To earmark the beginning of this financial journey, it helps to know what my goals are so that I can work towards them. And I have used the SMART framework both in school and in my professional work. It’s useful because it gives clarity to what I want to achieve. It also helps that I’m focused on the purpose behind making money and not just aimlessly trying to get rich. So here goes:
Specific: $10,000 monthly passive income by the age of 60.
I want to make sure that in the financial decisions I make, it is to ensure that I see passive cashflow even if I no longer hold my day job. Giving tuition or running a business on the side doesn’t count unless it can still bring in money without me having to constantly put in time for it.
Measurable: I will have systems in place that can provide me that cashflow passively.
It can be investing in the stock market or being a silent partner in a business venture. I do not know how they will look like in the future, but this much I can share today – I had an average of $185 of monthly dividends in 2019.
Assignable: Both my wife and I will work together towards this goal.
We sat down one day and discussed it and then laughed at each other. Sounds lofty and some may say, impossible. But we’re putting it out there now and we are going to try.
Relevant: I want to know be assured that both my wife and I can CHOOSE when we want to retire.
Passive cash flow is the key to knowing that I have enough coming to sustain our lifestyle and maintain our assets. It also means that there is a legacy I can leave behind when I’m no longer around.
Timely: 30 years
Many things can happen in 30 years, but it does mean that I’ll have to unpack all this a bit more and set mini-milestones along the way to realise this big goal.
+++++
Don’t get me wrong – it’s perfectly fine to have other types of financial goals, e.g. have $X or own YY by age Z. I just prefer to focus on the cash flow rather than the assets that I’m looking to accumulate.
What are your financial goals?
Making Cents 
Hi SG Dad,
I am also very much a cashflow guy, as I believe healthy cashflow is what we need to live on comfortably now and in retirement. Our networth or assets (especially if they are invested) are at the mercy of the economy and Mr Market and thus frequently fluctuate in value. The question is how to ensure a steady stream of cashflow while our asset values are fluctuating, more so when we are already in retirement.
To prepare for our eventual (impending) retirement, my wife and I have been striving to establish some passive income streams. As of today, we have three streams of passive income, namely;
a) Interest from our CPF OA&SA, b) Dividends and c) Rental. We only started tracking their performance in 2011. We are close to 60 now and still working.
We witnessed steady increases in our passive income over the last nine years and was happy that our effort was bearing fruit. That is, until the Covid pandemic struck. We saw how our dividend income got decimated (on top of the sizeable paper losses in the stock values), and our tenant quitting the tenancy abruptly. The only steady income stream was the interest from CPF. It not only held steady but grew, albeit by a little bit.
This crisis reminded us once again to:
1. Diversify our income streams and investment
2. Have at least one stable income stream (can be private annuity or at least the CPF)
3. Not to take things for granted. Here we were targeting to have such and such passive income by a certain date / age, only to have to come back to the drawing board in this crisis.
Our desired passive income for our retirement is $120,000 annually (or $10,000 per month) and up to last year, we were quietly happy and confident that we were doing right. This year cannot be more different. The below compares how our passive income streams performed this year (year to date) and last year:
………………………….2019………………..2020
Interest (OA&SA)….$53K………………$26K (Jan to Jun 20 interest)
Dividend………………$78.8K……………$38.3K (Jan to Jul 20)
Rental…………………$36.6K……………$16.85K (Jan to Jul 20, no rental income for 1.5 month)
We are not expecting the dividend income to grow much more from now (for remainder of this year) with more companies struggling to survive. And we are hoping our new tenant can complete the agreed tenancy period. We are also keeping our fingers crossed that the government do not reduce the CPF interest rates.
All is not lost though. Thanks to the government schemes, we also have SRS savings and CPF Life /RA savings. And we planned to tap on them in the following period of our lives:
SRS drawdown from 62 to 69 (over 8 years) at $42.5K annually
CPF Life payout from 70 (for life) at $55K annually.
If we start our CPF Life payout at 65, we would be getting $43k annually.
So there, thats our cashflow plan to sustain our retirement.
LikeLike
Thanks for sharing your story. An important reminder that our goals must also constantly be updated. Hopefully the cashflow that you have built up along the way has helped in forming a large asset base which is sufficient buffer to tide over these trying times. All the best!
LikeLike