Everyone’s version of financial independence looks differently. Some want to win megabucks in the lottery. Others want to earn a military retirement and then move to Thailand or The Philippines. Whatever the case may be, we all need to come up with a plan to achieve our goals.
No matter your goals, the best way to get there is by learning the 3 different types of income. Earned income (a job), business income (even a small business), and finally investment income (money from stocks, bonds, and real estate).
Most of us start with earned income. We have a job, we pay our bills, and maybe buy a house. It’s not a bad life. However, when you stop working, the money also stops. That is why while you are working a job, you want to build up business income. Whether that be from walking dogs, selling jewelry, buying and selling storage from storage units, etc., something that gets more income into your pocket. Once you have multiple streams of income, you want to invest in bonds, stocks, and real estate. This will give you even more streams of income via interest payments, dividend distributions, and capital appreciation (prices going up). The goal is that when you stop working you have multiple streams of income still coming in, called passive income.
Kris and I have been working on getting multiple streams of income over the course of the last year. We both have full-time jobs. I also teach online for good money. We rent out our second home for a small profit. We also rent out two rooms in our home that almost completely pays off our mortgage. We have also started to build up our investment portfolio. It paid us $161 this month (July 2020). Which is not much, however, let’s reflect on this. My job at McDonald’s in 1997 (San Diego) paid me $4.25 an hour. Therefore, $160 took over 37 hours of my labor 23 years ago. We always have to be put things into perspective.
Our definition of financial independence is actually pretty simple. My military retirement will ensure that Kris and I are financially independent for the rest of our lives. However, our goal is for our kids to be financially independent as well. They probably will work a job but have options on the hours and amount they work. They can start a business as well. All the while leveraging real estate that Kris and I have bought to earn passive rental income to pay bills and invest. They already have investments, so all they will have to do is continue building the empire left to them. I want them to be in control of their more important asset, TIME. That’s our dream as a family.
Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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