Abraham Harold Maslow, a psychology professor at Columbia University, was best known for creating Maslow's hierarchy of needs. His theory of human psychological health was based on the idea that there is a pecking order for fulfilling innate human needs based on priorities.
Dr. Maslow said humans are motivated by their unmet needs. In this article, we look at the hierarchy through the lens of our human economic need for money.
Particularly in the United States, we are not programmed to be “satisfied”. Instead we are expected to alway want more, better, faster, etc. From a mental standpoint, there is much to be said about being satisfied with what you have. On the economic side, being satisfied reduces stress and feelings of inadequacy. In my opinion, too few wealth conversations are focused around creating an income stream that meets our economic “needs” and matches our desire for fulfillment, purpose and legacy.
By focusing on your MONTHLY CASH FLOW, not the size of your Nest Egg, you feel empowered to your best life. We can’t let other people, marketing messages and conflicted financial planners define our tomorrow. Particularly because the image of retirement you’ve been sold is a lie. A study by the Employee Benefit Research Institute shows less than 50% of retirees report being “highly satisfied”, over 10% reported “not at all satisfied”.
Why is this so? Retirement as it has been defined for us, is neither attainable nor enjoyable, as evidenced by the cited statistics. Let’s face it: Boredom is not typically on anyone’s bucket list.
The words “retirement planning” usually conjures up the word “money” - but deep down we know that it is so very much more! How do you, or will YOU define “retirement’?
After we climbed out of our financial hole, from the 2008 crash, we decided not to purchase real estate in Florida. Instead we came to Isla Mujeres, Mexico and purchased an income producing vacation home. This property put money in our pocket immediately.
I learned a big lesson about this years ago. Many people think their home is an asset. They think that way because that's what their realtor told them, or maybe an accountant told them. The reality is, the definition of an asset is something that puts money in your pocket. I shared a quote about that in the Paradise Post last week.
So if your house doesn't put money in your pocket, it becomes this big albatross around your neck with a mortgage, insurance, taxes, maintenance and utilities. It’s a monster that demands to be fed every single month. That’s not an asset, it's a liability. Understanding that difference was huge for us.
The best time to make your plan B, to create your backup plan, is not when your back is against the wall, but when things are going pretty well. As a sailor, I know that the best time to prepare for a storm is before the storm comes. Fortunately for us, we did that. Even though we were making a very good income at the time, we said, “Hmm, we got most of our eggs in this basket…” and elected to diversify our income by buying foreign real estate.
At the time, we could have easily purchased a beautiful oceanfront home for ourselves to live in. If we had, it would cost us money every month and be that liability. We decided to purchase property that put money in our pocket.
It was a smart choice because, in fact a storm DID come two years later when our nice income vanished - literally overnight. Boy, were we ever glad we’d made the choices we did, to scale back our monthly expenses and focus on increasing our monthly cash flow.
I still own property in Florida that’s cash flowing nicely. That has turned out to be a really good investment long-term, in spite of the 2008 crash. Creating little streams of income that can grow is a smart strategy.
A lot of people make the mistake of trying to focus on too many income streams at one time - and frequently they end up with trickles. What I've learned is to focus on one stream at a time.
Get an income stream going. Then after it is flowing, you can shift and focus on “what's my next income stream going to be?” In our economic playbook, Cashflow is KING! We are not that concerned with accumulating a huge mountain of money or “nest egg”. We do have other investments, but our main economic focus is: how much do we need each month to FUND the LIFESTYLE we want? Do you know your monthly number?