“Insure a future income” is the sixth “cure to a lean purse”, as found in George Clason’s well-known book, The Richest Man in Babylon. If you have been following this relevant series on financial wealth, you understand that ensuring a future income fits right into the puzzle we have been assembling for a foundation of financial success.
Quoting our richest man in Babylon and instructor of these cures, Arkad, “The life of every man proceedeth from his childhood to his old age. . . Therefore, do I say that it behooves a man to make preparation for a suitable income in the days to come.” Arkad instructed his followers that they need to provide a “full purse” when the time comes that they are less able to earn. That age-old principle applies today! If we want to retire comfortably, we also need to have a retirement plan. We can do that by setting aside money to be invested for our retirement, controlling our expenditures, helping our money grow and guarding our money from loss.
However, this piece of the puzzle gets more complicated because of the many pieces available to help people save for their future income. There are 401k plans, 403B plans, pensions, lump sums, IRAs and ROTH IRAs, to name a few. All of these can be tremendous tools. But most people are overwhelmed by the many choices and don’t know how to effectively use these tools. This is where financial education and guidance are so important (puzzle piece #4, Guard thy treasures from loss). (Reference Blog #3 in our series.) We encourage you to consult with a Certified Financial Planner™ professional and let them teach and guide you in the options most suitable to your goals.
Obviously, the younger we start putting money away for our retirement the better. By doing this, we take advantage of an interesting concept called “compounding interest”. To quote Benjamin Franklin, “Remember that money is of a prolific generating nature. Money can beget money, and its offspring can beget more”. For example, investing $5,000 annually for 10 years, earning 8% and starting at age 25, yields $615,000 by age 60. While investing $5,000 annually for 25 years, earning 8% and starting at age 35, yields about $432,000 by age 60. That is 30% less total nest egg accumulated on more than twice the dollars invested! *
“This, then, is the sixth cure for a lean purse. Provide in advance for the needs of thy growing age and the protection of thy family.” Have a great weekend!
*This is example is for illustration purposes only and does not represent any specific investment or investment strategy. Taxes and costs associated with any actual investment or investment strategy are ignored for the illustration. This example is not intended as an offer to invest in any specific security or investment strategy.
Clason, G. S. (1926). The Richest Man in Babylon. New York, NY: New American Library.