Outgrowing The “Middle Class” Label
Hello high-income earning friends! It’s been a few years since I’ve written about my income from a holistic point of view. So for the sake of transparency I thought I would give everyone an update on my income situation.
My salary is currently closer to $60,000 than it is to $50,000. I won’t disclose the exact figure because I work with people who read this blog. As for my side incomes, they have gone up as well. 🙂 I’m leaving out rental income below because I use the rent to pay my farmland mortgage so it’s basically a wash.
Gross side incomes per year.
- Part time job – $10,000
- Dividends – $8,000
- Interest – $3,000
- Freelance – $10,000
Total side incomes = $31,000/year
If we put all the numbers together we see that I am making in the rough range of $90,000. Sweet sassy molassy! I believe this means my income is no longer considered middle class anymore. I am now part of the trendy upper middle class. 😉
In any case, I’m earning more than $75K/yr, which is a very important psychological hurdle. According to the Wall Street Journal, the magic income level for maximum satisfaction is $75,000 a year. “As people earn more money, their day-to-day happiness rises. Until [they] hit $75,000. After that, it is just more stuff, with no gain in happiness.”
Retiring Early on a Modest Salary
It’s rare for graphic designers such as myself to ever earn a six figure salary. What this means is that I have to implement a different strategy for FI/RE than someone else who’s a doctor or engineer. To make up for a lower salary, I boost my earnings by moonlighting, and also by increasing my investment returns by taking on more calculated risks. The extra income streams essentially increase my income by $31,000 a year right now and should continue to grow over time. They should also make the eventual transition to retirement easier. And by using leverage to invest in growing companies and other profitable assets like farmland and high yield bonds, my total portfolio has continuously brought high returns since 2009.
This method of choosing individual investments is admittedly more risky than the passive, Boglehead market indexing strategy. But I’ve also been compensated with higher returns, at least so far. I can’t say this plan is guaranteed to work for everyone or that it’s sustainable long term. But I started investing in my early 20s. Today I’m almost 30 years old, and my passive income is about $1500 per month, while my expenses are about $3000. So it’s working out for me. The only issue is I don’t know how my leveraged portfolio will perform in a bear market or recession, which hasn’t been tested yet.
I believe in the next 12 to 24 months it’s very likely that I will be making $100,000 per year including all my income sources. Wow. Never in my wildest childhood dreams did I expect to earn so much. I know six figures isn’t what it used to be but it still feels like a huge amount of money to me.
Many other high income earners claim that they don’t feel $90K or $100K is a lot of money. I don’t know if they’re just being modest, but I certainly do feel much more privileged and happier now than many years ago when I earned only $40K.
I used to believe that you have to be smart to make a lot of money. But apparently I’m living proof that someone with an average intellect can do so as well. I modelled my financial plan based on the brilliant minds that have already figured out the formula for success. All of my investment ideas and strategies can be boiled down to one simple philosophy; Do what other successful people do. 🙂 That’s it!