Shifting Generational Perspectives: Moving From Paycheck to Cashflow

It’s a strange experience when your kids start to outthink you. I remember vividly the first time it happened to me.

When my daughter was about eight years old, she was at that age where she was starting to question whether Santa Claus was real. We were desperately trying to find out what she wanted for Christmas and when we asked her – she told us that she had written to Santa Claus and since he knew there was no need for us to also know because he was going to bring her what she asked for. We further pushed the point and told her that we needed to know as we didn’t want to get her the same things as Santa. She quickly responded, “just be sure to keep the receipts”.

With my son, the same sort of thing happened recently.

We discovered that his perspective on career and personal finances was starting to develop to something quite different than we had at his age.

When my husband and I started working full time, our focus on our financials was quite linear. Similar to many others in our age group, we began our careers with the full intention that we would likely stay with the company we joined for the course of our careers.

After a few years of working, we bought our first house and when our kids came along we began saving for their education. We also had pension plans but also put aside additional funds for our retirement. We were also very fortunate to be able to pick up a cottage along the way. Our primary source of income throughout our lives was our paychecks.

As for my son, he recently graduated from university and is now working full time. He told me the other day that he has a very different philosophy on his career and views towards his personal finances. He shared that he does not want to solely rely on a single paycheck as his source of income and plans to develop multiple streams of cashflow.

He went further on to explain that to do this is extremely important to him as he wants to have the flexibility to be able to work at something he really enjoys and feels passionate about eight hours a day rather than being tied to a job that he is unable to leave given financial commitments.

This is how he is planning on achieving this;

Investments

My son has been investing since his early days in university. He would put himself on a strict budget and whatever money he saved was immediately moved out of his bank account and put into investments. He has a very diversified financial portfolio – with many blue-chip stocks that pay dividends and a few risker options in the mix as well. Before he invests in a stock, he researches the companies and takes a very unemotional view of the market and opportunities. As he tells me, he’s in this for the long game, not the riskier quick wins.

Rental Income

Like many younger adults, my son wanted to get into the real estate market and purchase a home but he also wanted to have some support in paying for it. They are not alone in this endeavor. As something being termed as “house hacking” this is an approach that many younger people are taking in order to be able to purchase a home.

To this end, he and his partner have purchased a rental income property where they will both live along with it also having rental units to help pay for the maintenance costs and mortgage payments. However, given the current high cost of real estate they are having to move quite a distance away from the major cities. Fortunately, they are both in positions that allow them to work remotely which leads me to the next segment of his designed cash flow.

Work

Work is still a primary source of income for my son and he is definitely not ignoring this. He was fortunate that over the majority of the pandemic, he was able to live at home with us and save much of his paycheck to be able to both invest and in turn then purchase the rental property.

Similar to his days at university, he remains disciplined in his spending. He will actually visit thrift stores and shop in online marketplaces to buy things he needs or wants. He sees this as not only being frugal but also good for the environment by recycling goods that are already produced.

Side Hustle

The other form of income my son has established is a side hustle. He started a small business in which he buys and sells high end used golf clubs. He was able to combine his passion and knowledge for golf and golf equipment into an online business and has managed to make a nice income from it.

As I was thinking about my son’s career and financial plans and his focus on generating cash flow, I realized that many of these options are a great learning opportunity for older people as well as we enter into retirement.

As much as we may focus on saving for retirement, given our extended longevity, declining pensions, and increasing healthcare costs working thirty years to support a potential thirty-year plus retirement is really not a feasible model anymore. We will also need to shift our focus to cash flow and how we will generate it through our later years to support us.

Whether it’s from our investments, a side hustle or even starting a business, we likely have to think beyond the traditional funding approaches to retirement planning.

So as much as I would like to think I’ve taught my children valuable life lessons, I also have to recognize and appreciate when they teach me some too.

This also reminds me that age doesn’t necessarily always provide wisdom – but necessity and desire often do.