Tag: how to achieve financial freedom
10 Levels of Financial Independence And Early Retirement | How to Retire Early
Jason 0 Comments Retire Wealthy Retirement Planning Tips for Retiree's
Long-term financial goals can sometimes seem
so big that they feel almost unattainable especially when we’re just getting started
on our road to financial independence. I and many others like me in the financially
independent, retired early community have found it helpful to break down the goal of
becoming financially independent into smaller and more manageable levels of financial independence. Not only because it makes it easier for us
to track our progress, which in turns helps us to stay motivated throughout the process,
but also because it helps us get over that initial hurdle of starting to chip away at
this mountain of a task. In today’s video, I’m going to take you
through what I consider to be the 10 levels of financial independence as well as give
an example on how to go from the first level to the top level in your lifetime. Hey everyone Daniel here and welcome to Next
Level Life a channel where you can learn about Investing, debt, retirement, and many other
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Now obviously these ideas of the levels of
financial independence are not solely my own nor are they very new as there are many articles
and blog posts that have covered this topic already and have done so for many years. So consider this more of a summary of many
of the ideas expressed in those articles and if you want to learn more about the topic
feel free to check out some of the articles for yourself. I’ve left some links in the description. With that out of the way, let’s get started. Okay so real quick the 10 levels of financial
Independence are Level 0 Financial dependence, level 1 Financial solvency, level 2 Financial
stability, level 3 debt Freedom, level four coasting Financial Independence (also sometimes
known as freedom from employer), level 5 Financial Security, level six Financial flexibility,
level 7 Financial independence, level eight Financial Freedom, and finally level 9 Financial
abundance. The levels are usually defined as something
like the following: Level 0 – Financial dependency is when your
debt payments and other living expenses are greater than your own income.
This means that you are in one way or another
dependent on someone or something else to help you pay for your bills or if you happen
to be a kid and don't actually have any bills you need someone else, usually your parents,
to pay to put food on the table and keep the lights on and have a roof over your head. This is the level that all of us start out
on and it is referred to as level 0 because as a financial dependent you obviously have
no Financial Independence. Level 1 – Financial solvency is when you are
current on all your debt payments and you can meet your financial commitments and your
other living expenses without any outside help. Level 2 – Financial stability is usually defined
as when you have built some sort of emergency fund in addition to being financially solvent. Level 3 – Is again debt freedom and it's defined
differently depending on who you ask. For some, it is being completely debt-free,
mortgage and everything.
For others, it's being just free of the high-interest
debts like credit cards but you still might have a mortgage or other debts like student
loans. And for some others, it is paying off all
of your debts except for the mortgage but your credit cards and student loans or car
loans all that stuff is all paid off. Level 4 – Coasting Financial Independence
also sometimes known as freedom from the employer, Barista Financial Independence, or Agency
in blogs and other mediums. I personally like the idea of it being coasting
Financial Independence so that's what I'm going to be using in this video but know that
some people refer to it by one of those other titles but the idea is the same. You have reached the level of coasting Financial
Independence when you could, if you wanted to, step down from a job that may be higher-paying
but may also be either less satisfying or more stressful or both into a new job that
is lower paying but more enjoyable or less stressful or both.
This is because in the early years of your
career or just thought most recent years you have managed to save a very decent sum of
money that would be able to provide for the later years of your retirement after it has
grown even if you don't put much more in. Therefore all you need to do is make enough
money to get you to age 60 or 65 or 70 or whatever your numbers work out to be when
that amount of money you've already invested will be able to fund your lifestyle because
it's been given enough time to grow. So in a sense, you've worked really really
hard and been very frugal in the first few years so that you can coast into your retirement. I have gone into more detail on the various
types of financial Independence in a previous video which I'll leave Linked In the description
if you're interested in learning more.
