Inflation is upon us, and it doesn’t look to end any time soon. Everywhere we turn, prices are increasing to reflect the new world order. So, what can the average person do to survive?
The most significant expense that most people have is housing. The cost of living in our homes is also skyrocketing. I own three houses, and each experienced some kind of price increase.
My primary residence went up over $600/month between property taxes, insurance, and our electricity bill. Yikes! However, since we have roommates, I can offload some of these costs via rent increases.
The Magic of Dollar-Cost Averaging
The Housing Trap. In America, they told us that we could work hard, save money, and buy dream homes. Worse, they told us that we could do it in our 30s. America sold us a massive lie!
In fact, if you are attempting to live the American dream with only earned income, you’ll be in for a tough ride. Yes, that even includes if both spouses work.
The cost of living is just too high to survive without earning additional wages or income. If you can “afford” to live on two salaries, then you’ll be “House Rich, but Cash Poor.”
House Rich, Cash Poor. This statement means you bought “too much home.” Your housing costs are over 50% of your income. The worst part of this is that you can’t save and invest in your 20s, 30s, and 40s.
In “Real Estate Investing in Your 30s,” I warned that buying an expensive home will set you back for years. I know because that is what I did at age 27. It took me 14 years to recoup my money from buying a massive home that ate away at my budget.
The Magic of Passive Index Fund Investing
I know that you are screaming at the screen or book right now, “But what are our options? Housing prices are outrageous!” Okay, so let’s figure out some answers.
Location. The first question is, where are you trying to buy a home? If you are trying to buy in California or New York—why? Yes, you will make more money, but you will spend an inordinate amount to live in these places.
Working online is the solution most young adults should look for immediately. What jobs can you work remotely, through the Metaverse, or semi-physically? How far away from these cities can you locate yourself?
If you (and your spouse) can work online, you can live in places like Mississippi, Alabama, and the upper parts of Florida. You can even homestead in places like Missouri and Wyoming.
Relationships in the Metaverse
Create a career at home. Now, as I wrote in “Why You Need a Job,” your main goal is to create your career online or at home eventually. You can do this in many different ways—luckily, I covered these in my What Type of Home Business series.
- Outside. You can create a home business that caters to your love of the outdoors. This includes a rental company, farming, or raising animals or insects.
- Online. An online business uses search engine optimization, automation, and e*Commerce to create automated results.
- Content Creation. Becoming a content creator is perhaps the best way to make money passively in the long run. However, the barrier to entry is steep.
- Consulting. If you are young, you may not have the work history to become a consultant. However, your technical or enterprise knowledge may give you this opportunity.
By building your own business, you are giving yourself the best odds at earning the type of money you need to survive the housing crunch. It is okay to work a job and build a business. Read the book “The 10% Entrepreneur” for more ways to achieve your goals.
Build passive income. Once you have an online job and begin your own business, it’s time to create passive income. One of the best ways to do this is by creating a dividend portfolio.
I laid out an 8-step plan to building an interest & dividend portfolio from a high-yield saving account to income investing. You can build this portfolio in small increments over time. There is no rush or no need to take unnecessary risks.
4 Years of College vs. 4 Years of Content Creation
The ultimate goal of dividends is to supplement (and maybe replace) your earned income. As my wife and I approach $1,000/mo in dividend income, I can tell you from experience it feels good to have this additional income.
You can also create passive income in many other ways outside of dividends, but they may require time you don’t have. I cover many more ways to make passive income in “21 Passive Income Ideas.”
Move Overseas. I know that this may not be a popular answer, but give me a chance. If you can work remotely, start an online business, and earn dividends, what keeps you in America?
Passive Income from Creativity 106: Writing
You can stretch your money so much further overseas; that it could significantly improve your quality of life. Even better, many places overseas like Turkey and Thailand don’t fall into the materialism of America.
There would be no need to buy the latest cars and clothes. I wrote a ten-part series on Living Overseas Passively on passive income. It’s also important to realize you don’t have to live overseas forever.
You may achieve a point where you are significantly out-earning your cost of living, which allows you to build a massive dividend portfolio.
Real Estate is IDEAL: Income
Then, maybe 5-10 years later, you can return to America in a position to buy a house, knowing you have the resources to weather any storm.
It’s only a season. Living below your means to build a nest egg is only a season of your life. My wife and I have had roommates for three years. Yes, it’s not the best situation because we lose access to our large, beautiful master suites (we have two).
However, roommates have allowed us to become debt-free and build a $200,000 dividend portfolio that pays us $800/mo. We can stop having roommates now and keep that $800/month for the rest of our lives.
It’s the same with any sort of house-hacking that you need to utilize. It’s only a season. Yes, your friends will laugh at you. Are they truly your friends?
People laughed at my wife and me for living below our means, but that was before inflation hit. With inflation near 8%, people have a different perspective about house-hacking and building a passive income source.
My Four Favorite Index Funds
Conclusion. If you do what everyone else does, expect to have what everyone else has. Everyone is in debt up to their eyeballs. The economy runs on debt. Don’t believe everything you see on social media and in real life.
Live below your means, save and invest money, work remotely, build an online business, and consider moving to a small city or overseas. Those are the best ways to beat the housing crunch.
Eventually, you will put yourself in a position to buy multiple properties. You just have to overcome the hurdle of going from a typical American to a person who understands how the world works.
The world runs on passive income. Those that can make money while they sleep have the time and resources to acquire more wealth. Those that stay in the rat race will forever be indebted to the world—never to get ahead. Which route sounds good to you?
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