Over half of Americans can't afford a $1,000 emergency expense. That's shocking. Don't be one of those people.
What does it mean to be wealthy? For many, the idea of wealth conjures up images of luxury cars, designer accessories, exotic vacations and gaudy McMansions. But true financial freedom isn't about having a high salary or owning expensive things - it's about having enough income to comfortably cover your living expenses without relying on hourly labor.
This is what I call leveraged income.
Leveraged income is money you earn from investments, businesses, or other sources that don't require you to show up and punch a clock every day. It's often called passive income, but that's a misleading term. "Passive" gives the impression that you make money with no input or effort whatsoever, but that's almost never true.
For example, owning a business involves a lot of effort and decision making, but it also offers a much more flexible schedule, and the income you make can be much higher on an "hours of input" basis than even a top salary earner can hope for. That's the magic of leverage.
With leveraged income, you can create a steady stream of revenue without having to constantly trade your time for money. And a more flexible schedule, with more free time to do what you really enjoy, is the end goal anyway, right? Working 100 hours a week at a high-stress corporate job might bring in enough income to afford the appearance of wealth. Is slaving away with zero flexibility while your ungrateful wife burns your income on Gucci bags and a new Range Rover really the way you want to spend the next 3 decades?
So how can you achieve financial freedom through leveraged income? There are two main strategies: increasing your income and decreasing your living expenses. By finding ways to earn more money from sources that don't require your personal labor, you can build up a nest egg that will provide for you in the long term. And by cutting back on unnecessary spending, you can free up more of your resources to invest in assets that generate leveraged income.
Unfortunately, many people fall into the trap of living paycheck to paycheck and relying on high salaries to maintain a lifestyle that looks wealthy but isn't actually sustainable. I call this "high-salary consumerism." While it may appear like you have financial freedom if you can afford expensive cars or designer clothes, this type of high-earning/high-spending lifestyle doesn't provide the long-term stability and security that comes from leveraged income and living within your means. Especially when the high-spending lifestyle is supported with consumer debt, which it often is.
The good news is that anyone can start building a path towards financial freedom by focusing on creating leveraged income streams and living below their means. It may take some time and effort and a shift in mindset, but with dedication and discipline, you can achieve true financial independence.