Level 5 – Financial Security is effectively
when your cash flow from wealth such as you are investments has grown to large enough
that it can provide for your annual basic survival expenses. Now I say survival expenses because I do differentiate
that from living expenses survival expenses are just the basic things you need to survive
Food, Water, Shelter, some form of transportation, clothing and probably insurance. This does not include things like Netflix
subscriptions or cable bills or things like that it is purely survival expenses. So this may not be exactly the ideal spot
to retire and I certainly wouldn't want to retire at this point but it is an important
level to keep in mind because it does give you… well security. If you were to get fired today and you were
on level 5 you would be okay you could survive until you found another job. This is essentially the first level that really
gives you I guess that piece of mind even if the lifestyle should you have chosen to
live it may not be the most lavish.
Level 6 – Financial flexibility is similar
to Financial Security just one step up. It is when you have the ability to live off
of your current cash flow from your wealth assuming that you have a flexible spending
plan that adjusts for up and downs in the market. So if the markets up 20% one year you're able
to spend a little bit more but if the market is down 20% the next year then you don't spend
quite as much. I’ve seen it defined many different ways
so it could vary depending on who you ask, but the one that I personally like the most
is that it is roughly half of your full financial independence goal, or roughly about 12.5x
your current annual expenses if you follow the 4% rule to get an idea of how much money
you need to retire like I’ve explained in previous videos.
So it isn't quite Financial Independence yet
but it's close. Level 7 – Is financial Independence and it's
usually based on the 4% rule which I have covered in a previous video. You can follow the 4% rule when you have saved
roughly 25x your annual expenses. The vast majority of the time this will be
enough money to allow you to maintain your current lifestyle in retirement and as a result,
you can be considered financially independent. And some articles end it right there but I
think there are a couple of levels that are a bit higher than that that are worth considering
even if some of us may decide to not ever try to achieve them because being at level
7 allows them to do what they wanted all along. So let's talk about those other levels. Level 8 – Is Financial Freedom which I've
often seen defined as the cash flow from your Investments is greater than financial Independence
and a few more life goals.
Life goals, of course, will differ for everybody
but this is could be something like taking a trip or two overseas or moving to a new
place you've always wanted to live but haven't had quite enough money to live there up till
now or whatever the case may be for you like I said it's different for everybody. Level 9 – Is financial abundance and this
is quite simply just that the cash flow from your Investments is more than you will ever
need.
You could spend it if you really wanted to
but it would actually take some effort. And the stuff from level 8 doesn't really
cut into it much at all. So you could up those goals even more and
still have more cash flow left over at the end of the year. This also probably has a slightly different
definition for each person depending on who you ask, but I like to think of it as roughly
3x your financial freedom number because this would allow you to experience a horrible bear
market where your investments go down by 50% and still has 1.5x the amount that you would
need to maintain the lifestyle you lead when you reach level 8.
To me, that means that it is likely more than
you will ever need, but again that one is strictly my own opinion on the matter. So those are the 10 levels of financial Independence,
now let's walk through a hypothetical example of how someone could go from Level 0 to being
financially independent in a single lifetime. John and Jane are recently married couple
each making $20 an hour at age 23 or $83,200 a year between them assuming no overtime. They manage this because they are not only
good hard-working people but got great grades in school and we're selective about the job
that they decided to pursue. Obviously just like everyone else they would
have started off as Financial dependents and as they were going through college they would
have been building up student loans that they would not have had the money to pay off (assuming
of course that they didn't earn enough money while in school to keep up with the rising
debt).
In all they have credit card debt, two car
payments and the student loans which have balances of $5,000, $35,000, and $60,000 respectively,
but since they got their jobs they are no longer financially dependent and their incomes
have allowed them to become current on all their debt payments without the help of others. In addition to the regular monthly debt payments,
their annual expenses are $48,000 a year. So they are currently in level one Financial
solvency and trying to figure out a way to move to level 2 Financial stability. In order to do that they need to figure out
a way to build up an emergency fund.
Now if they're following the 10 levels system
to a T then they would look to build a 3 to 6-month emergency fund of their survival expenses. However, this is not the only way to approach
it say if you were to follow Dave Ramsey 7 baby steps you would start off with just a
$1,000 starter emergency fund and then get right onto attacking your debts. And other Financial systems and plans may
have you approached it an entirely different way.
