Just a thought as we move to the weekend.
You’re 15-30 years from retirement. You, or maybe you and your spouse, make more than enough money to live. In fact, you’re saving at a pretty impressive clip. What you haven’t done yet is take your retirement very seriously. Sure, you’ve been salting away money at work. (Another post entirely.) That hasn’t done much for you though.
You need to see some improved results.
You want the arrow on the chart to show your net worth growing, not your cash flow. That comes later — when you most need it — and it’s in big supply.
Here’s today’s lesson.
If Capital Growth Is The Goal — Thou Shalt Not Become Enchanted With Cash Flow Before Its Time.
Here’s why.
The more cash flow you wish to create, the more initial capital is required when first buying the property. This results in the acquisition of less property at the beginning of your march toward retirement. The difference between demanding cash flow and satisfying yourself with a break even or a cash flow trickle, will, in terms of net worth, end up costing you a dollar figure requiring two commas.
No kiddin’. 
Why? That’s easy. The investor chasing cash flow when capital growth is the way to go, winds up at retirement with some permanently missing pieces of his retirement puzzle.
Done at the front end of a Purposeful Plan, the ill advised pursuit of unneeded cash flow will also, with terrible irony, result in a reduction in retirement cash flow — a huge reduction.
If you began with $200,000 — in 20 years it is almost inevitable it would cost you six figures yearly from the day they retired until the day they died.
No kiddin’.
Chase cash flow and you’ll end up getting what you wished for. Yeah, you want cash flow. I do too. Just wish for it to show up at your retirement party. It’ll be more crowded with the extra cash flow there, but you’ll figure a way to make room. 
Related posts:
- Picking Up Pennies — Needless Cash Flow — And Million Dollar Pizza & Beer
- Chasing Chump Change Cash Flow — Sacrificing Tomorrow’s Dollars For Today’s Pennies
- Addicted To Cash Flow When Growth Is The Prescription — A Common Investment Mistake
- The Good Old Days — Negative Cash Flow Sometimes Golden
- Cash Flow Makin’ a Chump Outa You? Trading Tomorrow’s $20 For Today’s Chump Change? Stop It!
About BawldGuy
Next time you are over at Bloodhound ask Greg how his “21 reasons Phoenix real estate won’t fall in value” prediction is doing. For some reason he got a bit short with those who doubted his oracle and has since refused to even let the question be revisited.
http://www.bloodhoundrealty.com/BloodhoundBlog/?p=114
Personally I think Phoenix will eventually be one of those one-in-a-lifetime opportunities but we have to go through some pain first.
Jeff;
Just came by for a weekend read. Was worth it. So many have focused on the immediate and tangible that they lose sight of the goal. Thanks for the insight. Off to listen to some podcasts…
Robert — I’ve said for a pretty long time, Phoenix is gonna shock the real estate world. What I mean is probably what you mean too.
Nobody’s told the thousands of people migrating their, or he companies racing each other to hire more employees, (making Maricopa County the #1 job county in the country a few weeks ago) that Phoenix is a bad place to be.
I predict, as apparently you do too, Phoenix will ultimately live up to its name.
The fundamentals and pent up demand are simply to powerful a tandem to be held back — once the smoke clears on the correction that is.
Eric — Thanks for dropping by.
Why don’t we do the ‘guy’ thing, and start over?
Sounds good. Have a great rest of the weekend!
Eric
The fundamentals and pent up demand are simply to powerful a tandem to be held back — once the smoke clears on the correction that is.
Exactly. Phoenix has unbelievable pluses going for it. The fundamentals are sound and highly unlikely to change. Its residential real estate market just got way out ahead of those fundamentals and are exacerbated by a concentration of very scary financial practices. The good news is both those things are self curing and somewhat contained within their industries. The only general impact will be because housing and finance are part of the general economy. Unlike SoCal falling off a cliff and staying there, Phoenix will be more of a v-bottom. All the good initial recovery will be in place before most people even see it.
Robert — You have a great way of putting things. I can’t improve on it by adding to it — so I won’t.
Jeff,
As usual i like your writing and partially agree with your concepts. For example, I really think this is more about what you do with your cash flow. I totally agree that you should do your best to trade up for future growth, but couldnt you also use cashflowing properties as a base to buy more proprties? This strategy would lower your portfolio volatility and provide you some cushion in really bad times. Additionally, this would speak to the smaller investors that cant buy growth just yet. Finally, buying growth is a bit more challenging than buying cashflow. Cashflow is obvious, lets say .10 cap type properties. Growth on the other hand is not. If you buy at the peak of the market in growth, you will experience neither cashflow nor growth. Great advice, but I thought the readers might want a slighty different perspective as well.
Good to hear from you, Michael.
I see your point, which is another way to do things. The numbers though, like my way better. Here’s why.
Your point about volatility is correct. That’s why I WILL NOT work with anyone unless they have a Sominex account (cash reserves) that makes ME comfortable.
Once that’s in place Michael, the potential visit by Murphy to which you allude will bear no fruit for him.
Meanwhile, because the investor was safely able to acquire not only growth property(s), but with better leverage, they’ll significantly exceed the growth in net worth than the guy who decided to use your method.
It won’t even be close — and with the cash reserves on which I’ve insisted, he’ll sleep at night when that tenant skips, or the A/C goes bye-bye in August.