Modern wisdom dictates that killing off your successes is a good thing when timed correctly. I read about it all the time now - it is rife in advice being dolled out by all and sundry in the finance world.
Examples of killing off the golden goose:
- Selling property for profit instead of holding for its steady rental income
- Selling shares for their growth instead of holding for their steady dividend income
- Cashing in term deposits and bonds instead of holding for their steady flow of paid interest
- Selling off a profitable business instead of growing it for its steady flow of cash and favourable tax teatments
- Taking lump sums out of retirement funds instead of drawing down slowly off its earnings
More often than not, cashing in or selling off income producing assets will trigger taxes, stamp duties and fees not to mention the darn obvious ..... instantly stopping the flow of income. All for the sake of a short-lived profit. Meh.
So many modern investment approaches now have moved away from the wisdom of quiet steady income generation to a fast paced and speculative growth race complete with nail-biting stress and sleepless nights over every tiny shift in the financial landscape of the globe.
Shift the paradigm. Like so.
- Don't buy an investment property for its potential capital gains - rather, buy it for its long-term rental income. Hold it forever and pass it on.
- Don't buy shares awaiting their growth and eventual sale - rather, buy into wise steady dividend paying companies producing quality consumer products and enjoy the decades of dividends that drop into your bank account twice a year. Hold them forever and pass them on.
- Organise your term deposits into 12 equal lots so they attract the highest interest and the pay-outs of this interest is dispersed every month on the knocker. Reinvest the interest if you don't need it that month and only use what you need. Let these term deposits chug along forever. These term deposits will tide you over when rents and dividends go through the odd gloomy patch (perfectly normal ebb and flow BTW).
- Don't sell that lucrative business - in doing so you throw away a steady stream of post tax income and a wonderful vehicle for genuinely reducing your tax. Build it up so it can be managed with your wise general direction only, rather than your direct daily involvement.
- Don't cash in that superannuation to pay for a caravan or a new car - just leave it be and roll it into a pension mode that minimises tax. Set it to its minimum allowable draw-down amount. Superannuation (even with all its faults) should be played at its own game and kept alive as long as possible. The earlier you dip into it, the quicker it will evaporate.
None of these concepts are exciting, sexy or snappy - rather the opposite in fact. When it comes to money and investing I prefer to tread the old paths. The old paths mean I sleep well at night and watch the financial news with arms length interest.
Go tend those golden geese - their entire singular purpose is to respect your future self.
Over time, we'll have bred a paddock full of golden geese all faithfully laying their golden eggs every day. We'll have more golden eggs than we know what to do with.