Either way is perfectly fine because the 10
levels system is not meant to be a financial formula per say it's more there to give us
some sort of guidepost so that we can better track our progress towards achieving Financial
Independence. But for the purposes of this video, I am going
to assume that they follow the 10 levels in order so we are going to be building up a
full emergency fund. In order to find how much of an emergency
fund they will need we will need to know how much money they need to survive not necessarily
on their current level of expenses while they have jobs but purely on Survival expenses
which are basically your four walls of your financial house or in other words food shelter
including utilities Basic clothing and some form of transportation as well as the insurances
that are related to that assuming there are any.
In this case, I'm going to assume that their
survival expenses are right around $3,000 a month. Which means that in order to get a 3-month
emergency fund they would need $9,000 in order to get a six-month emergency fund they would
need to save $18,000. Both John and Jane feel that their jobs are
pretty darn secure and the market is doing fairly well so it's not likely at least in
the near-term that they would get laid off because the company has to downsize so they
decide together that they are comfortable with having just a 3-month emergency fund
of $9,000. So with $83,200 a year in income, $48,000
a year and expenses, plus minimum monthly payments of $100 on the credit card which
is 2% of the balance, $550.78 on the car loans, and $621.83 on the student loans they will
have approximately $1,660.72 a month left over to start building their emergency fund.
However, both John and Jane have been looking
into their finances and researching a lot lately and they become fired up at the possibility
of becoming financially independent while they're still young. So they want to see if there's a way that
they can speed this whole process up. And as it turns out thankfully there are many. After taking a look at the options they decide
that they're going to work as much overtime as they possibly can (for the sake of Simplicity
I'm going to assume that they manage to work on average 5 hours per week of overtime which
will increase their monthly income by about $1,300 a month, meaning that instead of $1,660
a month they will have $2,960 a month left over) and they're going to sell both of their
cars and buy some nice used cars with cash to help knock down some of that initial debt. After putting out a couple of ads online they
managed to find buyers for each of their cars that is willing to give them $15,000.
So they take that $30,000 and use $5,000 of
it to pay off the credit card balance and another $10,000 to buy a couple of used cars
from someone that they know takes good care of their Vehicles whether that be a family
friend or just a mechanic that they Trust. The remaining $15,000 is thrown at their car
loans. This means that the credit card loan is fully
paid off and therefore the hundred-dollar minimum payment is no longer needed. So John and Jane start throwing $3,060 per
month into their emergency fund and get it fully funded in 3 months with a little bit
left over at the end of the third month to throw out their car loan. Over the course of those first three months,
they managed to bring the car loans balances down to $18,423 thanks in large part to the
$15,000 that they threw at it in the first month after selling the cars and also making
the minimum payments in the first three months. Now that their emergency fund is fully funded
however they're able to throw that $3,060 a month in addition to the $550 a month minimum
payment at the car loan and get it paid off in 6 months flat.
So a mere nine months into their Journey John
and Jane not only have a fully funded emergency fund but they also have paid off both of their
car loans. Now there are just the student loans to tackle. And thanks to the fact that they've been making
minimum payments on them for 9 months and the fact that they had a little over $3,000
at the end of the ninth month after paying off their car loans their student loans now
have a balance of $53,263. John and Jane follow the same pattern that
they did with the car loans throwing the $3,600+ which is what they now have left over at the
end of every month because they no longer had a $550 car payment to make and they managed
to get their student loans paid off in full in 13 months. So John and Jane have managed to become debt
free and have a fully funded emergency fund in 22 months.
They have now reached level three and because
of that they now have over $4,200 a month left over to start investing. This brings us to level four coasting Financial
Independence. Let's assume that John and Jane want to retire
by the age of 65. That means that whatever they put in now needs
to be enough to grow to a point where it can support their lifestyle in retirement by the
time they're 65. If we assume a rate of return on an average
in the market of about 10% before inflation and an inflation rate of about 3% per year
on average then we can get a rough estimate of how much John and Jane need to put away
in order to achieve a state of coasting Financial Independence. In this case, since they're 24 about to be
25 they will have somewhere in the neighborhood of 39 or 40 years to let the money grow before
needing to take any of it out. If their expenses were $48,000 a year at age
23 then 42 years later if we assume a 3% rate of inflation they would need a tad bit over
$166,000 each year to live on.
