The workers barely manage to stick their necks out of the water, and in the end, many people are forced to retire poor. The situation is common, although this is more prominent in some countries than in others.
“Money is not essential in life, but it is at the height of oxygen”, according to Zig Ziglar
Money may lag behind health, great relationships, and career fulfillment in terms of importance, but as Ziglar says, “it ‘s right up there with oxygen .”
However, the sad fact of life is that less than 5% of people will be financially free at age 65. In other words, more than 95% of people will retire poor.
What Makes People Retire Poor?
In his excellent recording of The Strangest Secret in 1956, Earl Nightingale tracked the fortunes of about 100 people who started bright-eyed and busy at age 25.
These people were all highly motivated and eager to succeed. “By the time they are 65, only one will be rich, four will be financially independent, five will still be working, and 90 will be bankrupt depending on others for basic needs.”
These statistics are alarming and should justifiably provoke us to reframe the question “why are 95% of people broke by age 65?”
In other words, why do 95% of people retire poor?
Here are ten reasons that offer some answers.
1. They never clearly define financial freedom
Freedom can have a different meanings for different people. Therefore, achieving financial freedom can have a variable definition for each individual.
The plain and simple definition of financial freedom is: that passive income must be greater than or equal to lifestyle expenses.
IP ≥ EV
To achieve financial freedom and avoid being poor in retirement, the passive income from your assets must be greater than or equal to the income you need to finance your chosen lifestyle.
Most people retire poor simply because they don’t have a clear definition of financial freedom for their lives.
2. They never make freedom an absolute duty
Many people are too lazy to be productive. If you ask a hundred people how they plan to get rich, most will tell you that they would love to win the lottery, marry Heiress, or inherit a fortune.
That mindset means most people retire poor because they don’t have a plan.
Unfortunately, hope is not a strategy, and to achieve financial freedom and retire rich, you must be relentless and ruthless in pursuing your goals.
“hope is not a strategy”
3. They are unaware of the power of their subconscious mind
Have you ever come across the phrase, ” the rich think like the rich and the poor think like the poor? ”
Believe me, we all have a self-concept. You have a self-concept for your weight, your business intelligence, and your communication skills. Equally and critically, you have a self-concept for your current financial reality.
It is quite fascinating, but many people who won the lottery lost it in a short time. On the contrary, many people who file for bankruptcy recover the fortune they lost quickly. Your subconscious mind will set your financial thermostat. Similar to a thermostat that controls the temperature of a room, your financial thermostat dictates your financial reality.
If you are serious about being financially free in retirement, you must first examine what financial files are stored in your subconscious mind. If you have the wrong data, you will continually have an adverse financial reality. That can easily lead to a poor retirement. Do a mental checkup to see where you are.
Harv Eker sums it up aptly when he says “ the only way to change the temperature in the room is to reset the thermostat ”.
4. They are surrounded and influenced by other poor people
Many people do not realize the influence that their reference group has on their destiny. Ziglar once said, ” You can’t fly with eagles if you scratch with turkeys .”
If you’re serious about achieving financial freedom, you must surround yourself with smart advisors. At a minimum, you need a dynamic accountant, equally, a banker who understands you and your business.
You also need access to financially free people.
Learn from them, model them. Imitate them, success always leaves clues. Learn from people who retire rich and also watch those who don’t: learn from people who retire poor.
There is a common saying that ” birds of the same plumage fly together.” Today you can start proactively and choose to surround yourself with financially free people.
5. They never face the brutal facts of their financial reality.
If you ask people about their financial situation, most will tell you that they don’t want to talk or think about it. Many will tell you that they will have a financial advisor or financial planner to manage their finances.
Brown envelopes and bank statements are the two most frequently unopened documents in the world. The reason for this is that there is an inherent aversion within us to face the brutal facts of our finances.
To further your quest for financial freedom, you must handle your finances yourself and face the brutal truth about them. One of the surest ways to retire poor is to avoid the truth about your finances.
6. They don’t save
Many people will retire poor simply because they don’t have a golden goose or because they kill it frequently in the name of instant gratification.
