How to Know You Wouldn''t End Up dependent like Your Parents - PART 1

Saturday, December25, 2021 / 12:00PM / Grace Agada* / Header Image Credit: Independent Newspaper Nigeria

A few decades ago, your parents were exactly where you aretoday. They had jobs, regular income, a good life and were filled with hopesand dreams. Financial freedom and helping other people were also part of their dreamsand they made certain investment efforts hoping to achieve it. But like manyother things, their life did not go as planned? Today they have a life that isworse in retirement than their active career life. The big question is wouldyour life go as planned? How many people do you know today whose Life has goneexactly as they planned it? What gives you the confidence that your life will goas planned? And is there a way to know upfront where you would end up at theend of your career?

A few years from now your career will end and your life will endup in a certain place. The big question is where would it be? Will your lifeend up in financial freedom or financial bondage?

Depending on what you do today your life will end up in eitherof these three places.

1. The same place asyour parents - This is where you are dependent on your loved ones but haveindependent children that can cater for you.

2. The second is aworse place than your parents. This is where you are dependent on other people,but also have children that are dependent on you.

3. the third is a better place than your parents -this is where you are independent and self-sufficient in retirement and yourchildren are also independent too.

Out of these three-end destinations, you would end up in acertain place. But how do you know where you would end up? And what can you doto end up in a better place than your parents? I will answer both questions inpart 1 and 2 of this article.

One of the big misconceptions that make people fail in life is tothink that time will change their financial situation. Timenever determines your financial success. If it does, more people will bericher in retirement than during their active career life, but research showsthat 8 out of 10 people are 80% poorer in retirement than during their activecareer life. This means that an increase in time does not necessarily mean anincrease in financial freedom.

What determines your financial freedom is your actions and thequality of the decisions that you make. Your actions more than your desire,good intentions, wishes, hope, or dreams is the biggest determinant of how yourlife turns out in retirement. Thus, it is possible to predict with accuracywhere you would end up in retirement just by looking at what you dotoday. And it is also possible to change your retirement destination ifyou do not like what you see today.

Yet rather than take charge of retirement and create a betterfuture most people are held back by fear. The most common of which is the fearof the unknown, a fear that simply exists because people refuse to confront theunknown before retirement. This fear, coupled with the fact that most peopleonly saw the perfect bad example of how not to achieve financial freedomthrough their parents, make poverty action the default action for most peopleduring their active career life. Only 10% of people have seen a perfect goodexample of how to achieve financial freedom and the best way to transition froma successful career to an even more successful retirement life.

The challenge with this is that you act according to what yousee and know and will only replicate the familiar despite your good intentions.You are also not likely to model or replicate what you do not know or see.Thus, chances are high that you are already replicating some of the povertyactions you saw your parents took while growing up without even realizing it.Yet if you do not unlearn what you saw, observed, and adopted from yourparents, your brain will automatically replicate the same actions when reallife situations hit. And in due course you will reproduce the same resultsguaranteed.

The only way to prevent this from happening is to do the threeimportant assessments that I call the "End-destination Financial FreedomAssessment". The first assessment is the "Odds of Success" assessment. Thisis where you compare the advantages and disadvantages you have compared to thatof your parents. The only way to have a better retirement future or end up in abetter place than your parents is to have more advantages and lessdisadvantages than they did.

The second assessment is the "Perfect Good Example Assessment".Right now, you have only been exposed to a perfect bad example of how not toachieve financial freedom. Until you also learn from a perfect good example, howto achieve financial freedom, you will not achieve it.

The third assessment is the "Action Resemblance assessment". When youlook at the actions, mindsets, and behavior of your perfect bad example and thatof your perfect good example and compare them to your own current actions. Whodo you resemble the most? Who you resemble is who you become?

These three assessments combined are what you need to determine yourodds of success and whether you would end up in the same place as your parents.In Part 1 of this article, I will cover the first assessment and then I willcover the remaining two assessments in Part 2 of this article.