Again assuming we follow the 4% rule to figure
out how much they need once they fully retire to be financially independent that means that
they would have to have at least $4.15 million invested in the market by the time they turn
65. In their case, they would need about $110,000
saved up give or take in order to achieve coasting Financial Independence and because
they're able to save about $4,233 a month now that they’re debt free, they’re able
to hit that goal in 2 years flat.
Meaning that in theory, they would be able
to step down from their jobs to a more rewarding less stressful but probably lower-paying job
just 3 years and 10 months into their financial Journey. That is incredible! But like I said coasting Financial Independence
wasn't their end goal. They wanted to be fully Financial Independent
so they keep working and investing for now. The next level is level 5 Financial Security
which is achieved when your cash flow from your Investments is greater than your annual
survival expenses which remember is $3,000 a month or $36,000 a year in John and James
case. Because they are debt-free, are making good
money at their jobs, and being intentional with their finances they Achieve Financial
Security in a little over 4 years with over $367,000 in their portfolio.
It is been a mere 87 months or 7 years and
3 months since they began their financial Journey. John and Jane are 30 years old and they are
able to get by on their Investments alone. In theory, they could retire now, it wouldn't
be the most glamorous retirement and it wasn't their goal but it is an option they have. They don't have to worry about losing their
jobs anymore because even if both of them lost their jobs today they would be able to
make it long enough to either find a new job or some other source of income. This is really the first level where you start
to get that piece of mind when it comes to money at least in my opinion. Next is financial flexibility which as I mentioned
earlier in the video has many definitions depending on who you ask but for the purposes
of this video, I'm assuming that it is roughly 12.5x your current annual expenses which for
John and Jane would be roughly $600,000 or about $855,000 if you account for inflation. This means that they would Achieve Financial
flexibility 9 years and 8 months into their Journey not accounting for inflation or about
11 years and 9 months if we do account for inflation.
John and Jane continue investing through all
the highs and lows of the markets until they reach Financial Independence exactly 14 years
into their financial Journey assuming we don't account for inflation or 18 years and 3 months
if we do. So you might be wondering why did I split
up the accounting for inflation time frames and the not accounting for inflation time
frames should we always be accounting for inflation? Well technically yes but the reason I split
them up is because in my experience taking this journey myself as well as seeing others
take it, this journey changes how you view a lot of things and more often than not those
changes lead to you valuing things such as freedom of mobility and location and freedom
of time to be able to spend with the people you love more and valuing more material things
that cost possibly a lot of money less and less. That's not to say that everybody becomes minimalist
going through this journey, I'm not saying that at all but I have seen a lot of people
who have gone through this journey become closer to minimalist than they were when they
started the journey as they find out more and more things that they used to buy just
don’t provide enough value or happiness for them to be worth the purchase.
They find better uses for their money and
time and as a result, they generally tend to spend less. Which means that even though inflation is
technically increasing your expenses by making every dollar less and less valuable over time,
if you're also decreasing your expenses because what you value is changing it may even out
or in some cases, you may even see your regular expenses going down year-over-year as you
continue through this journey. So that's why I split them up. And, before I go, I do want to mention that
based on what I've seen on various articles and forums some people really like to have
even more goals to chase as they go through this journey than what I've laid out today
in this video so if that's something that would help you feel free to break down these
levels even further then I have today this is obviously just the list that I used and
what worked for me, but you could take it even further.
For example, Debt Freedom could be broken
down into three separate stages: One where you are free from all high-interest debt,
a second where you are free from all debts except for the house (if you have one), and
a third where you are totally debt-free. You could tackle the coasting Financial Independence
level in a similar way breaking it down into two stages: One where are you have invested
enough to survive in retirement and a second where you have invested enough in order to
maintain your current lifestyle, adjusting for inflation of course, in retirement.
