Never Have to Work for Money Again

How much money do you need to never have to work again?

The personal finance advice we were all told was to save 10% of your income, invest it in your 401(k), and then you can retire comfortably at 65 through the magic of compounding. This is a rational, accurate path to wealth. Compounding over a long period of time can create massive wealth. But almost nobody follows this because it feels so painfully slow.

The other approach we’re sold, and I’ve promoted, is to hustle hard to make a lot of money as quickly as possible. Increase your income and you can increase your lifestyle. If you work hard enough, you can have whatever house, car, and other luxuries you want. This approach also works. But, you will always have to work. If you don’t, you’ll end up bankrupt like the long-line of high-earning celebrities who went broke after earning millions.

Financial freedom is not having to work for money

Building a high income is not financial freedom. If it requires you to put in 80 hours a week, be completely stressed out, and sacrifice every other area of your life, you’re not financially free.

On the other hand, if you build up enough wealth and manage your lifestyle expenses in such a way you could never earn another dollar and still live a great life, that is financial freedom. But how do you do it without doing the impossible task of diligently saving 10% of your income and patiently waiting until you’re 65 to spend any of it?

Cash flow is not king

Countless financial educators such as Robert Kiyosaki and Grant Cardone have promoted the supreme goal of cash flow. According to them and the hundreds of others with similar advice, all of your personal investments should generate cash flow. Asset appreciation is “fake” and cash flow is “real”. Cash flow is king.

Or is it? Cash flow is typically taxed at your regular income tax level. For now, that’s much higher than the tax rate for long-held appreciating assets which are taxed at the long-term capital gains rate. If all the value is taken out in cash flow, then the magic of compounding through appreciation also stops working.

I believe the reason people focus so much on building “passive” income cash flow to become financially free is that it’s easier to understand. If you own two real estate properties that bring in $10,000 per month in income after expenses, then you know you have $10,000 per month for your lifestyle. If you have a million dollars worth of stocks with only 2% of dividends per year, how much can you use for your lifestyle? 2%? More? Less?

A better approach: The 3-5% rule

Years ago a study was conducted that determined a person could live off 4% of their wealth for at least 30 years if that wealth was invested 50% in stocks and 50% in bonds. Depending on your age, this period might be the rest of your life.

A lot of personal finance bloggers discuss and sometimes refute the exact percent you can safely withdraw so at to not run out of money. Some say less, such as 2-3%, and some say more, such as 5%. The principle remains: if you build enough wealth and manage your lifestyle, you can live off a fixed amount of money for the rest of your life.

For example, if you build a nest egg of $2 million, you can likely spend $80,000 per year. Zero work required. The other way to calculate this is to multiply your target lifestyle by 25. If you want to live off $100,000, multiply that by 25 and you get a wealth target of $2.5 million.

You don’t need “passive” income. You only need build a sizeable amount of wealth and appropriately manage your lifestyle expenses. The long-term return of an S&P 500 index fund is 7.5% after taxes. The current dividend yield of the S&P 500 is 1.38%. Between dividends and long-term appreciation, you can live off an investment of mostly stocks, without prioritizing cash flow, for the rest of your life.

The most important lesson

Most people increase their lifestyle expenses, then try to figure out how to make enough money to pay for it. Don’t do this. Instead, increase your wealth to increase your lifestyle.

If you want a more expensive home that will cost you an extra $4,000 per month, or $48,000 per year, first build an extra $1.2 million in wealth ($48K x 25). Robert Kiyosaki had this right, in my opinion. He once told me, “Matt, when I want to buy something [personally], I just get more investments.” The goal is to get your investments to pay for your lifestyle permanently.

The value of this kind of financial freedom

Living within your means based on your true wealth isn’t easy. But it’s far easier than painstakingly saving 10% of your income for 45 years so that way down the road you can be financially free. This approach is the key to being financially free now, or at least within the next five years.

When you’ve built enough wealth and managed your lifestyle to be less than a modest percentage of your wealth, say 4%, you no longer have to work for money. You get to choose what you do. Don’t like a project or investment? Don’t do it. Don’t want to work with someone? Don’t. Want to do something that sounds exciting but may not pay off? Do it.

You will have less stress. You’ll make better financial decisions. You can think longer term. You control your schedule.

Finally, you will be completely free of the need to work. At that point, I believe you can do your best work and be the best person you can be.

Author Bio

Matt Clark is the Chairman and CEO of, Inc., a company which helps people start and grow ecommerce businesses. He’s also the co-owner of Inc 500-listed healthy coffee company, Lifeboost Coffee.

Matt has been featured on Forbes, Success Magazine, Entrepreneur, and Business Insider. He’s shared the stage with business icons such as Richard Branson, Robert Kiyosaki, and Sara Blakely, and Daymond John.

He’s been sharing his strategies to build businesses since 2012. Matt’s students have produced an estimated $9 billion in sales online.

You can connect with him on Instagram and Twitter at @mattclarktx.

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