What if the financial planners are wrong? What if you didn’t have to wait 30 to 35 years to retire?
And what if you didn’t have to sacrifice your standard of living to max-out your 401(k) or IRA contributions every year?
Furthermore, what if fully funding your retirement accounts and waiting 30 years for the market to do its magic were unnecessary? Would you be surprised if the “mountain of cash” you plan to retire on wasn’t nearly as large as the charts you’ve been looking at suggest?
If this is the first time you’ve investigated these questions, you’re in for a shock.
Most financial planners will tell you the market has an average historical return of 8 to 9 percent annually.
But if you look at anyone with their money in the market since the year 2000, their returns tell a different story. Far from rising an average 8 percent or more every year, the Dow Jones Industrial Average has only risen 7.8 percent in total over the last 15 years, when you adjust for inflation.
Take a look: In January 2000, the Dow hit 11,725 (or 16,100, adjusted for inflation).1,2 And in January 2015, the Dow was as low as 17,325, which equates to a gain of just 7.8 percent over 15 years.
That’s a 0.5 percent annual return, rather than one of 8 to 9 percent.
In 30 years at that rate, $100,000 would earn just $16,150. And yet most people expect to retire as millionaires.
So what is the answer, then?
Stream for success
The challenge is that while virtually everyone wants to retire wealthy, few want to make substantial sacrifices. And wouldn’t it be better if you didn’t need to work 30 years before retirement?
The answer to retiring wealthy in just a few years’ time—and without sacrifice—is to focus on cash flow rather than accumulation. Cash flow is the movement of your money on a daily, weekly, monthly, and annual basis.
When money is moving, it’s a living thing, and when it sits idle, death is setting in. To illustrate the point, compare the Amazon River to the Dead Sea.
More water flows through the Amazon River than the next seven largest rivers combined, and it accounts for a fifth of the world’s entire river flow. It’s a ferocious body of water.
The Amazon is also overflowing with life. Civilizations have sprung up on its banks and have survived for centuries.
And then there’s the Dead Sea. Many millennia ago, the ocean receded and left behind a saltwater lake with nowhere to flow. Instead, the water has been stagnant, slowly evaporating, and leaving salt behind. The Dead Sea is literally dead; its water has become so salty that nothing can survive in it.
The accumulation theory, where you set money aside and hope it grows, is treating your capital like the Dead Sea. Whereas cash flow is more like an active river with your money constantly flowing and working to make you more of it.
Once you’ve decided to focus on cash flow rather than accumulation, there are two things you can do: One, you can focus on increasing your monthly cash flow from investments and your practice, which will take some time, effort, and planning. Typically, this will require two to five years. Or two, you can focus on keeping more of the cash flow you already have.
It’s recommended that you do both, but the easiest and most natural place to start is with the second option— retaining more of your current cash flow.
Go with the flow
The three principal ways to keep more of your cash flow are:
Use a tool such as Mint.com to track and measure your spending habits to find out where you can save money. The idea isn’t to sacrifice, but to be deliberate in how you spend your money. For example: One doctor we know thought she was spending around $500 a month on eating out, but tracking reports showed she was actually spending closer to $1,500—much more than she wanted to be allocating.
Restructure loans to save on interest and lower your monthly payment. For example: Refinancing your house to access $30,000 in equity can be a great idea if you use that money to pay off a $30,000 high-interest loan. That’s because home mortgages are typically repaid over 30 years, have lower interest rates, and as an added bonus, the interest you pay is tax deductible.
Pay down loans that will increase your cash flow the most with the least amount of effort. For example: If you have student loan debt at 8 percent interest with a minimum payment of $50, and a car loan at 2.9 percent with a $400 payment, paying off the car loan and freeing up an extra $400 per month in cash flow will give you more immediate flexibility and opportunity in the future. And then, if you want, after you pay off the car, you could even start putting that $400 toward the student loan, which will speed up the time in which you pay it off and help you save on interest in the long run.
With these strategies, it’s possible to put more dollars in your pocket every month without working harder, hiring new employees, or learning new investment concepts.
Instead, it’s about more efficiently managing the cash flow you already have.
And with the extra cash flow in your pocket, you can use it to invest, grow your business, and even hire other practitioners so that you can virtually retire in a time frame closer to five years, only working when that’s what you want to do.
Garrett B. Gunderson, a lifelong entrepreneur, is a financial advocate to chiropractors and engages in a vitalistic financial philosophy to assist DCs creating sustainable wealth. His company, Wealth Factory, helps entrepreneurs navigate personal finances and investing. He wrote the New York Times’ bestselling book Killing Sacred Cows. Get a signed hardcover copy at ebookforchiros.com.
Dale Clarke is the co-founder of Wealth Factory. He was attracted to the cash Flow Banking system because it gives ordinary middle-class people the same tools to become financially independent that the ultra-wealthy have used for years. He can be contacted at cashflowbanking.com.
1 Ulick J. CNN Money. “Dow’s peak, 3 years later.” http://money.cnn.com/2003/01/13/ markets/dow_peak/index.htm. Published Jan. 2003. Accessed Sept 2016.
2 United States Department of Labor. “CPI Inflation Calculator.” http://www.bls.gov/data/ inflation_calculator.htm. Accessed Sept 2016.