Today on Financial Freedom Friday, Matt uses charts and equations to show you exactly what no one else will tell you about a fast rat race escape plan. Learn why patience equals speed, the absolute fastest way to achieve financial freedom, and the key to enjoying life while you’re still young.
What You Will Learn About What No One Is Telling You About a Fast Rat Race Escape Plan:
- Why patience equals speed
- How to define what “escaping the rat race” is
- How long it takes to escape the rat race by flipping
- They key to enjoying life while you’re still young
- How long it takes to escape the rat race by holding deals
- How many of today’s 65 year olds are ready to retire
- Questions to ask yourself to form your ideal rat race escape plan
- The fastest way to achieve financial freedom
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Speaker 1: This is Theriault Media.
Matt Theriault: Hey. Matt here at Epic Real Estate, and welcome to another episode of Financial Freedom Friday.
Speaker 1: It’s time for Financial Freedom Friday with Matt Terrio.
Matt: Hey, just got back from a great week at the Epic Intensive. It was last week in Indianapolis. The whole concept was around escaping the rat race. It was called, “The Cash Flow Conclave.” I introduced the crowd there to a concept, it was on day three, that I’ve referred to as, “Patience equals speed.” Patience equals speed. So what I want to do is kind of demonstrate what I mean by this when it comes to escaping the rat race, okay?
So first, let’s define what escaping the rat race actually is. That’s when you get your passive income to exceed your monthly expenses. You need your monthly passive income to be higher than your expenses. Once that gets higher, then you have officially escaped the rat race, and you have the option to work or not. That’s the plan. And that’s what everybody signed up for when they came to the Epic Intensive. They raised their hand. They bought the ticket. They got the hotel, and they traveled there. Basically saying this is really, really important to me. So let’s see if it’s really important to you, because there were a lot of people there scratching their head a little bit. I’ll show you what I mean by that in just a sec.
But let me show you the options that we have. So if I have this axis here, this represents cash flow. This represents time. So let’s say 62 years old. Basic retirement age. Then we have right here, what we have is this is where you are right now. Now if we needed, let’s say $5,000 a month to escape the rat race, so say we had $4,500 a month in monthly expenses, so our target number to escape the rat race, that freedom number, is going to be $5,000 a month. So let’s say that goes right here. 5K a month. Okay? So if that mark right there, that’s when we’d actually be free. So once we’ve got 5K a month, we are financially free. We have officially escaped the rat race.
Now, there’s two ways to go about achieving this. There’s the traditional way. The traditional way of how most people go about it. They go to school. They get a good job. They work hard for the next 40, 50 years, making sacrifices. They save their money. They invest their money. They put in things like IRAs and 401Ks, all these nice little retirement plans, and their journey kind of looks like this. They’re working, working, working, saving, not experiencing any passive income, any cash flow. That’s why it’s down here. This is where our line needs to be, right? So they’re just saving, saving, saving, and if they did it all right, by the age of 62, they will have had saved enough to hit their number, okay? So at the age of 62, put up a line, and now they’ve got their passive income to last them into their golden years. Got it?
Now, I say a big “if” they did it right, because if you look at the statistics, 95% of today’s 65 year olds are unprepared to retire. They missed the mark. They missed this, okay? But let’s just say, let’s give everybody the benefit of the doubt, let’s say this works for you, because there’s absolutely nothing wrong with it. It does work for some people. It’s just a choice you have to make, because you do have options.
The alternative would be since the goal, eventually, is passive income, that’s the goal for everybody, because that’s when you are free, that’s when you escape the rat race. So the goal being passive income, if that’s the goal, rather than saving the pile to create the stream, why not pursue the stream first, and then let the stream create your pile. So the trajectory might look a little more something like this.
You built work on your passive income, passive income. You work on your active income full time, but in your spare time, you work on your passive income. You hit your 5K mark, and now you can let your passive income start building your piles. Now you can put your excess cashflow into those retirement vehicles and keep that in a tax resistant or tax deferred environment. Then once you hit the age of 62, now you can withdraw on that as well, so you’re building on top of your passive income that you created before the age of 62, and your trajectory might look something like that, okay? So that’s one aspect. Obviously this one looks like there wasn’t much argument at the intensive about this being a better option, right?
The other thing to look at here, is your life, like how long does this take? Because the traditional path, now you hit the age of 62, now you can start living life in here, right? Now you get to start living life. But in this unconventional path, you can live life all in here as well. Over here, your best and most active years, they’re behind you. But if you pursue it this way, you can start living life while you’re still young enough to enjoy it. You can still create your passive income and live life while you’re still young enough to enjoy it. Got it? All right, so, that’s the concept. That’s what was taught.
Now the next big question was, are your actions that you take on a daily basis, are they consistent with your trajectory if you’re going to pursue passive income first? For example, are you debt averse? Are you trying to eliminate debt? That would be more along this path. Because nobody ever got financially free by eliminating debt alone. Certainly, you can do it. Certainly, it could be part of a good financial plan. But I want you to know you’re slowing yourself down. Now if you’re okay delaying when you actually get to start living your life from your passive income, fine. By all means, do it. But you are slowing yourself down. I’ll show you what I mean in a second.
Second thing is, is your primary investment strategy putting money in your 401K or putting in your retirement plan? Again, not a bad move, it’s just slowing you down to when you actually get to experience that financial freedom. It’s more along this path right here. Okay?
