The Secret to Funding Your Dream Life
Why do 80% of Americans live paycheck to paycheck? This statistic has not changed in quite some time, and what that tells me is that the real answer isn’t widely understood. If it were, the condition would improve and no longer persist. Now, living paycheck to paycheck is not just a problem for broke individuals. In almost a decade and a half of mastering personal finance and helping my clients, I’ve seen it exist with both broke individuals and high earners. And no matter how hard it is preached to “budget harder” or “live below your means,” it doesn’t solve the issue.
I’m going to give you the two reasons this exists, and by correcting these two reasons in your own life, you can handle this problem for good and gain valuable financial knowledge to share with those you care about, so they can address it in their own lives. What are the two reasons?
- Unearned income
- Unallocated income
That’s it. But what do these two things mean? Unearned income means that someone simply isn’t earning enough income. They spend exactly the same as or more than they earn. And spending less isn’t the solution. Earning more income is the solution. A person’s income is often a direct reflection of the value they produce for those who pay them. Want more income? Increase your value to the people who pay you or find people who will value you more. Those are the only real solutions. You do need to take care of yourself as an individual, but nobody is going to pay you for that. You do need to take care of your loved ones, but nobody is going to pay you for that. You need to take care of people who are not yourself and your loved ones and find people who can afford to pay you and who will value what you produce for them. Income is the responsibility of and under the control of the individual themselves, which is contrary to cultural belief.
Unallocated income means that money was earned, but it was not allocated. To allocate something means that it is determined ahead of time where it will go and then it goes exactly there. Personally, I have percentage-based allocations for all areas of my personal budget. Percentages increase and decrease with dollar amounts of income earned, which is why I do it this way. The more I earn, the more money gets allocated through my determined percentages, and I have more freedom to spend in that category. The less I earn, the less money gets allocated through my determined percentages, and I have less available to spend in that category. For example, I allocate only 15% of my income toward housing. I allocate 40% of my income toward savings. The more I earn, the more I can spend on housing and the more I will save. I like this a lot better because it puts me in control of spending on the things that matter to me. All I have to do is earn more income. Back when I did traditional budgeting, I found myself cutting back on everything and enjoying life less. And one day I realized it’s because cutting expenses is like pushing the brakes. Increasing income is like pushing the gas pedal. I want to push the gas pedal and live my dream life sooner and faster, not later and slower and more miserable while I wait to get there.
What should you do with this information? Two things:
- Set out to earn as much income as possible and then do it.
- Allocate your income. You can determine how many dollars per month you spend on all things in your life and then categorize them. Take the total dollar amount spent on that category and divide it by your average take-home pay. There is your allocated percentage. Then each time you get paid, you multiply your take-home pay by your allocated percentage, and that’s how much you can spend in that category.
Here’s why this matters so much and why you need to master this…saving is simply an allocation. If you can master allocation of income and increasing income, you can save meaningful amounts of money to build wealth. Investing, especially until you’re financially independent, is a way of supplementing your active income with passive income. If you already know how to control your active income to maximize it, when passive income shows up, you will keep doing what’s been working and simply allocate the passive income along with your active income sources to build more wealth faster. Wealth is simple. It starts with these two things. I hope you apply them with success in your life, and if you do, please let me know in the comments! In closing, my mission in life is to help good people build more wealth who make the world a better place. So, if you’re a good person who wants to help make the world a better place and this article helped you, I want to encourage you to start planning your next quarterly trip and putting this into practice. And feel free to write to me and let me know how it went.
If you’re a client of mine and you’d like help leveling up, send an email to my team with “Level Up” in the subject line to Contact@WealthDynamX.com.
If you’re a follower and have not read my book “The Blueprint to Financial Freedom” yet, that is the place to start. This book covers the specifics for each level in the various chapters, and you can grab the book for free as my gift.
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The Blueprint to Financial Freedom by Jerry Fetta
To Purpose, Wealth & Freedom,
Jerry Fetta
Jerry Fetta is the CEO and Founder of Wealth DynamX. He is a nationally recognized financial expert featured in Forbes, Yahoo Finance, Fox, Chicago Weekly News, New York Finance, interviewed on over 45 podcasts with world renowned experts, earning endorsements and affiliations throughout his career with names like Kevin O’Leary, Grant Cardone, Dave Ramsey, and Pamela Yellen.
Jerry’s mission in life is to help create millions of financially educated and solvent families achieving greater financial freedom and sharing the truth about money with those around them.
Learn more at www.WealthDynamX.com
(DISCLAIMER: The information in this content should not be considered tax, financial, investment, or any kind of professional advice. Only a professional diagnosis of your specific situation can determine which strategies are appropriate for your needs. Wealth DynamX can and does not provide advice unless/until engaged by you.)