And the financial independence level could
also be broken down into three stages: Stage one would be where you are at a survivable
level of financial Independence, stage 2 would be where you have achieved leanfire status,
and stage 3 would be where you have achieved full Financial Independence on your current
lifestyle assuming that it is above the leanfire level. So what do you guys think of this 10 levels
system of tracking our progress to financial Independence? Do any of you use a similar system to track
your progress? If so, what is it and what level, step, or
stage are you guys currently on? Let me know in the comments section below. But that'll do it for me today once again
if you enjoyed this video be sure to subscribe and hit that Bell next to my name so that
you'll be notified of all my future uploads.
I generally upload every single Monday, and
if you have a friend that would be interested in this kind of content be sure to share it
with them and let's really get this information out there and start our own Financial revolution..
Aim to be Wealthy Not Rich | How to Accumulate Wealth
Jason 0 Comments Retire Wealthy
hey guys toby mathis here with infinity investing and a question i get a lot and something i want to address today specifically is whether it's important to be rich or wealthy what is the difference and why it is so important to be wealthy not rich the easy way to look at this is rich is something that's temporary if if we were farming for example rich is having bushels of corn maybe a full silo wealthy is actually owning the farmland and the crops themselves so one thing's going to generate a ton more riches over time so that's the way i look at wealth is wealth is really hard to get rid of because it keeps producing as opposed to rich might be a temporary situation like if i win the lottery then i could be considered rich but i'm not wealthy wealthy is having something that's going to produce income over a long period of time when we teach infinity investing we're almost always focusing on on the crops not on the whatever whatever it's generating the money that comes out of it so we're oftentimes we're focusing in on creating perpetual income streams in the form of dividend producing stocks with the ability to sell options on those same stocks generating multiple types of income there's the dividend stream there's the growth of the stock and there's also the sale of the option so you're making money three different ways uh when you're investing in the stock market or if you're going into real estate you're looking at cash flow we're not so interested in selling the real estate we want that this is again like farmland where we have the farmland and we're growing crops on it and it's producing uh the fruits and the vegetables of the labor right it's producing something that we can sell or live off of you know we can exchange it for money when i say sell think of it like this i can exchange dollar bills for food i can exchange dollar bills for other assets i can change dollar bills for card or something like that like i put for goods and other services that's what i'm looking at so i want to be able to produce something so sometimes i have to produce uh rents sometimes i'm producing dividends sometimes i'm producing short-term capital gains off the sell of an option sometimes i am like having to work and i'm generating uh income off myself but where wealth comes from is having an abundance of kind of the farmlands and the crops that's producing this that i just can't get away from it it's always going to produce even if i run out of money temporarily it's just going to be replenished the next time the harvest comes around right so uh that's the difference between being rich and wealth and then the next question that comes right out of that is hey if i'm young and i don't have a ton of money let's say that one one one viewer wrote in and said hey uh i'm trying to put it put aside about 50 of what i generate which isn't a whole bunch it's hundreds of dollars a month it's not a tremendous amount of money what would i focus in on and what i would focus in on is learning the system and the way you learn to do something is by doing it it's the old nike adage just do it the way you learn to run a business is you run a business the way you learn to invest is you invest the way i learn real estate is i get involved in real estate either on the wholesaling side agent side until i have enough money to where i can be on the landlord side start buying but i need to be involved in that area so what would i do is i would start identifying uh high dividend paying stocks that have some volatility to them in their like we have a whole list that's on our site at infinityinvesting.com of course you can become a free basic member and take a look at these things um but we're always looking at companies that are producing a decent dividend that do have safety growth potential when i look at the dividends by the way i want to see at least 10-year history of increasing those dividends every year which is the profit that's paying out i want it to continue to go up i don't want you know a company that's paying me a dollar a year and in 10 years it's still paying me a dollar a year inflation has made that less valuable i need that dollar to go up every year to a dollar ten then a dollar twenty then a dollar forty then a dollar sixty then you know so in ten years it's paying me out three bucks i don't i want it to have this continuous growth so that i have protection against things like inflation in order to learn and become uh sensitive to all the aspects of investing you need to actually invest so what i do is i would pick one company that you can follow and that you could use as your learning ground and start buying even if it's one share a week of that company maybe it's one share every two weeks continue to accumulate that once you hit 100 shares now we can start selling options against it and generating another income source just by doing that simple thing of hey i'm just going to