Comments on: Is it Better to Have a High Net Worth or High Monthly Cash Flow?

By: Zach @ Four Pillar Freedom

Zach @ Four Pillar Freedom — Thu, 28 Dec 2017 15:58:06 +0000

In reply to BAMFmoney. Great point! Also, thanks for linking to your article on the SEPP, that's a useful post for readers to check out.

By: BAMFmoney

BAMFmoney — Wed, 27 Dec 2017 06:03:23 +0000

You can tap into your IRA early by setting up Substantially Equal Periodic Payments through Reg 72(t) to avoid the 10% penalty. Some 401(k) plans don’t allow for it.

By: Zach @ Four Pillar Freedom

Zach @ Four Pillar Freedom — Thu, 14 Dec 2017 17:05:18 +0000

In reply to Joe.

Thanks, Joe! You bring up a good point – if you have a high net worth it’s usually possible to generate cash flow from your savings. The only drawback is that it can take many years to build up a high net worth. For some people it’s much faster to build up a high cash flow. Thanks for sharing your thoughts 🙂

By: Joe

Joe — Wed, 13 Dec 2017 17:20:57 +0000

Having both is the golden scenario. Good luck!
If I had to choose, I’d go with high net worth. There are just more options when you have money to invest. Usually, you can generate cash flow if you have high net worth.

By: Zach @ Four Pillar Freedom

Zach @ Four Pillar Freedom — Wed, 13 Dec 2017 13:05:35 +0000

In reply to Cubert.

Real estate seems to be a favorite income source for many people who are looking for high cash flow and not just a high net worth. I personally like to use REIT’s for my real estate income. And I love that phrase “old man money” – that’s essentially what a high net worth is great for – taking care of yourself when you’re old and no longer want to work 🙂

By: Zach @ Four Pillar Freedom

Zach @ Four Pillar Freedom — Wed, 13 Dec 2017 13:04:18 +0000

In reply to Church. Thanks, Church! Liquid assets are key. I think it's easier to overlook this aspect of personal finance when net worth is the metric that so many people obsess over. I aim to maximize my retirement accounts while also keeping my brokerage account at a healthy balance in case I need to access that money in the short-term.

By: Church

Church — Tue, 12 Dec 2017 22:48:42 +0000

In reply to Cubert. Cubert, many thanks for sharing your take on cash flow. Hard to argue with your points, of which, I agree on all. Thanks again!

By: Cubert

Cubert — Tue, 12 Dec 2017 22:37:28 +0000

Nice post! I may be biased though, since I’m right there with you on cash flow being more important than net worth. Our preferred means of generating cash flow in early retirement will be a combination of real estate rents, part time gym instruction, and my wife’s chiro practice. Saving up that net worth for old man money. 🙂
My take is at: https://abandonedcubicle.com/build-cash-flow-ignore-net-worth/

By: Church

Church — Tue, 12 Dec 2017 20:04:21 +0000

“Ultimately, cash flow is what allows you to live a life of freedom.” <= I couldn't agree more. Liquid assets are what enables one to FIRE. The illquid (dormant) assets just make us rich on paper.

As the post mentions, strive for a high income and a high net worth. I am trying to maintain a 40/50 liquid-to-illquid net worth portfolio, just because I want options.

Great post 4IIII !

By: Zach @ Four Pillar Freedom

Zach @ Four Pillar Freedom — Tue, 12 Dec 2017 17:23:33 +0000

In reply to Andy. Andy, thank you for pointing that out. I have nothing against 401(k)'s and it is true you can withdraw the money at any point. Also, thanks for linking to that article by Joel, I don't think I've ever written about penalties associated with 401(k)'s and how they might not be as bad as they seem. Luckily his article and the Mad Fientist have resources to explain the idea.