From Financial Independence to Overflowing Wealth
One million dollars (cue Dr. Evil Laugh). Sounds like enough money to retire on, doesn’t it? But stretch that amount over twenty or thirty years and it suddenly sounds less ideal. Realistically, that’s sustainable income of about $40,000 per year for 25 years. And that’s if nothing goes wrong.
Most people get cartoon dollar signs in their eyes and focus on the wrong number when they think about their retirement savings. But, It’s not about a lump sum, it’s about creating a sustainable stream of cash flow – up to and into retirement.
Attainable Infinite Wealth
Sounds good, doesn’t it? So let’s investigate a little further and see how close you are to financial independence.
The left side of the Infinite Wealth Diagram is an average person who has put in place a budget that works for them. This is a good starting point. They work hard for a living and generate a decent income. Living within their means, they cover the expenses and save a little excess cash each month. This is most people. This alone, however, is not the path to wealth.
The right side of the diagram is someone who’s living within their means (check out Part 1 in The Path to Infinite Wealth series((link to part 1)) ), saving excess cash, and using that surplus to acquire high-quality, cash-generating assets that will grow their budding nest egg.
When this side is sufficiently strong, our investor can turn off the left side completely and maintain their standard of living purely on their investments. That is financial independence and will create a comfortable and confident retirement.
Put them together, and what have you got? A pathway to infinite wealth.
Making Your Money Work for You
Let’s look back about 200 years, when wealth was built by business owners and landowners. They knew how to get their money working. Today, investing allows you to essentially do the same thing, but in bite-sized pieces. So now, you don’t need a fortune to own great businesses, you just need to apply the right disciplined investment process. But all investments are not equal.
For the purposes of our discussion here, we will focus on two different types of investments:
- Non-productive assets, like gold bricks, parcels of undeveloped land, or even speculative stocks, which cannot be relied on to generate a steady stream of income.
- Cash-generating assets, like high quality businesses, commercial real estate properties, and select other investments can help you build wealth and sustainable cash flow – as long as they generate revenue in excess of their expenses, and share a portion of that excess cash with you as an owner or shareholder.
The second choice is the wiser one, but it’s not always easy finding the investment that will pay dividends. This is where a financial advisor can help, guiding you through the process to finding the right way to invest for you.
Where to Invest
The professional money managers that we work with understand that the most certain path to wealth is through the ownership of high quality businesses. The trick is to look for quality components of a business that will make a great investment. Start by looking for a company, a product, or a service that is:
- Difficult to live without
- Difficult to compete with
- Difficult to replicate
The best choice to grow your nest egg is buying into businesses that have a steady sustainable growth path and pay their owners a large and growing dividend. But, make sure that growth outpaces inflation, or it will chew into your purchasing power.
Even the greatest businesses aren’t worth an unlimited price. Follow the tortoise’s example – slow and steady. Stay disciplined and buy high quality investment assets at reasonable prices.
To do so, it’s important to understand what the business is worth – which involves:
- A complete financial analysis
- Reading its growth prospects
- Watching and predicting industry trends
Enter Bayview Financial. We can help you achieve and sustain financial independence – If your lacking the time, interest or knowledge to go it alone, we can help you build the plan to get there. With enough time, we will help you get to a place where you can live on that right side – retirement.
Looking Forward to a Comfortable Retirement
With an understanding of your cashflow, your goals laid out and your money properly invested, you now have a plan that is working towards building infinite wealth. You have the map of where you want to go, and now you have the vehicle to bring you to that place, through high quality cash generating investments.
Next up: let’s take a look a how to create a lasting financial legacy for you and your loved ones in The Path to Infinite Wealth Part 3