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5 Important Concepts When Preparing Financially For Old Age


Many people imagine their old age as that time of peace and tranquility in which they will enjoy everything they have built throughout their lives. 

And it should be so! However, to achieve this you need to have a plan that guarantees that worry-free life, and to be able to accumulate enough money to afford it. 

That is why it is so important to prepare financially for old age and that is precisely what we want to talk to you about in this post. 

Do you really want an old age without money problems? 

We know that most people would respond with an immediate YES; But, if we dig a little deeper by asking, what is your plan to achieve this? We may not get a response because most of us don't (initially) have a plan. 

And unfortunately, a wish without a plan is just a dream. 

Why don't many people have a concrete plan for their retirement?

There are many reasons and most of them come from the subconscious mind and the beliefs we acquired in childhood and in our culture. 

These beliefs make us discard the idea of ​​being financially independent when we are older. So much so that we don't try it thinking that it is not achievable. 

This is why the vast majority of people in the world do not invest any percentage of their income in productive assets that generate long-term income. 

At Liber Financultura, we have identified different reasons why many people do not begin to “fatten their goose that lays the golden eggs”, that is, the fortune that will support them when they are in their old age. 

Scarcity mentality: They keep telling themselves that they don't have enough money and that they can't save it for retirement. 

Limiting beliefs: they think that having productive assets is not for them. 

Gender beliefs: they affirm that women or men are not good with numbers. 

Religious beliefs: they say phrases like “it is easier for a camel to enter the eye of a needle than for a rich man to enter the kingdom of heaven” and fear prevents them from creating and investing money.

Family beliefs: They are afraid of what their family might think or that they will love them only for their money.

Ignorance: They are simply not aware that they could invest their money and were putting all their hopes on a government pension. 

Lack of financial education: they know that they can invest but not the means to do so.

Have any of these reasons ever stopped you? Don't worry if your answer is yes. That just means that at this moment you have just become aware and from now on you can do something about it. 

So what should a person do to prepare financially for old age?

You will realize as you read that it is not impossible. Really, anyone can achieve it by following the 5 concepts that ensure you reach old age with a fortune to support you:

Pay yourself first

What do we mean by this?

Every time you receive income you should pay yourself 20% before paying your bills (not just at the end if there is left over).  

This means that for every $1,000 in income you receive, at least $200 should be taken to invest in the Financial Freedom “jar” or “account.” 

This 20% will be used solely and exclusively to be invested (it is never spent) and is your “goose that lays the golden eggs” that the more you gain weight, the more golden eggs or monthly money it will give you when you want to retire. 

Invest periodic amounts

This concept consists of investing the same amount of money in the same amount of time. For example: $500 monthly, $3,000 semiannually or $6,000 annually.

Millionaires have mostly created their wealth by investing, not saving! Investing periodically and with a lot of discipline.

For example, S&P500 index funds have returned an average of 10% annually in dollars for the last 100 years.

Now, if in the last 30 years you have been out of the market for the best 20 days of this index, there would be no profits, incredible right?

And that is why this second point is important. To make money you have to be in the market, it is more important and profitable to be in it than to try to predict what those best days are going to be... Because we probably won't guess them.

When investing in something like the S&P500 (index funds) in the stock market, a proven strategy is to profit from cost averaging. 

That is, each time you invest, whether monthly, yearly or semi-annually, you buy it at a different price because this increases the chances of making money. Sometimes you buy very cheap in crises and sometimes you buy very high, but on average, by taking advantage of the increases in those cheap purchases and not having to guess which are the “good days” to invest, you earn more because you are always in the market!

It is a powerful concept especially if you want to start investing but you don't know when or how. In our 12-week Financial Freedom program, Financultura Masterkit, we teach it in total depth.

Millionaire rates of return

The reality is that millionaires make their money grow and work for them. 

Not because they are geniuses but because they achieve double-digit dollar rates of return on their investments and that makes all the difference. 

We are going to share a secret with you, are you ready?

If a person put $1 a day under the mattress from age 0 to 65, their capital at the end of that period is $25,000.

But, if you invest $1 a day, from age 0 to 65, at an average rate of return of 10% per year, the wealth created in this same time is more than $2,750,000.

Same effort, different information, different decision, different results.

How would you like to reach your old age? With $25,000 or $2,750,000? Clearly it would be much better to have almost 3 million dollars in your bank account. This is money that you will live with without problems and that you can pass on to other generations of your family so that they can create their fortune too. 

