Many of us have been sold the American dream. You go to school, attend college, work a 9-5 for 40 years, retire, then die. Leaving us to do the things we enjoy when we are old.
Who the heck wants to live that way? Why is this the American Dream?
Well guess what? We don’t have to. You should aspire to break this as the norm.
This is not the industrial revolution. We are not here to punch a clock while wasting our lives away.
Time is not money.
As a matter of fact, it’s the other way around. Money buys the most precious asset of all. That asset is (drumroll), you guessed it, time.
Every minute you spend doing something you hate, is a minute that you will never get back. We all get 24 hours a day. You can choose how you spend that 24 hours.
Every minute you spend doing something you hate, is a minute that you will never get back. Share on X
Think about that for a second. Memorize it. Recite it as you eat your breakfast (Not aloud in public of course, then you just look like a weird-O).
Everything is a trade off. You should be trading the cubicle life, for time spent doing what you love.
Let’s break it down:
Of that 24 hours, the average person spends 8 hours sleeping. That means you have 16 working hours to produce. Of your waking 16 hours, you spend 8 at the office (probably more). Then another four hours spent on life’s ‘administrative work’ – commuting, cooking dinner, paying bills, etc. That leaves you with 4 hours per day. If you’re trying to build a company on the side, you have even less.
One of my favorite ways to think about time is in blocks. Each day we get about 16 waking hours per day. That means we have about 100 ten-minute blocks.
(100 Blocks)
How we use our blocks is up to us. Everything becomes a trade off. Is that TV show worth six blocks or would it be better used building an online business? Should you mow your lawn for four blocks or can you hire someone to do it while you focus on something more productive?
Here’s another way to think about it, your time is a bank account. You have X amount left in that bank account. You can’t add to the bank account, you can only withdraw. Every day you withdraw 24 hours. How you spend that 24 hours is up to you.
What if I am stuck in a job I hate now?
You may be trading time for money now. That’s fine, you have to start somewhere. The fact of the matter is, you need a game plan to stop trading time for money. At the beginning, your job is the fuel to your fire. As the fire grows, you can start stepping away from tasks that require your time.
When you invest your money in a business you are freeing up your future time. You are actually buying time.
Let’s play a little game.
I hate games.
Well suck it up, this is your future we are talking about.
Fine.
Would you rather:
A.) Clip coupons for two hours a week that resulted in a net profit of $15.00.
OR
B.) Analyze rental properties for two hours a week result in a net profit of $300 a month.
In situation A, you have made yourself a minimum wage. You have to continue working two hours every week to make $15.
In situation B, you have created an income that will last you a lifetime. You use much less time to earn 18 times the coupon clipping.
How do I stop trading time for money?
Change the way you think about money.
I get it. It’s been ingrained in us since we were young. As a kid, if you wanted a new toy, you did chores around the house and were paid a wage (allowance). You would work until you saved enough for that new toy.
Somehow, we use this same logic in our adult lives. We think we must make enough to cover our expenses and save a measly 10% for retirement.
You cannot continue to think that you must punch a clock to earn a dollar.
Wealth accumulation is not about having money, it is about having options. Money gives you the option to do whatever you want, on your time.
Wealth accumulation is not about having money, it is about having options. Share on X
Start Learning
In the beginning you are going to spend a lot of time learning and experimenting on paper. As you read, you’ll discover some things ignite the fire in your gut and other things sound like nails on a chalkboard.
Chase the fire in your gut.
That could mean a number of options from index funds, dividend stocks, real estate, or starting your own business. Pinpoint the route you want to take and develop a plan. How much money do you need to step away from trading hours for money? Working backwards will make your entire plan come together.
Building a Business:
There are 4 steps to building a business so that you can create passive income.
1.) Take Action
Analysis Paralysis can become a major problem for some people. Don’t let that be you. Repeat after me “I’m about that action, boss.”
When your plan is in place you need to take the leap. The sooner the better.
Stop waiting for the perfect moment. Guess what? The perfect moment doesn’t exist. The “perfect” moment is a fairy tale. The sooner we realize that there is not a perfect moment, the sooner we can make things happen.
2.) Build Something
You’ve heard the cliche saying: “Work like no one else will today, so you can live like no one else tomorrow.” Well that rings true in almost any situation. You have to work to create assets that will help you build financial freedom.
If you are going to build a business, you will need to invest lots of time up front. Then you will reap the rewards later. This could be anything from developing a product, building a blog, or creating a course.
What are you good at? What do you enjoy? What can replace your income in the shortest period of time?
If you are having trouble finding a product, think about it another way. Don’t innovate, regurgitate.
What do I mean by that?
Take Yeti Coolers for example. Yeti is a huge player in the cup industry. Yes, cups. The little device that holds your beverage you are sipping on right now. Their steel cups
Well, within the past few years, Yeti has exploded. Their products are not something groundbreaking or innovative. Similar style products have been around since the 60’s. But they marketed their product extremely well. Instead of just going to boat shops and marinas, they targeted everyone who loves the outdoors.
Shortly after Yeti’s explosion, a new company showed up on the scene. They called themselves RTIC
This created a new market. The folks who would never fork over the cash for a $40 cup, can now buy the same exact product for half the price. You still have those in the market who will only buy Yeti for the name, but consumers now have options. You can be that second option.
If you are struggling to find a business to create, look at the products you love. Check patents, do research, and see if there is an option to become #2. There is a lot of money in second place.