So, let's see your odds compared to that of your parents

Job/Income

A job was the main source of income for your parents, and it isthe same for you today. However, your parents had a betterjob/income prospect than you do today. Your parents were lucky to be in anEra where jobs were more than the number of qualified graduates. They wereenticed with lucrative job offers like a car, a house, and a juicy employeepackage from day one. This meant that they were almost overpaid from thebeginning and didn't have to bother about acquiring more degrees to edgecompetition like you do today. If you had a degree back then, you were indemand. And it helped that they also lived in rural areas, so farminghelped subsidize household costs. Yet despite these advantages a lot of themended up broke in retirement.

Your options are slimmer today. You live in a time where degreesare a commodity. Regardless of the school you attended and the degree you haveyou practically need to beg to get or keep a job. You are also more likely tobe underpaid from day one with no juicy perk like your parents. Worst ofall is that the fierce job competition forces you to acquire more degrees,spending more money on tuition, and achieving financial independence at a laterage. Your cost of living is also higher as you live in more urban areas and lacka subsidizing system for your household cost. Thus, compared to yourparents your odds of achieving financial freedom are slimmer. Unless you find away to increase your odds your chances are worse than that of your parents.

Savings

Savings is what you would look like in retirement when yourpaycheck is gone. Yet it seems like your parents saved more money than you do now.And here is how I know. Your parents had more children and dependents thanyou do today, yet they were able to train them all debt free. Not manypeople used debt back then, but today debt is mainstream. Your parents werealso able to achieve major financial goals early and debt free too. They boughttheir cars debt free, built their houses debt free and trained their childrendebt free. Today we do everything with debt because over 75% of people onlysave 5-10% of their income. They send their children to school on loan,buy a car on loan, rent a house on loan, buy electronics on loan, and build ahouse on loan. We have become a loan infested society reducing any chance ofachieving financial freedom.

Your parents also had a better retirement savings plan. Most ofthem retired with income that is the same as the last salary they earned beforeretirement. Today retirement plans at best represent only 20% of your salary.Without big portion savings and the ability to augment pension income yourfinancial freedom dream is a mirage.

Investing

If savings is what you looked like inretirement, investing is what sustains you in retirement. Thus, there weretwo main investments our parents deed and understood during their career lifeand these are also the investments that you do today.

There are real estate and children education. But your parentshave certain advantages that you do not have. First, they could send theirchildren to affordable public schools, enjoy free education, and were not peerpressured into sending their children abroad.

Today Some parents spend a major part of their 15-20 yearsincome on education even though these educations are useless without a job.Parents today seem to be enriching the schools than they are enriching theirown financial future. They are also putting themselves in more debt throughhome ownership. A personal home is a non-income producing asset and the bestway to own it is debt-free. While a home is important, it will not pay yourbills in retirement.

Children Independence and Value System

Your Children are your greatest investment, yet our parents seemto have done a better job investing in children than we do today. At the coreof their career was time dedicated to bringing up resilient, strong, and respectfulchildren. A disciplined, moral-based, and religious-based training approach wasused. An approach not entirely perfect but produced resilient, disciplined, andrespectful children with strong moral and family values. Today in the bid tosoften this training approach, we have mass produced fragile children that aredependent, entitled and can break under pressure. Yet, the world we live in isneither soft nor easy. The worst thing we have done is dilute their valuesystem by sending them abroad.

Today's children are likely to be strangers in their homecountry and strangers in their base country. They are unlikely to return homeafter school and be present for their parents in their old age. Parental carewill be done majorly via skype and zoom. And real estate assets will beabandoned, sold, or left to strangers. Even so their chances of success in theirbase country where they are treated as second class citizens is limited.

Truth be told, you have way more disadvantages than your parents.While this generation has succeeded in increasing their cost and disadvantage, theyhave done little to optimize their advantage. And until you optimize youradvantage you will end up in the same place or even a worse place than yourparents.

To learn more about 'How you can end up in a Better Place thanYour Parents' watch out for Part 2 of this article.