Wow, I am 40 years old, and I am starting to realize how life works. I have realized that the more serious I take life, the easier it becomes. Also, the more fun I have with my family and friends (if I have any), when our finances are performing well.
This article stems from some recent conversations my wife and I have been having. I was on my way back to Japan, and the airline canceled my flight to Seattle due to the weather. So, I have been stranded in Seattle for nine days and hopefully leaving in a few hours.
Anyways, my wife and I have talked for hours on end while I pace my hotel room. Although we talk about issues with our properties, jobs, and friends, nothing truly concerns us. Why is this?
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Nothing concerns us because we have worked hard to get ahead of the power curve of life. As soon as we started taking life and finances seriously in early 2019, our lives have changed significantly for the better. Life is not a game.
Let’s take a trip. My wife was talking about our earlier days of marriage. We have been married for 15.5 years and have had the requisite ups and downs—and made money mistakes. I remember buying every annual iPhone release for four straight years. Now my phone is 4.5 years old.
That is part of taking life seriously. Getting your finances together and preparing for retirement will change your life—especially if you are average (like us). I think the biggest misconception floating around is that saving five percent (with additional employer-matching) will somehow be enough money to retire comfortably.
The first step to taking life more seriously is finding out how much cash flow you will need in retirement? There is nothing more vital than having an income plan. After the income plan comes the tax, estate, and succession plans.
Why is the income plan essential to our current lives? How can you truly enjoy today if you don’t know what tomorrow holds? Let’s look at two examples of a carefree couple in their 40s and another serious couple, also in their 40s.
Create a Never-Ending Stream of Content 2
Carefree couple, 40 years old. Our carefree couple loves to eat out and travel. They religiously save five percent of their combined $150,000 salary. Their companies match their contributions to their 401Ks. Outside of their 401Ks, they have $50,000 saved into high yield savings account for emergencies.
When they reach age 66, they will have $1.3 million. The income from their investments will be $4,300 (pre-tax) plus a combined $4,000/month from social security. They are doing well with $8,300/month of passive income at age 66.
The problem is they are not satisfied living on this budget. This amount of cash is a lot less than their working years, and they were hoping to travel the world during retirement. Although they are comfortable, nothing satisfies them like traveling, and they can’t travel nearly as much as they would like to annually.
My 60-Day Pre-Retirement
Serious couple, 40 years. Our serious couple also makes a combined $150,000/year. They, too, invest five percent (matching) in their 401Ks. Their hobbies include international travel, football games, and expensive wine tastings.
At age 40, they somehow discover the fantastic book by Joshua King 9 (me) titled “Don’t Gamble with Retirement 3 + 4 (free pdf).” They learn the most critical part of a future plan is having a plan (no pun intended).
They decide that they want to achieve $20,000/month in passive income by age 66. In addition to the same $8,300/month that the carefree couple makes, they also start planning other passive income sources.
They decide to save and invest 60% of their income by house-hacking, blogging, and running a small vending machine operation. They invest their income into high-yield products to receive a high return and keep a small dividend growth portfolio for their heirs.
Over-Budgeting 2: Low Expenses, High Income
By working their rear-ends off during their 40s, they achieve $20,000/month in passive income by age 55. This total is before social security and 401K withdrawals. They decide to retire rich, retire comfortably while running their blogs and vending machine business.
The serious couple is infinitely content with their choices and each other. Best of all, they learned how to create money—and build and maintain wealth. If an emergency arises, they know how to counteract it by making more income.
What did you learn from this simple example? As two people who became serious together, I can tell you that forging a path together is so much better than not having a plan. As soon as my wife and I decided to create enough passive income to live overseas, our lives changed forever.
Life is not a game where we all end up as winners. The vast majority of us will not be content with our income at age 66. Why would we not want to enjoy this magical time in our lives? Because most of us over-spend the earned income during our working years.
How do I start taking life more seriously? Okay, how much money do you make today? Are you satisfied with this amount? If you make $120,000/year now while working, and you’re happy, then plan for needing $120,000/year in retirement (inflation-adjusted).
I Have Everything I Want in Life… And Then Some
The difference is that you will not be working, so passive income is the key to keeping your income. Once you understand how much money you need to earn passively, the next step is to focus on your financial mindset. Building streams of passive income is not easy, and it can take its toll on your mind.
After you have the right mindset, understand how challenging the task ahead will be, and accept the challenge, you just need to know what income stream you want to build.
I divide my passive income into six types; retirement income, rents, dividends, royalties, cryptocurrencies, and automated business. Take it one at a time, set your goals, and go after them.
You’ll become serious. As you (and your partner) begin to focus on your goals, you’ll become more serious. You will exchange things like boats, motorcycles, and RVs for dividends, ATMs, and land. It sounds boring, but nothing is more fun than becoming rich together, over time!
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My wife and I started young and poor in 2006. Now, we have a $200,000 dividend portfolio, three homes, a military pension (coming), and a blog/book business. I am 40, and she is 37. We have so much more life to live.
We don’t worry about little things like we used to in the early days. Everything we do has some sort of future implication, yet we can still let loose and spend dividends on a whim. The sooner you start working towards the future, the sooner you’ll achieve your financial goals.
Conclusion. Who would you like to be, the carefree couple or the serious couple? Although the names sound confusing, make no mistake, the serious couple will be happier throughout life.
Don’t let the world tell you that your 5% investment per month is enough for retirement. Life is not a game, and what’s at stake is your long-term health, fun, and livelihood. All you have to do is say the magic words, “Life, I take you seriously.”
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