Have you become a sucker for the American Dream? You know that quaint little myth which implores you to find a good job, work hard, and live life well in your nice home in the suburbs.
The unfortunate reality is that a 9 to 5 job will never allow you to bask in the afterglow of financial freedom. In many cases, a JOB stands for Just Over Broke. Simply ask the 127 million working Americans who often struggle to make ends meet.
Nearly half of all Americans are living paycheck to paycheck.
66 million Americans do not have the savings to cover even a small financial emergency.
69% percent of Americans have less than $1000 in savings.
American households with credit card debt owe, on average, more than $16,000 in such debt.
About 50% of American families do not have a single cent set aside for retirement.
Clearly, grinding away at a job is not working for everyone. With so many struggling just to make ends meet, it’s no wonder few people get rich working a 9 to 5.
Unfortunately, you’ll never save your way to wealth either. That’s probably why you’ve never heard of the coupon millionaire. Forgoing your favorite Starbucks latte won’t make you millions.
So if you’ll never get rich working at your 9 to 5 job or get rich by cutting coupons, why do I often stress maximizing earnings at work and living frugally as pathways to financial freedom? Why do I encourage you to become indispensable on the job; to do what ever you must to garner the raises you deserve, and obtain the skills crucial for higher paying positions? Why do I stress frugality? Why is it so important downsize the cable bill, trim your phone bill, and renegotiate your car insurance?
To understand why, you must first appreciate the most important wealth building formula of all time:
Income – Expenses = Capital (seed money) left over to invest in wealth building assets.
Your trajectory out of the rat race begins when you realize that it is capital (seed money) invested in wealth building assets that truly propels you to financial freedom. This is how the wealth game is played.
The more raises you earn or promotions you garner at work the higher your income grows, ultimately resulting in more seed money left over for investing. Reduce your expenses by frugally cutting your living and entertainment expenses, and you also create more seed capital to invest in wealth building assets.
Your job and frugal living will not make you rich, but they are the means for creating the seed money which you can use to truly build wealth.
What do you invest in once you have accumulated your seed capital? Consider these wealth building assets:
Stocks – Warren Buffet, one of the wealthiest investors in the world, suggests that you invest in simple low risk index funds, which over time will help make you financially independent.
Real Estate – Our population is always growing, but the amount of land in the US remains a constant. That’s why fortunes are made through real estate.
Bonds – Corporations, cities, states and the US government all borrow money. When you lend them money in the form of bonds, you’re the one earning interest and smiling all the way to the bank.
Intellectual property – Use your seed money to build your own app, create your own software, write your own book, or create your own website that will continue to earn you passive income in the future.
Businesses and Side Hustles – Everyone has a talent, expertise, or experience that people are willing to pay to gain access to. Find your talent or expertise, and then use your seed money to get your business or side-hustle off the ground.
The vast majority of Americans toil at their jobs on financial treadmills going nowhere fast. You don’t have to be one of them. Understand that financial freedom is gained by spending less than you earn and investing the difference (seed money) into wealth building assets. Work to earn more on the job and cut down your expenses through frugality and you’ll create even more seed money to fuel your wealth building.
BMWK, how can you earn your piece of the American dream?