First of all, I would like to blow away a myth which can be found almost anywhere, which sounds like this “If I would have a bigger salary, I would get the financial welfare”, which is not true, once you have a bigger salary, your life standards will grow automatically.
This happened to me, when I was smoking (I am not smoking anymore), I used to smoke cigarettes that cost around 1 euro (in the Republic of Moldova, cigarettes are cheaper) and when I started to earn more money I automatically started to smoke the most expensive cigarettes on the market, that cost more than 2 euro.
It is then when I understood that in order to get the financial welfare, a high salary according to the conditions in Romania, even if it is one – two thousand euro per month, it is absolutely insufficient. The more you get, the higher the needs and expenses become (law of needs increase).
From the financial welfare point of view, it has no importance if you get 300, 500, …, 1000 or 2000 euro per month.
If you spend this entire amount immediately on the current needs, you remain anyway in the same category – in the category of financially dependant people, who are in the area of permanent financial risk.
And if, at a certain moment, you lose your well paid job – such probability is always there, as the old age gets close, it becomes even unavoidable, the more painfully you will bear then the decrease of the income and consumption level you were used to, due to the miserable pensions nowadays.
When the pension system was created, it was estimated that approximately 3 employed persons will financially support a retired person, which actually was happening until few years ago, but for some time now the situation dramatically changed, at this moment the situation being reversed in Romania, one employee financially supports 1.8 retired persons and, as the years go by, this difference tends to grow more and more, so that it is estimated that in 15-20 years, based on the fast aging of population, one employee will carry “on its back” 15 retired persons.
What I said above was confirmed also by a state official from the government, who said a while back that in 15 years the retired persons will receive only 15 % out of the money they should normally get, proving once again that the pensions system is a bankrupt one. And the biggest problem is that people continue to blindly trust that the government will take care of them when they will be of old age.
In order to efficiently manage your money, you only need 20% knowledge, the remaining 80% is only behaviour, this is the reason why only 0.6 % of the people worldwide have financial freedom and money are working for them and 63.3% are in the area of financial chaos, not knowing what they are spending money on and not having a penny saved for the reserve fund.
Wealth is not measured in money, but in time, if you stop working today, how long can you live with the money you have now … 1 month, 3 months, 6 months or a year, this period is your wealth and if 67% of people lose their job, they are unable to cover their expenses even for 2 months.
Therefore, the need, without any other alternative, for each person to permanently invest and reinvest part of the current income can be justified as follows. Each of the persons reading this article will live, in average, up to 80 years old (the average life expectancy in Romania is 72 years).
You started working at 20-25 years old and you will work, in average, approximately 40 years and you will live another 15-20 years at retirement, also trying to work somewhere else. So, you have not won anything or almost anything in the first 20-25 years, the pension will be also very modest, delicately speaking, and in the almost 40 full years of work you will have a maximum income for approximately 20-25 years: young specialists have small salaries, close towards retirement illnesses begin to appear, women are approximately 6 years in maternity leave, unforeseen job discontinuity occurs sometimes, as well as the need to go to less well paid jobs etc.
So, you will have a maximum income for approximately 20-25 years. In order to support yourself and your close ones you need: 55-60 years – yourself, 20-25 years – at least, for your child (considering you will have two children and the second child is dependent on the income of your life partner).
Besides this, it is necessary to help your elderly parents (they have supported you until you were 20-25!) and, usually, to support your wife at least during the periods of giving birth and taking care of the babies, and sometimes to support your close ones when they are in trouble. Therefore, the 20-25 more “fruitful” years should allow you to support yourself and your close ones for approximately 100 years, meaning a “rich” year should allow you to feed 4-5 less fruitful and unfruitful years.
How can you solve this task of vital importance, maybe even the main life task? Work until exhaustion almost until the last day of your life? It is a very sad perspective; then again, will they keep you at your job until old age today, when most advertisements about vacant positions are inviting specialists “up to 35 years old”?
Saving for “rainy days” is an important part of the income during “rich” years, or keeping your money “in a sock” or in a jar? They will be mercilessly “eaten” by inflation: even according to the official data, it represents approximately 5-10 % per year, but it is actually twice as high.
If an investment with profitability of 20% per year multiplies the amount you deposit 1470 times in 40 years, exactly the same a 20% inflation will depreciate your savings kept “in a sock” in a similar proportion, namely also 1470 times (and your money goes down the drain!).
Conclusion: no matter how hard you struggle, there is just no other alternative to solve the above mentioned problem of vital importance, except investing a significant part of your current income from the “fruitful” years, at least no alternative mankind invented yet.
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