start accumulating and it might take me a year to accumulate those hundred shares so be it you're going to be learning and you're going to start hearing this company's name you're going to start being sensitive to the information it puts out when you hear things like dividend yield it sounds neat from a hypothetical standpoint but once you actually see this is the impact it makes on me here's what it's paying me oh that's what that means as soon as it starts putting money in your bank account you're going to start going what was that well that's the dividend that paid out his ex dividend date was x and it paid out on this particular date and here's what its cash free flow was and here's what his profitability was and you're like wow that's great now this stuff actually makes sense to me and you're just going to follow that very simple let's accumulate just one company because remember this is learning so i want to buy the one company and focus in on accumulating 100 shares and that means when you have 100 shares it means you can sell one option now and you're selling out of the money option uh at that point and now that will become relevant to you and you might buy it back and sell it again and buy it back selling like there's absolutely a ton of opportunity to generate some extra dollars if you want to spend the time on it so you can absolutely do that that's a great place to start so if what i would tell my daughter which is hey if you want to she's by the way in her 20s but i always say like hey if you want to learn to do something you just do it because it triggers a type of memory is it's there's a uh there's a terminology for it but all of a sudden you start becoming aware of it and whenever you hear it in the news whenever you start seeing things that are relevant to you your brain picks it up whereas opposed you were just completely blind to it so it makes a huge impact on just doing that so that's what i would say to anybody who's just getting started if you want to focus on wealth you're focusing in on the farmland you want to buy things that are going to produce so if i am going to start i'm going to start by buying something very simple stock in the stock mark that is producing the stock market that is producing dividends income on a continuous basis that i still get to see the growth of that company and i can also produce another type of income by selling options against that same company so that's what i'm going to be focusing on so let's go to another question then that we get and this is a very specific question it says hey my spouse and i took a while to get our careers together not uncommon we have a good income now and want to better plan for the future but we have no idea where to start so this is a good place a lot of the info provided seems geared towards starting right after college so a lot of the information that you see in infinity we're talking about a longer time horizon absolutely true we are near 40 we don't have much savings for retirement so no real investments no college funds and a good amount of debt uh are we pretty much screwed in the thought of early retirement no you're absolutely not so let me just explain uh again the infinity theory is that we focus in on how much you spend on a monthly basis so we have our expenses and we're looking at replacing your income the work that you do through assets buying assets that produce that income for you so that you don't have to work so the infinity net worth is how many days i could make it without working right now like if i quit my job or if i stopped working how long would it take to burn through my assets well if i have enough assets that is producing enough income so let's say i i could live off of two thousand dollars a month and i have assets that are producing two thousand dollars a month i will never have to sell any of my assets on because it produces enough income to cover my expenses so you know again using the the analogy if i have crops that produce enough food that i can feed my family then i'm fine and it has enough to where there's a little extra so i could pay the taxes on my property or you know pay any any cost pay for the car pay for things as long as i have enough crop coming in on an annual basis i never have to sell anything i own i just have that crop i'm selling that crop well in our world the crop is really the cash so where am i producing cash i'm producing it with dividends i'm producing it by selling options sometimes i might end up letting an option expire and i'm gonna take the gain off that company uh all of those things are revenue producing i might buy real estate in that real estate is producing rents it's cash flow real estate and so those rents are coming in enough to cover the expenses plus i have some extra and if there's enough coming in that it covers all my personal expenses that i don't have to work all right so now we're 40 and we're saying oh geez i don't have any of those assets to produce it so then start right away the easy thing to do is to go right to the stock market and you're going to start building it up i always say the first 50 000 you're going to go in and you're going to buy income producing companies and infinity investing always has a list and we're always rating them continuously throughout the month so you can always just pick some that are good income producing companies make sure that the timing is right run your seven criteria which again is explained in the in the portal there and just see whether it's the right time for you to buy a particular company buy that particular company and let it start producing those dividends for you buy a hundred shares and now i can sell one option against it so i can produce some more income and if you just do that you just keep repeating it until you hit about fifty thousand dollars that's where i would start is i would be looking at it going all right i need to have a little emergency fund i need to have my investment fund so i'm just going to focus right now on the investment fund i want to have liquidity