I will ask you a question that will rattle you to your core. Do you really want to go to work every day?
It’s okay to be truthful; I’ll go first. My job fulfilled me for the first 15 years after high school. At a random point, it became more of a chore than entertainment.
It was harder to go to work knowing I wasn’t getting ahead financially. It wasn’t until I learned how to free myself that everything made sense.
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Now, it’s your turn. Are you tired of the rat race? Do you see an end in sight, or will you be in the workforce until age 75?
How to escape the workforce. The workforce is a tricky beast. Think of yourself as a free agent in professional football. Every team keeps offering you more money to continue to play for their franchise.
However, what if the league paid you half your salary to retire? What if you could stay at home watching the games with your family?
Sure, when you are younger and full of energy, you will want to be on the field. But as you age, your priorities will shift from personal accomplishment to family success and building strong relationships.
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So, do you take the big contract to continue to play the game, or do you settle down with the retirement check?
You have the same options. Perhaps, that is a bad example because football players are very passionate about the game. Are you passionate about your job?
However, you have the same options as an employee: work for a big check or retire at half price. You must decide your path early in life, or you’ll be playing much longer than you want.
Active income vs. passive income. Most people don’t understand the difference between active and passive income.
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Active income means exchanging time for money, while passive income comes from assets. You create, build, or purchase the asset once, and it continues to make money for you on its own.
You can earn active income by going to work, consulting, freelancing, driving Uber, etc. You can earn passive income from books, videos, dividends, bond payments, real estate, etc.
Did you notice the difference in the words “by” and “from?” That’s right; active income involves you being the verb. Passive income comes from your assets performing the work.
Salary vs. passive income. Like the football player, companies will offer you more cash as you gain experience—that’s the trap.
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I was falling for the trap myself. At my peak, I earned $180,000 at my job. There was a promise of even more cash and a bigger retirement check if I continued.
However, the more money you make, the more money you spend. Therefore, the question becomes, “Would you rather earn $100,000 in active income or $50,000 in passive income?”
How you answer this question will decide your fate and perhaps the fate of your children. The media (and our parents) train us to make ever-increasing amounts of money.
The golden handcuffs of lifestyle inflation. However, as we make more money, we spend more on our lifestyle—we call this lifestyle inflation.
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If you earn $100,000 at work, you’d be lucky to spend $100,000. Most people cannot even stay under their income level, hence the credit card crisis.
We are forcing ourselves to stay in the workforce, and we know deep down. That’s why we are so miserable at work; we can sense our own betrayal of ourselves.
Cutting your income in half. Once you decide that passive income is the way to go, your entire life will change. You will start to value time more than money—this is the lesson we want to pass on to our kids.
As you earn $100,000, you’ll want to live on $50,000—this serves two purposes. First, you’ll have a massive 50% savings rate, and second, you’ll prepare yourself to live on $50,000 of passive income.
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My wife and I lived on roughly $5,000-$6,000 a month, while we earned over $16,000/month. This allowed us to save and invest $300,000 in less than four years.
Now, we are both retiring from the workforce. With the military pension, rental income, dividends, and royalties, we will make around $10,000/month in passive income.
It will surely be a pay cut, but we are used to living on $5,000 to $6,000/month already. We just need to execute our plan and enjoy our lives.
Is it scary to live on passive income? Yes, moving from active income to passive income is quite terrifying. They taught us to work for money, and now the money will come to us.
Do What Your Love or Love What You Do?
However, we are using the “systems approach” to building wealth. We will use the tax code, the stock market, the housing market, and the internet to grow our wealth.
Every year our income will increase. Our goal is to continue to build our wealth by growing our businesses, investing in dividends, and buying more properties.
Retirement is just the start. As you leave the workforce, it is the start of your life, not the end. Now, you can focus on doing what you love and earning income.
It’s important to say that you don’t need to make tons of money; just make tons of great choices. If you make $1,000 from your woodworking business, invest it in an income investing portfolio.
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Your true wealth comes from the power of compounding. Your goal is to get as many assets compounding on your side as possible.
Most people wait for a social security check and pray it doesn’t disappear. This is a scarcity mindset, which we pass along to our children. You’ll want to do the opposite by creating and building an empire throughout retirement.
Conclusion. Do you need $100,000 to live an extraordinary life? Do you want a fancy house, car, and wardrobe? If you’re going to spend 50 years in the workforce, have at it.
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My wife and I are walking away under the age of 43. We have much more to do in life, but not under someone else’s oversight.
We are perfectly capable of managing our own time. Plus, it will be nice to show our kids a different path than going to college, getting a high-paying job, and being miserable for 50 years.
Your journey to financial freedom involves more than just you. It is a family effort, and your mindset will have a direct and measurable effect on your children.
So what’s it going to be, free agent? Will you take the hefty salary or retire at half price? Always prepare for retirement, even if you want to play a few more seasons. Good Luck!
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