The other day, I was chatting with a doctor about entrepreneurial side projects for extra money. He had found an opportunity to work an extra shift per month for $2000 shift, so $24,000 extra per year. Not too bad for a dozen days per year. Who doesn’t want some extra cash?
I told him not to do it. It won’t make his life any better. As things stand, it would probably make his life worse. Is making more money the answer for him?
He makes around three hundred thousand dollars per year, and he and his family spend it all. They don’t have a clear budget plan or saving plan, and every time his pay increases, their spending increases. He resents that his family spends through every dollar that he earns but hasn’t done anything to change it in the decades this has gone on. And the spending doesn’t make their lives any better—I know nurses who make a third what he does who are much happier.
If he works those extra days, the family will spend the money, scale up their lifestyle, and rely on getting the extra $24k per year. He will lock himself into working more for the rest of his career (not to mention needing more for retirement!). The family has no specific plan to use the extra money and still no budget. So where will the money go? Spent on the same old lifestyle creep.
He just wants to make a bit more because he feels overwhelmed by the amount he and his family spend. But he loves his free time and will be better off finding ways to work less while still supporting his family than working more to increase his income. The extra money won’t be used to create financial freedom, it will just be spent.
I told him to find passive income investments and funnel money away from frivolous expenditures. Does he need to grow his wealth in high-risk, high-return investments? No, more wealth won’t make his life better. Does he need to invest in something active, like residential rentals in? No, managing them will only add to his workload. He needs a stable, passive investment that produces income. Is making more money the answer? No, but making better money is.
He is a perfect example of someone who should invest in an income-oriented real estate syndication or a private fund. Based on income, he is an accredited investor and qualifies for private offerings. He does not want an active investment. Without a significant budget plan in place, a large payout from a value-add investment would probably be spent away quickly by the family. Even better, since he is in a high tax bracket, the tax benefits of depreciation will make his passively earned money much more valuable than his regular income.
At Fall Creek Partners, we are huge proponents of building financial freedom through passive investments–that’s what we work on every day to bring to our investors. Is making more money the answer for you? Does your current plan involve a way to increase your passive income over time? Many people don’t want more money, they want more time. Can you increase your hourly income instead of working more hours?
If you are interested in learning more about passive income investments, feel free to reach out to me at: jacob@fallcreekpartners.com