Breaking the 5 for 2 for life thinking

close up photo of a rat trapped inside the cage

What is the rat race, the matrix, the trap, the deception? Simply exchanging 5 for 2 for life. Work for 5 days to get 2 days if you’re lucky. We are trained from school age to exchange 5 days for 2 days. T.G.I.F. But, how does this happen?

Most people are enticed into school debt under the guise that it will mean a
good paying job i.e., money: however, now you must pay for the debt incurred. Your
money is now someone else’s money. In addition to all the school debt, you need
a house, car, groceries, significant other (and possibly little significant
others as a result), boat, dog, bigger car, bigger house, lawnmowers or
gardeners, clothes, lots of shoes, new gadgets, bigger tv’s… heck one for
every room in the big house, etc., etc., etc. In other words, you need a good
job to create an income to pay for all those EXPENSES and LIABILITIES. As a
result, most will never be able to get off the hamster wheel they are on for 40
years or so without a massive shift in thinking and action. So, let’s begin to
shift our thinking so that maybe we can hop off the hamster wheel.

Let’s try to renew our minds and shift our mindsets with a little exercise.

You are going to acquire a new vehicle liability. This liability will cost
you $500/month. However, as an astute investor, and anti-hamster wheel spinner,
you begin to calculate 1) how much you need to invest and 2) what rate of
return you will need to get, so that your investment will pay for the
expense created
by this new vehicle liability. (Did you catch the
shift from hamster wheel thinking?)

For example: Idea 1) Purchase a $150K single family home with $30K (20%
down). Maybe it’s a short-term rental or maybe a long-term rental, if after all
expenses are paid, it generates $500/month or $6K/year, then it will pay for
the liability that you want that costs $6K/year. Furthermore, once the new
liability is paid for, your income will continue. (Read my post on cash-on-cash
returns and how to calculate if you need a little direction.) The point is to
buy cash flowing assets to pay for your expenses.

Consider another example: Idea 2) as an accredited investor, you could invest $100K at 6% in a multi-family apartment syndication to yield the $6K a year to pay for the new $500/month expense because of the liability you want to acquire. Contrast this to wasting $500/month or $6K/year for 5 years on a vehicle and you will quickly realize that your $30K will never come back to you. It will never produce an income for you. Reach out for more information on cash flow investing.

If you plan and delay some gratification and acquire income producing assets that pay for your liabilities, then once the expensive liabilities are paid for, your assets will continue to spin off all that wonderful cashflow as long as you hold the cash flowing assets. Whereas, if you blow through your income on liabilities and expenses, then you will never see your cash again and must continue to go back to work, exchanging 5 for 2 for life.

In this thought exercise, we have only considered one liability you want or
have… think of how many liabilities you really want or have. Now think of how
much money you are throwing away on liabilities that will never pay you and
never work for you to produce perpetual income. You need lots of cash flowing
investments to get off the hamster wheel of 5 for 2. You must start today to
change tomorrow.

What investments are on your horizon to pay for your liabilities? How much
will you need to invest and what will be the rate of return needed to
accommodate for your expenses from liabilities?

1) Leave a reply to solve the problem (*you might help others shift from income to expenses thinking vs income to investments to pay for expenses thinking*)

Published by Wesley Fikes

Wes Fikes is the owner of North Forty Realty, North Forty Property Management and North Forty Construction located in Bentonville, Arkansas. Mr. Fikes is a well-diversified real estate Broker, and cash flow investor with a portfolio of single and multi-family properties and Limited Partner interests in 1,200+ doors located in Arkansas, North Carolina, South Carolina, and Texas. Prior to his real estate career, Mr. Fikes spent 10 years with Pepsi-Cola Company in small and large format sales. Mr. Fikes was first licensed as a realtor in 1999 in California and acquired his first rental property in the same year. Mr. Fikes holds a Bachelor of Science: Business Administration degree - Magna Cum Laude from Liberty University and is a Certified Retail Analyst. Over the past 20+ years in the real estate industry, Mr. Fikes has personally participated in 1031 like-kind exchanges and assisted fellow investors with selling and locating real estate investment opportunities, as well as traditional home sales.

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