Shew, this month has been hectic! Yours as well?
We’re on the last of our three blogs on the “I” of the acronym, LIFE. So far, we have covered Live, Laugh and Love. Then Imagination and Inspiration – that was a tome as I re-read it 😊
Today, we’ll cover Investment and I promise it will be shorter. Nonetheless, I am again ready to “throw my heart into it”.
Albert Einstein dumfounds me when he says, “The most powerful force in the universe is compound interest.” Every time I read it, I think he must have had unaffordable debt and he couldn’t believe the cost of not being able to pay it off on time, but, of course, that’s tripe – if he ever had debt, he knew how much money he repaid. We, at Homeloan Junction know that at 10%, a 25-year bond is 2,5 times more than the original cost. Throw in the transfer, attorneys, etc and buying houses are expensive.
Of course, this type of compounded interest we all know well. Hopefully, we also know enough to never incur credit card, and upwards in the sense of interest rate debt. My rule is simple,what you can’t settle on your card at month end, can’t be bought. With that rule, I buy almost everything on my card and just settle the balance at month end. Negative compound interest kills and especially when no tax deduction lessens the load on our purse. The inverse is Investment. Here, compound interest works splendidly.
The other day I helped an elderly lady consolidate her investments; little bits and pieces in three financial institutions. Wow, what a surprise as I trawled through old records dating back to the late 90’s when she retired. Figures like R43000, R60000, etc, but nothing too rich. Unsophisticated investing – a unit trust, fixed deposits, money market, etc. To our surprise, the total amount was over R600000! The reason is that she has lived off her dwindling pension in real terms and never dived into even the interest of her investments. Then, every 6 months or so, she would be advised to re-invest and she did. The lot just grew and grew and the end result was unexpected. No wonder a friend of mine once asked me, “What’s the best investment?” I waited and he told me, “The one you stick to.” You see, the elderly lady could probably have done better in Naspers, but what she knew all well was that time and interest are directly correlated and maybe she didn’t maximise the opportunity, but she had enough. I am not an investment advisor, but here are some generic rules for Investment from personal experience.
Time is measured two ways, the length of time you save and the length of time you don’t.
You see, R500 per month over 40 years at 8% earns you R1745504. The problem of not starting 40 years ago can be expressed in three ways:
- 30 years: R745180
- 20 years: R294510
- 10 years: R91473
This is the way we normally look at it and, often, we look at it relative to a fixed date, retirement, child’s education, the coffee shop we’ve always wanted to own etc.
There is another way and it’s not insurance broker-speak, just a fact of life – Cost of Delay. You see, the numbers of 40 and 30 years may kinda look alike, but the difference is R1000324. That’s a Million Rand! Compare it to the R91473 which you save in the first 10 years and the number is 11 x [1000324/91473] more than you could save. That’s the awesome power of compounded interest. It builds like a hockey stick at the end if you have not touched it.
You see, when the “fixed date” arrives and its retirement, the third problem is that you just don’t have 40 years of R500 per month to catch-up. Very sobering, I know.
In case you think you’re the only one who missed this, I took out a unit trust in 1976. It was R50 per month. As a guess, the JSE Index would have been about 500 then. Today it is 55000. Doing the sums, that’s 11.22% growth plus dividend yield of, say, 3,5% would total 14.72%. Using that “interest rate”, my little R50 per month investment would be worth about: R1900000. Makes you think, doesn’t it?!
So, the moral of the story is: Take out an investment while you’re young. Don’t delay, and then, stick to it.
You know as well as I do, that the money part of this Investment is the easy part. Life calls for an investment as well. For that thought, I turn once again to my old well-known guy, Dr Dennis Waitley, who said, “It takes as much energy to live a good life as to live a bad one. So live a good one.” There’s a thought, but we also know we don’t always put the “good” together long enough to make the ultimate difference. We sometimes stumble up and then stumble down and then stumble up again.
We all seem to do it; I include myself. On the negative side, it seems we have the ability to:
- Regret we failed
- Regret we tried
- Then try again
- Repeat the cycle.
You there as you read it? The downward spiral of defeat and “if only’s”? You know that the only failure is failure itself. “Don’t judge me by my successes, judge me by the times I failed and then stood up again”, said Nelson Mandela. Read some of his books and this understanding of life permeates them. “I should have…”, “I could have…”, “I shouldn’t have…” are often on his lips but in the end, “I did, and if I failed as I or some may think, I tried again.” [My way of expressing this man’s attitude to Life]. Ultimately, despite the naysayers, Nelson Mandela succeeded beyond our expectations.
So let’s rerun a “good life”. One that you invest time, energy, and a focus on priorities into:
- Forgive yourself or ask forgiveness
- Repeat the cycle.
You see, investment in yourself tries, parks the past, learns falling forward, and never gives up. Please hear me!
Taking from the financial lessons above:
- Start as soon as possible. Lives also endure the cost of delay.
- Invest regularly and as much as you can. A little study is better than none. An hour a day extra doing what you believe is important, not urgent, is 3650 hours of extra focus on your priority every 10 years, not just your “stuff”.
- Opportunity cost is real. Redefine your focus by all means, but don’t stop doing what is right for you.
- If you’ve wasted time, stop regretting it and get on using the time you have left.
- Forgive yourself, you’re better than you think.
- Celebrate successes, even if you’re alone.
I don’t want to go on to produce a tome like Inspiration, though I could. Thus, a closing thought from the Good book. Job is a well-known story – a great guy who loses everything and then recovers “twice as much as before.” At the end of chapter 42, the last verse says this: The he [Job] died an old man who had lived a long, full life. That fact stuck with me when I read it about 2 weeks ago. Long is easy – Job died at 140 years of age. Right now, scientists are telling us that the person who will live 200 years has been born. Whilst I’m thrilled that’s not me, the “full” caught my attention and has wandered through my thoughts since. What is a ‘full’ life? What things have I done, seen, been to, given attention to, consistently undertaken, left, adopted, listened to, read, spoken about, focussed on, achieved, believed, debunked, tried, striven for, loved, hated, bought, sold, eaten, experienced, achieved, learned, given birth to…that makes up a life that is “full”? I’m still teasing this out so I don’t intend to answer my question right now. However, I encourage you that if something in the question, or anything else above it, has struck you, read it again, begin to coagulate your thoughts, mind-map them and let them develop into something positive and forward-thinking.
As the business of HLJ, we are all on this journey. We have chosen to associate with each other. We have common ground, knowledge and resilience. Use what we have to make a better place from our inside out. Touch lives and encourage them upwards once again. For those on a high, imagine the possibility of being an inspiration to the rest of us and invest some time in all of us, and all of the others, you meet.
Yours in Property.