A question that I am asked several times is: how to create a plan to replace one’s income? Which is what I’d call an exit plan! I love creating exit plans! You can upscale them to become your lifestyle plans.
Before we get onto the upscaling plans, let’s start with the first steps first. It is a great question to ask yourself how much money it would take to step away from your job right now? The funny thing is that we tend to forget a few things on one hand and inflate figures on another, so that magic number can sound HUGE and SCARY, which means that people shy away from it.
I can give you the plan that I followed, please don’t take it as gospel or financial advice as we are all different, with different circumstances. However you can possibly still learn from it, and implement points that can serve you to move forward.
Know your numbers
Firstly you need to know the numbers you are aiming for. Are you going to aim to replace your current gross salary before you step away from your job? Are you aiming for your net salary? Or are you aiming a higher number to allow for growth/different lifestyle?
The choice yours! Don’t let anyone say you need this much or that much to make things happen. Only you know what it would take to make you feel comfortable without the ‘security’ of a job.
To know this number you need to break down your cost of life, what is it you want in it, how much does it cost? As mentioned sometimes people tend to inflate these figures, so don’t just guess, instead do your research.
If you are unsure where to start with this, check out the How to Set Purposeful Money Goals Masterclass.
Know your income creation vehicle
The vehicle to bring in incomes can vary from businesses, property, shares etc. And it may even change as you progress along the way. Or you may use more than one vehicle. Whatever you choose you need to know the ins and outs of that vehicle.
Things like, how active do you need to be to make an income from it? How often would you be ‘paid’? What taxes would be applicable? How easily can you scale up? How much time and effort do you need to put in it? What do you need to do to maintain it? What return on investment would you get? How easy is it to liquidate if you need to?
Study your chosen vehicle. Make sure you understand it. Make sure you can set a clear strategy around it. Get a team that can help you with it.
Step out your growth plan
As a big picture view, you will need to consider things like, how much it will cost for you to get you started on this growth journey. What will that get you? How much will you need to spend to scale up from there?
Say for example if you choose property and in particularly a buy and hold strategy to create passive income with. How much deposit would you need to get started? Where could you purchase properties that provide you with a cashflow? Who would provide you with a loan? What would be the exact criteria for the property? How could you then move onto the next one? Re-finance, new deposit? How many properties would you need to create the income you desire? Are there other strategies that can help you along the way? Are among the questions to consider.
If you look at business you will need to consider, how much money you need to get it going? What type of business would it be? Is it a product or service? What price point? How much would you need to sell to make it viable? What do you need to make it happen? How can you sell more without having to work more on it?
Once you know the answers you can create a stepped plan with actions to be taken such as start saving any money you need to get you started, finding professionals that can help you, networking, obtaining the skills and knowledge you need to get things growing.
Set milestones to achieve certain things that move you forward massively, like having the amount saved up that you need to get going, setting up the legal structures that you need in place, registering your business name. etc.
As soon as you have a plan, take action! However small it seems, action is what will make the biggest difference to your growth. Sometimes the plan may seem forward, but you will find that once you get going the action you are taking could find you uncovering the need to do something differently. Don’t fret! Achieving your outcome will not be a linear progress, sometimes there will be side steps to move you forward. It’s OK as long as overall you stay the course.
Review and adjust
Your progress should be checked on each week, so you can steer yourself in the right direction, in saying that every 6months to a year you should have a major health check up on your progress, income, strategy. There may have been changes to your circumstances, in the market, in the legalities. It’s worth while to check that you are still progressing the way you wanted to, to hit income targets. Adjust your strategy, and action anything that drains your back pocket.