Getting to Independently Wealthy

by Chris McGinty of AccordingToWhim.com

Nathan recently wrote his goals for 2020 as two blog posts. He’s got a draft going for a third, but as I write this there are only two. In the second blog post, he explained why he wants to find a new job. The short version is that he doesn’t feel very inspired by his job. He feels like his time is just not really doing anything worthwhile, except for making a business rich with the help of his hard work. I may write a blog post at some point about why I believe businesses exist, but today I want to deal with a strategy that Nathan could consider adopting.

My own personal journey is bringing me very soon to having no more child support to pay. At the height of paying child support, I was paying roughly 42% of my take home pay into child support. Once I was behind on child support, they were able to take 50% of my paycheck. I’ve averaged $24,000 a year. I’ve often said that I would have rather made $100,000 a year and paid $60,000 a year in child support, because I could have at least bought my own house. Instead, I was making $24,000 and paying $8,700 a year. That couldn’t have helped my exes all that much, and I was broke most of the time.

While it fluctuated based on how much overtime I worked, my take home pay most years after taxes and child support was around $11,000. Think about that. I’m used to living on somewhere around $11,000 a year, and I’m about to have $8,700 more a year available to me. It’ll be like having two incomes from one job. This means I could either significantly decrease the hours that I work, or I could continue working normally and sock a lot of money away.

For the first couple of years my intention is to do the latter. The reason for it is I don’t see any real reason to keep struggling when working 40 to 45 hours a week really isn’t that big of a deal. The other reason is if I save the $8,700 a year for two years, I can kick my seven year plan into high gear during the third and fourth years. I think I can replace $24,000 a year in income relatively quickly as a business owner if I don’t have notices of “possible action taken” against me every time I miss a child support payment. Sometimes when building a business you need a couple of weeks here and a couple of weeks there to focus on things. I couldn’t effectively do that before.

I deeply agree with Nathan that it would be fantastic to do a job that has some sort of value socially, and also makes me happy to be at work. I think we both would like it to be doing the creative work that we’ve done part time for years. We have different needs from our incomes though. If we both could live on $11,000 take home, I could just give him the $8,700 I’m about to have freed up, and we could spend all our free time creating games. He has a family of four, so even if he were to cut every unnecessary expense, his household would be below the poverty line unless they had, like, seven roommates. It’s probably not a good option.

Nathan’s job search may be the best thing he ever did. He might find a job he loves and make more money than he’s making now. He makes significantly above the US household average though. It’s possible he might have to take less to work a job he likes. In this way, I wonder what would happen if Nathan were to keep his current job (unless he found something higher paying or close to equal his current income) and save half of his take home pay for the next two years. It might not be as easy for him to replace his income owning his own business as it will be for me, but it would put him closer to doing so than he is now.

My actual hope is that Nathan’s predisposition to having the highest income he can will lead us to make a ton of money from our business work. It’s a funny balance with business though. The more you take in income, the less you have to reinvest. It often means that the less you need from the business the more options you have for growing the business. Nathan may be best suited to be an employee. Sometimes employment work simply pays better than entrepreneurship. Either way, having money saved and available for opportunities is a good idea.

Independently wealthy isn’t a specific number. It’s the ability to go indefinitely without having to work. Nathan and I are both people who would work even if we didn’t have to. Our job needs would just be significantly different if that was the case. This means that you can reach a form of independently wealthy where you do have to work, but with the ability to choose your job and leave it if it no longer suits you. The important part of this pre-independence is to always be gaining, so that each year you need less from employment.

Chris McGinty is a blogger who has had a number of hypotheses over the years about money, work, and how money works. He’s about to actually get to test these ideas out. He’ll let you know how it goes.