The Crossover Point for investors
Can you retire when you have $500,000 invested?
How about $750,000?
What about $1 million?
Geez, that’s nuts. Nobody needs that to retire.
The Retire by 40 post recalled this article about a Canadian couple struggling to make ends meet, with a net worth of $4 million. From the article, the struggle was related to the “present monthly expenditures of $4,274 on wine, restaurants, clothing and grooming, travel and their golf club” (membership). That’s a huge a burn rate on those items alone but to each their own.
As the saying goes, the more you want, the more you spend. This is not a financial myth, it’s a matter of fact for many people today. Most people seem to spend up to their income level (and sometimes much more). Cheap credit undoubtedly fuels that. Lack of financial literacy is another. It’s a foreign concept to some people to pay off items in full once their credit card statement comes in. Does this mean most people have no willpower or have no brain? Of course not. Many people simply underestimate or do not understand their spending habits. Without knowing your spending habits and expenses unfortunately I can’t tell you when you can retire. I can tell you when we can.
When we reach our Crossover Point.
Our personal Crossover Point is where our investment income covers most basic expenses, with some cash buffer.
Once the income from our invested capital comes close to matching our monthly expenses, I believe we’ll have enough money to change our working habits.
We’ll consider working part-time when our Crossover Point is reached.
I encourage you to figure out your Crossover Point – when your investment income will cover most of your daily expenses.
The biggest benefit I gain from dividend investing is seeing our money at work every month so we don’t have to (work) someday. We’ve created a spreadsheet that outlines the dividend income we’re earning today showing how our income is rising every month (thanks to mainly reinvested dividends); income that will eventually cover our expenses. Because we focus on the income stream we need (rather than what the market does or does not do in any given day or week or month), we have confidence in our financial plan.
I only hope you find the same level of confidence for your plan.
What’s your Crossover Point? Do you know when you can leave the workforce behind?