Build These 5 Walls Around Your Money in 2022
This year use money to buy peace of mind
The ultimate money goal is “Financial Freedom,” AKA having f*ck you money.
But the most important money goal is “financial security,” which is when you no longer feel stressed about money because you know your money is safe.
Think of your money like a fortress. It has great strategic value, and every day an army of invaders wants to take it from you.
Here are the 5-walls you need to build around your money to achieve financial security in 2022.
Wall #1— A good paying job with flexibility
A 9-5 job is a perfect first line of financial defense.
There’s a simple formula to guarantee financial security:
Income > expenses.
As long as this equation is satisfied, your money is safe.
One of the worst takes that fake finance gurus push is that “only suckers trade time for money.” There’s a prevailing thought that everyone needs to be an entrepreneur.
I have a 7-figure net worth, and I am more than happy to continue trading time for money for two reasons.
Every year, 1-hour of my time can be traded in for more and more money.
I have an extremely flexible work environment which includes full-time remote work.
High pay, flexibility, and autonomy are the qualities that make for a great job. If you have those, you won’t be in a hurry to quit your job.
Wall #2—A side hustle
Don’t forget the formula to guarantee financial security:
Income > expenses.
Having a 9-5 that can cover your living expense is your first wall keeping you financially secure. But what happens if that wall crumbles AKA you lose your job? Your financial security evaporates.
If you can build a second stream of income that covers your living expenses, your money will remain safe even if you lose your day job.
If your goal is financial security, then I have simple advice:
Choose a side hustle that diversifies your portfolio of human capital
Much like an investment portfolio, your portfolio of human capital (your ability to earn income) is made up of risky assets like stocks and safe assets like bonds.
If you are a tenured professor, your human capital would be like a bond. The same amount of money hits your bank account each month, with a small chance of getting fired but with a cap on your earnings potential.
If you own a business or work a 100% commission sales job, your human capital would be stock. There is no limit on the potential returns, but it could also come crashing down to $0 one day (as it did for my family.)
To balance out and diversify your human capital, choose a side hustle that has the opposite characteristics of your day job.
If your day job looks like a stock, go with a second job that acts as a bond to provide a predictable and stable source of income.
If your day job looks like a bond, go with a side business that acts like a stock to provide you with the upside potential for unlimited growth.
Wall #3— Treating new money like it does not exist
Lifestyle inflation is when you spend more money as you make more money.
Big promotion? Time to buy a new car.
Got a bonus at work? Better go out and buy a 70’ 4K TV.
Lived in your house too long? Time to go buy the “dream home.”
Lifestyle inflation is evil because it slowly erodes your finances over time.
Make 2022 the year you defeat lifestyle inflation once and for all by embracing this seven-word mantra.
Treat new money like it doesn’t exist.
Instead of spending every new dollar you earn, you save it.
If you get a raise this year that increases your monthly take-home-pay by $300 per month, you set up an automated savings plan for $300 per month. If you get a $3,000 bonus, save every penny of it.
Treat new money like it doesn’t exist. It really is that simple.
If you do that, you’ll begin to increase your savings and, more importantly, your savings rate. The higher your savings rate, the higher your margin of error is with money.
The best part about treating new money like it doesn’t exist is that unlike starting a side hustle, it’s something every single one of us can do to increase our financial security with next to no effort.
Wall #4— Passive income
“Passive income” is one of the most overused buzzwords in personal finance. I will make this simple, there is only one true source of passive income.