Money Management

How to Live Without a Job: The Four Key Steps to True Financial Independence

How to Live Without a Job
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Like many people my age — the so-called “early millennial” generation born between 1980 and 1990 — the idea of living without a job first entered my mind after reading Timothy Ferriss’ now-classic book The 4-Hour Workweek

Until that point, I thought I would go to college, graduate, and then eventually run the family business. I assumed my life would follow a similar pattern as my parents.

But The 4-Hour Workweek opened my eyes to a new way of thinking. What if I identified the lifestyle I wanted to live — instead of the one I was supposed to live — and then designed a business and financial strategy to make that lifestyle possible?

The more I thought about it, the clearer it became that my existing career path was never going to produce the outcomes I actually wanted. So I realized I needed to make a change. 

And that’s when I began my journey of living without a job. 

In this post, I’ll share the steps I took to make this happen, and explain how you can do it too. 

Step #1: Define Your Ideal Lifestyle

Billionaire hedge fund manager and author Ray Dalio has a three-part equation for a successful life:

Dreams + Embracing Reality + Determination = A Successful Life

Here’s what Dalio says about the formula: 

“You first have to dream big and prioritize. If you follow the right principles you can have virtually anything you want, but you can’t have everything you want. Rejecting some things you want in order to focus on achieving other things more is key.”

Ray Dalio

If you’re serious about wanting to live without a job, it’s essential to understand what “living” means to you. 

Think about how you want to spend your time, where you want to live, what kind of work (if any) you want to do, and what type of income you need to support your desired lifestyle.

It’s not enough to simply acknowledge to yourself that you want to live without a job. You need to get specific about how you want to spend your time.

For example, some people dream of traveling and living in a different country every year. Others, like myself, envision a life where they have autonomy over their time and creative projects while being able to play a prominent role in raising their children. 

These dreams have never been more achievable than they are today. We live in a globalized, connected world that empowers you to do almost any kind of work on your own time, on your own terms, from wherever you want. 

But in order to make your dream a reality, you have to figure out what your dream is. And that means being clear and specific about what you want.

Recommended reading: To get started, check out our guide “How to Set Financial Goals That Actually Make You Happy.” Money goals need not be different than life goals, and this post walks you through the most important questions to ask yourself when you’re beginning to think about your ideal lifestyle.

Step #2: Calculate Your Ideal Lifestyle’s Cost

When I calculated how much my ideal lifestyle would cost, I was surprised to find that it would take less money than I anticipated.

Of course, your cost of living will vary depending on where you want to live, the type of lifestyle you want to live, and how many people you plan on supporting. 

Still, I find that people are surprised by how little they need to live the life they want — at least once they get specific about how they want to spend their time.

After all, many of life’s most enjoyable activities — such as spending time with friends and family, creative pursuits, being outdoors and learning — can be free. So what people often lack is time, not money.

One concept we talk about frequently here at The Ways To Wealth is the idea that financial planning done right is about maximizing opportunity costs. As Ray Dalio says, “…you can’t have everything you want. Rejecting some things you want in order to focus on achieving other things more is key.”

If your single highest priority is to live without a job, one fast way to get there is living off rice and beans in the back of a van for $200 a month. If you had $5,000 in the bank, you could live for over two years without a job this way.

But that lifestyle isn’t for everyone. And so, you have to begin making trade-offs regarding both the type of income you’ll need to generate and what you’re willing to do to create that income.

For most people, living without a job means finding a satisfying balance between material and immaterial wants. Living without a job can give you a unique level of autonomy, but it can also mean earning less money over your lifetime than if you had chosen to pursue a demanding career path.

This realization was a big moment in my life. I came to realize that the cost of wanting a million-dollar home wasn’t just the money I would spend on it, but also the life energy I would have to expend to afford it. 

Ultimately, I concluded that living in a mansion wasn’t worth the opportunity cost of giving up control of my time, or of having less time to spend with my family.

Recommended reading: I suggest creating what’s known as a values-based budget. This is different from traditional budgeting in that you calculate your expenses in terms of life energy. 

Step #3: Learn How to Make Money Outside of a Job

If you read The 4-Hour Work Week, you’ll find a chapter in which Ferriss walks readers through a step-by-step business creation process for building a source of automated income.

I was in my 20s when I read the book, and I spent a good deal of time trying to follow those steps. Unfortunately, I found that the path to automated riches is not as easy as Ferriss made it out to be.

Looking back, it’s easy to see that part of the problem was a lack of skills. I had never created a website before, written advertising copy, learned to drive traffic, or even made a single dollar online. But there I was, thinking the book had given me the secret to online riches.

During this same period, I read an article by the entrepreneur and author Jason Fried called “How to Get Good at Making Money,” which introduced a simple concept: the idea that making money is a skill. And further, that like any skill, it takes time and practice to get good at it.

Up to that point, I didn’t consider myself particularly skilled at much beyond sports. But I started to wonder what would happen if I applied the same approach I used to improve at basketball to skills that were valuable in the marketplace.  

