My Cashflownaire Plan has three sequential steps:
- Create monthly cashflow equal to twice your living
- Use 50% of your cashflow to pay off all of your
- After you’re debt-free, use 50% of your cashflow to
build a financial fortress for your family
This plan may seem very basic; however, I can assure you it’s very strategic. Our #1 priority is to eliminate our need for a paycheck in order to obtain our time freedom. To live with autonomy.
The reason why we follow these priorities is because we understand that our time is far more valuable than money. We align our actions and investments around our priorities.
My Cashflownaire Plan and the required three steps may be challenging for some people. This is because Step One requires us to focus entirely on investments that provide monthly income. We don’t make investment decisions based upon appreciation until we’ve arrived at Step Three.
The main reason is because we don’t want to risk money we cannot afford to lose chasing appreciating investments. This would be one of those insane trades Buffett would warn against.
My plan obviously goes against what financial planners advise. They would actually suggest that you invest the majority of your money into long-term growth investments so that you’ll be able to retire in your 60s and live happily ever after.
Oddly enough, these financial planners do not have time freedom in their lives. They’re all working for money. They haven’t achieved the glorious “Position of F – You.” So why should we listen to them when they haven’t obtained what we want in our lives?
NOTE: If you read Buffett’s annual shareholder letters, you’ll probably see that he invests mainly for income. He does NOT invest for appreciation. Appreciation is simply a bonus on top of the income collected from Berkshire’s investments.
For some people, it’s very hard to focus on income without any consideration for appreciation. This is because we’ve all been brainwashed to invest for appreciation.
To help those who want to profit from appreciation, I thought I would
highlight a solution that may provide a way for you to get your cake and be able to eat it too. This solution is to combine cashflowing assets with appreciating assets as if they were ONE investment.
To show you how this might work, let’s walk through an example of someone who wants to invest $20,000 into “Toll Position” opportunities.
Here’s How You Can Combine Two Investments to Benefit from Monthly Income & Appreciation:
$15,000 Mobile home investment +
$5,000 into shares of Amazon stock
The $5,000 investment into shares of Amazon will not provide any cashflow, as Amazon doesn’t pay dividends. Jeff Bezos reinvests all of Amazon’s cashflow back into the business and it’s a compounding machine.
The $15,000 investment into the mobile home is an investment that will provide monthly cashflow. We’ve kept this as our #1 priority, as we have invested 75% of our funds for income.
This $5,000 investment, which is 25% of our funds, is therefore made purely for appreciation. We’re hoping our Amazon shares will be worth more than we paid when we’re ready to sell them down the road.
Please notice both investments were into “Toll Position” investments. You can learn more about “Toll Position” investments in this free report.
This combined strategy may actually provide a hedge against losses in each individual investment. A stock market crash will not impact the mobile home investment, and a problem with the mobile home investment will not
impact the shares of Amazon. The two investments have zero correlation and provide a small amount of protection for the combined total investment.
This combination of investments may allow the investor to benefit from both monthly cashflow and appreciation.
The downside to this strategy is that it will delay the time required to accomplish Step One in our Cashflownaire Plan. This means it will take longer to achieve your time freedom, and this is because this investor isn’t allocating 100% of their investible assets to generate monthly cashflow.
Delaying the accomplishment of Step One carries two significant opportunity costs:
1 – The first opportunity cost is that you’ll have to work longer before completing Step One. This means you won’t experience the lifestyle benefits of not having to go to work for money.
You’ll still have someone else controlling your schedule, telling you when you have to work and what you have to wear. You’ll still have to deal with a pain-in-the-ass boss and may have to continue kissing ass, playing the corporate world game.
2 – The second opportunity cost is the additional monthly cashflow streams and wealth you would have been able to create once you had achieved time freedom.
Once you have control over your time, you can create “Toll Position” businesses. These “Toll Position” businesses may allow you to significantly increase your monthly income streams. They may also allow you to build more wealth as you’ll have more money to invest.
The reality is most people don’t “see” this second opportunity cost. They only see the lifestyle benefits of not needing to work for a paycheck
We need to be able to see both costs.
Let’s say you don’t allocate all of your investible dollars into assets providing monthly cashflow, and this decision requires you to work full-time for an additional five years before you eliminate your need for a paycheck.
How much will this actually cost you?
Well, it’s easy to see it will cost you five years of 40-plus hour workweeks. This is over 10,000 hours of your precious life. This doesn’t even consider having to deal with your daily commute and the actual cost of work including: gas, clothing, and stress.
More importantly, how many future monthly income streams will you lose because you won’t have time to create them?
How much additional future wealth will you lose?
If you didn’t have to work 40-plus hours a week for a paycheck, could you create an additional 25 income streams a month each year? Probably!
25 new income streams created each year for five years would be an additional 125 monthly income streams. This means working full-time for an additional 5 years may cost you 125 future monthly income streams.
If you averaged just $100 per income stream, you’d lose $12,500 of monthly income by continuing to work. You’d obviously lose $25,000 of monthly income if you’re average income stream was $200 per month.
The average person doesn’t see any of this.
All they see is what they’ve been taught to see, which is that their 401k balance is higher this month as compared to last month. They don’t see the various opportunity costs associated with this retirement plan.
They also don’t truly grasp the magnitude of risk they’re assuming with their plan. A stock market crash close to their retirement date could be devastating.
Thankfully as Cashflownaires, we see all of this, and we focus mainly on creating monthly cashflow. We take actions that are aligned with our priorities. We think for ourselves we don’t blindly copy the priorities of others.
And we also work our asses off to complete Step One as fast as we possibly can because we understand what’s truly at risk.
P.S. If you would like to learn more about mobile home investments, you can check out a recent CASE STUDY of one of my investments here.
P.P.S. In this post, I mentioned the “Toll Position.” This is a very important strategy to understand and use to your advantage. I’ve detailed this strategy in a report you can download here.