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Today I came across an article on CNBC's "Make It"…
"This Couple Retired in in Their 30s – now they live off the grid and spend $40,000 a year."
And I'd like to write an open letter to the couple because I think there's some things they can improve on…
Specifically, they should start generate more retirement income using this simple strategy.
Go here to get started.
You see, Steve and Courtney Adcock were both making about $100,000 a year each as a married couple when they decided they wanted to retire as soon as possible.
And the route they decided to go was the "4% Rule."
Now, if you're not familiar – the 4% rule basically goes like this: - You decide how much you want to make in retirement (so for Steve and Courtney it was $40,000 a year).
- You multiply that amount by 25x (so in this case it would be $1 million).
- You invest $1 million into the S&P 500 and you withdraw 4% per year
This retirement model assumes an average 5% net return in the S&P 500 after taxes and inflation and the idea is that by withdrawing no more than 4% a year you won't run out of money.
The on-demand income formula breaks this rule – go here to see exactly how.
In order to reach this goal as soon as possible, Steve and Courtney cut their lifestyles back dramatically.
The moved into a camper. Sold their house. Sold their cars. They stopped eating out all together, stopped going to bars, and stopped going to the movies. They saved and invested up to 75% of every dime they made.
Here's where they are now…
Their typical monthly budget goes like this… - Phone: $55
- Gas: $72
- Discretionary: $115
- Subscriptions: $132
- Property Tax: $144
- Dining Out: $250
- Business: $333 (such as domain names, PO box, cloud services)
- Groceries: $750
- Insurance: $651
That comes out to about $2,502 per month as their monthly budget.
They have zero debt.
To cut down on living expenses even further, they purchased an 800 square-foot house on a 6.7 acre parcel of land in the middle of the desert outside of Tucson Arizona, close to the Mexican border (partly because healthcare in Mexico is cheaper, so they cross the border for dental checkups).
The house was purchased for $72,000.
They also "live off the grid" by powering their home with a solar panel array, which was purchased for $28,000 but ensures they never have to pay for electricity bills.
They also have a septic tank on-site that collects rainwater and so they also avoid water and sewar bills.
This is all great – but one comment by Courtney caught my attention.
Here's what she said,
"If we're having a good year and we're making money, we can be a little bit more flexible with our lifestyle. And then if we're in a down market, we will really cut back and get our annual budget more in the $30k range."
Herein lies the problem of retiring fully off a formula that requires the market to go UP a certain amount in order for you to live comfortably.
Courtney and Steve's retirement is structured similar to a car that only drives forward, but can't backup or even turn left or right.
They are FULLY exposed to the whims of the market and the market can only go "up" for this to work.
And as I've explained in past emails, there have been plenty of situations in which the market has produced effectively NOTHNG for decades at a time.
For example, an 18-year period from the mid 1960s to the early 1980s…
And again for a 15 year period between the late 1990s and 2011…
If that were to happen to Steve and Courtney – they'd really be in trouble.
If they don't get the return they need every single year, they start drawing down on their account.
They should have some kind of alternative cash-producing strategy that creates income NO MATTER WHAT the market is doing.
In fact – that's what my 10-minute cash on demand income formula does << see how it works by going HERE.
And here's something else from the article that caught my eye…
"The couple also aims to keep at least two years' worth of expenses in their high-yield savings account at all times, which amounts to somewhere between $60,000 and $80,000."
Whoa!
Hold on there Steve and Courtney!
The highest yield savings account in the United States is Sallie Mae's SmartyPig account, which pays out a "whopping" 0.7% a year!
Yet, according to official Government CPI stats, over the last year inflation is at 4.2%!
That means, if they had $70,000 in their savings account over the last year, it lost 3.5% of its purchasing power.
In other words, it lost $2,450 in purchasing power!
And even if inflation gets down to 2% they're going to KEEP losing purchasing power.
Yet, the reason they have this savings account is "in case the market goes down, we have expenses for 2 years."
Here's The Thing: With My 10-Minute Cash-on-Demand Income Formula Their Emergency Savings Could Actually Cover Their ENTIRE Monthly Budget!
Right now, Steve and Courtney say they spend about 1 hour a week looking over their finances.
But with just 10 extra minutes of "Work" they could have joined my system right here and started generating an average of $2,561 per month with those $60,000 – $80,000 in savings.
That's more than their entire monthly budget right now!
Think about that for a second.
This could do a few things for them, depending on their goals.
- It could mean they were getting an over 40% return on their emergency savings every year, which allows them to grow it and compound it even faster.
- It could allow them to DOUBLE their retirement budget, without depleting their emergency savings and without increasing their index fund withdrawal rate.
- It could allow them to take the cash they generate from this income strategy and put it BACK into their long-term index fund investments, thus adding fuel to their existing retirement investment formula.
- It could allow them to live partially or fully off their emergency savings (without actually depleting those savings) and they could leave their index fund investments UNTOUCHED to return the full 5% net average per year.
No matter what way you look at it, it's a win-win-win-win.
Instead, Steve and Courtney have to just cross their fingers that they get an expected return every year from the market going up. If the market doesn't go up that year, they have to reduce their expenses.
In the meantime, they have 2 years of emergency savings that are sitting there rotting in value.
And even then, if the market ticks sideways for longer than two years, they will use up all that cash and then they'll really be in trouble.
Folks – this is why having a cash-on-demand income formula no matter WHAT the market is doing is so important!
Even if you're already retired, even if you're already comfortable – you could always have more money working for you in the background.
Let me show you how this works – GO HERE now to register for my free live webinar.
Trade Wisely,
Jon Lewis |
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