Retirement planning is serious business; YOUR retirement is even more crucial than everyone else’s. You won’t survive long if you don’t prioritize your retirement over everything else.
This may sound selfish; however, it is the truth. No one is coming to save you. To have a healthy, wealthy retirement, you’ll need to start planning today.
I call my retirement system “Happy Cash Flow Retirement” because it uses cash flow as the basis for the program. Without cash flow, your finances will starve.
Bond Growth Investing
But there is more to the story than just cash flow, as your retirement requires a budget and a plan. Let’s discuss all three today.
Step 1: The Plan. How many Americans have a concrete retirement plan? I have no idea, but most Americans cannot cover a $2,000 emergency expense with their savings, so they probably don’t have a retirement plan.
The first step to a healthy, wealthy retirement is creating an actionable plan—meaning setting achievable goals. What do some of these goals look like?
Where do you want to retire? Who will be on retirement with you? How often do you want to travel or eat out? What are some things on your bucket list?
Answering these questions early will help you create a budget that allows you to accomplish your retirement goals.
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Without retirement goals, you’ll make do with whatever social security pays you. You can do better by sitting down and writing out your plan. Let’s look at my plans.
I created my retirement plans in 2019. I wanted to retire from the Marine Corps and travel easily between the United States and Turkey, as my wife is from this region of the world.
I knew this kind of travel would be expensive, so I had to set very high-income requirements for it. I also knew I wanted to help my kids financially, which is another costly luxury item.
Other things to consider are whether you want to pay off your house before retirement and whether you’ll live in a high-cost area.
Saving for a House Down Payment #4
The toughest part of achieving your goals is thinking of them and then writing them down. Once they exit your mind, you have a better chance of accomplishing them.
Step 2: The Budget. Maintaining a retirement budget is vital to leading a healthy, wealthy retirement. Without a budget, your lifestyle will be in jeopardy.
What’s the difference between living on a budget and living on a fixed income? With a budget, you determine your spending habits outside of your income.
When you live on a fixed income, you let your inbound cash flow dictate your life. Let’s examine this further, as it is an important distinction.
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Let’s say you receive $5,000/month in retirement income (pension, social security). If you live on a fixed income, you’ll spend $5,000/month and run out of money every month. When you receive cost-of-living increases, you’ll quickly spend those as well.
When you live on a budget, you’ll spend $3,500/month on expenses. You’ll move to a location where this is possible. You’ll save and invest the remaining money to generate additional cash flow.
When you get pay increases or windfalls (taxes, insurance, inheritance), you invest it because you don’t need it to survive.
Living on a budget allows you to be ahead of the power curve constantly. You control your spending, not the other way around.
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My wife and I started living on our $7,000/month budget in 2021 when we made considerably more income.
As my military retirement approached, I discovered my pension and benefits would total $9,000/month. With that, I knew we were financially free.
I retired in 2023, and my wife and I still adhere to our $7,000/month budget. This allows us to save and invest over $5,000/month.
While my family and friends continue to work, we can save more than they can. I am not bragging; I am simply stating that budgeting works.
You can cross reference your dreams with your budget. Your budget should be simple and easy to read. You can include things like property tax and insurance ($600), utilities ($1,000), food ($800), transportation ($500), spouse 1 personal budget ($600), and spouse 2 personal budget ($600).
Renting Rooms vs. A Recession
If you stick closely to a similar budget, you will be very successful in retirement. My passive income and net worth grow every year, even during retirement.
Step 3: Cash flow. Cash flow is the heart of your retirement. Your budget keeps you grounded in reality, and cash flow allows you to live your dream life.
Let’s explore the magic of cash flow. Let’s say you invest $1,000/month into a high-yielding closed-end fund like PIMCO Dynamic Fund (PDI). This CEF yields 11% and plays monthly.
After three years, you would have at least $36,000 in PDI (more if you reinvest). That $36,000 would pay you $3,960 annually or $330 monthly.
You can use this $330 any way you choose. You can eat out, or save it to go on a vacation. The main point is that it is not part of your $7,000/month budget.
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You can also create income from thin air by making art or music. You can become a writer, podcaster, or YouTuber.
My wife is starting to knit bears, which she sells for $30, which gives her a $10-15 profit. More importantly, she is generating cash flow that she can invest in the markets. Every penny counts.
One of my favorite ways to generate cash flow is to have a roommate. Our current roommate pays us $1,000, which contributes a huge margin to our $1,700 mortgage.
You can also become an options trader, buy a vending machine, start a dog-walking business, or become a consultant. The options to add additional cash flow to your retirement are unlimited.
Inflation Ate My Paycheck 108
Many retirees do not see the world through the “abundance lens,” which means that they have a scarcity mindset. In reality, there has never been a better time to be alive. If you can dream it, you can do it.
No matter how much money you make, stick to your baseline budget. This will allow you to save and invest additional resources.
Every once in a while, you can take your new income for a spin—perhaps purchase a Slingshot to go to Japan. The main thing is not to increase your monthly living allowances and expenses.
Rental Properties vs. Rental Rooms
You will eventually become wealthy if you can prevent lifestyle inflation (or “lifestyle creep”). At that point, you can give yourself an upgrade to $9,000/month in expenses.
Conclusion. My wife and I enjoy every day of our retirement. We are somewhat simply people who just want to stay on our little patch of Earth.
The best part of our retirement is not having to worry about money. Our cash flow greatly outpaces our expenses, and we have a one-year emergency fund.
If you want to achieve a healthy, wealthy retirement, follow these steps: plan, budget, and cash flow. Do this, and everything will work out in your favor. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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