etc. all take money out of your pocket each month you own a property you live in.
Solutions?
Rent a property making sure you can sublet to roommates. This allows you to break even or even make money while learning to manage tenants
Purchase a duplex and rent out the other unit. Again, you can come close to breaking even and, when you are ready and have enough money to do so, you can keep the property as a full rental and move into another duplex. If you play your cards right and focus on property investments you can even eventually move into 4-plex, then an 8-plex, then possibly a 12-24 unit building. If you could do this (it isn’t actually too difficult if you know what you are doing) before you are 30, you can now marry, have kids, purchase your own property to live with just your family and the multi-unit property will pay you an ever-increasing amount each and every month for the rest of your life!
3. A financed degree
I could go on and on about this. I myself have a master’s degree in the field of psychology and love education, but borrowing money to do so is a terrible idea for most people. One of my degrees I paid for in cash and another with debt and I would never pay for a degree with debt again! The major reason not to finance a degree? You are spending borrowed money to not work for up to 4 years of your life (which is lost income of a 4 straight years!) in order to get a job that may not pay much more than the job you could currently gain with a few thousand dollars spent on informal education.
Solutions?
Work full time at whatever job you can currently get and use the next 4 years of your evenings to learn the skills you need to develop a successful business. This is well worth your time. During this period of time I highly advise you to hire a mentor/coach who will help you fast track toward success. Even an expensive mentor typically doesn’t cost more than around $10,000 as of this writing (though it can cost a lot more) and is often less expensive. There are less expensive options as well such as working for a person you desire to learn from for free in order to learn on the job. This is a win-win scenario because you will be learning from a master int he field and the only cost is your time. Sometimes you can even develop a relationship with this person and do business deals with them in the future.
4. Travel (because we've all heard it will be difficult later on in life)
The question is: Do you really do the best travelling when you are young? Would you not rather travel with your family because you have the money to do so? I have travelled straight out of high school and am currently planning a year-long trip to France with my family… Guess which of the two will be best remembered later in life?
Solutions?
Work hard when you are young so that when you have a family you can take more time off and do the things you want to do. Let’s be honest… If you really want something you will do what is needed to get it. If travelling is a top priority for you I’m positive it will happen. Practice some delayed gratification rather than spending $3,000-5,000 each year wasted in a week or two that really does not add a lot of value to your life and, instead, take $50,000-100,000 later on to create memories with your family that matter while educating them in cultures and languages around the world.
5. Work like a dog for your current company
This will kill you physically but, more importantly, it will kill your spirit. Do what you are paid for and work hard, but realize that life in the workplace for any company is tenuous at times and carries it's own risk. I have worked at a government job and can assure you that even those jobs aren’t as secure as every believes.
Solutions?
Develop a business on the side or invest with someone who does. When it is making enough money to quit your 9-5, you can then realize a completely different freedom than you have ever had with a J.O.B.
Invest in yourself; your own education and ability to do whatever you want.
6. Keep doing what others around you are doing and what is advertised daily to convince you it is the best way.
If you have doubts about whether ‘the heard understands how to live well financially’ simply Google 2008, 2009, 2010, or 2011 and read all you want about how well the largest banks in Canada and the US of A's bank's protect their assets and make safe decisions. The 'best' banks took advantage of average people (people who dream of mutual funds and stocks because that is what the banks advertise) in order to line their own pockets.
Solutions?
At the expense of sounding repetitive I will again recommend that you educate yourself. Hire mentors/coaches, spend some free time learning instead of watching hockey or the latest show that doesn’t matter and grow into the person you need to be to manage your money better than others around you can manage theirs.
If you honestly don’t have the desire to manage your own money you need to hire someone to do so. The best way to do this, in my opinion, is to enter into a joint venture partnership where your partner only makes money if you do. An example is that you put up the cash for an investment property and your partner finds and manages the property (only if they have a proven track record and this matters to them). This way they only make money if you make money and they will work harder and better for you and themselves.
7. Negative friends or, even worse, investing in a negative partner by getting into a long term intimate relationship without your eyes wide open.
If you are living every day with a negative person who does not hope in the future or has so much fear than s/he cannot allow you to pursue your financial dreams… this won’t end up well.
Solutions?
a. The simple solution here is to simply take your time. The world doesn’t end for anyone if you don’t have a serious relationship at the ripe old age of 25! Statistics I’ve read state that the wealthiest people are generally those who get into a long term relationship a little later (at least after the age of 30), have already set up their business, and then never separate from their partner. People with multiple relationship endings often find difficulty finding wealth in life (there are always a few exceptions).
Summary
Why sacrifice the enjoyment of now in order to work for your future? Because while our world typically sacrifices a lot for small thrills, deeper satisfaction from life ALWAYS helps more in managing the day to day if you believe in what you are doing... We come to another problem: What if you don't believe what you need to in order to feel deeply satisfied right now? That's another post (or many actually). Stay tuned!
Here's to your future of risk-averse investing!
If you would like to learn more about investing in real estate please contact me at the email address listed at the beginning of this article or go to my website at: www.akerahomes.com/investing-in-real-estate.html