Compound interest

People who manage to have a carefree old age about money have long-term vision and commitment. 

So they pay themselves first, invest monthly with million-dollar rates of return and take advantage of the magic of compound interest. 

This consists of the interest generated being added every period to the initial capital and the interest already generated previously. In this way, the next period you will earn interest, not only on the initial capital, but also on the capital plus interest.

When a person lets compound interest do its work, it becomes a positive snowball that grows exponentially over the years. 

In other words, reinvested interest generates more interest and the long term makes the money grow exponentially, which is why it is important to start as soon as possible.

Long term vision

We mentioned this concept previously and it is a key point. Investors who participate in this type of equity investment have a long-term vision of 20, 30, 40 or 50 years.

When preparing financially for old age we must know that time makes ALL the difference.

Let's see it with an example! We are going to talk to you about a person with a monthly salary of $3,500 net.

Let's imagine that this person takes 20% of that monthly salary (paid first) to invest in the “Financial Freedom jar”. 

$3,500 multiplied by 0.2 = $700 per month.

We take the average compounded annual return of the S&P 500 index fund from 1970 to 2019, which is 10.60%.

Assuming that the time allocated to this investment is 20 years , we have the following data:

If we multiply $700 per month X 12 months X 20 years we will realize that the amount the person will contribute is $168,000. 

Due to growth over time, the capital that the person will create in this period will be $502,781.

From the last number we subtract the first amount to know that the person will earn $334,781 in returns. That is, 200% more than what he contributed.

Now let's look at the same example with 30 years:

$700 monthly X 12 months X 30 years = $252,000, this is the sum that the person will invest.

However, the assets you will achieve in this period will be $1,443,990.

From the last digit I subtract the first sum to know that the person will receive $1,191,990 in profit. We can say that 473% more than what you invested.

Same example with 40 years:

$700 monthly X 12 months X 40 years = $336,000 is the amount that the person will place.

However, the wealth that will be created in this period will be $3,885,243.

From the last figure I subtract the first amount to know that the person will receive a profit of $3,549,243. That is, 1,056% more than what he placed.

Same example with 50 years:

$700 monthly X 12 months X 50 years = $420,000 is the figure that the person will enter.

On the other hand, the fortune that it will generate in these decades will be $10,217,226.

From the last amount I subtract the first figure to know that the person will collect a benefit of $9,797,226. That is, 2,332% more than what you initially invested.

How can I prepare financially for old age if I don't know about investments?

As millions of people around the world do, with the S&P 500 index fund. This is the simplest method and recommended by expert investors like Warren Buffet. 

If you want to have a financially free old age and achieve it passively and without spending a lot of time, it is best to invest periodically in this fund following the five concepts that we saw in this post. This is part of what we teach our students in the Masterkit program.

One last point

Being a millionaire may sound like a luxury, but creating wealth or assets in the long term is really necessary, we can even say that it is non-negotiable. Especially if you live in a country where the pension system is not going to give you the life you deserve when you reach the suggested retirement age.

Imagine that according to data from the World Bank, in 2019, 9% of the world's population is over 65 years old. How many of them will have a plan? Probably very few.

We know that it doesn't feel like an urgent issue because it's probably a long time before you reach that age and you have more important things to do. 

However, time will still pass, whether we do something or not. And you already saw with the previous example what happens when we take advantage of that time.

Therefore, today I want to invite you to take control and responsibility for your future. 

At this moment you are part of a select group of people who have chosen to receive this information, which is very important if you want to do things in a different and improved way. 

The key to having a dignified old age and an excellent present is financial education

If we do not have education to achieve our goals then they will forever remain dreams that remain in our minds.

And as we mentioned before, the Financultura Masterkit program guides you through the entire process of making your financial goals a reality. It is a program that teaches you how to get out of debt, organize your finances, pay yourself first, invest in the long term, plan finances in your old age...

We certainly believe that it is easier to follow a proven recipe and use the tools that have worked for hundreds of people.

The Financultura Masterkit program is the recipe! In it we took on the task of sharing each step to guide you on your path to financial freedom using the methods that work for us and hundreds of students who have already applied the recipe. 

If you want to take the next step, we invite you to schedule a free call with our group of experts. The objective of the call is to get to know each other, understand your current situation and together identify how Masterkit can help you achieve YOUR financial goals. 

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