This is the fourth part of our six-part intensive series on the Freedom Generator. If you missed the first article, you can read it here.
Feeding money into something called a Growth Engine just sounds exciting, doesn’t it? Drop your money into this Freedom Generator bucket, set a timer and then pull out a lot more money than what you put in!
If you’re ready to maximize your money, let’s dive in to what the Growth Engine is and how it works in your Freedom Generator.
What Is The Growth Engine?
Let’s start with what the Growth Engine is not. It’s not money that you use now. And it’s not money you tap into when you reach Financial Freedom.
So what is the Growth Engine? It’s the bucket that holds all of your retirement savings–the money you’re allowed to access only once you reach your government-approved retirement age. It’s the nest egg that’ll handle your increased expenses–like health care–during your retirement years. And it’s what will cover any shortfall from your Income Generator.
While your Income Generator’s job is to produce a steady, reliable cash flow for you after you achieve Freedom, the role of the Growth Engine is to multiply your money. With the Growth Engine, you tap into the power of time and compound interest to take on the types of investment risks you wouldn’t consider for your Income Generator. And, as a result, you reap the benefits of significant asset growth.
What Level Of Risk Is Right For Your Growth Engine?
Of course, you want to maximize the output of your Growth Engine assets while not taking on more risk than is appropriate for you. A quality financial advisor or even an online tool can help you nail down your risk profile. In creating that profile, you’ll consider things like
- Your age;
- Current financial situation;
- Future goals;
- Available assets; and
- Comfort level with risk and more.
Remember: Your Income Generator’s purpose is to fund your Freedom with Cash Flow. But your Growth Engine’s goal is growth and net worth. So it’s critical that, while you invest conservatively in your Income Generator, you adopt a more aggressive stance on your Growth Engine asset choices.
How Much Should You Invest In Your Growth Engine?
Dr. Tony is the co-founder of MindShift.money and the best-selling author of three books on personal and business finances. Having achieved Financial Freedom at 27, Dr. Tony believes that through Financially Fit Bootcamp and Cash Flow Cure everyone can get there. He has made it his life’s mission to help others live a life where their money works for them—not the other way around.