Personal Finance

The Biggest Myth About Income You Literally Can’t Afford to Buy Into

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If you’re on BiggerPockets, then it’s likely you’re seeking financial freedom. Your definition of "financial freedom" may differ from others, but what it really comes down to is this: When your passive income is greater than your monthly expenses, you've reached financial freedom. You no longer have to slave away your precious time, day in and day out, at a job just to survive.

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There are higher levels of financial freedom, too. The way I break it down is “freedom from” and “freedom to” do or not do certain things in life.

Financial Freedom: Stage 1

For example, if you create a monthly passive income of $5,000 and have $2,500 per month of expenses, then you are free from having to work a bad job, having to deal with toxic co-workers, and having to endure being bossed around.

Financial Freedom: Stage 2

The next level of financial freedom involves things such as having more purchasing power to, for example, buy a $10 million house. If you’re making $100,000 per month, you are free to buy just about whatever you want and create a lifestyle most people can’t fathom. But your first goal should be stage one. Find a way to generate enough income to create your own schedule and invest your time into more important areas of life.

Related: 3 Steps to Financial Freedom in 10 Years or Less

A Full-Time Job Is Not the Path to Wealth

man with blue geans and sneaker shoes in stair

“How” you make your money in life is so important. This is what determines the limit on your financial success.

If you trade your time for money in a 9-to-5 job, then you can only earn so much. You are limited by the number of hours you can work, by the amount your boss will pay you, and by your industry standards.

If you make your money from investments—such as real estate—then you can earn an unlimited amount, because your assets work for you 24/7.

This type of pay, also called passive income, is not connected to the amount of time you work each day. As mentioned, passive income can be achieved through real estate investing, other types of investing, starting a business (and eventually removing yourself from the day-to-day or selling it altogether), and so on.

The Typical Way of Earning Income Is Flawed

If you’ve read several articles on the BiggerPockets Blog, listened to BiggerPockets Podcasts, or watched BiggerPockets videos on YouTube, then you already know that real estate investing doesn’t have to be that complex. It all comes down to choosing the right strategy for you and then executing until you succeed.

Doing extremely difficult math and holding advanced degrees are not required to be successful in this business. You just need to have a strong will and to take action every single day.

The reason why becoming financially successful is so hard is because of time limitations. When you work a 9-to-5 job and have an hour-long daily commute, you don’t have much free time. Plus, when you get home, you’re probably hungry, exhausted, and ready to relax. On top of that, you may have to deal with other time-consuming or disruptive factors, such as raising kids, medical issues, bills, family matters, etc.

The point is, between a full-time job and everyday life, it’s pretty overwhelming to consider starting some side business that you’re half passionate about and half doubt will even work. Trust me when I tell you I know the feeling.

Related: Life Hacking in Pursuit of Financial Freedom: How I Add $1,500+/Mo to My Income

Passive Income Is Paramount

Man sit on the Bench looking out a sunset over grassy field

When your passive income is greater than your expenses, you can afford the ability to do something that most people never get to do: breathe. You can relax long enough to actually think clearly. You can spend hours and hours reading books and studying business strategies.

Passive income gives you the freedom to pull your nose away from the grindstone long enough to ask yourself, “What do I want my life to look like?”

Without passive income, you can’t get off the treadmill long enough to catch your breath and reorient yourself. This is why you must do whatever it takes to get your first deal up and running as quickly as possible. This is the moment that your wealth-building efforts will take a turn for the better.

Passive income, completely detached from time, means you can just about set it and forget it—and then move on and do it all over again. There is no limit to the number of cash-flowing assets you can add to your portfolio.

Alternatively, there is a limit to the number of jobs you can have and the amount of hours you can work in a week.

By the way, I’m not telling you to quit your job or to do anything rash. If you’re just starting out, you need all the cash flow you can get to jumpstart your wealth-building. If that means working a job, then do it. But the moment that you can work fewer hours for someone else and more hours on setting up your own passive income-generating business, the sooner you’ll arrive at financial freedom.

