No matter how many jobs you’ve had or how far down the career path you are, facing any workplace transition brings up emotions, fears, and possibly some sleepless nights. The bittersweet feelings of quitting a job include guilt, worry, anxiety, excitement, adrenaline, and gratefulness.
It only seems sensible that a cushion of cash in the bank might make any transition less worrisome. In this article, we’ll share 3 steps toward making the leap from a nine-to-five job to real estate investing so you can spend less time behind a desk and more time doing things you love.
Why Leave Your Job
Unlike with prior generations, it’s rare these days for anyone to remain with a single company, or even in a single industry, for their whole working life. At the same time, there’s a massive work-from-home, remote position, freelancer, and small business shift happening.
There are many professionals (you included) who want to take the leap and are aware of the freedom they desire, but feel the guilt and fear associated with abandoning a career path, reducing their income, and still being able to afford a life they love. Some of these fears can be because of a need to support a family or because the cost of living in their area is high.
The simple solution to all of the above is passive income. Income you earn
without actually having to step foot in an office or head to work even a few hours
a day seems like a dream, but we’re here to share with you how you can make this your reality and achieve financial independence.
Step 1 – Find Your Freedom Number
The first step toward building a strong financial plan toward quitting your full-time job with confidence is finding your freedom number. This number is the amount of money that would more-than-cover your regular monthly expenses based on your current lifestyle.
This is the amount of income you need to earn passively in order to quit working and still cover all your bills worry-free. You can easily find this value by looking at your expenses from the past six months.
Let’s pretend your expenses for the last six months look like this:
Month 1 – $7,700
Month 2 – $10,100
Month 3 – $7,200
Month 4 – $8,800
Month 5 – $7,500
Month 6 – $7,300
The average of these expenses is $8,100. Now, add a ~10% buffer.
Your freedom number in this case is $9,000. This is how much you need to establish in consistent, passive income so you can leave your nine-to-five with confidence.
Step 2 – Build Passive Income
Now that you have your target freedom number calculated, you can get to work building multiple streams of income that will equal that total. If you’re retired
from the military, or public service such as law enforcement, your government pension is one stream you already have that covers a lot of ground toward your freedom number.
Some ways to generate passive income include writing a book, creating online courses, or designing products to sell online. My favorite though, the one that requires much less time and effort, is real estate investing.
Did you know there are more people who become millionaires through investing in real estate than through any other path?
It’s true! This is because you don’t need to know how to write, design websites, or create products and market them. With some capital and dedication to research, you can invest in cash-flowing real estate and build your income streams one deal at a time.
Passive investments in real estate syndications can earn between 7 – 10% average annual cash-on-cash returns, plus additional income upon the sale of the asset after an average of 5 years.
So, as an example, you could invest $100,000 and earn $7,000 to $10,000 in passive income per year while doing very little work.
Get a few of these going, and you build toward your income goal (freedom number…$9,000 per month in the example above). Even just an extra one or two thousand a month relieves some financial pressure and allows for more flexibility in your personal schedule.
No matter how you choose to build your financial cushion – through real estate, online products, etc. – the main goal is to create multiple streams of passive income to reach your freedom number.
Step 3 – Track Your Progress
As you build each stream of income, it’s quite fun to track your progress and see that passive income number increase over time. Whether you’re an Excel nerd or not, you’ll want to establish a way so you can easily see how much passive income you’re earning each month and which investments are out-performing others.
If you were to choose real estate syndications, for example, you could see that for every $50,000 investment, you might earn $350 per month in passive income. By this math, you might consider moving the $200,000 you have in the stock market over to syndications and begin generating $1,400 per month.
While $1,400 is quite far from $9,000, it’s a building block. Plus, it will probably more than cover your groceries for the month – one less thing to worry about.
Each additional passive income stream you add covers another current living expense and acts as one more tile to your freedom mosaic. If a syndication deal you’re invested in goes “full cycle” (sells), you should get a good profit at sale that you can invest in multiple new deals, creating even more streams of income. Sort of like branches on a tree. One day soon, you’ll reach the tipping point where you feel comfortable reducing your work hours or quitting your job altogether, without experiencing a true reduction in income.
Drastic changes and quick transitions can easily stir up fear or worry in any responsible adult – even more so if you feel the weight of providing for a family or achieving steep lifestyle/income goals. However, the biggest thing to remember is that countless others have built passive income like we discussed here…and that means you can too.
The steps outlined herein will help you identify your personal passive income goals, create a path toward creating that passive income, and track your progress. No matter your reasons for wanting to build passive income, following the three steps above will help you build the financial assurance you need to quit your job with confidence.