Everybody wants to be a millionaire these days. For some reason this seems to be the magic number that everyone says would solve their financial problems and make them wealthy.

Articles have been written and polls taken about how much it would really take consider yourself rich. It’s interesting to see the wide variety of answers that people give.

Some say that they’d be rich if they only had a couple hundred thousand dollars. Others say that a million dollars isn’t what it used to be. Inflation has eaten away at purchasing power so they’d need at least five million dollars to consider themselves wealthy.

All this is well and good, but as far as I’m concerned it’s nothing more than a mental exercise with very little practicality. I’m also not convinced that a certain amount would ever be “enough”. People always want what they don’t have.

I don’t really understand why all the focus is on a specific dollar amount. I’m less concerned with a specific amount or “nest egg” and more concerned with a stable monthly cash flow.

Your monthly cash flow is what determines your standard of living, not what balance you have in your bank account.

If you still want to focus on a specific amount, first decide what amount of income you want to have monthly. Then devise your strategy for providing this income, and lastly figure out what amount it’s going to take.

Say you want to retire on $5000 a month. If your strategy is to live off of income from fixed income investments such as bonds that pay about 6%, you’ll need to have exactly one million dollars invested.

If you choose to use rental real estate as your strategy, you’ll need 5 houses that produce $1,000 each or an apartment complex that will do the same. In order to get this amount, your houses might cost about $150,000 each. This would mean you’d need to own about $750,000 worth of real estate.

Not every strategy is right for everyone, but I want to make clear that it’s more important to figure out your investment strategy for producing cash flow than it is to worry about a specific dollar amount.

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