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.
In this article, we’ll share 3 steps toward making the leap from the 9-5 through real estate investing so you can spend less time behind a desk and more time doing the things you love.
Why Leave Your Job
Unlike generations prior, it’s rare for anyone these days to remain with a single company or industry throughout their career. There’s a massive work-from-home, remote position, freelancer, and small business shift happening at the same time.
There are many professionals 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 (especially a successful and stable one), reducing their income, and still being able to afford a life they love. Some of these fears can be because of their 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.
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 – $ 9,500
Month 2 – $ 12,300
Month 3 – $ 8,700
Month 4 – $ 10,800
Month 5 – $ 9,100
Month 6 – $ 9,600
The average of these expenses is $10,000. Now, add a 10% buffer.
Your freedom number in this case is $11,000. This is how much you need to establish in consistent, passive income so you can leave your 9-5 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.
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.
Fun fact: 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 streams of income, one deal at a time.
Passive investments in real estate syndications can earn between 8 – 10% annual cash-on-cash returns, plus additional equity upon the sale of the asset after an average of 5 years.
So, as an example, you could invest $100,000 and earn about $9,000 in passive income per year while doing very little work and making money while you sleep.
Get a few of these going, and you build, brick-by-brick toward your income goal /freedom number ($11,000 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 or online products or both, 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 can be fun and rewarding 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’ll earn about $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 $11,000, 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 number mosaic. 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.
Also, if you are a married couple, you can consider working toward a goal of one partner at a time leaving the job. In the example used, you may only need to reach a passive income goal of $5500 for one partner to make the initial leap.
Drastic changes and quick transitions can easily stir up fear or worry in any responsible adult, but even more so if you feel the weight of providing for a family or achieving steep lifestyle/income goals. The biggest thing to remember though, is that countless others have built passive income like we discussed here, and 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.
If one of your goals is to build passive income streams through investing in real estate syndications, we at Tera Investment Group would be happy to explain how syndications work and guide you through the process of investing alongside us.