It finally happened; my wife and I retired. I am 42, and she is 39, and life couldn’t be better. We both started with below-average resources, but we still arrived at this momentous occasion.
So, what’s the secret sauce to retiring when you want, having a great income, and living your dream life? The secret is two-fold: budgeting and passive income.
Budgeting to financial freedom. Building an air-tight budget is the fastest way to free yourself from the workforce. However, most people don’t know how much it costs to run their household.
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My military pension is $7,000 per month, and my house runs on $6,000. I knew how much it took to run my household almost three years ago.
Your hardcore budget includes your mortgage, bills, additional expenses, food, and personal spending.
I like to separate additional expenses like video game memberships, streaming services, and website subscriptions because they are “nice to haves.”
If I need to cut expenses, they will be the first to go. We keep our bare-bones bills as low as possible, which include electricity, water, sewer, cell, and car insurance.
Create a Budget and Start Income Investing
Building your emergency fund. My wife and I can live very comfortably within our $7,000 budget; however, we must prepare for when emergencies strike.
Having an emergency fund throughout retirement is necessary because you don’t have the same level of cash flow as when you were working.
We keep $10,000 in our emergency fund but will keep growing it over the years. Remember, just because you have an emergency fund doesn’t mean you should continuously tap into it; it’s still the last resort.
Our goal is to fully fund our emergency fund over the next few years. I would consider $30,000 to be fully funded for our household.
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Passive income is the dream. Most people could settle down on $7,000 per month and be completely content and happy; I still want more.
I didn’t grow up with much, so I have always looked to provide more for my family. It’s not about nicer cars and bigger homes; it’s about having options.
In the end, money opens doors that won’t open if you are broke. So, I continue to add passive income to our bottom line.
The key to earning passive income is respecting your time. It’s better to make less but keep your time available. Time is our most valuable resource.
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Dividends give you time. My favorite way to earn passive income is dividend investing. Dividends are the most passive type of income, but they require tons of money in your investment portfolio.
We earn roughly $1,500 per month in dividends, which allows us the freedom to go to restaurants and sporting events.
We reinvest about 50% of our dividends so we can continue to grow our wealth and income. Dividends also allow us to beat inflation, as many companies raise their payout yearly.
Dividends are also a great way to build generational wealth by holding solid companies and passing them down to your kids and grandkids.
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Getting real with real estate. We earn a total of $650 per month from our two rental properties. Owning real estate and being a landlord is not for the faint of heart.
However, we can provide our kids with a home when they are ready to assume the responsibility. This fact alone makes owning multiple homes worth the pain.
The extra $650 is excellent as well. We can put it into investments or our emergency fund. It’s great to have some side income when random things come our way.
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The option to trade options. We are pretty comfortable with these three sources of income (pension, dividends, real estate), but I keep earning more.
I find trading options a great way to earn large payouts without putting in too much time. However, the paycheck comes with something most people don’t like—risk.
If you can control your emotions, trading options can be less risky than you imagine. Once you understand the rules, everything makes sense.
The most challenging part is getting out while you are ahead. The stock market can present you with great opportunities to earn a lot of money but take them away just as quickly.
Therefore, you must take profits when you can. I aim to earn $1,000 to $2,000 monthly by trading long strangles, covered calls, and cash-secured puts.
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Spend your time being creative. So what do I do with all my free time? I write and produce books. I love writing, even though it’s less lucrative than trading options.
I spend roughly 3-4 hours writing and creating books. I take the weekends off from writing but usually perform a lot of administrative work on my books and website.
Writing keeps my mind fresh as I digest new information and try to turn it into something people can consume.
I make roughly $200 per month from book sales. It seems small, but this number keeps growing exponentially. One day, I hope to earn $1,000 from Amazon book sales.
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Putting it all together. The most important part of our retirement plan is living under $7,000 per month. It is great to know that if all our passive income dried up, we could still live comfortably.
Once we have a solid income base, we add multiple forms of passive income to make life more enjoyable. Some are very passive (dividends), semi-passive (options, real estate), and others are active (writing).
Honestly, I feel like we have more money now than when we worked. On paper, we were making much more while working.
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But being home every day makes you want less. I rarely get the urge to go to Amazon and blow my money. There is peace in knowing what the next day brings. Less chaos, more contentment.
Conclusion. My next step is to enroll in college and use the GI Bill. That will add some more dollars to the bottom line.
I wrote a while ago that $20,000 per month in passive income is the dream, and I still stand by that. I would love to earn $10,000 per month in dividends one day.
We simply don’t know what the world holds for our children. Maybe they get stationed in Italy or Germany. Wouldn’t it be nice to rent an apartment there for a year to spend time with them?
We have the time, but now is our chance to ensure we have the money. Earning money isn’t about being greedy; it’s about respecting the future.
Don’t Gamble with Retirement 9
If you don’t want to earn more money, you are “pricing in perfection,” which means you are assuming everything will go as planned.
When things don’t go as planned, you put the onus entirely on your kids. It sounds good on paper to have them be responsible for everything.
Trust me; once I turned 18, I had no help from my parents. However, living this life alone changes you. I want to be there for my kids, emotionally and financially.
What do you want in the future? When do you want to retire, and how much do you plan to help your children? Answer these questions, and you are well on your way to a successful retirement. 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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