HAPPY LABOR DAY — How to Trade Labor for Financial Freedom
In addition to BBQs and the last hurrah for boat people, Labor Day is a time to reflect on our personal labor and how we value it.
Labor Day was established in the 19th Century to commemorate labor movements and honor the American working class. While we agree that labor is honorable and important — the foundation of the American economy — at MartelTurnkey we prefer to focus on an equally American value … freedom.
We want to redefine labor as a phase in an American life, not its sole purpose … and to reframe financial freedom as a goal that anyone, regardless of social class or industry, can strive for and ultimately achieve.
Here are three principles I encourage everyone to adopt to transition from a life of labor to a life of financial freedom.
1. Understand That You Are Trading Time for Money
Whether you are digging ditches, or billing hours as a partner in a law firm, understand this — you are trading your time for money. Some of us charge a higher price for our time … but that’s still time you could be spending with family, or exploring, or cultivating hobbies, or building a business out of your passion, or making a difference in the lives of the disadvantaged.
Here’s the thing … trading time for money is always a bad trade. Why? Because you can always make more money. Money is also volatile. The value of a dollar goes up and down with inflation and deflation.
But time is of fixed value. We all have the same 24 hours in every day to live our best possible life.
And time is limited. One day, time will run out for all of us. We can always make more money, but we can never give ourselves more time.
2. Set Your Sights on Financial Freedom
With this in mind, let’s start treating our “time-for-money” paradigm as a phase in our life, not the whole banana. It’s a means to an end, and that end is financial freedom.
What is financial freedom? We dig into it in this blog, but in a nutshell it means that your time is your own again. You don’t have to punch a clock or deliver for clients to make your daily bread. Your expenses are taken care of, no matter how you spend your 24 hours.
How does one achieve this? For our money, the best way is cash-flowing rental real estate. With enough cash flow from rent, you can replace your job with “passive income.” When one of our clients has enough rental cash flow to replace his or her job income and/or cover every personal expense, we describe that person as “financially free.” They’re out of the labor rat race!
3. Don’t “Save For Retirement” — Invest For Freedom
Now that we’ve set our sights on financial freedom, let’s put it into practice. For most employees and self-employed persons, this means no more “saving for retirement.” Instead, start investing for financial freedom.
Am I suggesting that you stop contributing to an IRA or 401(k) and save that money to make down payments on rental properties?
In a sense, yes.
Government-sanctioned retirement accounts are largely meant to keep people in the workforce, paying taxes and contributing to the economy by trading time for money for as long as possible. Yes, IRAs and 401(k)s let you “grow your money tax-free” … but so can real estate investing, as we describe in this article about the tax advantages of real estate.
The problem with IRAs and 401(k)s is that once the money is in there, it has to stay in there. You can’t take it out (at least, not without penalties) until you are the age at which the government wants you to retire and drop out of the labor force.
But with rental real estate, you can use the cash flow to start replacing your job income right now … while still growing your net worth as the property appreciates and you pay down your mortgage. You can even defer taxes on those gains indefinitely using 1031 exchanges.
Forget waiting until you’re 65 and trying to hike the Appalacian Trail on a second-hand hip. As fast as you can accumulate property, that’s how fast you can become financially free … and kiss your laboring days goodbye!
If you want a deeper dive into how to transition from labor to financial freedom as quickly as possible, my book Stop Trading Time for Money tackles the subject head-on.
If you’re ready to start accumulating cash-flowing rental property — pieces in the puzzle of your personal financial freedom — MartelTurnkey makes it easy. We have a catalog of pre-screened turnkey rentals in US boom-towns ready to go for our preferred list of buyers. Click here to get on that list … or just start shopping for your next rental property now!