When I was starting on my journey to financial independence, I was always thinking about big amounts. I remember thinking I needed to save tens of thousands of dollars at a time to make an investment that mattered. As I got more experienced, I realized that for someone in their twenties, all they need to save is $3,600 a year. The only skill needed was knowing how to be creative with saving money. If someone is 25, and they save $3,600 a year until they are 65 achieving a 10% rate of return, they would have almost $1.6 million dollars. The real issue is coming up with $3,600 a year to invest.
Be Creative with Saving Money by Monetizing your Passion and Efforts
Someone I work with has a good friend whom I haven’t met that writes LGBTQ fan fiction featuring film and TV characters. According to the person I work with, her friend has got thousands, and maybe even tens of thousands of followers who read her work. Let’s say this person wants to turn her writing habit into something that could make her money. If she has 10,000 regular readers, it only takes her converting 400 of those readers into paying customers. She could, in addition to her current writing activities, self publish 1 book a year on Amazon. By charging $10 she would turn 4% of her current readership into an annuity stream paying her $4,000 a year writing about topics that she enjoyed. By being intelligent about how she uses her writings, she can a find a personal fulfillment pursuing a passion she loves, her audience gets to be entertained for hours reading something they identify with, and she gets monetary compensation for her efforts. All she has to do is be creative with saving money through her ideas.
Another method I have talked about is using an individual development account to buy a property you rent to your friends. By saving a thousand dollars and getting the accompanying three or four thousand dollar match in combination with other FHA loans, you can buy a small house you rent with four or five friends. This would also allow you to reach that $3,600 a year while providing affordable rent for your friends.
When Mark Cuban talks about pursuing your passion, that applies to just about everyone on this planet. Some people work in the oil and gas industry. If that is you, look at buying undervalued oil royalties when commodity prices are low. I have seen a few people design their own clasps and purses because they didn’t have enough money to buy them conventionally. They ended up having a lot of fun designing them, and they try to start a business. The real key is crossing $3,600 that is free cash flow. Once you cross the point you don’t need that money for necessities, and you do this when you are young enough, you have the key to wealth in your hand.