How to make $100K make $100k in Passive Income with a Financial Plan

I never professed to be the best with money but I know how to construct a financial plan.

The very reason that I’m writing this now, is because I took the fast ramp toward debt, depression, and anxiety. For most of us, unlucky with money, either from not being born with it or just squandering early opportunities; the road is rocky and rough. I grew up with no concept of how to administer a self-diagnostic; I only know that I’m well when I’m already through it. In that aspect, I’m lucky.

Most people will never know the opportunities missed until it’s too late.

“If we have persisted in making errors, it is despite their best efforts.”
The Mentor Leader, Tony Dungy with Nathan Whitaker, 2010

Free resource: Money Management Estimator

When I say that I know what it’s like to go hungry, to feel stuck, to hope that the credit card doesn’t bounce, and to watch the cool kids from the outside; yeah, we connect. I don’t write these articles for the well-to-do crowd. Most of them, already have the basics. I’m not writing for the insurance-driven financial advisor. They are only in it for the money. I’m writing to those who never had much. I’m writing because too often poor people receive knowledge from the worst sources. YOLO is a flawed idea. Yeah, you don’t want to miss out on life, however, you shouldn’t gamble your future away at the price of today.

Table of Contents

I write for those who never had

You’ve read all the grim stats. 41% of Americans don’t have at least $400 for emergencies. Most are carrying at least $140,000 in debts. Others are carrying $12,000 in credit card balances and a ton of money shame. For some of us, when our grandparents and parents pass away, we don’t even have the money for the burial. It’s a strain (period).

You might be living that way right now. Maybe you tried to save and maybe you didn’t. You listened to friends like me or family members grill the importance of good credit, saving, and investing. And yet, it still fell apart. So I’m here today on the long journey to recovery. After 50 articles about money behavior, disorder, planning, and execution; anyone can LEVEL UP. First, forgive yourself. Let go of the pain of failing so that you can start winning.

If you are brand new, I suggest you start from the beginning with the Net/Max Financial Plan For Single people, Single Parents, and even Couples. I also recommend reading The Magic Number for Million dollar Millennials, and When You Are Your Parent’s Retirement Plan.

I was broke in 2012 but happy by 2018. If you told me that I would be thinking 5, 10, or 15 years ahead, I would have fought you for lying or getting my hopes up. In the end, it is all true.

“I went from $-110k to $115k+ in Net Worth. I learned a few things through the valley.” Lawrence Gonzalez

The Net/Max Financial Plan was simple enough

With a clear understanding of the financial order of operations; here’s the Higher Level (Net) Max Strategy. The main takeaway is to have the bulk of your assets working just as hard for you. Hitting 30+ is not just a social media post, this is where you get grinding and thinking ahead to your 40s, 50s, and 60s.

The unknown should terrify you… it should also excite you. Be brave.

Higher Level (Net) Max

1. Maximizing Earned Income to more than $110,000+ annually

While I know that it’s easier said than done. This is why you are on a higher level max. In your mid-30s, this is the goal if you are single. For married couples, I would say $140,000+ annually. Either both people are working, or one pulling all the cash in while the other is taking care of the home, that’s the half marathon winner’s pace.

The U.S. Census Bureau reported in September 2017 that the real median household income was $59,039 in 2016, exceeding any previous year. Prices are rising and this is where you build your lead above the average. Work two jobs if need be, break the sweat and reap the rewards.

2. Living on Less than $45,000 Annually

Single people, aim to live on less than $35,000. My current expenses in DC are around that much right now. Don’t worry if you go a bit over. You are still in your accumulation phase, the back half of your 30s should be level out. I traveled to 13 countries in 2019 and I’m still in range. If you follow the plan and you learn along the way, you will realize how much you can really afford. Just prioritize your must-haves vs all the stuff you do, because you feel obligated to.

For married people with quick, try to stabilize your spending at around $45,000 even if you have kids. Yep, that means minimizing the big HGTV home dream. By the space that fits your needs, not the space that fits your wants.

According to the latest figures from the Bureau of Labor Statistics, the typical U.S. household spent $60,060 in 2017. You aren’t average. You are counting your money to be different. I reduced my spending while my income improved, and it works.

Bonus Resource: 50 Personal Finance Habits Everyone Should Follow.

3. Establishing the Net/Max Acid Emergency Savings

If you are reading this, you shouldn’t be carrying any consumer debts. Those credit card habits need to be heavily regulated. All your money should be making money. As such, you should be free to have a quick cash emergency bankroll that should be highly liquid. You never know what opportunities will come around so having at least $15,000 (if your net worth is less than $500,000) and north of $25,000 (if your net worth is more than $1M) is a damn good look.

