Income Stacking: An Employee’s Roadmap To Financial Independence
The following is guest post by Rowan from Minimum Viable Life Project discussing the concept of income stacking. If you’re looking for ways to make money online or side hustle extra cash outside our 9-5, this strategy of income stacking is a great mindset to take. Whether you want to reach financial independence or just cover some monthly bills, let’s explore the idea of income stacking. Take it away Rowan!
You hear it all the time…
“If you want to succeed in business you’ve got to take risks!”.
But, what if you’re just a normal kind of guy? A guy that’s got bills to pay, and mouths to feed? What then? Should you just quit your dead end job now and risk everything in your pursuit for financial freedom?
And what about “it takes money to make money”? I haven’t got any damn money, that’s why I’m reading this blog post! Don’t worry, I hear you.
Making the transition from your dead-end day job to solopreneur is VERY hard. That’s why so many people fail. You hear countless stories where “they risked it all, and now they’re bankrupt!”. But what if there’s a different way?
What if there was a way to create passive income with no money, and no risk?
$5 dollars a day here, $40 per month there, $25 per month there.
Introducing, the Income Stacking Method!
WHAT IS THE INCOME STACKING METHOD?
I first got introduced to the idea of ‘Stacking’ by James Clear where he discusses the value of ‘Habit Stacking‘ and the incredible benefits it can have, as its effects are compounded over time.
Inspired by the compounding effects that ‘stacking’ has, I used this same approach to my income.
Put simply, the income stacking method is this:
“Build multiple passive income streams online (regardless how small). Stack them on top of one another. Offset all of your expenses one by one with your new income streams until you’ve transitioned out of employment”.
HOW DOES INCOME STACKING WORK
Creating a product or building a business that generates $50k per year is fricking hard. If you’re already a multi millionaire hot-shot you’re probably laughing at the above statement. But if you’re just starting out, and your still in full-time employment, that stuff is hard!
Not only is it super difficult, it’s also far from a guarantee. Sure you could spend the next 12 months building the next Airbnb (trust me, I’ve tried it…), but you know what, the truth is it’s probably going to fail.
That’s just the way it is.
Sure, you’ll learn a tonne of valuable lessons along the way (that’s for certain), but you can’t get back that time or money (well you can get back the money, but it’d be nice not to have lost it in the first place).The income stacking method approaches things a little bit differently…
INCOME STACKING DO’S AND DON’TS
This whole process assumes that you’re probably not the next Elon Musk, or Richard Branson. I hate to break it to you but statistically you’re not.
Instead, the Income Stacking Method just follows a formula, and it just… kind of works.
Here’s the formula in a nutshell:
DON’TS OF INCOME STACKING:
- Invest your money in your BIG IDEA.
- Swing for the fences trying to build the next big hit.
- Try to recreate the wheel.
- Get all complicated and fancy.
DO’S OF INCOME STACKING:
- Keep things simple.
- Stick to the basics that have been proven to work.
- Build multiple passive income streams (regardless how small).
- Repeat, repeat, repeat until you have all of your outgoings are covered.
Every extra dollar that you generate takes you one step closer to financial independence.
CAN INCOME STACKING WORK FOR YOU?
Income stacking can work for anyone, regardless of whether you have a full-time job or not. It starts as a side hustle, and you earn the right to invest more of your time on it as it becomes more lucrative.
Taking your first steps and getting started is the most important part. Even as little as 30 minutes a day will get the ball rolling.
Let me explain.
Working a full-time job and juggling family life basically results in almost zero spare time. That’s why you’ve got to start small to begin with. Which is fine, as we all have to start somewhere.
However, in order to speed up your transition out of your day job, you’ll need to invest more time. That’s why it’s important to reduce the workload from your day job so that you can invest more of your time into generating more passive income streams that will ultimately free you from the shackles of employment. Replacing that single day from your paid employment also gives you a huge psychological boost too.
It sets up the map, and gives you the pathway to follow.
Not ‘if’, but ‘when’.
