I read financial news quite a bit, perhaps too much. Typically Yahoo. One recurring theme in personal finance headlines reflects this obsession with how much one has saved for retirement. What is the value of your 401k or your net worth or some such tally of assets.
Questions like, "I have $3 in savings for retirement, am unemployed, and wonder if it is enough to retire early?" My immediate response is "Uhhhh, well, sure, why not."
On the other end there are those who say "My wife and I have $6 million in savings and are concerned we don't have enough to cover health costs in retirement." I'm like, "If 6 mil is not enough I'm not sure what another mil will do to fix it."
It's Not About Assets
I always had this notion in my head that I wanted to be able to say someday that I was a millionaire. Can't say what that was all about (I still don't know) but it was just one of those goals I had hanging out there.
I also recalled saying somewhere in my late teens that I was going to be a millionaire or dead by 30. Living the rather reckless lifestyle I was at about that time, the latter was more realistic than the former. And by the time 30 came and went I had achieved neither. I suppose I should be thankful.
Who needs silly goals when you're burning through life like a Roman candle. I did rather quickly settle into living a rather 'normal' life and let go of such foolish things. Well, not entirely.
So, here I am some 38 years later I can say I am a millionaire. Turns out a million isn't what it was nearly four decades ago but also better late than never.
But it's more than that. Aside from the fact that a dollar doesn't buy you what it used to, the pursuit of net worth or net assets is somewhat off the mark as well. At least that is my view of the situation.
I recall reading Kiyosaki's Rich Dad Poor Dad many years ago and the one thing from the book that stuck in my mind was that an asset is something that pays you. If it costs you money to possess it then it probably isn't an asset.
From his view, a house is not an asset but a liability. So too a car. Now that little nugget runs contrary to modern accounting principles.
The bottom line from Kiyosaki's perspective is that it's about cash flow. Does an asset pay you or do you have to pay to keep the asset.
We Live on Cash Flows
Okay, first off I understand that the aim of most financial planners who talk about the import of growing assets of various sorts as we go through life is to be able to afford a certain lifestyle when we quit working. I understand the logic of accumulating 401k investments, savings accounts and real estate and such assets.
The aim is to have enough in assets so as to draw down or liquidate these assets over our non-working days in retirement and have enough to cover that phase of life. I get it. The trick, of course, is to have the liquidation phase match your life span.
Ideally, your last nickel hits the table the day of your death. Good luck with that.
However, we don't live on assets so much as we live on money flows. So, Social Security is a significant inflow for most in retirement. Unfortunately for way too many it is the only flow or the bulk of their inflows.
I wanted Social Security to be only a portion of my income. In fact, I wanted it to be the portion I didn't really need to live on. No little trick for most of us.
The only way to do that is to develop alternative streams of income.
I have to confess at the outset that I've really made some crappy investment decisions over the years in the name of diversification. I call them lessons from the School of Horrible Investing and True Stupidity (affectionately referred to as the S.H.I.T.S.).
I can also say I've made a number of good moves in recent years. I suppose that is the nature of investing, there are risks. Win some, lose some. Few things are guaranteed.
And there truly is a learning curve to finding one's groove so as to win more than lose. That's a topic for another day.
Broadly speaking, I've invested in rental property (real estate that pays me well and pains me much at times), crypto (not for the faint hearted but wow!), foreign ag investments (internationalize some risk), stocks for growth and dividends (stocks themselves are a bit bloody these days), gold/silver (long-cycle ups and downs), uranium (doing well these days), alternative energy (some pain here in recent months), marijuana (been a blood bath in past year or so, again) and online business (has potential if not for the neglect).
My goal is to reduce Social Security dependence to under 25% of all inflows. This is being done in part because I am skeptical of Social Security's viability over time, but also because my wife is over 10 years younger than I am and thus has accumulated fewer benefits from Social Security. So, alternative flows are important.
The above goals assume we spend a few months a year living and traveling outside our local area.
Like all things in this life, who knows how our individual story will play out. Something about 'mice and men' seems appropriate here.
Cash flow is the life blood of our financial lives. Accumulating assets is an important lifelong process. But getting assets to pay us is a more important and a more sustainable financial plan than simply liquidating the assets later in life. Who knows how long our individual stories will last.
Individually we're more than a life expectancy table.