Then the other thing is people like to buy their primary residence and then pay it off as fast as possible. Again, nothing wrong with that, but you’re slowing yourself down if financial freedom is important to you. Now if being debt free is more important to you, by all means, do it. If having money in a tax deferred environment is more important to you, by all means, put it in your 401K, put it in your IRA. If having a home paid for free and clear, if that’s more important to you than your financial freedom, then go ahead and do that. But if your financial freedom is more important to you than all of those things, you’re really slowing yourself down by doing those.
Let me show what I mean. Particularly what that refers to real estate investing, because how you create your passive income doesn’t really matter all that much. I mean, you can create your Amazon business, you can create a Spotify business, you can write a hit song, you can invent something, you could … What else could you do? Automatic car wash or a storage facility, those are all different types of ways that you can create this passive income. But as we see here, these statistics going this path per the Department of Health and Human Services, this is failing the majority of the country. That’s just what the statistics say. You may be the exception. That’s fine. The statistics say most people are not going to make it. 95% to be exact.
The other statistic when it comes to creating passive income, more people have done and continue to do it, and build upon it inside of real estate. It’s just where the statistics are in your favor. So let’s look at it from a real estate perspective, all right?
If you got a house, you have this house here. Okay? There’s my house. Now you have two options, you can flip this house, or you can hold this house. Got it? So if you flip it, let’s say you’re going to make $30,000, pretty good payday. But if you chose to hold the same house, you might make something like $300 a month. $300 a month, okay? So looking at this scenario, which one would you do? Would you flip the house for $30,000, or would you hold it for $300 a month? I mean, real world. I mean, think about it. If it was sitting right there on the desk in front of you right now, or on your table in front of you, which one would you choose? You could have the stack of $30,000, or you can take this $300 a month. Most people will take that $30,000. It just feels better. You feel like you’re progressing. You feel like you’re moving forward faster. You’re feeling successful. This is a lot of money.
All right, but let’s look at it in the perspective of how it works into our escaping the rat race formula. With that said, I went to bankrate.com. Bankrate.com. And I went to just see what is the best producing savings account that’s available right now. How much money would you have to put in that savings account, is what I really wanted to know, to create $300 a month? So I found one over at, I think it was Investor’s Bank. Let me look at my computer screen real quick. Yeah, Investor’s Bank. They have a 1.9% annual percent yield. Annual percentage yield. Now they put that Y, that yield, there at the end. I don’t want get into all finances, but it’s a little bit of a trick, isn’t it? A lot of people think that’s an annual percentage rate. It’s not. It’s annual percentage yield, something a little bit differently. But let’s just give them the benefit of a doubt, let’s say it’s going to be 1.9%.
How much money would you have to put in that account to create $300 a month? Right? I did the math before, so I’ll let you know. You would need $189,000 in that back account, the most aggressive bank account that’s available at the moment of recording this video. Whenever you’re watching this video, even if it’s 10 years in advance, the same principles apply, okay? But right now we’re working with 1.9%. You need $189,000 to create $300 a month.
So how many of these flips would you have to do to create $189,000? You thought about it? So I did the math again in advance. You would need to do six of them. So 6 times 30 would give you 180. Let’s say you made a little extra on one. So that’s the difference between you holding one property, doing one deal, or flipping six. Flipping six, okay? So are you starting to see how the difference here is? One feels good. But the other one is faster. It’s moving you there faster. So to hit your $5,000 a month to escape the rat race, how many deals would you have to do? So if we’re going to hold deals, if we’re going to hold every single one of them, that would be 17 deals. You have to hold 17, or you have to do 17 deals, all right?
Now if you had to flip deals, how many of those would you have to do to create your $5,000 a month? You’d have to do 102 of them. We don’t want to do that. That’s a lot of work, right? That’s a lot of work. 17 deals, this is what we want. We don’t want to do that. And that’s what I mean when I’m talking … You’re starting to see what I was talking about when I’m saying patience equals speed, right?
So if you did one deal just every other month, one deal every other month, how long would it take you to escape the rat race, holding a deal, holding all of your deals? We’re looking at right around 3 years. 3 years to escape the rat race. Now if you did it by flipping, how long would that take you? Say you flipped a house every other month. How long would that take you to escape the rat race? 17 years. 17 years.
So when I say patience equals speed, what I’m suggesting is, have a little patience with your $300 a month holds. Just a little bit of patience. Because what that translates to is speed. Escaping the rat race, and what’s that, more than five times the rate, all right? Patience equals speed. Hold the properties. Be patient with this passive income. Resist taking this 30K, all right? Resist. Hold off on that. Delay your gratification just for a few years, and you’ve escaped the rat race. You’ve created that $5,000 in passive income.
You start playing with this 30K … By the way, you can’t spend any of this along the way. You have to put it into that savings account. So you can’t even enjoy it. So if you were going to start spending it and living the high life doing this way, at least double, right? At least double. Say you kept 15 in your pocket and you put 15 in the bank, now you’re 34 years. Got it? So that’s really more along this red trajectory, the traditional trajectory flipping houses. And by holding them, you’re more along this green trajectory. All right?
So at the Epic Intensive, this is just kind of what we covered on day three. On day one and two, we talked a lot about how to go out and find the deal, how to talk to sellers, how to convert those sellers into contracts, and then take those contracts and exit in a way that you get the highest and best profit for yourself, so you move the fastest on this trajectory. The next one’s coming up in a few months. If you’d like to join us, I’d love to have you. Tickets are up there right now. They’re available right now. I believe as I’m recording this, there’s still some of the free ones available. We give the first 25 away for free each time we do an intensive, so you can go to epicintensive.com. Grab a ticket. I’d love to see you there. Epicintensive.com. All the details are there, and if you act right now, you might still get one of those free tickets, all right? So that’s it. I will see you next week on another episode of Financial Freedom Friday. Take care.