The key is to keep going, regardless of how futile it might feel in the beginning. So, can income stacking work for you? Absolutely. You’ve just gotta put in the time. As you can see it’s not a magic pill solution to all of your financial problems, and it’s definitely not a get rich quick scheme. Instead, it’s a process you can use to ease your way out of your job little by little.
Without risking it all.
KNOW YOUR MINIMUM VIABLE LIFE POINT
Financial independence is a word that gets thrown around a lot these days, but what actually is it? It’s basically where you have generated enough cash flow from investments or passive income streams, whereby you never have to work again.
I like this, but for me it feels a bit distant.
Instead, to make the goal more tangible, and achievable, I instead like to focus on the minimum viable life point.
It’s not like this is the end goal, but this is the primary focus.
A full transition from working for the man, to a life of financial freedom
CALCULATING YOUR MINIMUM VIABLE LIFE POINT
Calculating your minimum viable life point involves breaking down all of your current expenses into their simplest form, and removing anything and everything that’s not absolutely essential.
For example, total up potential expenses like:
- House Insurance
- Mobile Phone bill
- Debt Repayment
Once you have your minimum viable life point set, you now have a target to aim for. And it may be a lot closer than you think.
INCOME STACKING IN ACTION
Rather than focusing on the big picture of leaving your job for good, instead focus on each individual outgoing and work towards building income streams to offset it.
For example, let’s say one of your expenses is $50 per week on fuel. Your focus should be on building a passive income stream that generates you $50 per week. This could be achieved over multiple smaller income streams or one larger one. It really doesn’t matter.
Once you’ve built up that passive income, it effectively means you’ll NEVER have to pay for fuel again.
That’s the same as winning one of those competitions like “Free Fuel For a Year”, but for life! That’s how powerful passive income is, and that’s why it’s worth the investment of your time to build it up. Once you’ve got the hang of it, and your first expenses are getting ticked off the list, just rinse and repeat.
As you pick up momentum you’ll be able to cross expenses off your list faster and faster.
And, as more of your expenses are offset with your new passive income streams, your minimum viable life point becomes closer and closer.
Let me explain.
If your current minimum viable life point is say $20k per year (to use a simple round number example). That works out to be a measly $385 per week to be free! That’s not overbearing at all.
Now here’s the good bit…
Let’s say you build your first income stream and you make just $50 per week (very doable). You’ve now reduced the amount you need to generate by 13%! Your new minimum viable life point is now just $335 per week.
Replicate this 7.7 times more, and that’s it!
You are now FREE!!!
Does that seem ridiculously tangible to you?
Your financial independence is assured, it just might take awhile to get there.
HOW LONG SHOULD IT TAKE
Everyone is different, but I think for those of you that are fully committed, then 12-24 months is a realistic time frame.
However, there’s a few things you need to know before you get too excited…
- This is NOT a magic pill and does take time.
- You will do huge amounts of work upfront without receiving ANY financial incentives for a decent period of time.
- You will need to do ALL of this in your spare time (well, nearly all).
But, ask yourself this:
How much are you willing to sacrifice for a lifetime of financial independence? What sacrifices are you willing to make?
If 12-24 months of work with no immediate reward is too much, then this game ain’t for you. Stick to your day job and try to be grateful for all the things it gives you. If however you’re excited by the thought of living life of your terms, then I urge you to get started now.
Get started with whatever tools you have, and don’t let perfection get in the way of progress.
You can do this!
CONCLUSION: INCOME STACKING TO FI
Income stacking is a methodical approach to building multiple different income streams no matter how small, and stacking them one on top of the other until you’ve reached your minimum viable life.
If you follow this approach then it’s not a case of if you’ll become financially independent, but when. How long that takes depends on how much effort you invest.
Regardless, following this method ensures that each step you take, each new income stream you build is serving you (no matter how small) in your ultimate goal of financial independence.
For other posts on making money and developing income streams, here are some articles on Making Momentum:
ABOUT THE AUTHOR
Rowan is the founder of Minimum Viable Life Project. On his website he writes about income stacking, passive income and other strategies to help readers transition out of their day jobs into financial freedom.