We all want to escape the workforce. I have been working since 1997, when I started at McDonald's, and I've never seen an employment market like this.
Everyone is overworked, underpaid, and struggling to survive. Leadership is even more chaotic and unorganized than the employees.
If you do not have your finances in order, you will grind into the madness for 20, 30, or 40 years—that is not the way to live.
We need to work. We all need to work, but we can do things to make the experience more enjoyable. The most important step we can take is to get our finances in order.
Suppose you can change your money cycle and change it from being broke (working, wanting, buying, owning) to being an investor (budgeting, saving, investing, spending). In that case, you can dictate the narrative of your life.
Is it going to be easy to go from spender to saver? No, it will be tough to pay yourself first, live on a budget, and make investing a priority.
However, that doesn't mean you can't change your ways; I did. I used to love buying electronics, video games, and Blu-Ray discs—now I invest for income.
The FIRE movement. The Financial Independence Retire Early movement (or FIRE) aims to save as much money in index funds as quickly as possible.
FIRE followers create a FIRE number (say $1 million), budget, and save their way to success. They then retire early, using the 4% rule to sell assets and generate income.
This method has its flaws because the stock market wholly dictates its returns. If the market is down, they must sell more shares to generate the same income.
Luckily, FIRE followers believe in having robust emergency funds to insulate them from market movements, recessions, and downturns.
FIRE with income investing. My article "The Best Way to FIRE: Index Funds vs. Dividend Growth vs. Income Investing" explores different techniques for FIRE.
However, over the last year, I have become a massive fan of income investing as the freedom method of choice.
Why income investing? Because FIRE isn't truly about retiring and sitting home all day; it is about having options.
Income investing gives you much more options, much sooner than over methods. It allows you to create a paycheck much quicker than DGI and index funds.
Once you achieve $1,000/month in dividends, you'll start to feel the difference at work. You understand that you can keep growing your own paycheck, regardless of employment conditions.
The power of choice. The most powerful part of income investing is supplementing your current paycheck. This means you can change jobs or reduce your workload once you hit a certain income level.
Let's say you earn $7,000/month at your current job, but the operation tempo is stressful and chaotic. You want to take a slower position across the street, but it only pays $5,000/month.
This scenario is what makes income investing so powerful. When you invest in high-yielding products, you aim for 8-11% returns. You can see dramatic gains in your income very quickly.
To earn $2,000/month at a 10% return, you would need to invest $240,000. Does this seem feasible to you? Well, I am telling you that you can do it because I did it.
I, too, was in debt to my eyeballs (to the tune of $77,000). My wife and I chose to change our ways, get roommates, pay down debt, and start income investing.
Money in your pocket. In December 2022, we received $1,850 in dividends. This was an eye-opening amount of money for us.
Cash flow is the heart of your household's operations. With this much cash flow available, you can start making great decisions about your life and future.
Income investing gives you dividends upfront, but it comes at a price. The price is education and confidence in your investing abilities.
Income investing is the toughest of the three FIRE methods (index funds, dividend growth, income investing) because you deal with leveraged products.
Leverage means that high-yield products will swing dramatically with interest rates, economic conditions, and inflation. To be a successful income investor, you must understand what's going on in the broader markets (bonds, housing, stocks).
Most importantly, you must buy and hold when things get scary. You have to trust the system and understand why interest rates affect mortgage-backed securities, preferred shares, and business development companies.
Income investing is logical, not emotional. Investing for income makes sense; that is why it is my favorite type of investing.
You won't be shocked by anything with income investing; it is all pretty predictable. If the Federal Reserve raises rates, treasury rates also increase. This causes the products you hold to react a certain way, depending on how they compare to the new rates.
Index funds don't require additional daily research; they are fire and forget. Dividend growth stocks can be emotional, especially sin stocks like tobacco (Altira MO and Phillip Morris PM) and technology (Apple APPL and Microsoft MFST)
With income investing, you have many options to get an excellent yield. It is fun to constantly find something new products (that pay high yields).
High-yield products like closed-end funds also pay special dividends from time to time. These additional payments can really juice your returns. They are better than waiting for an annual bonus from your employer.
Conclusion. I love the FIRE movement for a few reasons; chief among them is the mindset that comes with aiming to retire early.
To retire early, you must dump the consumer-first mentality they have ingrained in us since childhood. You have to budget, save, and invest.
By investing for income, you create a paycheck you can use immediately to change your lifestyle. Even having an additional $300 a month from dividends is life-changing.
They teach us that working a job is the only way to earn income. This mindset gives your boss supreme power over your life and state of mind.
Building an income portfolio will help you FIRE quickly. This works simply by giving you the resources to change positions until you find a job you can stand.
We all want to find meaningful work and have a great employment experience. If you are struggling and in debt, your employer will treat you differently than if you had resources. So, that means you need to create your income-investing paycheck today. Good Luck!
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