As shocking as it may seem, I got a lot of heat on Twitter for a certain post. Here I am trying to help my fellow man, and I get hassled. Some people even resorted to name calling. Sigh, some will never learn.
Anyway, here’s what it said:
Many people were up in arms about it, but few understood. The people who took the most offense decided to focus on the minor details and clearly didn’t read the entire tweet. Interesting.
Since many were confused, let me be very clear here.
You need to make more money.
The two factors of finance
Personal finance has two parts: income and expenses. Much of the personal finance world revolves around the expenses line. Look around any personal finance blog (including this one) and you’ll find budgeting, cost-cutting tips, and ways to save on your taxes.
In my opinion, much of this advice goes way too far.
Don’t get me wrong. It certainly has it’s place. When you are just starting out in your journey towards financial independence, getting your expenses under control is a must. If you continue spending more than you earn on things you don’t really need, you’ll never be able to retire–especially not early.
You can’t have champagne tastes with a beer budget.
So the first step is getting your habits and relationship with money under control. Budgets and tracking your spending can help significantly.
But once that’s under control, your focus needs to change.
When you’ve got a firm grip on your expenses, the next step is increasing your income.
Expenses have a limit to how small they can go. Most of us can’t live for free, and nobody I know is paying people to stay at their house. Income, on the other hand, has no upper bounds.
If your expenses have hit their floor, the only way to increase your savings is to increase your income.
Which brings me to my next point…
Income doesn’t mean salary
Many people assumed that my statement said that everyone should be making a six figure salary. That’s not the case. Some people choose lower-paying careers for a multitude of reasons. Maybe you do it for a deeper sense of meaning, or maybe it offers you greater flexibility. That’s okay. I know that not everyone will be able to make a six figure salary.
I’m advocating for a six figure income.
The definition of income is “money received, especially on a regular basis, for work or through investments.” I don’t care if you make your money by working or by owning things. I just want you to make more of it.
The “six figure” goal may seem arbitrary, but it represents a big milestone. Achieving a six figure income puts you in the top 20% of all United States earners. After that, seven figures comes next ;).
There’s more than one way to skin a cat
Increasing your income can be done many ways. In many cases, getting a salary bump is the fastest and largest income increase you can get. This can be done by finding a new job, getting a promotion, or simply negotiating a raise.
Your employer gets more value out of you than they pay for you. It’s the way business works. It’s your job to figure out how much they value you and push that value to the limits.
Getting a second job and starting a side hustle is also an option. One that many people take.
But investments constantly get overlooked as income sources. Owning and renting real estate can deliver monthly checks to your bank account. Dividend stocks give you extra income several times a year. Even selling options can be a good source of income.
And even if it doesn’t pay you in cash, investments still provide income. Real estate and stocks can appreciate in value leading to capital gains. It may not seem like it, but even portfolio gains count towards your income number. If it causes your net worth to increase, it counts as income.
Not the only goal
Financial independence is a big goal of mine, but it’s far from the only goal.
I also cherish the relationships I have and want to experience the world. That stuff doesn’t always come cheap. I will always strive to increase my income and grow my wealth, but I won’t sacrifice my happiness to achieve it. You shouldn’t either.
The world of finance is fun and tricky at the same time. No person’s journey looks the same, and no piece of advice is made for everyone. Keep that in mind next time you think about picking a fight with a cartoon scotch glass. 🙂
Thanks for reading!