of about 50 000 before i go to the next step which is where i'm buying real estate i want to have some liquidity because real estate it can go like i might have to replace a roof the day after i buy a a property or my you know maybe i get hit by a hurricane right away or you know there's lots of stuff that can happen or you know the economy just decides to tank and all of a sudden i'm sitting there vacant for six months i need to be able to handle all that and the way you do that is with liquidity now we're going to do everything we can to minimize those risks but there's no there's no replacing having that actual liquidity that's why i always start in the stock market and i say hey start buying those same companies get 100 shares sell option against it out of the money options which again we want to we want to be a stock market landlord we want to start renting out our stocks so we can start producing this income then it's just up to you as to how active you want to be i have clients that make a very good living simply focusing it on the real on their stocks and buying and selling and buying and selling they sell they they chart they get very good at charting they spend time in the advanced area which is what those guys are doing eric and company are always in there showing you guys how to do these things but they might be selling those options then buying them back as as the stock pulls back there's always ranges that it's flowing and so sell the option buy a back sell it's buy it back you could do that multiple times in a single day and make some decent money all right all that stuff is now replacing the income that you're having to make as an individual now if you're still working and you have both now we're compounding that's exactly what we want to be at now we want our assets producing i'm producing and it starts to snowball as time goes on you'll be very surprised at how little it takes before you could start replacing your income now that does not mean you quit your job it just means that i'm going to have a period of time where i have not only the income that from my assets but i'm also working i'm going to be making twice as much and if i cut my expenses a little bit so if i'm 40 and i'm like hey i'm behind the eight ball all right now it's a function of how much do you need to live on how much do you have generating i can keep making more i could show you guys how to generate more but on the same token maybe i need to be spending a little bit less maybe i need to get my spending under control in those two things conjunction you know again i lower my lower what i'm paying i increase how much i'm generating i'm going to get to my goal much much quicker now there are people in our group who have retired off of as little as three homes because their income was sufficient off of those houses and that in this particular case i'm thinking of somebody who did shared housing who ended up generating a nice chunk of change somewhere in the 17 000 a month range simply by buying a house and deciding that what she was going to do is do shared house now i'm not saying that's immediately where you go i'm going to say she was able to do that because she knew exactly how much she needed to live off of she had some other income coming in she had this income coming in and she was able to say hey you know what i have enough coming in that it's replacing everything i need to live off of and i can retire and that's exactly what she did it's not i have to have millions and millions and millions of dollars you just need to replace what it is that you're spending and then you can decide whether or not you want to work because those assets are going to continue to grow you're able to continue to generate income off them so it doesn't take a ton it's actually way easier than you realize once you identify and target a number and say oh this is how much i need to replace then this is how you do it now again i'm going to say this if you like this type of content please subscribe please share this with other people too if you think it'll help them all right last question under this rich versus wealth and where should i start in these types of questions uh this is the last one that i got and i want to go over this one this is actually something that a lot of people think which is uh let me read you the question and then you'll see what i mean i started putting 10 percent towards paying off my debt and investing in a dividend paying stocks that's fantastic i feel it'll take me decades to get caught up i see people with more debt driving newer cars and buying houses will the 10 percent really get me to financial freedom i feel i'm missing out any advice so let me be very specific to you yes it's going to take a while that 10 is the getting out of debt getting at least 10 percent that you're putting aside you should be putting 10 percent towards philanthropy if you don't have the money to do that like if you don't want to give it to charity if you don't want to tithe then at least put your time towards those things and then you could take the 10 percent and dump it into your investment there's another 10 percent that's going towards debt so as soon as you're out of debt then that lumps in and so we're really going to be putting about 30 percent aside into our investments and you can put more it's as simple as saying hey what am i what do i need to live off of can i cut back some of the stuff like am i spending stuff money just because i have it and it's like burning a hole in my pocket and i'm going to go to the movies twice a week i'm going to go to dinner all the time if i cut back and put myself on a budget can i put more towards my investment absolutely then you say well i see all these people driving around on a new car that's a big fat liability that is costing them thousands of dollars i understand that there's an envy of like geez you will lose that once you realize the true expense then you'll probably start looking at them going oh wow they're probably going to be working till they're 80.
