A Better Solution to Work Save Retire
Why save cash?
There are some apparent answers to this question. A common one is retiring. This is usually the reply folks think about, yet it’s not even close to being the most significant. For a lot of working people, retirement life is so distant, that saving for it seems to be unimportant. This is why a lot of people postpone saving for retirement until it’s too late. This is a big oversight, but an easy one to make if you function like the average person. Think about it? Why might any person sacrifice even a penny of hard-earned wages for something so far away that it’s just about impossible to picture? I believe it’s essential to save, but not for retirement in the conventional sense. There is a better solution to the work save retire grind.
What is actually the biggest reason for saving money?
The best reason for saving your money is that it enriches the quality of your life by helping you to realize financial independence. I define financial independence as being able to do whatever you desire without needing to worry about money. In short, in the event you spend any time doing something you don’t wish to do for the sole motive of acquiring money, then you are not financially independent. Of course, everyone has to possess funds for basic essentials in life. However, if you are financially independent, the way you generate those funds is independent from the way you decide to spend your time. Financial independence is the thing that everyone ought to shoot for and saving money is a component of that regardless of who you are. How large a role it plays depends mainly on how you make money.
WII: Work-Independent Income
Now that I’ve explained financial independence, I shouldn’t need to sell you on why it must be a serious objective of yours. The liberty to do whatever you want definitely improves your mental and physical health in addition to your enjoyment of life, the two other components of The Magic Trio. What you’ll need for financial independence is work-independent income (WII). There are a couple strategies to acquire WII:
1. Earn passive income (cash flow that is created while you sleep, i.e. investment income, interest, royalties, rent checks)
2. Earn active income (income you must spend time to earn, i.e. employment) by spending time doing a thing you’d do anyways
You are financially independent whenever you earn enough to live comfortably with some combo of these two techniques. Maybe it’s 50/50. Maybe you earn half this figure, your minimum required income (MRI), from working a profession that you love and that you’d do for free and the other half through interest. Maybe you get it all from real estate investments. Maybe you get all of it through a career you love.
The majority of people do not earn any WII.
They don’t earn any passive income and they don’t earn active income doing a thing they truly love and would do anyways. If you’re one of the rare folks who does not have this problem, then you can skip this section. If not, then the entire premise behind your personal financial strategy ought to be solving this issue. This means discovering or creating a job which you love, bringing in passive income, or both. I encourage you to do both, however the former could take some considerable time and soul seeking, so while you bring this about, you could also begin to build passive income. For passive income, unless you’ve designed a good or service which makes you money while you sleep, you’ll need to have some capital. Whether this capital is used to earn interest or to make investments in real estate or other ventures that make a positive cash flow, you’ll need some.
Enter savings.
The more|The harder} you save, the quicker you build capital. The sooner you build up capital, the quicker you’ll be able to start playing around with it and earning some WII. How much capital you will need depends on the minimum required income you wish to provide for. It’s as simple as that. The rest is just details, some of which I’ll enter into later on. The goal of this section is to concentrate on the “why”. Many personal finance books will advise you to begin saving as soon as possible (in your early twenties when you begin working, if not sooner) so you have a large enough amount of money to retire by the time you become 65. I say begin saving as early as possible so you can liberate yourself from the demands of money, hopefully a long time before you turn 65! Don’t merely work, save, retire old. Work hard early on, save hard, and enjoy your life!