Building a Perpetual Money Machine
Perpetual Money Machine
You too can have a perpetual money machine, but you have to build it. There are no short cuts. There are no easy pathways short of speculation. Whether investment or career speculation, the road is risky at best. But if you are willing to work, willing to stay focused, financial independence is a hop, skip, and a jump away. Although doubted by the great majority of our population, financial freedom is neither unattainable nor particularly complicated. It is, however, hard. So you have to work, especially in the beginning.
Financial Independence Defined
Financial independence is nothing more than a perpetual money machine. This machine, once built, runs on its own energy with only minor upkeep by its owner. The idea is to build a portfolio of assets that do all the heavy lifting on their own. We often talk about the four percent rule or having saved 25X yearly spending. The reason, of course, is because with basic index investing this amount of money should be able to compound enough to provide both spending cash and stave off inflation in perpetuity. And if you don’t like indexes or want to uncorrelate from the market, there are also other asset classes like real estate. Many of us prefer to diversify by having at least a four-legged financial plan.
If You Build It…
If you build it, the cash will come. But there is no way around it. You have to build your perpetual money machine. Here is where the real work comes in. As our friend John would say over at ESI Money, you have to earn, save and invest.
Earn: The path is simple but not easy. Avoid career speculation and invest in education and training that will make you competitive in the market place. Front-load the sacrifice in the form of hustle when you are young so you can let both earnings and experience compound.
Save: Use frugality as a tool when it serves, and a lifestyle if necessary.
Invest: Squirrel that money away in a diversified portfolio of asset classes. When it comes to stock, choose high quality low-cost indexes and develop a good sense of market apathy. If your interested in real estate, buy a condo, or a single family home, or a building or two. Learn a few landlord hacks to streamline your operation.
Time Is On Your Side
Then dig in. For years. Put your head down and work. Invest. As you accrue wealth, you will have time to come up for a breath, and may even be able to speculate a little bit. Follow a passion project and start a side hustle. Side hustles are just another form of diversification and will add sturdiness and strength to your perpetual money machine.
By the time you are thirty, or thirty-five, or forty, you will look up one day and your perpetual money machine will be humming along.
And you wont have to work if you don’t want to. Of course, if you did things right, you will hopefully enjoy some aspects of your W2 and than can start downsizing to early retirement. This will not only insure you against sequence of returns risk but also bring your safe withdrawal rate down closer to zero.
Final Thoughts
The good life was never really about financial independence. FI is a superpower that allows you to pursue long-term contentment by concentrating on your life’s work unhindered by the bonds of fiscal responsibility. So build that perpetual money machine, schedule occasional maintenance, and find better things to do with your time.
More fulfilling things.