I’m back from a brief hiatus. Thanks for your understanding. I should be back on my Tuesday/Friday posting schedule unless I have more tech issues. Have a great weekend!
And now on with the post…
Regarding retirement, slow and steady wins the race. But what do you do when you have pushed retirement savings to that targeted 20% of income. If you’re saving 20% in a matching 401(k), then to the Roth IRA, and then back to 401(k), what’s the next goal?
There are three alternatives many people consider during the accumulation phase.
Penny pinching is good, but what happens when you have arrived, so to speak? (I’m still on my journey!) I have found two schools of thought on continued wealth accumulation. One is the F.I. movement. Another is diversifying with more streams of income. And you could of course start to harvest.
1. What is the “F.I. movement?”
The initials F.I. stand for Financial Independence. You may have also heard about F.I.R.E. That’s Financial Independence Retire Early.
In essence, F.I. is ramping up your 20% to as high a percentage as possible. Jim Collins even talks of going as high as 50% being plowed into VTSAX.
Just VTSAX and Relax! Share on XF.I.R.E. adds the “retire early” piece to end. However, most people who work hard enough to achieve financial independence don’t just stop working. They’d likely get bored. There really is no end to the process until we die or are mentally and/or physically incapable. As a result, many people opt for just the F.I.
Finally, this option could involve investing as much as possible into a 401(k)/403(b). For 2022, the contribution limit is $20,500, $27,000 if you’re 50 or older.
2. What is the multiple streams of income approach?
Although I don’t remember who said it first (I think Tai Lopez says it often), I remember learning that millionaires have – on average – 7 streams of income. (Please fact-check me on this.)
For most of us, our first stream is our regular day job. For instance, my regular day job is being a high school math teacher.
After that, people looking to increase income (and therefore the ability to invest more) often start blogs, podcasts, YouTube channels, sell online courses, invest in real estate, become affiliates, etc. Doing any of these things is relatively cheap. But the low barrier to entry usually means investing at least 24 months of sweat equity to replace primary income.
3. What about just spending it?
For sure! Remember to enjoy the fruits of your labor. The reason we work is to fund our lives. You’ve worked hard for the money, so I say don’t be afraid to treat yourself. Treating yourself doesn’t have to be extravagant. My wife and I will celebrate milestones like birthdays and anniversaries. For bigger milestones, we do bigger celebrations. For example, Carol and I saved up to go to Ocean City, MD for her 50th birthday, and we had a whole entourage.
So invest more and/or create more streams of income, and of course spend it!
As Always…
Thanks for reading! I hope this information provides food for thought. Remember that I am not a certified financial planner, a certified public accountant, a licensed real estate agent, etc. My content is for educational purposes. I am a math educator who happens to have a finance degree. Like they say, never take financial advice from a math teacher! (Do they really say that?)
But you should spend less than you earn, invest the difference, and stay out of debt!
I would so appreciate your sharing my content with anyone you feel could benefit. And if you would like a free exploratory conversation or just want to shoot the breeze about personal finances, call me and leave a message or send a text to 570-731-0425.