I had my own international management consulting company for almost 20 years. I travelled around the world, and while I was never a world-beater, I was acceptably successful. It was fun and rewarding, but very hard work.
Waking up in the middle of the night worrying about where the next assignment was coming from, what the cash flows were like, when they would get better, and so forth. Cash flow was always the primary concern. Fortunately I could always even out my cash inflows versus cash outflows so that I usually had something tucked away for the rainy days.
The strains of mortgage, school fees, living expenses, new cars, clothing, travel expenses (unless the client paid for it), and on and on, all took their toll over the years. There never seemed to be a day when I could relax and refrain from worrying. This initiation into personal finance and how to cope with the swings up and down, taught me a very valuable lesson………….. never let that happen again, especially when in retirement.
Well, I AM in retirement now, and by luck and common sense and a bit of good financial planning, the cash flow worries have substantially been avoided. The feeling of relief cannot be over-stated.
What was the secret …?
As money became available for investing through the years, I always invested it in an “annuity strategy”. The funds invested (the principal) are treated as a non-spendable money, but the income derived therefrom was the sole factor in whether to invest in a particular security or not. The investment yield money is the spendable money.
For example, if I had $10,000 available for investment I could get say 6% return, then the $600 would be classified as annuity income for life. And I would still have the $10,000 principal. I appreciate that circumstances change in the investment world which could change the 6%, but the value proposition to me was that $600 or thereabouts could be classified as cash flow income into retirement.
And I hear you saying that a 6% yield in these times is impossible. Not so. I will discuss specific investment strategies in subsequent articles.
For the time being, the annuity strategy has been a very useful, yet simple approach. In theory, if you never spend the principal but can live on the annuity income then you will leave the principal to family or charities etc. You may not like that idea of course, but you would have the choice.
Alternatively, you could eat into the principal and super-charge your spending patterns. But if you live a satisfactory and comfortable life as it is, then there is no panic to change.
Retirement living, as much as possible, should be the time in life when the worries of cash flows should be behind us.