The number-one fear in America is the fear of running out of money during retirement.
Setting Your Infinite Wealth Goal
The difference between the Rich Woman philosophy and other financial philosophies and strategies is that most financial planners, experts, spokespeople, and journalists plan on two things happening upon your retirement:
1. You will have a fixed amount of money to live off of that earns you a small amount of interest, and
2. You will have a lower standard of living during retirement than when you were working, due to the loss of a salary or paycheck and rising medical expenses as you age.
The Rich Woman philosophy does not make those assumptions. Instead we assume:
1. You have income coming in every month that equals or exceeds your living expenses… forever, In other words, you never have to worry about running out of money once you retire or stop working, and
2. Your standard of living remains the same or, in many cases, increases.
That is why we measure wealth in terms of time—specifically, infinite time. I can’t imagine a more horrible money problem than being 70, 80, 90 or 100 years old and knowing you are just about out of money.
I was in Honolulu meeting some friends at a beachside restaurant. I took a seat at the bar to wait for them and began talking with the gentleman sitting next to me. He and his wife had both recently retired and they were living their dream of retiring in the islands. They bought a house on the island of Kauai and were on their way to their new life in a few days.
We had not discussed money, retirement, or the economy, yet out of the blue, this man said to me, “I am just a bit concerned.”
I asked him what he was concerned about, and he told me, “My wife and I have looked forward to our dream retirement for many years, and now here we are. My worry is that we may not have put aside enough money to last through our retirement. I guess time will tell.” There was a sadness in his voice.
Here he was, after a lifetime of working hard towards his goal so he and his wife could live their retirement dream in Hawaii, and he was already worried before they had even begun. He was in his first week of retirement and already he was fearful of running out of money. That is not a way to live out the years that are supposed to be your reward for a lifetime of hard work.
Reaching your financial heaven requires determining your infinite wealth goal and aspiring towards your dream, and then acquiring and applying the knowledge to achieve it. Simple? Yes. Easy? Not necessarily. Worth it? More than you can imagine.
Now let’s figure out how you can do that.
To rise to the investor within takes…
You will not get to financial heaven by saving money and investing in 401(k)s and mutual funds. It is virtually impossible. Yet, that is what most financial experts and planners tell you to do. That advice will not get you there.
Investment plans such as 401(k)s in the United States, Japan, and England; superannuations in Australia and New Zealand; or RSSs in Canada were never designed to be vehicles for retirement. They are basically savings plans, and not very good ones at that.
Today, it is nearly impossible to save your way to retirement. Can it be done? For some, yes. For most, no. It’s unachievable for the majority of us because of:
• Rising taxes
(Did you know that the average person in the United States works four months, from January to April, just to pay taxes? This varies from country to country. Check out the statistics in your country.)
• Inflation,
• Lack of pensions,
• Future rising interest rates,
• Devaluation of the dollar and other currencies,
• Insolvency of Social Security, Medicare, Medicaid, and other entitlement programs,
• Insufficient personal retirement accounts.
There was a time when our great-grandparents, our grandparents, and, in many cases, our parents could save their way to a very comfortable retirement. But what worked then does not work now. That is why we have to look at our financial lives differently from the old, outdated, and no-longer-relevant conventional advice.
Where Does the Income Come From?
If the monthly income of your infinite wealth plan does not come from a job, a salary, or you working for it, then where does it come from? It comes from you putting your money to work, instead of putting you to work. It comes from investing your money where it will deliver a consistent return of money back to you. Different investments produce different results. The question is, what results do you want?
There are two primary outcomes an investor invests for:
1. Capital Gains
Capital gains is the game of buying and selling for a profit. You have to keep buying and selling, buying and selling, buying and selling, or the game and the income stop.
Capital gains occurs, for example, when you buy a share of stock for $20. The stock price goes to $30, and you sell it. Your profit is called capital gains.
The same is true with real estate. You buy a single-family house for $100,000. You make some repairs and improvements to the property, and you sell it for $140,000. Your profit is termed capital gains.
Let’s say you bought 10 one-ounce silver coins for $15 each. You sell the coins for $40 each. Your profit is called capital gains.
Any time you sell an asset or investment and make money, your profit is capital gains. Of course, there are also capital losses. This occurs when you lose money on the sale.
Unfortunately, many “flippers”—people who buy a real estate property and quickly turn around and sell it for a profit, or capital gains—got caught when the real estate market turned. The mindset for many was that the market would continue to go up. When the market reversed and crashed, the properties were no longer worth what the flippers bought them for, and there were no buyers to flip the properties to. This is one reason why we are seeing so many foreclosures and people just walking away from homes.
Most investors today are chasing capital gains in the stock market through stock purchases, mutual funds, and 401(k)s. These investors are hoping and praying the money will be there when they get out. To me, that’s risky.
As long as market prices go up, capital-gains investors win. But when the markets turn down and prices fall, capital-gains investors lose.
2. Cash Flow
Cash flow is realized when you purchase an investment and hold on to it, and every month, quarter, or year that investment returns money to you. Cash-flow investors typically do not want to sell their investments because they want to keep collecting the regular income of