Bronnie Ware is a nurse that worked several years caring for patients with fewer than 12 weeks to live. She uncovered 5 common regrets of the dying:
1. I wish I’d had the courage to live a life true to myself, not the life others expected of me
2. I wish I hadn’t worked so hard
3. I wish I’d had the courage to express my feelings
4. I wish I stayed in touch with my friends
5. I wish that I had let myself be happier
This is important because we only become true to ourselves when the end is near. During our lives we treat time as infinite and often put aside our needs for the sake of perceived success. There’ll be time to re-connect with friends later. There’ll be time to pursue my hobbies later. There’ll be time to devote to family after this project at work is finished. The thing is, the demands of today never go away. This project will lead to the next, and so on.
While I don’t think it’s a good idea to live recklessly, you must balance your wants and needs with those of others. Once in a while, take a moment to evaluate your life as if you only had a couple months left to live. Would you have any regrets?
So you’re an entrepreneur with dreams of building a small business.
You’ve probably devoted a few soul-sucking years into a giant corporation and now you just want to do interesting work and stop worrying about the corporate ladder. You would be happy with a solid, consistent salary drawn from your own small business.
Well, I have bad news for you.
Over the long term it’s impossible to operate a business that doesn’t focus on growth.
Let’s say you run a business that sells extra-special socks at $10 per pair. Each pair requires $5 of material to make and you hire a couple people to make socks at $20/hr. Let’s say you can generate a salary of $50,000 per year selling 20,000 pairs of socks. Everyone’s happy, right?
Fast-forward 5 years. Because you’re OK with a steady salary, the price of your socks are still $10 per pair and you still sell 20,000 pairs a year. The problem is that the cost of cotton has risen with inflation and each pair now requires $6 of material to make. Worse, your sock makers haven’t received a raise in 5 years – the best sock makers are quitting to join other sock companies that pay better. The remaining sock makers are the least productive. You’re left with a group of sock makers that take longer to make the same number of pairs of socks. So whether you raise salaries or not, your labor costs have increased.
Your rising cost of materials and labor squeezes your profit margins and you are unable to pay yourself $50,000 anymore. What you’re left with over the long-run is a slowly dying business that will end up closing once costs outsize selling price.
Despite the romantic notion of running a simple business that generates a steady income, you must grow just to remain in place. To maintain a $50,000 salary, your little sock business must raise prices and/or sell more pairs of socks just to cover costs that inevitably rise over time.
Grow or die. That’s the growth imperative.
How much should you be saving? Many people have no idea.
David Bach, author of The Automatic Millionaire, provides his recommendation:
Why does it rise with age? According to Bach, “typically the older you get the more you earn and spend. And if you lose your job it can take longer to find a job that replaces that income.”
I’ve witnessed this first hand. It frequently takes a senior executive 1-2 years(!) to find comparable employment. I can only imagine how devastating this can be to the ego, savings account and family dynamic. Since senior executives tend to be in their 40s or 50s, they probably have exhausted marriages, college-aged kids and massive responsibilities. There is no worse time to stop the regular paychecks.
This is where years of socking away money into an emergency fund helps. But how many people are doing this? The reality is quite bleak – 26% of Americans have no emergency savings at all. This means they’d be dipping into their retirement funds if an emergency occurs. Unfortunately, the median retirement account savings for Americans is only $5,000.
Why are people so unprepared?
The average person is financially illiterate. In 2011, the Investor Education Fund conducted a survey and found that only 29% of respondents could pass a basic financial literacy test. If people don’t understand basic personal finance, they sure as hell aren’t taking the right steps to secure their financial future and prepare for emergencies.
The average person must become more invested in their financial future. I’m happy to see that the Ontario government is working towards mandatory financial education in high schools. More must be done. Unfortunately, by the time a student reaches high school many bad financial habits have already formed. Parents still have the ultimate responsibility teach their children values and behaviors that support financial freedom and flexibility.
As I alluded to earlier, the risk of ignorance is financial ruin, divorce and missed opportunities for your kids.