How did you do in high school math? You’ll need to revisit your old math books if you didn’t do so well.
Life is a math game with emotions running on top. If you can solve your unique math puzzle, you have a much better chance of having successful relationships.
Math comes into many aspects of our life, but let’s start with the number one way to become financially free: your savings rate.
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What is your savings rate? Your savings rate is the amount of money you put into savings and investments every month.
Common knowledge says you should put 5-10% toward your savings. However, the downside is that you’ll work 50-60 years before you can retire.
I recommend putting at least 50% of your income into savings. That means if you make $10,000 per month, you’ll save and invest $5,000.
The cool part about life is that you can fudge the numbers. If you make $10,000 at your job, you can get two roommates to pay you $1,000 each.
Now, you can use that $2,000 toward your savings rate. You don’t have to count your total income as $12,000.
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Therefore, by adding side hustles, you can effectively save more money and expedite your escape from the workforce.
The math behind retirement. You’ll need to determine your financial freedom passive income number early in the game of life.
If you live in a small city, your number may be $5,000 per month. Now, you can work toward that number aggressively.
In a perfect world, you would achieve $5,000 per month in dividends and retire on that income. However, that would require at least $1 million in investments.
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However, we can patch together many passive income sources to reach $5,000. For example, we can get roommates ($2,000), rental properties ($1,000), dividends ($1,500), and start a blog ($500).
Once you leave the workforce, your only mission is to keep increasing your passive income streams—this is how rich people live.
If you live in a big city, you’ll have a much harder time retiring early. However, you can save much more money if you make a massive salary, say $200,000 per year.
The science of living below your means. The hard part of living in a big city like San Diego is avoiding the lifestyle creep.
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It’s crazy to me to watch people in the most expensive cities driving the most expensive cars. I don’t know how most people can afford a BMW or Mercedes while living in California.
Living below your means is a science and a math equation. It’s easy for me to live below my means because I don’t want much.
My wife and kids are comfortable in our house. All I need is a video game every so often. I drive a Ford Focus that I am proud to own.
I didn’t come from money, but I never bought into the “wants” of life. Live simply and enjoy your time; that’s my motto.
If you can live below your means and save 50% of your income in a big city, you can escape the workforce in less than ten years.
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Moving to a small city. Most people want it all. They want to live in a big city, have a big house, drive big cars, and pay for big private schools.
This lifestyle costs much more than $200,000 per year. This is literally an NBA player lifestyle, and the average person wants it.
If you can keep a level head, you can escape the big city with a bag of money. Then you can purchase a home outright in Biloxi, Mississippi, on the Gulf of Mexico.
Matter of fact, you can purchase two or three homes to ensure your kids have a place to live. If you miss the city, flying in for a couple of weeks is much easier and cheaper.
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Small cities make much more sense financially, especially if you bring in your passive income.
The daily math budget. To stay on target, you will need to become a hardcore budgeter. I have a daily budget of $50 here in San Diego.
However, when I return to Pensacola, it’ll be $33 daily. This budget creates more freedom because I always know where I stand.
If I spend $200 in a day, I can lower my spending over the next week to catch up. If I go a week without spending much money, I may have $200 to blow.
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Your daily budget and bills budget are the two most important parts of your math game. If you can master paying your bills, automated investing, and your daily spending habits, you will quickly free yourself.
Why do most people fail in life? Most people cannot free themselves because they use their entire income as income.
If they earn $10,000 per month, they budget with $10,000—that’s not a winning formula. You need to chop off at least 30% towards savings.
If you earn $10,000 per month, your bills and spending budgets must total $7,000. The other $3,000 goes directly into your money system (dividends).
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Your dividend portfolio will begin to spit off money that you can use toward your daily life. My dividend pays me $1,500 per month.
Conclusion. Life is even better when you live on $7,000, but you can spend an extra $500 from dividends.
Everyone should experience the joys of living below their means but having passive income (rents, royalties, dividends) to supplement their lifestyle.
I went to a San Diego Padres game, paid for with my dividends this month. This was in addition to my spending budget.
It’s cool to have multiple options to spend money. I keep a tight spending budget, but I can use rents, royalties, and dividends to bring more fun into my life.
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Life is a math game, so you must figure out your numbers. Start with your passive income retirement goals. This means how much money you need to earn passively per month.
Once you have this number, live your life on this number—slowly replacing your earned income with passive income.
If the numbers don’t add up, you must take drastic actions like getting roommates, creating content, or renting your car.
I love numbers because they never lie. If you are not saving at least 30% of your income, you’ll need to become more extreme. Once your numbers make sense, you’ll be well on your way to retiring early. Good Luck!
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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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