In Articles, blog, Real Estate, Wealth

You cannot save your way to retirement. Hopefully, you already know this, but I recently discovered that many people believe they can do it! They think the money you put away each week, month, or year, whether in traditional savings, an IRA or a 401K will accrue enough to get you to your retirement goal. Odds are it won’t. The gains are small, and the results are inconsistent – and as historically evidenced, can reduce your account balance.  So, what’s the solution? You create a cash flow machine—and invest in that.

Step 1: Create a cash flow machine.

Start small. I find this is the most comfortable approach for those beginning this journey. My first step was to invest in my financial education, whether with time or money and there are many resources for this (this blog being one of them). I then began buying single-family homes to rent. It didn’t take me long to realize the same time and effort could be used to create much larger returns. Enter commercial real estate. I began investing in income-generating multifamily properties and outsourcing the day-to-day operations to onsite management. And the cash was flowing!

Step 2: Invest in your cash flow machine.

So now I had time and money, time I otherwise would have used to manage the property was now used to source new investment opportunities. And the cash flow I was receiving from my investments was used for the second critical step of creating wealth: reinvesting. I funneled it back into the machine to invest in another asset to create more cash flow which was then reinvested in another asset to create more cash flow which was then …  see where I’m going with this?

 

Basically, wealth is like a snowball

Finally, I like to think of retirement as a snowball. Stay with me. Consider money is snow.

You can sit all day and gather it, making small snowballs. At the end of the day, you’ll have a stack of many snowballs that required time and attention to create -OR- You can make a snowball and start rolling it down a hill, watching it gain momentum, growing as it goes with little to no effort on your part. At the end of the day, you’ll have one massive snowball that required only a shove here and there to keep it going and growing. When the temperature rises and the snow stops falling, what will you be left with? Which will take longer to melt? The stack of many small snowballs? Or the one massive snowball? So, wouldn’t you also want to create wealth that takes less effort, builds faster and lasts longer? I know I do!

I tell you my story (and this analogy) to illustrate the possibilities. My hope is you will take this knowledge and apply it in a way that best fits your situation. Start building your cash flow machine now, and let me know how I can help!