Work Is A Form Of Investing
I think of work for myself a lot like an investment. Suppose for a second that you decide to invest $6,000 in the stock market, and you spend 2 hours a week watching stocks and making adjustments. If you perform in line with economic averages today, you might end up with as much as $7,200 in a year (that's a 20% return - which is killer).
Now suppose your name is Don and you instead take that $6,000 and spend it on a broken corvette. You spend 2 hours a week taking parts of the car, dealing with sales on Craigslist, and any number of other tasks that parting out a car requires. After a year you have invested 104 hours of your time and will end up with $10,000. 10,000/6,000 = 1.6666, or a 66% return on your investment. Also consider the time that you spent ended up paying about $38 per hour, as opposed to the stock market paying you $11.50 per hour.
Now, in real life, unless you are actively engaged in your personal stock portfolio management, there is no reason to spend 2 hours a week on that. Perhaps the average person only spends 15-30 minutes per month looking at that information, which in turn puts the investment of time relative to money at $200-400 dollars per hour. Also consider that you may be paying investment bankers in the background of your account that has monthly regular draws of of some per-transaction fee or per month fee. It all eats away at your investment.
In this particular example, I'd refer to stocks as passive investment strategy, and parting out a car as an active investment strategy. Here's a handy chart in case you have questions about which is which:
It is entirely possible to take any passive wealth building example and dump personal time into it, in which it becomes active. For the most part, those forms of wealth building exist because they are tried and proven to yield wealth without doing a lot of work over a long period of time. If you have the time and are willing, you can make significantly more by participating in the active wealth building column, but it also requires the diligence not to squander the additional income that you have. This means being disciplined enough to take the cash that you make from active wealth building and transfer it into passive wealth building as time goes on.
You should have a plan for allocating additional income into passive sources over time. The more you do this and make a habit of doing it, the quicker you are going to become financially independent and subsequently be able to "retire" as it is classically referred.
How do you decide which of the categories above you should participate in? Well unless you're a blood red entrepreneur already, you've probably already got a couple you're working on - a 401k and a day job, which puts you in one of each at least. Following our advice you might have a side hustle or be flipping stuff on the side. Ultimately, you should find for yourself the best of those categories that doesn't really feel like work. To me, that's flipping stuff and working on cars. To someone else, it might be a hands off stock portfolio, or just maxing out their 401k.
Ass aggressively as we recommend pushing post-tax income into investments, you must also establish a similar path for any side income. I find it far too easy to blow that money on other projects and equipment to facilitate the ease of future work (I see a larger garage and a two-post lift in my future), it is equally as wise to invest 50% or more of side income into those passive sources. This is even more difficult for me than investing with my regular income, because it is easy to feel like you're on the freight train to financial freedom already, and that there's no need to save or invest that extra cash that you come up with. I like to consider whatever amount I make through side hustles, and multiply it by 1.4, to give yourself of an idea of what you would have to earn in your day job to make that money and have it in your pocket after taxes and deductions. It becomes clear pretty quick the incentive for saving that, as each side hustle dollar is already about 1.5x more valuable than an employee-earned dollar.
When you decide to save side hustle money, it feels good. It motivates you to make more. You can calculate the days, months, or years saved off of your life every time you make a deposit, strictly from deciding to save that money instead of spend it. When you put it in the perspective of time, to convince yourself to save, or to start something that enables you to earn more, is much easier.