There is nothing wrong with being average. In fact, I strive to live an average life where no one knows my name. However, I also chose to be silently wealthy.
Just because you are average doesn’t mean you can’t be happy and financially comfortable. You don’t need to be a successful entrepreneur or star athlete to give your kids an amazing future.
How do you build passive income and generational wealth as an average person? The key to your financial freedom is investing; in this case, income investing. I’ll explain why.
The Magic of Compounding
Why don’t most people get ahead? Most people do not get ahead financially because they exchange time for money—exclusively. This means that when they don’t work, there is no money coming in.
To become rich, we all must have money coming in passively; we conveniently call this money “passive income.” Whatever your career or job, you must seek to build a stream of passive income.
Can you imagine a world where you get paid $500/month without working for it? My wife and I earn about that amount in dividends.
Every single person in America can become a dividend investor, right from their Cash App application on their phones. So, why don’t people invest?
Is Budget a Bad Word?
The simple answer is “fear.” The fear of the unknown, the fear of losing money, the fear of looking foolish. Therefore, you must decide if the fear of working forever looks more appealing than becoming an investor.
I’ll let you decide the path you want to choose. I chose to become an investor, which changed my life dramatically. I retired at age 42 with a combination of military pension income and passive cash flow.
The “system” abuses the average person. They cut jobs on a whim and increase property taxes and home insurance whenever they want. So, how do you get ahead, and more importantly, stay ahead? Introducing income investing.
What is income investing? Income investing is an advanced type of dividend investing. Here, you seek current income above any other metric.
I like to think of income investing as shopping for gift cards. Wouldn’t it be great to find a $50 gift card that sells for $30? You are getting 40% more value.
Retire Rich, Retire Comfortable with a Business 4
Income investing exemplifies the same philosophy as bargain shopping. You know exactly how much the investment pays; you simply look to get it at a better price.
In more practical terms, income investing gives the average person access to free markets. With this opportunity, they can create a passive income stream that lasts their entire lives—and longer.
Earning $500/month with income investing. A tremendous short-term goal is to earn $500/month in dividends within your income-investing portfolio.
$500 per month may not sound like a lot; however, it is life-changing because you are not exchanging time for money.
I know that it may sound unbelievable to receive $500 from the sky, but that is exactly how it happens. You wake up to money sitting in your brokerage account.
The Dividend Debit Card 2
However, you must insert your money into the markets to become an income investor. You have to understand “The Four Principles of Income Investing.” They are 1) shopping on discounts, 2) targeted reinvestment, 3) the rule of 72, and 4) automatic investing.
Let’s walk through the steps of building a $500/month income investing portfolio. The first, and most important, step in the process is preparing your mindset. You must reduce your dependence on shopping, and refocus your efforts on budgeting.
Yes, it’s time to budget. It’s difficult to build wealth if you spend all of your money. This process aims to create cash flow, which is the difference between income and expenses.
There are only two ways to build the amount of cash flowing through your house: by lowering expenses or increasing income.
How to FALL into Investing 2
The fastest and easiest way to become wealthy is to get a roommate. I know this because I still have one after five years.
Let’s say your roommate pays you $1,000/month (like mine). You can insert that cash flow directly into your income investing portfolio.
There are six types of income investing products: closed-end funds, preferred shares, mortgage REITs, dividend ETFs, business development companies, and high-yield dividend stocks.
I will keep it simple for this example and put everything into the PIMCO Dynamic Fund (PDI). This is my favorite closed-end fund.
It’s time to build wealth. Let’s assume PDI pays a 12% yield. That means we would need to invest $50,000 into the portfolio to achieve our $500/month quota.
The Maintenance of a Great Life #1
Using simple math, it would take us roughly four years to hit our goals. But, in reality, it would probably be about two years. Don’t forget the power of compounding.
The benefits of becoming an income investor. But, why become an income investor at all? Isn’t it easier to just work for money?
Income investing allows the average person to defeat inflation and cost of living adjustments. You have the power to invest capital to make more capital.
Every year, your home insurance, car insurance, property taxes, utilities, streaming services, car registration, etc. increase in price.
The Magic of Automated Income Investing
As an income investor, your income also increases every year. You can use your dividend increases to counteract and defeat other cost adjustments.
Eventually, you will have created two income streams: the roommate and the income investing portfolio. You can use both to get ahead—and stay ahead.
Most people do not earn any income outside of their job. This can be worrisome when “things” hit the fan. The person with the most income wins.
Conclusion. I have been an income investor for almost six years, and things get better yearly. I don’t know how it happens.
The Magic of Talking to Yourself
That is the power of compounding at work. I can’t even fathom how the numbers keep getting bigger and bigger; it’s beyond the scope of my mind.
Therefore, it’s time to decide. Do you want the power of compounding to work against you (debt) or in your favor (income investing)?
I made a choice in June 2019 to get out of debt and to do right by my family. This powerful choice has served me well; that’s why I write about it every day.
You can lead an average life and have extraordinarily above-average results. You just need to understand how to harness the power of compounding.
As someone who is average, the best thing I did was become an income investor. Becoming an investor has elevated my life from average to extraordinary. 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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