The most significant shift I had with this approach was thinking of the various side hustles and businesses I started (or was going to start) as practice. If they didn’t take off, I learned what worked and what didn’t while building valuable skills. 

I did a lot of different things during this period, including starting websites, freelancing and completing the coursework to become a CFP®.

I learned SEO.

I learned how to negotiate by pitching to freelancing clients.

I worked for some of the larger personal finance blogs, which gave me an inside look at how successful online publishers operate. 

I was also building my knowledge base in financial planning.

All of this took time. To be exact, I first started down this journey in 2009, but it wasn’t until 2016 that I combined all these skills and started The Ways To Wealth. And it wasn’t until late 2017 that I was able to live without a job due to these skills. 

One of my favorite podcasts, The Tropical MBA, calls this the 1,000 Day Principle. The idea is that it takes about 1,000 days of full-time effort to go from starting something to having that thing be able to replace your full-time income.

Many people want a shortcut. 

There isn’t one. 

I started this website in 2016 and was able to go full-time 13 months later. But it was the seven years prior — seven years of building my money-making skills online and offline — that allowed me to do this.

Recommend reading: Leveling up your skills one day at a time is critical if you’ve never made money outside of a job. This is why I’m such a big proponent of starting a side hustle. It’s jumping in and doing things (not just reading about theory) that will help you increase your money-making skills. Once you’ve had some success with a side hustle, you’ll start to understand the idea of building a business that runs itself

Step #4: Invest In Income-Generating Assets

The most common way people live without a job is by having sufficient cash flow from their income-generating investments. Unfortunately, most people who accomplish this do so after 40+ years of working. And they tend to call living without a job “retirement.” 

I assume you’re looking to get to that level in much less time.

The traditional definition of retirement or financial independence is having 25 times your annual expenses in investments. So, if you spend $40,000 per year, you’ll need $1 million if your goal is to never work again.

Fortunately, this level of savings isn’t required to live without a job. As discussed above, you can make enough money outside of a traditional job to cover your ideal lifestyle cost.

Ideally, however, you’ll want to have some level of investment income in as well. This will provide a buffer should your primary source of income ever decline.

Many types of investments can generate income. While my favorite is investing in stocks, this approach takes a lot of time to start producing enough cash flow to live on entirely.

Second to stocks is investing in real estate. Because you’re usually using leverage, it’s possible to reach a point where your real estate investments generate enough cash flow to live on much faster than you would with stocks. One of the common strategies used in real estate is creating cash flow with vacation rental properties via Airbnb.

The goal is to get to a point where you are…

  1. Continuously increasing your money-making skills and generating revenue outside of a job that is more than enough to cover your living expenses.
  2. Living within your means, which allows you to invest your excess cash flow to create passive income.

Recommended reading: See our in-depth guides on investing as a beginner, investing for retirement and getting started investing in real estate.

FAQs About How to Live Without a Job

What do you do about health insurance?

If you’re in the U.S., navigating health insurance is one of the most difficult aspects of living without a job. While I’ve tried a lot of approaches, what I find works best is purchasing a high-deductible plan on the health insurance marketplace, then doing whatever you can to limit your health insurance costs.

In addition, this opens you up to using a health savings account (HSA), which carries a host of tax benefits. From there, adjust your emergency fund to ensure you can cover your plan’s out-of-pocket maximum for the year.

Of course, this works best for those without pre-existing conditions that require regular medical care.

How much money should you save before leaving your job?

I had a six-month emergency fund before I left my job. But just as important, I had zero non-mortgage debt, such as credit cards, car payments and student loans. This helped control my month-to-month costs and extend my runway if needed.

What’s the best way to make money without a job?

There isn’t one answer that fits everyone. It depends mainly on your skillset. I created a business that I love running (this website). If you’re not quite sure what you want to do, I recommend leveraging your current skills and abilities so you’re not starting from square one. 

So, for example, if you’ve been working at a marketing agency running social media campaigns for local businesses, attempt to go out and get clients on your own utilizing the skills you’ve built from your career. 

See our article “7 High Income Skills For Making Six Figures With No Degree” for more ideas.

Final Thoughts on How to Live Without a Job

On the one hand, there are more ways than ever to make enough money outside a traditional job. But one thing that hasn’t changed is the fact that you’re still going to need a certain level of business acumen to make it work.

The individuals you see succeeding without a job today have likely put in years of hard work to get to where they are. 

The good news is that this path is available to you.

Three to five years of getting knocked down and crawling back up is the price of admission to live a life most people only dream about. So, if you’re willing to put in the work, it’s possible to transition from employed to self-employed and ultimately to living without a job.

What to read next: How to get rich quick.

R.J. Weiss
R.J. Weiss is the founder and editor of The Ways To Wealth, a Certified Financial Planner™, husband and father of three. He's spent the last 10+ years writing about personal finance and has been featured in Forbes, Bloomberg, MSN Money, and other publications.

1 Comment

  1. Very well written, everyone is looking for easy get rich schemes but you made it clear that patience is important along with an emergency fund.

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