Young people, the best way to learn the lessons of life is to ask those who are older and more experienced than you, as to what mistakes they made in their careers and what lessons can to be derived from those mistakes. This is a different advise paradigm from one that always puts a positive twist to everything by asking people to do this, that or the other unproven methods - or in other words, cook book solutions to life's challenges.
Quite often in the vast realm of "self help" books all you get are statements of what is the "right" path to follow. You are preached at with quick and easy certain number of steps that can be followed to achieve "success nirvana". Authors like Deepak Chopra, Anthony Robbins, Wayne Dwyer, Dale Carnegie, Steven Covey just to name a few (and there are countless others) are writing book after book and giving expensive lectures telling you to follow their steps to success. Do you buy all the hype?
Well, I will tell you what. The person you should carefully listen to, are those people who are in the trenches and are trying to survive in this tough day-to-day world. Listen to the persons who have made mistakes in their lives and are willing to tell you about their most expensive, stupid and serious mistakes. These are the people who will give you valuable insight into the perils of life's real journey- i.e. what to avoid. They will provide you with the real warning signals. Heed and learn from these people.
One such mistake that I made early on in my career is not to have personal financial intelligence, personal financial integrity and thus total financial independence.
What I learnt from my many mistakes on this subject is that I should have saved as much as I could have from every paycheck I earned. The temptation to spend and be subject to the infinite attractions of our consumer society is quite acute. We measure our self-worth with "what" we have by way of material things. We forget that the word consume means to destroy, to squander, and use up. Warren Buffet gives very sound advise to young people by suggesting that one should never get a credit card. You certainly can do without them. Getting a credit card with a balance on it puts you in the hole right away. That hole then gets harder and harder to claw out of. If any of you readers carry credit cards now, gather them all and light a bon fire!
Save for a rainy day and save for your senior years. One should always have a year's salary saved up. I suggest to young professionals to be an aggressive saver and save up to 20% of your paycheck if you can. This can be done with careful planning and a fine tuned execution of the plan. Do not fall into the "get bonus and buy new car" trap!
But most of all save for when you cannot work in your old age. Here you younger professionals need to be very aggressive. And there are many reasons for creating a retirement fund very early on in your professional lives.
Here are some of the reasons:
1. The world population is becoming older and people are living longer so most likely the younger generations will have to deal with a significant portion of their lives where the earning potential will be next to nothing.
There is a corollary to the contention that the world population is becoming older and we are simultaneously seeing a decreasing proportion of those who are younger. The result of these trends will be that more and more people are going to be demanding payouts from their government pension schemes and there will less and less people to pay into the fund. This is a real doomsday scenario!
2. To effectuate a solid retirement (which includes a very early retirement) a young professional needs a three legged stool approach.
The first leg is an aggressive on-going personal savings plan. If you start saving and start saving early the law of compounding comes into play and within about twenty years a significant amount of money piles up for your benefit.
The second leg is, government social security. This I am afraid will get smaller and smaller as time goes by. Most governments around the world have not done a good job as a trustee of the funds that are put aside by most of us to receive retirement assistance when the need arises.
The third leg is, private retirement programs - the defined benefit pension plans and the defined contribution pension plans. We have seen and we will continue to see a rapid decline of defined benefit pension plans and an increase in defined contribution plans - the 401 (k) types of plans.
Thus my advise to young folks in a very direct straight forward manner is that the future of the world is not that secure because of growing populations, increasing diminution of natural resources, scarcity of investment funds, large government deficits, world wide corruption, decreasing education standards, and on and on. So a young professional has no choice but to take the bull by the horns to create a solid financial security plan, for themselves and by themselves.
I suggest the start of the journey is "deferred gratification".
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