Do you remember the fable of the golden goose? A long, long time ago, a family came into possession of a goose that laid golden eggs. After a while, the family got greedy and killed the golden goose to extract all the golden eggs in its entrails. Unfortunately, by killing the Golden Goose, they also killed the mechanism by which their income was produced.
If there is ever a habit that everyone should adopt, it should be the habit of saving. Unfortunately, millions of people find one excuse or another not to save. Without savings, your financial dreams could be in a distant land.
Pay yourself first!
In his classic book, ‘The Richest Man in Babylon,’ George S. Classon advises that we pay ourselves first. Even though there will be hundreds of excuses not to. That could be the biggest step you’ll ever take toward financial freedom.
How often do you see workers buying new cars or moving to an expensive neighborhood when they get a pay raise? People who couldn’t delay bonuses are likely to retire poor.
7. They Are Unaware Of The Power Of Compound Growth
“Compound growth is the eighth wonder of the world” – Albert Einstein.
Compound interest can make or break you financially. It can make your life happy or miserable.
Why? Compound interest can greatly increase your wealth and also increase your debt incredibly.
8. They work for money as opposed to having money work for them.
Income typically manifests itself in three ways;
- Earned Income – This is income usually earned as a paycheck or salary for the product or service provided.
- Portfolio Income – Represents income derived from stocks, annuities, investments, and pensions.
- Passive Income – This is income that is earned without you having to work full time to earn it. An example would be income from rentals, royalties, patents, and online products, or services.
In his excellent book, “Retire Young Retire Rich,” Robert Kiyosaki suggests that earned income is the worst source of income for several reasons.
First of all, it is the highest tax income. Second, you have to work hard to achieve it, and it sucks up all your valuable free time. Third, there is limited leverage, as the only way to earn more is to work harder and harder. Finally, there is minimal precious residual value in this income, as each day you must start anew.
A significant difference in mindset between rich and poor is that rich people have money working for them instead of working for money. This is the true path to financial freedom.
If you want to retire poor, keep working for money without an alternative source of income.
9. They lack the knowledge, skills, and training to be financially free.
It is said that knowledge is power. If that is true, only a few are ready to pay the price to acquire that knowledge. The poor are the set of people with the worst reading habit. They find it difficult to invest in financial education.
Without a solid financial education, achieving financial freedom will be a very rigorous task. As the saying goes, ” Life is hard, but you can make it harder if you’re stupid .” Achieving financial freedom takes a lot of work. But you can make it more difficult if you are financially ignorant.
” Life is hard, but you can make it harder if you’re stupid “
It is vital to acquire and sharpen your financial skills to be financially free. Fortunately, with the advent of the Internet, the acquisition of knowledge has become infinitely more accessible. There are no excuses now.
To generate a stable, safe, and consistent income from investments, you will need to acquire good financial knowledge and improve your skill with good practices over time.
The acquisition of knowledge can be through books, financial games or seminars, and business coaches.
As employees, it is easier to acquire practical skills and knowledge than it is to acquire financial knowledge. This is what keeps most people in the rat race and retiring poor.
10. They have no plan, or lack the willpower to follow through
There are many differences in the strategies used by all the great investors. However, they all have two things in common; They all had a plan and they follow it. It is imperative to have a plan on how you are going to achieve financial freedom.
Your search will be doomed without a plan. Planning is essential. Even a bad plan is much better than no plan. (At least you know it’s terrible, and you can work on it to make it better.)
Most people never plan for their retirement and the most significant percentage of those who do so is too late. To avoid retiring poor, you need an early plan at your company; one that will take you to your financial destiny.
You can study the strategies of great investors and choose the one that most appeals to you. You must stay with it. Consistency of purpose and practice is what ultimately wins out in generating continued profit.
Make up your mind and choose!
In their excellent book, ‘The Millionaire Next Door: Tom Stanley and William Danko highlight how two families, living in the same type of house and employed at the same job, end up with totally different financial scenarios. At age 40, one is financially free. The other is mired in debt and despair.
The reason is not education, opportunity, or lucky breaks. It’s simple; It’s a matter of choice. Retiring rich or retiring poor is a choice, and no one can make that decision for you.
Today you have another opportunity to choose the path you want to follow. The path to becoming rich and prosperous or the path to remaining poor. So choose wisely.
