1 September 2018

The Income Stream Commitment

For most people, pursuing Financial Independence seems a pipe dream; talk of saving 50% or more of your income is laughable. Scraping together enough to be able to take a family holiday once a year, and to give your kids a decent Christmas, takes all the frugality we can stomach.

Early Retirement? Not only is it a joke, it's an offensive joke.
Thing is, I get that. This blog is meant to help people, to inspire people, to give people new ideas on how they can take control of their life. Not to insult them.

The median average individual income in New Zealand is $49,475, which after tax is $40,924¹. For a family of two working adults, that's about $82k.
In my own 'frugal' budget, I can't get down less than $77k a year, so I'm in no position to tell people that you can always trim some more off. Even if you did, at that level, saving $5k a year is a long way from hitting any kind of Financial Independence.

I believe spending less is just your first lever. When that doesn't get you there, time to pull some others.

Earning More

Here's an obvious statement: if you can't save enough from the difference of the minimum you need to live and the amount you earn, then your only option is to increase what you earn.

Easier said than done? Absolutely.
Possible anyway? I'm placing my bets on yes.

I read recently that the average millionaire has seven sources of income². Well… as a family right now, we have two: my day-job, and our small (at time of writing, $11k) investments. I suspect most families have around one or two sources, with one or both adults working a main job, and that's about it.

We all know, deep down at least, that no one becomes rich by just doing a regular 8 - 5. Those that really succeed do something special: they work harder at the right things.

I'm not sure about you, but seeing a beautiful looking Wednesday and having the option to turn a long, lazy barbecue lunch into evening drinks sounds pretty sweet. Being able to go on a month long family holiday would be an amazing experience for the kids and ourselves.
The rewards of not needing to turn up to the office each day are pretty compelling.

Side Hustlin'

So how do we, Team FI, try to move the dial from one or two forms of income to seven? Side hustles. Work outside of work.

The downside is: work is work, and if it was more fun they'd call it play.
The upside is: you can do whatever you want. Whatever you enjoy, and whatever you're really good at.

Some things are going to pay more in the short term. If you've got a sellable skill, like plumbing or software engineering, than you can find small jobs for an hourly rate and bring in some decent money. I brought in $10k doing small pieces of development work in 2017 for instance.

These are great, because if you're investing, then money now is worth way more than money tomorrow. But you're basically just increasing the hours you're working and as soon as you need a break, your income will fall right down with it. This is the reason, along with a second child, I stopped the programming contractor side hustle.

Seven Streams in Seven Years

I like to say "it's the process that matters", but when it comes to the sharp end, I'm motivated by hitting a goal. So here is my commitment:

As a family, we will add at least one extra income stream each year over the next six years

We're very lucky; as we're able to live on just my day-job's wage, anything we earn above that is purely for investment. As long as day-to-day life is not sinking you further into debt, then this is true for all of us. Everything extra we can bring in now will pay massive dividends in a decade or two.

Here are some of our plans and ideas; starting from the most likely to the more speculative:

My wife goes back to work

My wife stopped working when we had our second child, and is planning to stay out of the job market for a full year. Once we move city again in the new year, and we put down some roots, she'll be able to start the job search. It'll be part-time, maybe two or three days a week, but it'll make a massive difference.

We AirBnB a room

The next house we buy will be purchased cheap enough that we can pay it off easily in five years. If we invest more, then it will need to have rental capability. AirBnB, or Book-a-bach, make this process incredibly easy - as long as you're switched on to the tax implications. Which, having filed extra-income related tax returns in the last two years, are actually easier than I thought.

Monetise this blog

I'm not sure how yet, and I'm enjoying just writing for now. My main motivation for doing this is centred around sharing the journey and providing encouragement to others. But I'm also trying to hit my financial independence number… So maybe it's adverts, maybe it's the odd sponsored post if I really believe in the product, maybe it's referral fees, maybe it's Patreon or similar? I'd need to think long and hard about what mechanism doesn't compromise my desire to do the right thing.

Until I've got thousands of weekly readers, it's not something I'm planning on worrying too much about.

I build products that we can sell

I've been tinkering around with software projects for a couple of years. Every time I try something and it doesn't work, I learn. I'm getting closer. In fact, I think it's now only the two children impacting my time in the morning, evening and weekend that's stopped something from already making some money.

As they get older, and become a little more independent, I'm hoping that some time can be clawed back for more serious investment in my own products.

I've no real intention for this to replace my day-job. That company does amazing work that I'm proud to be part of, and it can be a real engine for positive change in the world. These side products however improve my value to my employer as I'm picking up a host of skills I can also bring to bear while working for them.

Wife sells jewellery and crafts on Etsy or similar

My wife has an outstanding talent. More than one actually. But specifically for this, she can make beautiful things. One year she made and sold Christmas decorations at a local market, she's made candle holders, beautiful collages for presents… The list goes on, and they always look stunning and professional.

In the short term, making and selling these items in a crowded marketplace results in a very low hourly rate - I think I calculated about $3 an hour for that Christmas market. However, as we better identify what the market wants and what it will bear, I'd imagine we can start to significantly move the dial on that.

She also loves it. What we're talking about here is a hobby that can make money, and that's really the sweet spot for all side hustles.

My wife does contract proof-reading

Through something like Upwork my wife can probably find some contract Proof Reading work. Sites like this can be a great place to sell your services. It's worth noting however that it's a global market-place. You'll be competing with people from much lower wage economies, so prices can be low. At least initially until you've established a reputation.

I finally write a book

I've started and stopped a handful of books, both fiction and non-fiction, over the years. Probably one of the least likely ideas until post-FI given the time commitment, but it's something I'd love to do. If I could then bring in some money off the back of it, well, that's truly the icing on the cake.

Side Hustles FTW

Side hustles are an opportunity for us to get ahead, and they're only limited by your time. While time is our most valuable resource, used correctly it can be invested to great effect. If you're having fun while building a business that can one day earn you income, then that sounds like a massive win to me.

I hope some of the ideas here help trigger some better ones for the rest of Team FI. It's going to be so much fun.