Reaching Your Financial Independence in Buckets

[Rick Martin]

If you pegged your monthly freedom number at say $10k/month or $120k/year (the amount that covers all your bills, and little extra), it can seem daunting or nearly impossible to achieve that investment by investment

Don’t put it all on yourself at once, and maybe more importantly don’t put it all in one bucket. Find a way to contribute to the passive income and “new” income side and reduce the reliance upon your salary with the initial goal of scaling back your hours to part-time or on a consulting basis. If your current salary pays you $120k a year, try to position yourself so that you only need 30k a year, so that you can scale back to working only ¼ of the year. Now you have ¾’s of the year to focus on the new you.

For example:

Bucket 1: You have two active investments. One fourplex that pays you 10k/year, and you partner on a 20 unit, and your split on that is 20k per year. Total Active RE = $30k (you still get back your principal and profit at the sale).

Bucket 2: You passively invest $250k across five syndications that average 8% COC. That is another $20k (you still get back your principal and profit at the sale).

Bucket 3: Your new career that earns you income. Maybe you are a new syndicator and you have given yourself an attainable goal of $40k/year in acquisition fees. You could be a wholesaler, Airbnb host, or property manager, and you set that same attainable goal of $40k of annual income as you build your new business. Whatever it is, that bucket’s goal is $40k

Bucket 4: Your necessary evil - your old career that you are trying to break away from. Now that you are consistently earning $90k from the other real estate-related income, you only need to make $30k from your old job, and you have negotiated a way to work part-time in order to do it. Now you are only working only ¼ of the year, and have ¾ of the year to focus on your new life.

$30k + $20k + $40k + $30k = $120k. In order to focus and get that life we want, we need the time to do so, so make it a goal of chipping away at the hours of that W2. Keep in mind, also, that there are many buckets that we can combine to replace that income, and get us to that goal of financial independence sooner.