This is your own mini rich slush fund for all opportunities annually. If you use it in that year, start the rebuilding process asap.

4. Support your Financial Plan by Staying One Step Ahead of the Unanticipated

Murphy’s Law. A rule that states, “If something can go wrong, it will.” In addition to this law reads, “and usually at the worst time.”

On average, anticipate the unanticipated occurrence every 4 years. It’s a thing. “It is known”, you will come out of pocket for at least $15,000. So in accordance with #3, keep that amount in a high-interest savings account.

Online bank has seen more turnovers than a UM vs UF college football game. Popular Direct is currently sitting at number one and has 2.55% APY (as of 8.2019), Chase Premier Checking is currently offering a bonus of $300 as of 3.2019.

The huge benefit of having an emergency account? Not putting your random emergency expense on a credit card!

5. Buy It. Hold It. Flip It or Rent It

90% of the world’s millionaires do this to create wealth. Over the last two centuries, about 90 percent of the world’s millionaires have been created by investing in real estate. For the average investor, real estate offers the best way to develop significant wealth.

They aren’t creating more land so you might as well jump into it. 35% of millionaires take it even further, investing in REITs to layer on additional real estate classes, beyond their own home and investment properties.

Here are a few ways:

Long-term residential rentals, the most common method, is to leverage long-term buy-and-hold residential rentals. People will always need a place to live, and that means getting involved with rental properties.
Lease options can be a great way to get involved in real estate without having to put up a significant amount of capital. You’re leasing to clients with an option to buy.
Home-renovation flips. I still think this is hard for the wrong investor. It’s all about selection and renovation experience mixed with resale ability.
Vacation rentals can present a lucrative path to profits in the real estate marketplace. You could make money while drinking Mai Thais. Think Air BnB deluxe.

*3-5 Units are manageable when it comes to rental properties, but 5-10 units would require a property management company for sure.

6. $100,000+ in a Multiple Stream Portfolio is the base of a great financial plan

In this stage, I’m thinking of putting in at least $100,000 in a Traditional/ROTH 401k, 457b, 403b, a Health Savings Account, and ROTH IRA.

For a couple, you can save up to $38,000 per year ($19,000 per year, per person) in a 401k (or 457b/403b) as of 2019. You can stock up to $12,000 per year (or $6,000 per year, per person). This is a great starting lineup.

They are the hardest working foundational elements. They can each yield a historical average of 8% annually. Three areas grind their way to the top. That’s a great flow while you take care of business. That’s about $24,000 in potential earnings. #SquadGoals

7. Medical Savings or lack thereof can destroy your financial plan

Health savings accounts are a triple tax advantage source.

Contributions are tax-deductible, so they reduce your federal income taxes owed. Assets in your HSA account typically grow tax-free, at least at the federal level. Funds can be withdrawn without being taxed by Uncle Sam if you use them for qualified medical expenses.

And you can save all those sweet receipts for later, like much later. I think The Money Guy team can explain it all better than I. Check out these episodes:

Top Secret Wealth-Building Strategies of the Rich!

FSA vs. HSA: What’s the Difference?

8. Earned Accreditation(s)

People live off of credentials out there. We are all only getting older. Grab those creds while you can.

Industry-recognized credentials help employers validate the knowledge and skills of potential employees and save valuable time in assessing the skills of job applicants. Having highly qualified workers can actually draw businesses to a particular area, creating even more job opportunities for local workers.

Team “Get all the extensions” behind your name.

9. The Smartest Person in Any Room

I’ve always been one to take information differently than others and that’s a good thing. Scratch that, that’s a great thing. It’s perfectly fine to embrace being the smartest person in your peer group.

You have to hone those skills down to a point. Understand how to assemble the best team, even among your peers. Be a problem solver while others complain. Be creative when others are stagnant in their thoughts. The more diverse the mind, the more likely it is to come up with innovative solutions. Don’t neglect things like reading books, travel, lectures, and other activities that broaden your horizons and teach you how to think in unexpected ways. Be prepared and always have a plan. Trust your guts. My gut has saved me more times than I can count. I’m not susceptible to all that glitters.

“Until we prove it, being transparent about [intuition] has been influential and it does take certain courage; ‘I can’t explain it as a scientist, but that’s where I think we should go.'”
Dr. Moncef Slaoui

Don’t set out to be perfect. Focus on your uniqueness and how you can do one thing better than anyone else. Be energetic. Let your actions precede you. Let them miss you mid-dialogue. And accept the willingness to fail. Do these things and you will be seen as the best and the brightest in the room. Don’t shrink, grow from it.

