Income Versus Net Worth

Many individuals focus on their net worth as a measure of financial progress. However, net worth holds little value if it doesn’t generate income. The economy operates on income, and you will need a substantial amount to navigate life’s expenses, especially as your children grow up and face their own financial milestones.

When your home appreciates, it does not directly benefit you financially. Thus, it’s crucial to explore strategies for maintaining and growing your income beyond inflation.

Your Employment Income

Relying on a W-2 job alone will not suffice to keep pace with inflation. While you might consider job-hopping for higher wages, this can lead to dissatisfaction. To ensure your income continues to rise, you must become an insider in your field. This means managing assets and income streams directly.

As an insider, you set the terms for costs, rental prices, and reinvestment strategies, allowing you to take control of your financial future.

Building Your Financial System (Dividends)

The key takeaway here is to create a robust financial system focused on dividends, which will help you stay ahead of inflation. Various investment strategies exist for dividends, such as index funds, dividend growth investing, and income-focused investing. Each offers a distinct approach to generating revenue.

I personally utilize all three strategies, though income investing is my favorite due to its mathematical foundation and economic principles, which may seem tedious to some. The more dividends you reinvest, the quicker your income grows. However, I also like to use a portion of my dividends to cover everyday expenses, allowing me to spend guilt-free.

In December 2021, my dividend income was $884, which increased to $1,322 by last month. It’s important to note that December typically features higher earnings due to special dividends, which skews the average.

Increasing Rental Income

Many people dream of owning rental properties but hesitate at the thought of becoming landlords. It requires a thick skin, but that doesn’t mean you have to be harsh. It’s essential to ensure that tenants pay rent punctually and that you increase rents annually, even if just a small amount. Your costs—property taxes, insurance, HOA fees, and repairs—will continually rise.

Platforms like Zillow can help you gauge average rental prices and determine the market value of your rental properties. For instance, a master bedroom should generally rent for half the price of a full home. My wife and I own two rental properties and two rental rooms, and we consistently adjust our rates to reflect market conditions.

In December 2021, our rental income totaled $1,800 ($200 from properties and $1,600 from rooms), while in April 2023, it rose to $2,750 ($650 from properties and $2,100 from rooms).

Embracing Creativity

One of the most effective ways to ensure your income increases each year is through creativity. Be prepared; it may take time for your creative endeavors to yield results. The beauty of creativity is that it allows for the development of multiple income streams from a single project.

For example, as a writer, you can create a blog, publish books, and share articles on platforms like Medium—all stemming from the same core content. There are numerous avenues to explore your creativity, and if you’re hesitant to share publicly, consider establishing an automated business model for income growth.

In December 2021, I made $125 from my creative ventures, which increased to $208 by April 2023. Again, December tends to be a strong month for book sales, thus not fully representing a typical month.

Automating Your Income

A smart approach to enhancing your income is to create an automated business that supports your financial system. Options like operating ATMs, vending machines, or renting out cars on platforms like Turo can provide income to accelerate your financial growth without demanding excessive time.

While I haven’t yet launched an automated business beyond my website, I plan to list my third vehicle on Turo once I retire.

Integrating It All

The essential elements for increasing your income involve funding your financial system, adjusting rental prices, and developing a substantial portfolio of creative works. Note that I didn’t emphasize the pursuit of a higher-paying job. While such a job can be beneficial, relying solely on it is risky.

The good news is you can implement these strategies while maintaining full-time employment, as I have successfully done.

Conclusion

Indeed, consistently monitoring the stock market, managing multiple properties, and writing during late hours has been demanding. However, my wife and I are now reaping the benefits. She is retired, and I am just three months away from leaving my job for good.

With a pension in hand, I feel secure knowing I can manage my income through rents, dividends, and royalties. We can comfortably support ourselves with our pension, allowing other passive income streams to generate even more passive income—it’s a remarkable cycle.

To thrive in life, you must think creatively. The moment you become complacent, the world will shift around you. Income is crucial for your family's security, so strive to create more. Best of luck!

Disclaimer: I am not a financial advisor or money manager. The information provided is for guidance and should not be considered specific investment advice. I am an Amazon Affiliate, and any investments should be thoroughly researched. This article is written based on my own opinions, and I do not receive compensation for it. I have no business affiliations with any companies mentioned.

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