10 factors that highly affect financial independence
DESCRIPTION
10 FACTORS THAT HIGHLY AFFECT FINANCIAL INDEPENDENCE . FEBRUARY 2013. Session Contents. Reality Checks What’s required now The 10 factors Thinking ahead References . Reflection:. “Half of the Leaders I have met don’t need to be told what to do , they need to be told - PowerPoint PPT PresentationTRANSCRIPT
10 FACTORS THAT
HIGHLY AFFECT
FINANCIAL
INDEPENDENCE FEBRUARY 2013
• Reality Checks• What’s required now• The 10 factors• Thinking ahead• References
Session Contents
Peter Drucker
“Half of the Leaders I have met
don’t need to be told
what to do,
they need to be told
what to stop.”
Reflection:
Required:
4
1. Live on 50% of your Net Salary
2. Career Transition Package
(1/10 of Annual Salary x Current
Age)
3. Emergency – 3 months’
Consolidated Pay
4. Earn 80% of your Monthly Pay
outside Pay Cheque
Required (Cont’d):
5. At least six (6) hours a week for
contact and
conversation on Domestic Budget
i.e. SAVINGS,
SPENDING, DEBT and INVESTMENT.
6. Debt – Burden ratio and Reverse
mortgage.
7. Economic spider web model
Required (Cont’d): 8. A Business and Investment Club.9. Avoid ANCHOR Effect
• Stuart Smalley• Surety position• Buyer’s remorse
10.Over-optimism • Known Knowns• Known Unknowns• Unknown Knowns• Unknown Unknowns
FACTS OF LIFE:Poor or Not Planning
“Are you like this financially?”
“The greatest glory of living lies not in never falling, but in rising every time you fall.”Nelson Mandela
10
Is your asset overheating?
LUXURY
COMFORT
BASICS
CHARITY
DIED
100 men aged 25 started life, they were all ambitious for success. Some came from wealthy families, some were poor; some had just finished school, others had been working for years.
10 years Later
@ 35
20 years Later @
45
30 years Later
@ 55
101
1
16 20 36 63515 30 34 54
65
570 5 0
1
46
2
1
1310 1
40 years Later @
65
50 years
Later @ 75
“These People didn't plan to fail… they failed to plan”
1st Factor (A):
According to a recent study by a Department of Health and Human Services, for every 100 people starting their careers, the following situation exist at age 65 …
(B):
Have annual in-comes who lived their dreamsAre deadHave annual in-comes who could hardly live on basicsHave annual in-comes who live in poverty
These people didn’t plan to fail … they failed to plan.
DESTINY …is not a Dream.
It is a Decision.
Most people have no specific plan. They procrastinate during their working years and don’t ever seem to get around to start to plan
The end result, FINANCIAL FAILURE!!!
Step # 1Set Financial Goals
Step # 2Prioritize those Goals
Step # 3Initiate a Plan of Action
Step # 4Review and update the Plan regularly
The longer we wait ... the steeper the climb
(C)
The Systematic Planning Method
Few People Save A Definite Amount First …
and Spend The Balance
• These people will generally make the best use of their money left to spend. • Because of the potential for waste in the first method the systematic savers will have just as good a lifestyle today and a better lifestyle tomorrow
SPEND
SAVE
2nd Factor – Hit & Miss Method of SAVING: There are only two (2) Methods of building Financial IndependenceThe Hit-And Miss Method
Most People Spend First … and Try to Save Whatever is Left
• It’s easy to spend!
•And there is generally little or no money left
SPEND SAVE
Nobody saves to fail but too many of us failed to save.
3rd Factor – Consumptive Saving: Saving money to spend it on something not worth
your while is saving like the Roller Coaster Way.
Roller Coaster Way of Saving
Spending so much today at the expense of tomorrow is a mistaken kindness.
Have you tried saving money in the past to spend it on something …save and spend … save and spend … Sometimes borrow money to spend?
Life Line
Started Working
Today Ret. Age
Financial Independence
What would you like to happen when you retire?
If you were to save for the next 20 yrs. As you have saved in the past,Do you think it will improve your financial situation?
4th Factor – The Impact of Inflation:
History tells us that inflation in here to stay.
The staggering effect of inflation causes shocks to the shilling every year!
Ush – Dollar Exchange Rate:
Because of Inflation; the Power of the Shilling is Diminishing!
Dollar Savings or Investments can help hedge against Inflation!
“No one would
remember the good
Samaritan if all he
had were good
intentions and NO
Money”
Margaret Thatcher
5th Factor – The Effect of Spending, Savings, Credit (Debt) & Investment:
1.Spending 2. Savings
3. Credit(Debt)
4. Investment
“We spend money we have not
earned on things we do not
absolutely need to impress
people who do not even care”
Mike Murdoch
Your Trend Analysis
1 – 2 Years Ago 2013 2013 and Beyond
Savings
Spending
Debt
Investment
Earning
Phase AgeYearning Phase
25 yearsLearni
ng Phase
Income Graph of a successful Salary Earner
0 years
6th Factor – Bad Investment:
To minimize investment risk, Investments must be diversified. Putting all money in one basket can cause
the outright loss of our money.
