The Reverse Financial Plan: Taking an Income-First Investment Approach to Building Wealth  

Investing is an essential tool for building wealth and securing your financial future. However, the path to obtaining one's financial objectives is not always clear.

Investing is an essential tool for building wealth and securing your financial future. However, the path to obtaining one’s financial objectives is not always clear. Questions like, “Should I invest in the next hot company?” or “Should I invest in a safe allocation of stocks and bonds?” arise when speaking to investors. 

At Cornell Capital Holdings, we believe an income-first investment strategy can help many investors achieve their financial goals because the investments are designed to generate passive income while aiming for capital appreciation over time. It is an approach we coined the Reverse Financial Plan as we believe people shouldn’t have to wait until retirement to take income from their investments. Instead, invest in assets that generate income from the start and decide to either reinvest the income earned from those investments or use the cash flow for other purposes. The Reverse Financial Plan, or an income-first approach, sets people on the path to financial freedom. 

In the following paragraphs, we will explore the intricacies of an income-first investment strategy and how investors can implement it to achieve their financial goals. 

What Is the Income-First Investment Strategy? 

The income-first investment strategy is a method of investing that prioritizes generating regular and consistent income from investments as the primary objective. Unlike traditional buy-and-hold strategies, where the focus is on capital appreciation, the income-first approach aims to produce a steady stream of income, often through a variety of investments like dividend-paying stocks, bonds, and alternative assets. 

As with any investment approach, risk mitigation should be at the forefront of an investor’s mind. With an income-first strategy, diversification is essential to managing risk. By spreading investments across various asset classes and sectors, investors can reduce the impact of poor performance in one area while benefiting from strong performance in others. 

Benefits of an Income-First Investment Strategy 

While traditional asset allocation models encourage investors to save now for the future, income-first models provide investors with benefits that traditional models do not. 

  • Regular Income: One benefit of an income-first strategy is the consistent stream of income it provides. This income can be used to cover living expenses, reinvestment, or save for future needs. 
  • Lower Volatility: Income-focused investments like dividend stocks and bonds tend to be less volatile than growth stocks. At the same time, certain alternative assets generate returns uncorrelated to public equity markets. Therefore, a diversified portfolio of income-producing assets can provide ongoing income while offering the potential for asset appreciation over the long term. 
  • Wealth Preservation: The income generated from investments can help preserve one’s wealth, providing a buffer against market downturns. Even during market corrections, income-producing assets can continue to generate cash flow. 
  • Long-Term Growth: While the primary focus of the income-first strategy is on generating income, these investments can also appreciate in value over time, potentially offering both income and capital growth. 

Implementing an Income-First Investment Strategy 

Implementing an income-first investment approach takes careful consideration and analysis of one’s financial situation and goals. Therefore, we suggest seeking the advice of a financial advisor and tax professional before starting any financial plan. 

Once you and your advisor decide an income-first approach is the right approach for your financial goals, there are a series of steps to follow: 

  • Set Clear Financial Goals: Determine your financial objectives, such as retirement income, education funding, or buying a home. Outlining your near and long-term objectives will help formulate a financial plan aligned with your goals. 
  • Build a Diversified Portfolio: Select a mix of income-generating assets that align with your goals and risk tolerance. Consider working with a financial advisor to create a well-balanced portfolio consisting of traditional and alternative investments. 
  • Reinvest Income: Reinvesting income is a powerful way to compound returns over time. Consider whether to reinvest the income in the asset itself or take the income and invest in a new asset that provides the benefits you seek at that point in your financial journey. 
  • Monitor and Adjust: Regularly review your portfolio’s performance and adjust as needed to ensure it remains aligned with your goals and risk tolerance. 

An income-first investment strategy offers a practical approach to building wealth while generating a consistent stream of income. By focusing on building a diversified portfolio, investors can achieve their financial goals and enjoy financial freedom. 

The Reverse Financial Plan 

The Reverse Financial Plan is an income-first strategy that aligns people’s financial goals with an investment approach that allows them to earn income now while setting them up to benefit from long-term asset appreciation. 

Learn how clients Lisa and Scott have preserved their family’s legacy with the Reverse Financial Plan, here.


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