I recently met someone who has the following strategy. He works on a contract basis for six months and makes good money. He pays off the debt he accumulated when he wasn’t working and then he quits and gradually builds up debt until it gets to be unsustainable and then he goes and works again.
His money strategy makes me a little nervous. Ok, it makes me a lot nervous He’s still fairly young, but I can’t help but wonder what will happen when he gets to a point where he doesn’t have the energy to do these intensive spurts of work. Not to mention, what if something happens to him and he can’t work or he can’t just pick up and find well paid work? Yes, I have a worry gene. This person does not appear to. I wonder if it will kick in for him and what age that will happen if it does?
He argues he likes to live life as it comes and he certainly is living in the “Now” which is a popular thing to try to do these days.
On the flip side, he clearly sees work as only a source of funds and does not appear to get any other value out of his contract jobs. He puts in his time to make money and then gets out as quick as he can. I wonder how he perceives those six months when he is working flat out. I bet it is a bit of a struggle for him and that those six months feel a bit like a jail sentence.
I am also curious as to what will happen as he get closer and closer to retirement age. Will he panic? Will he live in denial and just keep doing what he is doing?
Generally, as people get older they seem to get more anxious about retirement. I’ve noticed that most people tend to have a negative outlook towards retirement. Especially those that do not have any savings. I have not met too many people that imagine the wonderful life that they will be living when they retire. Instead they seem to think that they will not have enough money to maintain a comfortable standard of living.
And, instead of investigating what they need to do to maintain a comfortable standard of living in retirement, they worry. Worrying does not provide more clarity about retirement. Worrying may feel like you’re doing something, but you’re not really. You’re just sacrificing your current happiness to the worry about some uncertain future.
These fears of the future are powerful and can leave you feeling trapped. They can make your life take on a terrible hue. Instead of enjoying your present life, you are living somewhere in an unhappy future. They can also lead you to make decisions that are not the best for you.
For example, you may take on work that you are not suited for. This may be sustainable in the short term, but what if you have to keep working at this type of work after retirement age because you didn’t save quite enough money? This is what my client appears to be doing. He will continue to work these six month contracts for money and money only. What if he found something he enjoyed doing and decided he didn’t want to stop after six months? What if he enjoyed it so much, he wanted it in his life after he retires?
Here’s another decision people often make. They use their home as their retirement plan. They build a life and community in a neighbourhood and then completely change their lives when they sell their home and move somewhere cheaper. This may work for some, but as we get older, we lose some ability to make big changes. It is hard to pick up and start over completely somewhere new when you’ve already had one big change (retirement).
What if instead of procrastinating the planning or living in denial, you started thinking about your retirement right now and you thought about it with hope?
These are the steps I would take:
- I would assess what my financial standing is today.
- I would assess the amount of cash inflows I need as of today to cover my cash outflows as of today.
- Then I would look to what is missing in my life and what is going well in my life.
- I would think about what I still want in my future life and then I would project what my cash inflows and outflows will be when I am older and not able to work as much.
- I will project how much money I will have when that day comes and if it is not enough, I will try to find a source of extra funds or I will figure out what can go now and cut my spending.
- My new sources of cash inflows will tie into what I need in my life. I will try to find work that I enjoy and can sustain and I will get rid of spending that does not contribute to my well being.
I will start doing this self reflection at least once a year and try to bring sustainability to my life. I don’t want the type of retirement where I quit everything I have been building cold turkey. I am building a life that I want to enjoy while I’m living it. Why would I suddenly change everything when I retire? You may be surprised that there are certain parts of work that you actually need in your life: connection to others, contributing to society, personal growth and yes, of course money.
There are people out there that are already doing this. In fact, it seems many people do this. My grandparents continued to work into their 80s because they loved it. Aren’t those the people that you know that seem to live forever?
So what can you do if you are getting older and you are starting to worry about retirement?
Start looking at your life now. What can you start doing that has potential cash inflows for a long time? What can you get rid of that you don’t really need that is costing you money?
Then you can stop worrying about how horrible your life is going to be and you can start planning how you want your life to look.
It is never too late to do this.