Why You’re Not Financially Free: Part 4

**Problems with the middle-class strategy.**

If you call up your typical brokerage firm, they’re mostly going to all say the same thing: Put money into an IRA or 401k, invest in index funds, and pay off as much debt as you can. Then, after slaving away 40 hours a week for the next four decades, start selling those stocks and live as frugally as possible.

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If you haven’t guessed already, there is a *lot* to criticize about this strategy. Keep in mind, for very conservative investors who have extremely secure jobs (think engineers, doctors, or programmers), this isn’t the worst strategy in the world. It’s long-term and it implements [dollar-cost averaging.](https://www.investopedia.com/terms/d/dollarcostaveraging.asp#:~:text=Dollar%2Dcost%20averaging%20(DCA)%20is%20an%20investment%20strategy%20in,volatility%20on%20the%20overall%20purchase.&text=Dollar%2Dcost%20averaging%20is%20also%20known%20as%20the%20constant%20dollar%20plan.) And it’s certainly better than nothing.


**However, we still have some issues.**

First, this strategy only utilizes a single income source: A job. And oftentimes, these jobs cannot scale. Your hourly rate is your hourly rate. Try to increase it and you may lose your job to younger competitors. Keep it low and you may not be able to save as much as you’d like. Overwork and you get burned out. Contrary to popular belief, I believe only having a job as your income source is extremely risky.

The second challenge of this strategy is that it assumes that a person is able to work consistently for forty years straight. Companies often downsize or are bought out by competitors. People experience dire medical issues that take them out of the workforce. Your skills may become obsolete as technology advances

The third issue is that you cannot access your funds without a severe penalty. Not long ago I was talking with a friend about what we do. After understanding that it was legitimate, he inquired to see if he could cash in on part of his retirement account. Unfortunately, he could not withdraw his money from his 401k as long as he worked there. Having your money locked up this way makes it extremely difficult to get ahead. If a prime opportunity presents itself, having your funds tied up in a traditional retirement vehicle means you often cannot move forward.

The fourth challenge with the typical middle-class strategy is that, on average, [the stock market only returns 7%](https://www.thesimpledollar.com/investing/stocks/where-does-7-come-from-when-it-comes-to-long-term-stock-returns/) after inflation. Although this beats your typical savings account rate by a lot, it is quite difficult to become financially free at 7% APR unless you are already extremely wealthy.


**This brings us to a very important question.**

How does your average investor get 1) a secondary income stream that is 2) historically reliable and 3) gives you a nice, fixed APR that beats the socks off the average stock market return?

The person who can answer that and has the initiative to act is miles ahead of the pack.

[WYNFF Part 1](https://www.reddit.com/r/passive_income/comments/kdpw1f/why_youre_not_financially_free_part_1/)

[WYNFF Part 2](https://www.reddit.com/r/passive_income/comments/ken3pd/why_youre_not_financially_free_part_2/)

[WYNFF Part 3](https://www.reddit.com/r/passive_income/comments/kgvruq/why_youre_not_financially_free_part_3/)

[Stop Giving All Your Money Away](https://www.reddit.com/r/passive_income/comments/kbs4fx/stop_giving_all_your_money_away/)

[Partnering and Promissory Notes for Passive Income](https://www.reddit.com/r/Money/comments/kd21cs/partnering_and_promissory_notes_for_passive_income/)

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