Being Rich vs. Looking Rich—Choose One (for Now)

In the West, our culture often values superficial success: what car you drive, how you look, etc. There’s a time and place for everything, so I’m not saying don’t indulge in something if you want it. However, if saving your money now means retiring in the next three to five years, then that should be more important to you. (Yes, this is possible.)

Most people have tens of thousands of dollars in debt, high car payments, high rent payments, student loans, and an elevated standard of living. That might be fun and all, but it's just plain stupid unless you're already wealthy.

If you can find clever ways to lower your monthly expenses by being frugal and selling off your liabilities, then stage one financial freedom will become much easier to attain. For example, if you can find a way to lower your monthly expenses from $3,000 per month to $1,500 per month, then that’s the number you need to make from your business and investments to be financially free.

But if you’ve racked up a bunch of debt and live above your means by spending $4,000 per month, then you just raised the bar significantly. If you can put your ego aside and live like a college student for a few years, then you just might be able to quit your job and retire sooner than you ever would’ve dreamed.

The wealthy people I know did exactly that when they were young, too.

The consumer culture we’re currently living in is literally ruining people’s chances of ever getting ahead. I don’t know about you, but I’d rather “be” rich and “look” broke, than vice versa. Trust me, the freedom to spend my time living life the way I want without worrying about money is so much better than having “stuff.”

And remember, this is only a platform to set you up for more success later. Once you’re making big money from your business, you can improve your lifestyle. But the quickest way to get there is through creating financial freedom on a small level first.

Good luck!

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Where are you on your journey to financial freedom? If you have yet to start, what’s holding you back?

Let’s talk in the comment section below.

Jason has been in the real estate business since 2015 with a primary focus on commercial investments. Over the last 10 years he has also started and operated businesses in digital marketing and eCo...
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    Barry H. Investor from Scottsdale, AZ
    Replied about 2 months ago
    Well stated and so true !! Living below your means is the first step, the others follow much easier if you can master that first step.
    Wenda Kennedy JD from Nikiski, Alaska
    Replied about 2 months ago
    Is there a happy medium between steps one and two? I think there is a comfort zone where you are financially independent without even thinking about buying a 10 million dollar house. The whole idea of a huge house, or a private plane, or a big yacht, or any other flashy thing is totally laughable. Old frugal habits die hard. Many times, the more you are able to buy, the less you want. The key for me is the ability to make the decision to dream coupled with the means to work toward that goal -- without trading my life's blood. It's more like a slow dance rather than a hot sprint. Success creates a rhythm that plays quietly in the background and propels future wins.
    Jason Allen Investor from United States
    Replied about 2 months ago
    Yea, of course, it's really up to you and what you're satisfied with.
    George Joy from Farmington, New Mexico
    Replied about 2 months ago
    I certainly think there is a very happy medium between broke and flashy rich. (not that there is anything per se wrong with flaunting wealth) My goal is to be very, very comfortable; wealthy enough to travel, spend unlimited time with my family, pretty much do whatever I choose to and NEVER have to worry about money ever again. I'm slightly different to many people in that I have a job I love and find extremely rewarding. However, if I could be in my ideal position as laid out above, I would quit tomorrow because my family is much more important to me and I'd much rather spend 12 hours a day with them than be away from them. Great point.
    Jason Allen Investor from United States
    Replied about 2 months ago
    I think so. It's all about engineering your life.
    Tom Phelan Real Estate Investor from Key West, FL
    Replied about 2 months ago
    The Rich also know and utilize systematic strategies to build real estate wealth and lifetime income. Like the body builder who knows "No pain no gain" and moves forward from the 35 pound dumbbells to the 45s, you cannot rest of rental properties acquired decades ago that lull you into a false state of wealth and comfortability. You must consider 1031 Exchanging upward to increase Appreciation, Depreciation and Mortgage Reduction. Justice Learned Hand aptly said: "In America there are two tax systems, one for the informed and one for the uninformed. Both systems are legal".
    Jason Allen Investor from United States
    Replied about 2 months ago
    Yes, never stop learning.
    Luis Rivera New to Real Estate from Puerto Rico
    Replied about 2 months ago
    Thank you for the reminder Jason! I love this post
    Jason Allen Investor from United States
    Replied about 2 months ago
    Thanks Luis.