One of the best ways to sustain prosperity is to create as many stackable income streams of recurring revenue as possible to fund your income needs.
One form of dependable income stream is the traditional pension. Offered and funded by governments, municipalities, corporations, and schools, among others, pensions have historically been a pillar of wealth management and retirement planning. Pensions, or defined benefit plans, typically pay a monthly stipend (the defined benefit) to retired workers during their lifetime. Some pensions may also pay a percentage of the monthly payout to the worker’s spouse when the retired worker dies. Pensions are still available for a few, but they are gradually being replaced by self-saving mechanisms such as 401(k)s, or defined contribution plans, so-called because you define the contribution that you make to your own retirement plan. This transfers the responsibility of sustainable prosperity onto you, the individual.
Social Security is a government-funded pension created in 1935 by Theodore Roosevelt. It was designed to provide assistance for, and encourage older workers to leave the workforce to make room for younger workers in a time of high unemployment.
Social Security is unusual in that the U.S. government guarantees that the benefit will grow by 8% for every year the individual waits to take it from age 62 to 70. Due to unexpected downsizing or poor health, many cannot afford to wait. Social Security is a second pillar of retirement planning and is particularly valuable for women who tend to live longer than men. In 2013, nearly half (49 percent) of all elderly unmarried females, including widows, receiving Social Security benefits relied on Social Security for virtually all (90 percent or more) of their income. In 2013, the average Social Security benefit for women was $12,857, about one-fourth less than men. Social Security is an important benefit for all retirees that is worth protecting.
Personal savings is a foundation of wealth-building and a third pillar of retirement planning. Dividend stocks may offer sustainable prosperity in the form of cash dividends paid out to shareholders quarterly, which are backed by the corporation. Dividends are a major reason that shareholders, such as individuals, retirees, mutual funds and large pension funds buy their stock, so they go to great lengths to maintain and even increase their dividends.
An affordable way to buy dividend stocks is to purchase a minimum number of shares, typically 100 shares, and then use the company’s dividend reinvestment plan to buy more shares. This is accomplished by reinvesting the dividends and by making monthly or quarterly purchases that may be as low as $50 increments. This is especially ideal for individuals just starting out, young parents, or graduates who are paying down tuition loans.
CDs are FDIC insured, and offer sustainable interest payments. In this low interest rate environment, it is difficult to prosper on the current interest from CDs.
Bonds offer sustainable prosperity in the form of interest payments to the bondholders. Bonds are backed by the entity that offered them for sale, such as a corporation, municipality, state government, or the U.S. government, which offers Treasury bonds. Some municipal bonds may offer tax-free interest.
Even though bond interest rates are currently low, bonds may serve to diversify your portfolio, offset market volatility or even reassure lenders, who view bonds as an asset they can understand, value and possibly use as collateral.
Sustainable prosperity implies stackable income streams of recurring revenue. Apple created an entirely new model when it introduced its 99-cent music downloads. It also profits from monthly recurring storage fees.
Netflix changed the movie rental business with its monthly subscription program for movies. Pandora created a subscription fee model for music streaming. Data storage services, such as Dropbox, charge monthly fees to store large, otherwise unmanageable data. Doctors now have monthly or annual subscription services for their concierge medical services.
We used to say, “think outside the box.” Now we say, “there is no box.” The book Blue Ocean Strategy suggests that the innovative businessperson can create a market where there was none – in effect, “blue oceans of uncontested markets based on differentiation and low cost.”
Uber upended the entire taxi business with a new low-cost, cashless business model that is typically transacted from a mobile device. Airbnb dislodged the lodging industry with its worldwide online model. Facebook started as a social network and transformed itself into an unprecedented and hugely successful targeted advertising website.
Can you create stackable income streams of recurring revenue in your business? This may require you to take an entirely new view of yourself, and maybe even reinvent your business model. Can you think of ways that you can be a fine jewelry retailer and ….. a recurring revenue stream service provider?
Amazon is a retailer who embraced the future and created a whole new business model online. They took that a step further to invent Prime, a recurring revenue package delivery service. So Amazon, a retailer, is now a huge online retailer and a package delivery service. Apple is a computer company and a music download and data storage provider.
Sustainable prosperity for the jewelry industry may require that your business succeed throughout your lifetime, and into the next generation if you expect to use your store and inventory as part of your retirement plan. What is your innovative business model to attract new, younger customers to create stackable income streams of recurring revenue and secure your legacy? How do you stay relevant in a digital world? It starts with a state-of-the-art website and a dynamic web presence that extends to mobile devices and beyond.
Join Donna M. Phelan, MBA, GG at AGS Conclave on Saturday, April 16th, 2016 at noon, for a lively session on Prosperity & Retirement: New Strategies for Success. Donna shares the top 10 money secrets of millionaires, 16 quick fixes for a broken budget, and why money is like a smartphone. Learn new strategies for success and how to write a formal business plan for financing.
View my article in The Retail Jeweler I am on page 10!