Bad investment can cause the outright loss of our MONEY.
One of the first things we need to understand about investments is that, the greater the rate of return offered, the greater the risk.
Wealthy people who can afford to lose some of their capital can take chances in an effort to obtain high rates of return. For most of us, however, this is not a prudent course of actions. There are at least two (2) reasons for this:
1. We simply cannot afford to lose “Hard Earned MONEY”2. Losses are difficult to overcome
So the best strategy may well be to invest for safety first and return, second.
“Wealthy people who can afford to lose some
of their capital can take chances in an effort
to obtain high rate of return. But for most
of us who can’t afford to lose hard earned
money can invest safely through VARIABLE
LIFE INSURANCE POLICY.”
frustrations; heartaches; pains; failures; negative
thinking; bad habits;
acceptance; concerns; behavior;
forgiveness; revenge; marital; financial; laziness;
in-laws; pride; envy; sensitivity;
7th Factor – Procrastination: FINANCIAL SECURITY is a DECISION not a DREAM!!!
Your future, is determined by your commitment to starting the process NOW – not TOMORROW, not NEXT WEEK – but NOW.
Expand Present
We say … I will decide tomorrowI will decide later this weekI will decide later this monthI will decide later this year
We Procrastinate!!!
frustrations; heartaches; pains; failures, negative thinking; bad habits; acceptance; concerns; behaviour; forgiveness; revenge; marital; financial; laziness; in-laws; pride; envy; sensitivity;
If we put back the past into its proper place, what do you have in the future?
NOTHING!What can you do with nothing?
ANYTHING!
NOW
Present DECISION
The present is a Decision which divide the past from the future
The reason why wecan’t move
forward … is because our
future is full of the past. Past Future COMPRESS
Why do most of us can’t do something
outof nothing ?
People will come up with all types of reasons as to why they didn’t do what they said they wanted to.
@ 25
8th FactorProcrastination …can be a very costly
decision
@ 35
@ 45
@ 55
@ 65
US $ 1,164/yr
US $ 3,700/yr
US $ 12,392/yr
US $ 50,878/yr
US $ 1,000, 000/yr
OR is the real reason … that we fail to take the time to organize our financial affairs and then develop a systematic plan that will
help us get where we want to be?
Saving a Million @ 12% return
We All Procrastinate!
• Early death• Emergency• Disability• Job loss• Long life span• The next generation’s agenda• Divorce• Business failure
9th Factor - Risks
PROTECTION AGAINST RISK
28
REAL
MO
NTH
LY IN
COM
E (U
SHS)
20 25 40 55
AGE65
What does potential future income look like?
1.8 m
Adopted from LIBERTY
29
20 25 40 55
AGE65
What does potential future income look like?
1.8 m
4.5 m
REAL
MO
NTH
LY IN
COM
E (U
SHS)
FROM TO
What seems ! What is!
What used to be! Today’s reality?
What is happening? What is likely to happen?
What has been happening? What could (might) happen?
What I deserve. What can I afford?
Who has tried it? It’s up to me.
What is easy? What is right?
Week end project Life long project.
10th Factor - Mindset Change
EARNING – KNOWLEDGE, SKILLS AND ATTITUDE
• Allocate hours for employment earning.• Allocate hours for your OWN earning.• Invest in own business – full risk.• Invest in others business – own shares• Invest in property and other assets.
Thinking Ahead…
When it comes to … Balanced Financial Planning
32
Financial experts recommend the following:
• CREATE an Estate of Protection Money (Premature Death and
Disability)
• BUILD a Foundation of Guaranteed Money
• INVEST for Growth to Hedge Against Inflation, AND ONLY AFTER
THE FIRST THREE (3) NEEDS ARE SATISFIED.
• SPECULATE for Rapid Growth, with Money you can afford to lose.
• Gotcha Capitalism; Bob Sullivan• Stop Getting Ripped off; Bob Sullivan• The Capitalist Nigger; Chika Onyeani• www.living up to 100.com • www. myFICO.com• www.kathleen rehl.com• www.gail van-oxlade.com• www.suzeorman.com• www.kiplinger.com• www.pkmojo.com
Online References
• “The Richest man in Babylon” George Classon• “The capitalist Nigger” Chika Onyeani• “Stop getting ripped off” Bob Sullivan• “Gotcha capitalism” Bob Sullivan• “In Deep Conversation” PK• “How to skip Retirement” PK• “Key Questions people don’t ask about retirement”
PK• “What’s next? How professionals are retiring
Retirement” Dona Roche – Tarry and Dale Roche -Lebrec
Others
Thank You&