We’re proud to introduce our new service, Portfolio Payday™ to all of our clients at PCIA Charleston!
At PCIA Charleston we’ve seen so much growth over the past few years, whether it be professionally or personally. With growth comes new opportunities, not just for us at Prime Capital, but for you, our clients! We’re now capable of providing a service a long time in the making that we expect to redefine the way we operate. So, without further ado, it’s time to unveil Portfolio Payday™ to the world!
Before we discuss what Portfolio Payday™ is, we have to go over how most Americans focus on their cash flow. Income typically comes in from work then goes to a checking account hosted by a bank. After taxes, that income is spent toward mortgages, rent, bills, credit cards and other necessary expenses.
It might also be placed into an emergency account, but a recent study found that 17% of Americans who make over $100,000 per year cannot cover an unexpected $400 expense [1]. With that in mind, no matter how affluent a certain person may be, the possibility of building an emergency account is up in the air.
Portfolio Payday™ works to redefine the way cash flows, making it more possible to build savings for emergencies and retirement. First, we would work to find a total for each client’s necessary expenditures, or how much money they would need each month to maintain a comfortable lifestyle. Then, through our service, instead of a paycheck going to the bank, it would go to a taxable investment account. That taxable investment account would then send what we call a Lifestyle Paycheck to the client’s checking account, but it would keep the difference between your income paycheck and Lifestyle Paycheck.
Over time, that difference works to build a predetermined cash buffer for everyday emergencies, helping you cover that $400 that only 17% of Americans making $100,000 per year are able to cover. Once the account reaches that buffer amount, it then effectively functions as a retirement account, investing additional deposits toward your future. Here is a quick, hypothetical example for illustrative purposes.
We begin with a married couple who has a net income of $17,000 per month but has $14,000 per month of expenditures. We believe in a buffer amount that adds up to three months’ worth of expenses, meaning that with Portfolio Payday™ , we would first work to build the couple’s cash buffer to $42,000. Portfolio Payday™ then functions as follows:
- Step 1:
Once we exceed $42,000 in the cash buffer, the additional deposits are invested into long-term investments. - Step 2:
The Lifestyle Paychecks are sent from the cash buffer, and new deposits replenish the cash each time. (We do this to avoid selling long-term investments every month. If an emergency comes up, we have the cash available to send to their bank within two business days.) - Step 3:
Also, if a goal comes up, like a vacation in a year’s time frame, we can send additional money to the bank’s savings account so that when that trip occurs, clients have the cash in the bank to pay for the whole vacation. (If they spent a little more, we have them covered with the cash buffer.) - Step 4:
This couple went from saving $500 per month to now saving $3,000 per month. They are in their early 40s and are set to retire at 65 years old. By leveraging Portfolio PaydayTM, assuming they continue to save $3,000 per month for 25 years, and earn 6% on average on their investments, they would have an additional $2.09 million in their retirement plan! - Step 5:
What if they needed to increase their Lifestyle Paycheck to $14,500, thus saving $2,500 instead of the $3,000 per month? With all other factors staying the same, they would have an additional $1.74 million instead of the $2.08 million, additional meaning that it would pile on top of other accounts like a 401(k), a 403(b), an IRA or another type of retirement plan.
The goal of Portfolio Payday™ is to get you to a more robust retirement sooner, giving you the chance to chase your dreams at the earliest age possible. With Portfolio Payday™, you are your own boss, paying yourself today and in the future.
