The website isn’t called My Money Design for nothing! It’s been almost 10 months since my last Money Design update and a lot has changed. Not only have I learned a ton of new tricks from my fellow personal finance bloggers on making and investing money, I have also taken a number of important steps at home and at work that I believe will further benefit my family’s efforts to reach financial freedom.
So with that in mind and in anticipation of my usual Money Design update, I have decided to get to work early with the revisions to my plan.
My Money Design – Updated:
“First, have a definite, clear practical ideal; a goal, an objective. Second, have the necessary means to achieve your ends; wisdom, money, materials, and methods. Third, adjust all your means to the end.” – Aristotle.
To start, this is just a sketch. Notice there are no numbers yet. They will come later. All great designs start off as just an idea before someone starts detailing them with the hard work and numbers. Compared to last year’s illustration, I think this one will also be simpler and easier to follow than last year’s Money Design.
In this concept, I figured the easiest thing to do was to group together income sources by when they would become available first. This puts them into three main categories:
• Pre Age 59-1/2 – These are all the income sources that will be available to us before age 59-1/2 such as our normal taxable accounts.
• Post Age 59-1/2 – These are all the income sources that will be available to us after age 59-1/2 that have been tax advantaged up to this point such as our 401k, 403, IRA, etc.
• Post Age 70 – These are all the income sources that will be available to us after age 70; mostly with the addition of Social Security.
How This Will Work:
The idea here is simple – Try to strike a balance of income volume throughout all three groups based on how much income I believe we will need to sustain our lifestyle.
For example, let’s make up some numbers and start by assuming we’ll need $5,000 per month. If you start all the way towards the right in the Post Age 70 column, you’ll notice this is the area of the Money Design with the greatest number of potential income sources. If you assume that Social Security will deliver $2,000 of income, that means the other sources only need to total up to $3,000.
Knowing this, we can then move over to the left to the Post Age 59-1/2 column and see what combination of income sources will result in about $5,000 of income. The significance here is that because we don’t need as much in the third column, we can withdraw more in the second column.
This same process is repeated for the relationship between the first and second column. For example, maybe I could take divert some of our 403b into a 72T to create income within column one.
Not only does this technique even out our income sources, it will also help me to identify weak spots where I should be concentrating my efforts. For example, maybe I’ll want to save more money into my Dividend fund rather than my 401k because that will even out my income in column one.
Over my next few Money Design updates, I plan to figure all this out by adding numbers to each of these accounts and seeing just how this would (or could) all play out. It will be somewhat like trying to solve a Rubix Cube, but I think it can be achieved!
What Do the Colors Mean?
Yellow = In progress. These are accounts and income streams that I’m working on building up right now. You can read about how in my Cash Flow Update report that I posted a few weeks back.
Red = Nothing has happened yet. These are ideas I have for creating another source of income. But so far nothing has really been accomplished yet to make it happen. For example, I’m exploring buying rental property to collect rental income, but I still don’t actually have a house yet to rent.
Where is My Blog?
Ah, yes, the blog. While My Money Design has certainly started to become an excellent source of side income for me, I cannot tell you what the feasibility of it (or any Internet marketing activities) will be 5, 10, or 20 years from now. Will people still even read or write blogs? Will the face of advertising on them be much different? For example, will it be such a saturated and unreliable market that people are offering pennies on the dollar for what they offer now? Think about it – if its so easy to start a blog and make money, how long before everyone you know becomes your competition in the Internet real estate market?
So while the getting is good, I’m going to use my blog income to fund things within my Money Design like my Savings or Dividends funds. Essentially, one form of income will generate other forms of income.
This does not however rule out Saleable Products. Over the past 50 years, books, instructional videos, interactive software, speaking events, training, consulting, and other similar services have withstood the test of time. While they continue to evolve, they are still (at the heart) a service of people helping people. I do not believe this will ever go away. So part of my Money Design is to use the writings of this blog to evolve them into something more tangible and actionable that people will find really valuable. There is obviously a lot of work to do and a long ways to go in this department …
Readers – What do you think of my Money Design sketch? Any critiques or suggestions? Do you have any similar plans laid out for how you will achieve financial freedom? If so, please share. I’d love to hear!
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