(Read part one of the series “Are you part of the rat race” https://militaryfamilyinvesting.com/2020/07/20/are-you-part-of-the-rat-race/)
Now that your eyes have been opened, let’s continue. The rat race is a MINDSET. To escape the rat race you first have to change your perspective. Why do you go to work? If your answer is, “To pay bills, provide for my family, and ensure my family has a comfortable life.” then you are 100% American. I love this answer. Going to work every day is the most American thing we can do. However, your work serves a higher purpose. The answer should be something like, “To ensure our family is building wealth for present and future generations so that they can earn back life’s most valuable resource: TIME.”
Remember, when you are working for earned income, you are exchanging your valuable time for money. Whether you are making $10-12 an hour or $500 an hour, time is time. Our goal is to build businesses and investments so that we can buy back our time. In essence, “BUY OUR FREEDOM”. That is how you truly get out of the rat race. Most of our generation and the next generation will need to work a job. That is a fact. If you are reading this article there is a high probability that you are beginning on your path to freedom. Here is how I envision an imaginary couple to escape the rat race for themselves and their futures generations.
Imaginary couple: Jack, 40, and Jill, 40, have 3 children Jade, 10, Sam, 9, and Rouge, 3. They have been working in the electric industry for 20 years each. Their combined income is $120,000 or $10,000 a month. They live in a lower costs area, so their mortgage is $1200 a month. They have paid off all credit card debt over the years, as well as their cars. They also have $20,000 in their emergency fund. They have $5000 in their vacation fund. They also have been investing in their work’s 401K program, stashing away $200,000 combined. They are living the American dream. They only have to pay their mortgage and child care, they are invested in the stock market via the 401K, and they have emergency and vacation funds. What more could they ask for? Well……
This is a well above average American family. They are doing well with their money. However, this is where education for most individuals stops. This also includes me, up until about a year ago. They are making earned income, but they don’t have business income or investment income. Eventually, Jack and Jill start learning about their higher mission and start to think bigger picture. They start to change and adjust.
Jack wants to start his investment portfolio to build a monthly income, NOW. He doesn’t want to wait until he is the retirement age to receive income. His dilemma is that he also wants to keep all his investments and funds the same. The solution is to earn more income. Jack has a friend who rents out a room. Jack inquires about some of the advantages and disadvantages. They decide as a couple to try it. They invite an older person into the home for $1000. Jack didn’t realize that the rental market was so lucrative. Jack uses all the income from the room rental to invest in his dividend portfolio. Over 3 years he gets his portfolio to pay him $400 a month of passive income.
The kids are now 13, 12, and 6. Jill truly appreciates the value of owning property and renting it out over time. They start researching and find a smaller home for $100,000. They want to buy it and rent it out. The mortgage will be $750 a month and they can rent it for $1000. However, their goal is to pay it off in 5 years. Jack sets his dividend portfolio to auto re-invest back into its self. He uses the other $1000 from the room rental to put monthly extra principal payments on the new rental home. After 4 years they can pay off the house.
Now, let’s recap where the couple is now, after 8 years of enlightenment. Their 401K is now $500,000, emergency fund is now $30,000, and vacation fund is still $5000 (they like to vacation). The room rental has increased in value to $1200 a month. The rental home is paid off and still commands $1200 a month. Jack has been putting all the extra cash into his dividend portfolio. It now pays a whopping $1100 in dividend income.
Now that they have expanded their horizons, they have many more options as their family grows. Jill decides to open a small gardening store in their backyard. She sells fruits and veggies, fresh spices, and also give lessons on how to build and grow a garden. The business starts slow but over 2 years it grows to make $1000 a month, just from working 8 hours over each weekend. Jade now has decided to go to a community college for 2 years, to save money. She would like to move out of the house. Luckily, the family owns a rental property. Jade moves into the rental property. Since the house has 2 bedrooms and 2 bathrooms, she can rent out one room to her friend for $750. Jade can almost survive off of this income, however, she decides to help her mom on the weekends for $500 a month. Jack also sends $300 a month to Jade from his dividend income. Jade loves gardening and majors in plant biology. When she graduates, Jill and her plan to start a bigger gardening shop.
Whew, I can go on and on. Can you see the different trajectory of the couples’ lives when they decided to jump into business and investment income? Not only are they able to truly help their kids out, but they are also building long term businesses and portfolios that will only grow with time. They are also teaching the children humility (renting room) and family values (take care of one another). This is what the wealthy are doing. They always have multiple income streams and they take care of their own. The best part is: Jack and Jill can control their time. They both can retire at 55 if they wanted, or stop full-time work and work somewhere part-time. This is the life Kris and I are aiming for. Why be a regular couple when you can be an extraordinary family?
Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. Please research any investment vehicles that are being considered. 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.
Leave a Reply