How to replace your current income with new net wealth

How to replace your current income with new net wealth


July 2018
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How to replace your current income with new net wealth

In today’s frantically busy 'instant everything' world, most of us long for more freedom – to slow down and have the choice to be able to do what we want when we want without pressure or limitation. 

However, we can only do that when we have free time on our hands and in our western world, we can only regain our precious time if our active work income is replaced by passive recurring investment income – this is income that doesn’t rely on us to generate it. We need to use our income to invest in growing wealth that will then replace our income.

What is Your Freedom Number?

So how do you do this? It is a lot simpler than you think. You just need to get clear on your four Breakfree Numbers – combining your ‘Lifestyle Income’, ‘Nest Egg Number’ and ‘Breakfree Timeline’ to create your Freedom Number.

Firstly, create a vivid picture of what your ideal lifestyle looks like – what are you doing when with who, and where. Paint out your perfect day, week, month and year. Then monetize it so that you know how much this lifestyle costs per year. As a starting point, if you enjoy a good lifestyle, use 80% of your current combined incomes – as a guide, $120,000 per year will give you and your partner a reasonably comfortable lifestyle. This is your ‘Lifestyle Income’ number.
How do we generate this and replace your work income so you no longer have to work? By building the value of your passive income producing investments (property, shares, superannuation, savings etc) to the level that will provide and sustain your lifestyle income. Most income producing assets produce an average return of about 5% per annum which leads to the 1 to 20 rule. Just times your lifestyle income by 20 to get your ‘Nest Egg Number’ – using our comfortable lifestyle of $120k a year x 20 means you need nett worth of $2,400,000.

Now I know what you are thinking – holy moly, this nett wealth or Nest Egg Number seems enormous! How can I ever do this? You will be surprised to hear that it is a lot simpler than you think and the ease of achieving it is all dependent on the time that you have left before you want to stop work. Here is the good news – if your ‘Breakfree Timeline’ is 20 years before you want to stop work, then you only need to secure 2 rental homes to do it – your Freedom Number now is only 2 (or $800,000 in other investments). But if you only have 10 years left, your Freedom Number doubles to 4 rental homes (or $1.4M in alternatives).  Time invested is clearly a key ingredient. 
So while your Nest Egg Number initially looks scary, most time poor professionals have the ability to secure 2 to 4 investment properties without sacrificing their lifestyle if it is done properly. Your freedom and wellness is waiting – time is ticking so when will you get started? 

Bushy Martin and his wife Sonya have built an international portfolio of 12 properties that affords them a great lifestyle. To assist other time poor professionals to do the same they have founded Know How Property Finance Strategy as property investment advisors and finance brokers that has helped over 1700 investors secure in excess of $600M in property. To help you further, Bushy has now released his ‘Get Invested’ podcast and published his book ‘The Freedom Formula.’ To find out how Bushy and his team can help you achieve your lifestyle goals with property, visit www.khgroup.com.au 

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