I’ve realized over the past year I don’t think about portfolios the way most people do.
I view portfolios as infrastructure that enables life to be lived intentionally.
I think a lot about what the point of investing is. And I spend a lot of time talking to people about what they want their portfolios to make possible for them. The most important framing has nothing to do with investing. It’s:
What is the life I want to live?
When I was in my 20s, I thought what I wanted was to end the game with the largest number possible.
But over the years I’ve realized the point isn’t to die with the largest portfolio but to live a life that I can reflect back on and feel was truly enjoyable along the way.
A Personal Endowment is the best metaphor for what I’m trying to build. I want a portfolio that pays a steadily increasing income year over year that supports the life our family wants to live.
I am a product of two first-generation immigrants. Frugality and intentional spending were highly valued in our household. It is hard for me to “enjoy” spending money. I get much more of a thrill out of finding a good deal than in paying for an unnecessary luxury.
This mindset helped me “retire” from a C-level career before 40. But it also meant years of depriving myself of vacations, concerts, and other experiences that I’ve come to regret.
The forced cashflow that comes from the diversified income portfolio we live off has been a strong mechanism for enjoying life more with each year. It’s a number that is meant to be spent in order to ensure I don’t look back on missed experiences or the opportunities to treat the people I love.
It’s become a system specifically designed to prevent my frugality and accumulation instinct from consuming the enjoyment that financial independence was supposed to enable.
What is it like living off income from a portfolio?
Here’s what this looks like in our actual day to day life.
I start each year by projecting out the cashflows our portfolios are expected to generate which forms our yearly budget.
As the year progresses, those cashflows have steadily increased (so far).
By September, I start paying out a portion of that excess cashflow to ourselves as a monthly bonus.
During the holidays we’ll take some more of that excess cashflow and donate to causes we care about and then treat ourselves to a nice gift. Something we wouldn’t normally buy ourselves but we know we’d enjoy. This past year it was a new Switch for me and a nice pair of earrings for Sheila.
When the new year starts, the budgets ratchet up as the cashflows increase. As the budgets increase, I try to make sure we’re intentionally setting aside funds to enjoy life together.
This year it was an extra $7,000 for vacations which we spent going to Sarasota in the winter months.
My parents optimized for security. I spent years optimizing for financial independence. Now the forced cashflow from my income portfolio is optimizing for something neither of us quite had: the permission to actually enjoy what we built.
The financial independence I was building would solve life’s money problem. But the psychology that got me there would have prevented me from actually living it.
Nathan
Founder & Lead Advisor
Kangpan & Co.
Kangpan & Co. is a fee-only, registered investment advisor specializing in helping people live off diversified portfolio income.
This content is for educational purposes only and is not investment, tax, or legal advice. No post is an endorsement of any particular strategy or security. We do not receive any direct payments or commissions for securities discussed in our posts. Private funds are generally available only to ‘Accredited Investors’ as defined by the SEC. The Personal Endowment is a conceptual investment framework customized to each client and does not represent a specific fund or guaranteed outcome. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.