I will always live on a budget, but I never want to live on a fixed income. Today, my goal is to explain this statement so you understand the difference between the two—and make a choice.
Budgeting. Budgeting is the key to creating, protecting, and increasing your income. If you want to be rich, you will need to live and die on a budget.
Some people budget more intensely than others; it all depends on your situation and mindset. If you follow Dave Ramsey, you have a different perspective than a Robert Kiyosaki follower (me).
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Budgeting requires excellent discipline. You appreciate and account for every dollar coming in and leaving your home. Discipline is one of the core values of passive income.
Fixed Income. Living on a fixed income may feel like you are budgeting. You have a limit to how much you can spend. Your limit is more of a “hard limit” because there may not be more income after you reach this amount.
The main difference. The main difference between budgeting and fixed income is that the budgeter usually has much more money beyond what they spend.
Budgeting is the key to wealth creation, and living on a fixed income limits your resources and mindset. Let’s look at two couples living on $3,000/month.
Couple living on $3,000/mo fixed income. The couple living on a $3,000 fixed income earns $36,000/year. They have to eat, pay expenses, emergencies, maintenance, etc., all from their fixed income amount.
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This couple barely survives, and each month becomes more difficult (inflation) to finish in the black (positive). In the best months, they can put a little away for emergencies.
However, inflation has been horrible for their fixed income. Every time they go to Walmart; they spend more money than they did last time. They are 60 years old and have another 20+ years of living this way. They don’t know any other way to live.
Couple living on a $3,000/mo budget. The couple living on a $3,000/month budget tout themselves as minimalists. They do their best to survive on their budget, even during inflation.
When Walmart prices rise, they see where they can cut expenses elsewhere. This may be getting rid of Netflix, Hulu, or going out less often. They always try to balance their budget because it could lead to lifestyle inflation if they don’t.
Although this couple attempts to live on $36,000/year, they make $150,000/year. They use the difference between income and expenses—we call this cash flow—to save and invest.
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Every single month they make more money in dividends than the last. They also spend their free time creating content and businesses that add their overall cash flow numbers.
They understand the statement “Wealth is having excess income vs. expenses.” They both have growth mindsets versus fixed mindsets. They know that they can always generate more wealth by creating, producing, and adding value.
The difference between the couples. The main difference between the couple is how they spend their free time. The fixed-income couple has fixed mindsets. They feel that it’s their lot in life to live on $3,000/month.
They spend their time playing the lottery, watching the news, complaining about politics, and predicting the weather. They don’t seek knowledge from books, YouTube, or online courses.
The budgeting couples create businesses together. Every night they follow the markets, read Kiplinger’s Personal Finance magazine (my favorite), and consume books on their Kindle Unlimited subscription.
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The budgeters have an emergency fund, cash reserves, investments accounts, education accounts for their children, life insurance, long-term health care insurance, and retirement accounts. They take life seriously.
Life is supposed to be fun. Many poor people will tell the budgeters things like “Life is supposed to be fun,” “You don’t need that much money,” “You’re boring,” and “You only care about money.”
These are all limiting beliefs and shaming tactics. Budgeters should never feel bad about taking life seriously and focusing on getting their money “right.”
In fact, couples that budget and invest together have a strong possibility of long-term survival. Books like “Know Yourself, Know Your Money” and “Smart Couples Finish Rich” help couples get (and stay) on the same page.
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When it’s time to spend. But when it’s time to spend, the budgeters come out swinging. Although the budgeters and fixed incomer lives look similar from the outside, one couple is wealthy.
When the budgeters decide to go on vacation or visit their children, they have the resources to make it a magical trip. They can spend $20,000 on a family vacation to Europe. They can rent a private boat to celebrate college graduation.
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Don’t ever count the budgeters out—they practice something called “delayed gratification.” This used to be a standard trait in most people but has slowly regressed.
The budgeters had a long-term vision for their lives that they could now enact. They can retire at age 45 and never work again. They can provide real estate, businesses, and investments to their children. They can wake up and drink coffee together for 2-4 hours a day without a care in the world.
The fixed incomers accept life as it comes. They didn’t push for promotions, start a business, or create content. They didn’t learn about saving, investing, or real estate. Social security has been their goal since age 25.
Who are you? Which of the two couples do you identify as your future? In fact, do you feel as though you are in control of your future and it’s outcomes? If you don’t, you need to take control.
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The best way to take control is to read books. If you are just lost financially, “I Will Teach You to Be Rich” is a great place to start. It was the first book I read on my journey (now on book 86). If you have a problem with the relationship between you and money, try “Effortless Money.”
I am a budgeter! If you haven’t guessed, my wife and I are budgeters. We try to live on $36,000 to $48,000 a year. It fluctuates because we have three homes that require money. We make over $200,000/year combined.
We are investing all the extra income, which increases dividends every few months. Last month, we made $900/month in dividends. Can you imagine what that number will be in 30 years?
I also can create money from thin air by writing blogs and releasing books. It doesn’t take money to make money.
Conclusion. The purpose of this article is for you to look at yourself at age 66. Which couple do you want to resemble? Do you want to celebrate and live on social security? Do you want to take social security and invest the entire check into the stock market?
The choice is up to you, but let me be clear. Your actions need to start today if you want a comfortable, cash flow retirement in the future. You have no time to delay. Yes, I am very serious.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. 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. All Right Reserved Military Family Investing
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