Building Your Ultimate Money Machine

Imagine owning a machine that creates money and provides you with an income forever. This machine would be perfectly legal. I’m not talking about printing counterfeit money or stealing. The trick is to save enough money to allow you to live off the money it can earn.

Money Earns Money

You see, the greatest miracle of having money is its ability to earn you more money. Accumulate investments and savings, can be put to work to generate more money through interest payments, rises in share price, and reinvested dividends. Since money invested can generate money, the more money invested the greater the money generated. This is the magic of compound growth.

So how does a money machine work? If you accumulate enough wealth it’s possible to simply withdraw an income to live on and watch that amount be magically regenerated by your investments. If you keep the draw-down amount small (less than four percent) and have a large enough nest egg you can expect to live off your investments. The machine replaces your income and runs in perpetuity. Talk about a win-win.

When should you start investing in dividend paying stocks?

How Much Is Enough?

How much, you ask, is a large enough amount invested? Well that is THE QUESTION isn’t it? The answer is entirely up to you. How do you envision living in retirement? Do you simply want to be comfortable, or do you plan to travel and live high with all the bells and whistles?

Your retirement lifestyle is directly linked to the amount of money needed to fund that lifestyle. If early retirement is your ultimate goal you’ll require a larger investment, and you’ll have to save that amount earlier. Your expected retirement pensions also factor heavily into this plan since they reduce the draw on your investments once retired.

Extra Money Every Month

Let’s consider a simple example: If you had four hundred thousand dollars invested which paid a three percent yearly dividend that would mean twelve thousand dollars per year. Twelve thousand dollars per year divided by twelve months in a year equals one thousand dollars per month. At age sixty five an extra one thousand dollars a month added onto your pensions could go a long way to ensuring a comfortable retirement.

I know it sounds cruelly ironic but having more in retirement means having a little less in the present and investing that amount for your future. The trick is to balance living sensibly during your working life, saving for the future, and continuing that comfort level into your retirement.

The good news is that this ultimate machine does indeed exist. It takes a lifetime to build this machine, but once you reach your savings goal you can turn the machine on and enjoy your comfortable golden years.

In my E-books (“Water Barrel” and “The Balance”) I discuss simple methods to live sensibly for today, take charge of your financial affairs, and invest safely for the long term. For more information please visit David Penna Amazon.

As always, I am not a qualified financial advisor. I just relate financial management to my own experience which may not resemble yours at all. Advice is frequently worth exactly what you paid for it. Most of mine came from expensive experiences.