Bonus Tip: “If you are the smartest person in the room, go to the next room.”

10. Gratitude in Abundance should be part of the Financial Plan

“Happiness cannot be traveled to, owned, earned, worn, or consumed. Happiness is the spiritual experience of living every minute with love, grace, and gratitude.”
Denis Waitley

Somewhere along the way, we often lose gratitude. From the first day on the job to your last day, treat every hour on the clock with gratitude. I’ve never seen unhappy people prosper. They are usually stuck hating their very existence. Gratitude doesn’t have a numeric value but when I was asked by a potential financial advisor, “what did I want?”

The answer was NOTHING. There is nothing that the world hasn’t already given me. I don’t crave the fast car; I’ve driven a tank.

Since I don’t crave #travel life, I’ve visited 12 countries in 14 days. I don’t crave to be a part of anything. I just participate and move how I feel. You don’t covet what the next person has. You aren’t consumed and more importantly, you know that we all can win.

I think grateful people give more than they receive naturally, and for some reason, they get even more back. The grateful also live in the present.

“Yesterday is HISTORY, tomorrow is a MYSTERY, but today is a gift.” “Yesterday is history, tomorrow is a mystery, and today is a gift––that is why it is called the present.”

11. Accumulate at least $250,000 in Investments (Pt. 1) in your Financial Plan

*Diversify the Portfolio, Buy in bulk. Stable and Steady. ⇠ Rule of Thumb

A well-balanced portfolio contains diverse investments. As you get closer to needing the money, you should adjust your portfolio to reduce your risk. For example, if you have a child in college and you have money set aside for them in stocks, then you want to start moving that money into cash or safer bonds, as they get closer to graduation. If not, then there could be a huge downswing in the market that would result in the loss of or reduction of your investment and you won’t have the time to make up the money.

Holding at least $250,000 in investments is a great space when it comes to buying and selling with less drag and fewer fees.

12. Dividend Yields of at least $2,500 per QTR (Pt. 2)

The second part of investing is setting up at least $2,500 per quarter in dividends. For me, this is an arbitrary goal. I’m shooting for the moon. Who doesn’t want to make easy money on money?

Additionally, getting into a dividend reinvestment plan (DRIP) would allow you to automatically reinvest a stock’s cash dividends into additional or fractional shares of the underlying company. Buying shares via a company-sponsored DRIP is often cheaper than buying on the open market. DRIP shares are directly bought from and redeemed by the company. Reinvested dividends are still taxable but they are a great way to make your stocks’ money work for you.

13. Residual LLC Rental Income Earnings

For me, I want to set a goal of $25,000 bi-annually. I would want to keep my earnings for repairs and other purchases every other year. My goal is full-throttle accumulation.

14. Reinventing the Wheel

It’s important to reinvent yourself every five years or so. I want to keep learning and growing. From writing a book to getting accredited, and shifting as needed. I never want to be the expandable person or the first to go. Always be more integral to the game than others.

Everyone loves the story of the accountant who became the baker. I’m going from government auditing to IT auditing with weekend cooking classes, linguistics, and finally nursing. You have to view elements of knowledge that will be useful for you, your family, and your community.

15. Mastery of Communication if part of Financial Planning

It’s all about the mastery of languages and the power to communicate with others. It works well while traveling and even better when you are connecting to others. Never lose the power of the tongue. And never abuse it either.

We live in a multilingual world that is becoming increasingly globalized and it is therefore very important to know more than one language. I’ve run into many people overseas boasting over 4 languages. I have three down and need to work on the last two.

Public speaking and communication are essential components of a well-rounded person. You can connect more. It can help you in your career. It feeds your brain and keeps your cognitive functions firing. It’s been known to strengthen your decision-making and further your insight about others.

You learn to listen to the space between the words.

After Reaching Millionaire status in under 15 years with the Net Max financial plan, the next thing to do is to go to a Higher Level.

While I can’t tell you which direction to go with your life, this is how I choose to create mine.

The takeaway from all those steps, $75,000 to $100,000 in residual passive(ish) income annually. I did the math. I trust math.

This marks my 50th article on Linkedin. My goal for 2019 has been achieved by 8.25.2019. What a journey. It took time, research, reading a ton, and listening to podcasts religiously. I’m going to be on a social hiatus until I write my book.

Thank you to everyone who read at least one article, and to anyone who took away a wealth of knowledge… well my task is complete. See you guys in 2020. Enjoy the write-ups. Enjoy being flawed (because we all are) and be great. My next goal, Millionaire in 5 years. Wish me luck and see you on the other side, if you aren’t afraid.

Random side note. I have over 53 articles in draft version (by the way) which include but are not limited to: