The fact that we're all going to be living longer is an undeniable trend and the massive shortfalls in state pension schemes are clearly reported in many newspapers and books, yet there has been no solution put forward by governments.
The longer the state pension problem is left unfixed, the more severely it will impact unprepared retirees.
The prospect of living off our own savings for 20–30 years without a salary or a state pension of any materiality is a rather daunting one and dire consequences await those caught by surprise, so we must be self-reliant in our retirement.
The silver lining in our message is that it's not too late to start taking action, as long as you are at least ten years away from retiring, because time is the key ingredient in compounding returns on our investments – provided we invest in the right things, that is. As the saying goes, time is money, but money can't buy time.
Working your way through the building blocks will not be easy. It will require a great deal of discipline and a change in mindset but it has to be done because it's just not worth investing in BigIdeas without making sure that you have a sound investment platform from the outset.
Don't be dismissive about saving and investing, and don't procrastinate about taking steps to building and strengthening your investments. As we mentioned in the introduction, this is just a book; reading it will not automatically add zeros to your bank account balance. Action will.
Patience and perseverance will be rewarded, and once your investment platform is in place, managing your investments will require just one or two hours per month. Investing monthly must become a life practice for the rest of your working life. As we have explained, investing little and often is very effective and doesn't significantly impact your lifestyle. Don't be swayed by general market fluctuations – always take the long-term view, which we believe should be at least ten years. The financial turmoil of 2008 and 2009 has left many stocks and funds trading at multi-year lows. Careful selection of these investments at such depressed prices will mean exceptional returns once the global economy begins to recover by 2010.
To kick things off, you will need to devote at least a weekend to yourself – no phone, no spouse, no kids, and no distractions at all. You need to put together your action plan. Here are some of the things you need to consider in your plan:
Which building block (page 21) are you starting from? This will determine how ready you are to invest in the BigIdeas.
How long will it take you to work your way through the building blocks? Be realistic but aggressive about your debt repayments.
When do you plan on retiring?
Have you prepared your household income statement?
Have you prepared your household budget?
Do you have all the information required to complete the DiagnosticGrid?
Are there any unnecessary costs you could reduce from your household budget?
How much money do you need to get by?
How much money do you need in retirement? Will you have paid off your mortgage by then?
What will your life expectancy be when you retire? How many years do you need to fund your life without an income?
Think about our BigIdeas but, more importantly, think of your own BigIdeas too. Our book is intended to get you thinking about the world and the way it's changing, and how to profit from that change. There is no doubt that with every revolution of change fortunes are made and lost. Make sure you are on the right side of the next wealth transfer cycle. Remember, even if nine of your BigIdeas are mediocre, if the tenth turns into your MoneyFountain, your financial freedom is secured for life (provided that you continue to invest and spend wisely, of course).
Do the research, be structured, take it seriously – you are building the framework for the future of your finances. It's just one weekend in your life and, in the long term, it may very well prove to be the most lucrative two days of your life.
Find a financial advisor if you don't have one already. Prepare a list of questions to ask. Don't be afraid to ask him/her any questions that may arise from reading this book. Let the financial advisor guide you through the most tax-efficient way to invest in your BigIdeas.
It's over to you now: only you can change the state of your financial situation. Best of luck, and remember, be disciplined and think long term.