3.) Optimize Your Time
What is the first way you can optimize your time? How can you earn the same amount for less?
Charge more.
You can increase the customer experience and charge more. Say you build a company that has a client business model. You charge four clients $50 an hour, and make $200 in four hours. Not bad.
What if you raised your rates to $200 hour? You would only need one client. You have just awarded yourself an extra 3 hours of time.
Well I don’t think I can raise my rates?
To raise your rates you must bring extreme value to the table. Start building an audience of true fans. True fans will buy anything you produce. Think about Disney. They have true fans who will see any movie they release, buy any toy they imagine, and visit any theme park they unveil. Why? They’ve created an audience of raving fans. They scream “take my money” before the product is even created.
If you can do this on a small scale, you will have a full time living.
You can do the same activity with your tasks. Can a virtual assistant respond to your customer service emails? Can you hire someone to take care of the stuff that takes up too much administrative time? Look to free up extra time so you can focus on building your empire.
4.) Step Away
As you build your business, you should be creating automated systems. Begin thinking how others can do your tasks without missing a beat. Automation is key to you stepping away.
If your dream doesn’t involve a team, then it’s not big enough.
– Michael Hyatt
As growth escalates, you will slowly need to start hiring quality people. People who are better than you at specific tasks. This is where you begin to really create time for yourself.
For example, if you have an online business but hate the tech side of things then hire an amazing tech employee first. This will free up your time to build your business and focus on what matters most to you. Your growth will begin to explode because you can work on your passions.
As you grow, you will be able to hire more people. Eventually, you will need a manager to manage all those people. When this happens, you will be able to truly stop trading time for money.
Yvon Chouinard, founder of the outdoor clothing line Patagonia
How did he do this?
He hired highly skilled, extremely independent, employees from the start. He emphasized employees making their own decisions and in turn created a company culture that ran itself. He even encourages employees to do as he does and go surfing. “As long as the work gets done, I don’t care what you do.” Yvon figured out how to stop trading time for money.
Using Investments:
Investments are another way you can stop trading your time for money.
If you are going to invest in passive investments, you need to have a high savings rate. If you are only willing to save 10% of your income, it will take you a very long time before you can stop trading time for money.
Who wants to do work they hate for 40 years.
The early retirement community is a great example of this. They save 50% – 80% of their income in their 20’s and retire in their 30’s.
How is this possible?
The math is actually pretty easy. If you hate math, there is a calculator here that will do the arithmetic for you.
Here is an example:
You make $70,000 a year
You save 50% of that 70,000 per year
That means you live on $35,000 per year
Are you picking up what I am putting down so far? GOOD.
In 16.6 years you can retire. You have officially stopped trading time for money.
What!? You lost me.
If you are saving 50% of your income, you only need $35,000 per year to live on. If you invest that savings and your money earns a modest 5% return (the stock market earns about an average of 7%, so we are lowballing here) then in 16.6 years you will have $927,000 saved.
The safe drawdown in retirement is 4%. What’s 4% of $927,000? $37,000. You are retired home slice.
I understand that some of you may not want to live off $37,000 in retirement. I get it, I don’t either. Yet this can give you the freedom to pursue your passions. You are no longer trading time for money and that is a beautiful thing.
Doing this with real estate is a similar process, although it is not a passive as stocks. Here is a guest post I wrote on how to crunch the numbers for real estate.
So start your journey. Create passive income that will last. Create multiple streams of income if you can.
In the end, we only have one life to live. We can choose to spend it doing things we hate or spend time doing meaningful things we love. You don’t have to trade time for money. I plead with you not to. Get off the treadmill of life and go where you choose.
The choice is up to you.
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Cheers,
Andrew
Andrew is the host of The Personal Finance Podcast, a show that is changing the way you think about your money. His primary goal with the podcast is to bring as much value as possible to his listeners.
Andrew's favorite free financial tool he's been using since 2014 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.
His favorite investment platform is M1 Finance, a site that allows him to build a custom portfolio of stocks for free. It has no trading fees and is his preferred way to invest without having to lift a finger.
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Such a good article I feel like I can run through a brick wall!!! I have thought about for years as I sit in boring meeting at work how I am trading time for money and how I don’t like how I’m spending my time. I need to re-evaluate how I’m spending my time because this is the most precious resource that I have. Thank you for the wake up call.
Thanks for reading Mustard Seed Money!
The bright side about not being in your dream job is that your paycheck is the fuel to your fire. Every paycheck means you are one step closer to trading time for money. Keep pushing, you’ll be there sooner than you think.
Cheers!
Hi Andrew,
I was just doing a piece of research & found your article. Great content. Plus it helps my marketing as a new business owner Thanks.
Loraine
Great post! Recently adopted this line of thinking in pretty much every area of my life. I even wrote a similar post of my own… http://vegasbroke.com/time/ . I think your previous comment is spot-on regarding a day job you aren’t necessarily thrilled about and how it can fuel your fire paycheck-by-paycheck. Instead of putting in extra hours that won’t yield much benefit, I find myself seeing how much more efficiently (less time consuming) I can perform the same essential job functions. 80/20 analysis works both ways! Keep up the great work!
Thanks Eric! 80/20 is a fantastic way to save time (and money). One of the best life hacks out there. I enjoyed your post as well. Looks like we are preaching the same message.