6 Tools to Replace Your Salary for Financial Freedom

We’re all dreaming of the day when we can walk away from our jobs and finally start living our dream lives! Financial freedom is the pathway to reach this milestone. Whether you’re planning to reach your desired retirement age or call it quits early, there’s one thing standing in the way for most people: building a financial nest egg that affords your dream life.

Paycheck to Wealth helps individuals like you achieve financial freedom. We teach you how to strategically use your paycheck to build your nest egg, which will ultimately lead to financial freedom. It’s up to you to decide how fast you accomplish it. Six tools you can use to replace your salary for financial freedom are:

·       401k & IRAs

·       Social Security

·       Investment dividends

·       High-yield savings account

·       Passive Income

·       Side Hustle

With the right strategies, these tools can fast-track your way to living a life of financial freedom.

Use your 401k & IRAs

Does your job offer a 401k plan? Employees should always opt-in to participate in a 401k plan because it’s one of the best wealth-building tools. A 401k plan takes a portion of your paycheck to invest in the stock market. It’s designed to help employees prepare for retirement. Many companies even offer an employer 401k match to give additional contributions on your behalf to build your wealth even faster! While 401ks are managed through your employer, IRAs are accounts managed by you. However, both are 100% your money!

You can use your 401k plan to replace your salary by withdrawing funds from the account. You can recreate your salary by withdrawing every two weeks, every month, or once a year. You will see your 401k balance grow over time. The longer you work, the more funds will be available in your 401k and have time to grow with compounding interest.

Keep in mind that unless you have a Roth 401K or Roth IRA taxes are involved when withdrawing from a 401 (k), and penalties may apply for early withdrawals. Get your free consultation with a financial advisor at Paycheck to Wealth for strategies on how to withdraw from your 401k and IRA accounts.

Receive a Social Security check

Social Security is another line item commonly found on your paycheck. Money taken out of your paycheck to contribute towards Social Security will benefit you later in life. These funds are distributed after reaching a qualifying age (as early as age 62), which can be used to replace your income during retirement. The longer you work, the more contributions you’ll make to Social Security, which will be available for you later.

Social Security is used to supplement your other income after retirement to have more financial security. For example, the average monthly Social Security check in the US is $2,000 per month. Since it’s a government-operated program, you can feel confident that you’ll receive this check every month.

Invest in dividend stocks

Did you know that stocks can pay you every quarter? Most people gravitate towards high-growth investments early on in their career to build their nest egg. However, those who are closer to financial freedom can begin transitioning into having more dividend-paying stocks in their portfolio. Although they don’t offer the same returns as high growth stocks, they’re usually a safer investment for a reliable income to replace your salary.

Treat divided stocks like your new paycheck—one that you don’t have to work for! Dividends are cash payouts made directly to investors from a company’s profits. Whether you own one share or 1,000 shares of a company or fund, you’ll receive a dividend. Most investors aim for a dividend yield of between 2% and 3% on average. That means if you have $100,000 invested, you can expect to receive $2000 to $3000 every year without even touching your initial investment. That’s what we call making your money work for you!

Keep money in a high-yield savings account

You always want to have cash on you. In the event of a stock market decline, relying on cash is helpful while waiting for the market to recover. But keeping money under the mattress doesn’t grow and can actually lose value due to inflation. Savvy investors like yourself can mitigate the risk by keeping money in a high-yield savings account (HYSA), a key step to a successful investing hierarchy. These are even better than your regular bank because they offer higher interest rates that keep your money growing.

The interest earned from a high-yield savings account can add even more money to your pockets for financial freedom. It’s common to find high-yield savings accounts offering interest rates between 4% and 5% annually. With $100,000 saved in these accounts, you will earn between $4,000 and $5,000 every year. That’s an extra $400+ every month to easily cover your subscription services or “eating out” budget. And the best part is that you’ll still have your savings growing untouched!

Receiving passive income

According to expert investor Warren Buffet, one of the richest people in the world, “If you don’t find a way to make money while you sleep, you will work until you die.” The key to achieving this is through passive income. Passive income is like a paycheck you don’t have to work for. With the right investments, passive income can easily replace your salary from your job.

There are several ways to earn a passive income. For example, owning real estate and having tenants pay you every month is a common way to earn passive income. Alternatively, investing in REITs can also provide passive income from tenants, even without owning a real estate property. Other forms of passive income include interest payments, dividends, and royalties.

Now, you can sleep well knowing that you’re earning your salary without lifting a finger.

Start a side hustle

Retirement isn’t just a time to sit around and do nothing. You now have the financial freedom to finally pursue your own passions—ones that can pay you! When you’re not traveling, shopping, or spending time with your family, thanks to your newfound financial freedom, you can spend your spare time building a business on your own. The good news is that combining a side hustle with other tools means you won’t need it to replace your salary completely but rather to supplement it.

Side hustles can be tailored to your personal interests, so they don’t feel like work. Do you love yard work? Start a lawn care business. Do you like thrift shopping? Start a re-sell business? Got a knack for arts and crafts? Open an Etsy shop. Do you enjoy teaching? Consider substitute teaching or tutoring.

Your side hustle can be part-time, allowing you to continue enjoying the benefits of your financial freedom.

Do you need help learning how you can replace your paycheck by setting up these six tools for financial freedom? We’d love to help.  As always, Paycheck to Wealth is your trusted Investment Advisor to help get you started. Contact Paycheck to Wealth today!