The yins and yangs of setting aside something

Let’s get straight to the point. A recent SmallBiz Trends survey in the US showed that around 65 per cent of “solopreneurs” and small businesses are either losing money or making just enough to cover their costs each month (aka surviving). Which means that 35 per cent of solopreneurs are making a real-live, heavens to Murgatroyd, profit.

And less than 30 per cent of that vastly diminished group are putting money away each month to pay for their retirement and medical costs as they get older. To put it another way, one in ten solopreneurs and SME owners have an active savings plan for their retirement.

If this isn’t causing you to have an “Oh My Goodness” reaction with accompanying shaking hands, then it should. I’m not peddling insurance. I’m telling you the facts. Of life.

According to a recent “St. Louis Tribune” study, the median net worth of families in the US before the recession of 2008-09 was $140,000. Today it’s $97,000. That’s a picture being repeated around the world. Wages and charge-out rates are largely static, but costs are increasing all the time.

Companies are shrinking their workforces to avoid paying pensions and on health care. Governments are doing the same, getting out of health care programmes left, right and centre.

You’re on your own, mes chumalitos ...

You may not be thinking about retirement right now, which is a huge mistake. Tomorrow, it will be an even bigger mistake. If you start thinking about it in 20 years time, you will be working until you drop dead. Because you will leave it too late.

Not many people win the lottery, so that isn’t really a retirement planning strategy.

Let me introduce you to a couple of words which can be your powerful friends ... or your inexorable enemies. Time and compounding. The more time you have between starting to provide for your retirement and actually retiring, the more you will accrue, and the less of your total earnings you have to grab every month.

If you leave that money untouched and it earns a good annual return which you reinvest, then the compounding effect kicks in like a booster rocket. Most experts think you will need to save enough to provide 80 per cent of your current income over 30 years. If you want to retire at 65.

Here are three examples, aiming for the same amount of $50,000 per annum to retire on:

What to save

* Starting at 25 — You’ll need to save around $1,100 per month;

* Starting at 40 — You’ll need to save around $2,250 per month; and

* Starting at 50 — You’ll need to save around $4,200 per month out of a monthly salary of $6,250.

I’m not an expert. These numbers might be slightly inaccurate. But the point is clear. The longer you leave it, the harder it gets.

Pretty sobering stuff, huh. Now, if you are 50 plus and wondering how on earth you are going to be able to fund your “golden” years, I offer you two more words, which will be your staunchest allies. Leverage and scale.

Take the lessons of life and work that you have learnt, and put them into a format whereby other people can learn and use those lessons without you being there. That’s leveraging your expertise.

Then figure out how to get your valuable lessons in front of everyone on the planet (may as well start thinking big). That’s scaling your expertise. Or work with people who can help you earn income while you sleep.

Here’s another bonus idea — Multiple streams of income. If you have a job, you can take your experience and expertise and build it into stuff that other people will pay for online. Without starting your own business or giving up your steady income, you can be a successful secret side-hustler.

Success

W. Ross Ashby formulated a very powerful concept in the 1950s called “The Law Of Requisite Variety”, which has been restated by NLP experts as the First Law of Cybernetics. Simply put, it means that the person with the most options available to them, will succeed. If you want to have a fabulous time for the rest of your life, develop multiple streams of income by leveraging what you know, and working with cool people to give you massive scale.

If you don’t want to do this, you don’t have to. As a very wise man called J. Edwards Deming once said, “Survival is not mandatory.”

Small comfort I know, but the average life expectancy is starting to level out, not increase, so you won’t have to suffer as long.

Steve Ashby is founder and CEO of Businessmentals.