right now there's not a magic pill like boom and i'm all of a sudden super wealthy nope you got to buy assets and it might be a slow process but if you do it for that 10 20 years if you do it and you do it consistently then you'll you will not have to work until you're 80 90 100 years old and you'll have enough income coming in to where you'll be able to maintain your standard of living and then it just becomes up to you whether you want to volunteer a lot of people say geez i want to retire because they're miserable right they're saying hey i want to retire i want to be able to do this i want to do that i'm just why not build your life to where you're actually not miserable the a lot of the people that i work with they get to that point where they realize wait i'm i volunteer i don't really have to work and they enjoy it much much more and they're like i'm never really going to stop doing what i'm enjoying my life that's what we want to build towards and where do we start we always start by building up our liquid liquidity so we're going to buy stocks that are dividend producing stocks we're going to try to amass a hundred shares in one company so we can sell options on it so we can become a stock market landlord we're gonna keep repeating that process until we have at least fifty thousand dollars of liquidity so and then we're gonna look at real estate it doesn't take as much as you think as soon as these things start to snowball a little bit and it starts replacing your income it might just be it's replacing ten dollars a week and then all of a sudden it's twenty dollars a week and then five years later it's three or four hundred dollars a week and you realize wait a second all the pressure is gone and i'm just taking that extra money and i'm letting my assets continue to buy more assets talk to somebody today literally he and his wife make in the hundred the hundred to two hundred thousand dollar range their net worth was well over five million dollars and they were in their mid forties if you do this and it was the same thing i'm telling you is they they have that they are worth quite a bit of money they're absolutely liquid and they're doing a great job and the reason they did is because they consistently put investments aside consistently put investments uh and use those investments to generate more investments they didn't go out and buy an immediately a bigger house they didn't go out and buy a bunch of new cars because they were waiting until they had enough income coming off of those assets to pay for any of their liabilities so now they have uh again i just literally talked to him about an hour ago so i was like ah this is great they have about twelve thousand dollars a month coming in whether they work or not but they both still work they've replaced their income and a hundred percent of that income that's coming in off of their assets is going into more assets and it's compounding and they realize as they're doing their numbers like wait a second this is going to continue to snowball we're going to have a very substantial estate yeah that's exactly how it works as long as you start as long as you start doing this and yes you're going to look around and you're going to say but there's people driving bentleys and rolls royces every time i go down to miami i'm shocked at all the lamborghinis rolls or races and bentleys right that is not wealth that is rich that's somebody taking some money and dumping it on something that is not a good investment it's not an investment that's pure frivolity they're just they're pay they want to have a nice car congratulations i don't begrudge it but you got to have the asset to allow you to do that most people don't most people are buying that with another liability and what they're going to find is they're going to be 45 and they're not going to have a penny to their name they're just going to be in debt up to their eyeballs don't let that be you don't let that that be you so if if that 10 is a starting point to get you to start rolling it's going to continue to snowball the longer period of time if you're saying this is going to take too long give it some time number one and actually let the system work and then you could say hey maybe i cut down some other expenses maybe i get a side gig maybe i want to put more and i want to push it maybe you're willing to do a little harder like hey i want to work more with the the asset that i buy so for example i could buy a single family house and i could just rent it that's that's me that's that's lazy landlord i could buy a house and i could airbnb it maybe a little more work i could buy a house and i could do shared housing maybe a little more work right but i'm able to generate when i do shared housing for example it's about 200 percent net that you in like you actually take in about twice as much money on a net basis on a monthly basis but it is more work i could choose to do that so if i'm sitting here looking and saying boy it's just not going fast enough then that's what you do you start getting more involved in your investments or hey i'm doing dividend stock right and i'm writing covered calls and i'm doing them every month okay do them every week how about do them every day and and watch it and watch them and be a little more actively involved in it you can increase your income just by doing that and that'll get you to your goal a heck of a lot faster so hey if you like this type of information by all means please subscribe to the channel share it with anybody else that you feel it will help and ask them to subscribe as well thanks [Music] you
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