My last blog post, which I shall trust you read word for word, considered the value in giving ourselves choices in life and business, and I hope you have been more conscious of the choices you have open to you as a result of reading it. Of course, our choices are wider if we are better able to follow through on more options – if we have the resources to choose alternative paths.
As a child I learnt that without reserves of resources (usually money), one’s choices were much more limited. In adult life, and in business, I realised that it was also important to have reserves of the other two critical resources (time and energy/attention). So much more is possible when you have a reserve in place.
Imagine jumping in your car and contemplating a day trip. The more petrol you have in the tank (your reserve), the more choices you will have for your adventure. The most resilient individuals, teams and businesses tend to be those with more reserve. Time and energy may be topics for future newsletters but this month I want to focus on money, money, money. (Thanks Abba…)
The most fundamental way to build a reserve is to spend less than you earn, as much of the time as possible. As a country, a company or a household, living within your means creates more reserve, and thus more choices. It would seem obvious to know whether you are spending more than you earn, but I meet many people who don’t. They either resist finding out because they hate numbers, because they prefer to spend their time and energy elsewhere, or because they’d rather just hide from the bad news.
Do you know what you earn, and what you are spending? Do you know the current and predicted future size of your reserve? Do you make decisions based on clear facts about your finances or subjective emotions such as fear or confidence?
As someone who is advanced on the path to financial independence and retiring early, it seems obvious to me that one would know what one expects to need in retirement, and how close one is to building a pot to generate that income. Yet the vast majority of us seem not to. Those I know who have taken the time to work it out seem to be the ones who are nearer to achieving the retirement they want. Hmm…
So, whether in your personal or business life, do you know the various choices open to you? What are the financial consequences of each of those choices? What cash will you need up front and what are the ongoing costs? What is the predicted return?
If you don’t know, how will you know if you have enough reserve? How will you make the choice?
In recent months I have invited you to consider your perfect life, and the steps you will need to take to get there, and the choices involved. Now I invite you to truly understand what reserve you have, and what reserve you will need. Then you can plan to get there.
I’m not a financial adviser, nor an accountant, but in recent months I have increasingly found myself coaching clients on these money issues. My practical, logical line of questioning and an appreciation of the consequences of various options has helped several clients make better choices. Happy to do the same for others, if you or someone you know would benefit.