Live Off Dividends

Passive Income and Personal Finance

Why You Don’t Need To Make $100k+ Per Year To Achieve Financial Independence

Why You Don't Need To Make $100k+ Per Year To Achieve Financial Independence

A lot of people tell me that it isn’t possibly for them to achieve financial independence because they don’t make enough money. While it’s true that if you made more money and saved more you could achieve this state faster. It doesn’t mean that you can’t achieve it at all. I’ve come up with a good representation of why you don’t need to make an above average amount of money to retire early.

Someone who makes $100,000 before tax will end up with roughly $78,928.75 after tax. Someone who makes $60,000 before tax will end up with roughly $49,206.50 after tax. We’ll call it $79,000 and $49,000 to make it simpler. So even though it is a $40,000 difference in income it ends up being $30,000 after tax. A significant amount of money? Absolutely. But it’s what you do with this money that’s important.


Marginal Tax Rates


It’s important to understand how to arrive at the $78,928.75 and $49,206.50 numbers. There’s a common misconception when it comes to tax brackets. A lot of people think that if they cross into the next tax bracket by even just $1 their entire income will be taxed at the new higher percentage. This isn’t the case. Just the amount earned into the next bracket will be tax at the increased rate. For example, we’ll call the top of the 15% bracket $37,000 (it’s actually $37,450). And we’ll assume for this example that this person made $37,000 last year and they made $37,001 this year. They will be taxed exactly the same on the $37,000 and just the extra one dollar will be taxed at the higher rate (25%).


There are two types of people


If the person who makes $79,000 per year saves just 10% of his income he’ll be saving $7,900 per year. If the person who makes $49,000 per year saves 20% of his income he’ll be saving $9,800 per year. So the person who makes $30,000 less per year is saving almost $2,000 more. It’s not always about what you have but rather how you utilize the things you do have.

As you can see it’s not necessarily how much money you make it’s more so what you do with your money and how much you’re able to save. It comes back to cutting expenses and managing your money. Though you may make less than someone else, you can make your money do more.


What Kind of Person Are You?


Are you the kind of person that constantly makes excuses for why you can’t make it work? Or are you the kind of person who will do whatever it takes to achieve your dreams? Honestly ask yourself these questions and maybe you’ll find that you are actually able to save some more money. Maybe you will be able to retire earlier than you thought. Take your finances into your own hands because no one is going to do it for you!


What percentage of your income are you saving?







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  1. That is the key to achieving your financial goals! Before I began blogging I was always under the impression that you needed a high income to achieve a high standard of living. Contrary to this belief, all you need to do is save your money appropriately and it will quickly compound. Anybody on an average salary can retire before the age of 65 but it has to do with their mentality and habits more than their salary.

  2. Your post is a must read for anyone who thinks you need a lot of money to achieve financial independence. It comes back to a person utilizing what they have, and it shows that efficiency always win.

  3. Compounding interest is very powerful and so misunderstood.

    Interestingly, I only found out my partner and her brother both fell into the group of people that believed tax brackets cover the entire salary. I’m surprised at how many people misunderstand that now!

  4. Nice post! In general, it still really surprises me how little people save and how much people complain about not having enough. A few dollars saved early on really do add up if invested wisely. I worry that young adults aren’t learning this fundamental lesson.

    • It really is concerning. People complain constantly about not having enough yet spend money on useless things. I see it especially in young people being at the age I am.

  5. You nailed it John, its all about the mind frame of thing.

    It people out there who can stretch hundred bucks for two weeks because of the mind frame.

  6. I talk to a lot of people who say they can’t afford to save I tell them they can’t afford not to.

    I think more finances need to be taught in high school.

    A few guys have started later and still made hundreds of millions.

    • You’re right! I agree with you, there should be some kind of finance curriculum in school, too few people understand even the simplest concepts.

  7. This is a great article! Too many people turn away when they hear save X by age Y, and they immediately think it can’t be done.

    We’ve doubled our savings rate this year to about 40%. I often think of it as we are saving at the rate of someone who’s making 4 our income. It makes it feel much more powerful for some reason.

    • That’s great, a 40% savings rate is tremendous! It’s empowering because you know that if you made as much money as they did you would be doing even better then they are! Keep working at it and I bet you can increase your savings rate even further! I’m currently saving roughly 85% of my income.

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