Wage slavery is a trap most people never escape. But you don’t have to be like most people! In this article I share how you can break free of wage slavery and live life on your own terms.
The formula for escaping wage slavery is simple: Control your costs, eliminate consumer debt, build your cash reserves, increase your skills, apply the value equation, and invest in income-generating assets.
Wage slavery is the state in which a person has complete dependency on wages for their regular and immediate needs. Anyone living paycheck-to-paycheck is a wage slave.
I am going to share with you the simple pathway out of this trap—a trap that hundreds of millions of people find themselves in. Let’s get into it.
Control your costs
Controlling your costs is the fundamental principle of escaping wage slavery. The idea is simple: spend less than you make. Even though it is the most basic, it is also very hard to do, especially if you don’t make enough to get by.
Most people struggle to spend less than they make, regardless of income. They spend everything they earn and often go into debt to fund their lifestyle. This traps them in a never-ending cycle of working-spending-working.
Thus, learning to control your costs is the first step towards freedom. The trick is to get your spending below the level you’re earning.
Don’t despair at the thought of living on a tight budget for decades. I promise you won’t have to live like a monk for the rest of your life. Follow my process and you’ll have more income to work with soon enough. For now, do everything in your power to get your costs under control because you can not get free if you do not get this piece right. Otherwise, no matter how much you make, you’ll always be a slave.
The next step towards freedom is to eliminate debt.
The problem with debt is that it robs you of your future. Every time you whip out a credit card to get the latest tech gadget or sign up for an entertainment subscription, you’re taking money from your future self. The more you do that the less your future self has to work with, keeping you in bondage to your debtors, and trapped in wage slavery.
Focus initially on eliminating consumer debt. To do this, pay off your credit cards, your auto and student loans, as well as any personal loans you might have.
Don’t worry too much right now if you have a mortgage. A mortgage is considered consumer debt, but in most cases your house should be worth more than you owe, making it an asset. I am an advocate in principle of paying off your mortgage, but it’s often one of the last things you need to focus on as you work to break free of wage slavery.
There are differing philosophies on debt. Some folks believe all debt is bad and others think certain kinds are permissible and even good. I tend to agree with the latter. Debt can be a useful tool, especially when used to acquire assets like businesses, income-generating equipment, or investment real estate.
Right now, I want you to eliminate any debt not tied to a hard asset of equal or greater value. Pay off your credit cards, eliminate your auto loans, and get rid of debt tied to things like vacations, watercraft, or student loans.
When you get free of wage slavery you’ll be able to use debt in more sophisticated ways to help you build more wealth. Or, you’ll have the option to live totally debt free, if that’s your preference. The key here is you want to control debt rather than have debt control you.
Consider liquidating things you don’t need for cash, doing some debt consolidation, and even renegotiating your credit cards with lenders.
Paying off debt is critical, but you also have to stop using consumer debt. Don’t use credit cards or take loans to buy a car or take a vacation. Get out of debt and stay out.
Build your cash reserves
You need money in the bank. Having savings protects you from slipping into debt due to unexpected emergencies. It will eventually provide you a cushion to fall back on should you want to walk away from your nine-to-five job, too.
Think of money in the bank as the opposite of debt. Whereas debt steals from your future, stored wealth maximizes your future options. It gives you more freedom down the road, should you need or desire it. Think about it. What would you do right now if you were living below your means, had no consumer debt, and had six months to a year of income packed away?
I like to see people have a minimum of three months expenses in savings. Work out what your expenses are for one month, excluding non-essentials. This will give you your bare-bones monthly expenses. Multiple by three. That’s your savings goal.
Once you get three months expenses in the bank, shoot for six months. Having a six-month safety net is typically enough to get you though a lost job, career change, or an unforeseen event requiring some cash.
Increase your skills
As you can see, by this stage you’re starting to get free. And the good news? The hardest part is mostly over. The pain of aggressively cutting back to get your spending under control, the hard work of paying down your debt, and the slow process of packing away money has gotten you to a place where you’ve got real breathing room and a little bit of freedom. But, from this point on, I’m going to show you how you can get really free, like laugh-at-the-world free.
Let’s address one more thing you can do if you want to remain a wage earner while at the same time enjoying control over your options: increase your skills.
Most people work their job hoping they will be noticed with a raise or a promotion. This is a passive and undesirable approach. A better tactic is to actively work on increasing skills that can translate into better roles, promotions, more income, a new career, or even a new business.
There are so many resources for people that want to learn. You can take online courses for just about anything; languages, programming, design, accounting, sales, writing, and math. Spend time building your competences in ways that will translate into the raises, promotions, or new jobs you desire.
Remember, at any stage of this game, keep your spending under control and to avoid debt. No matter how much more you make never let yourself slip back into bondage. Enjoy life, reward yourself, but save and invest more and more.
Up to this point we have covered the conservative pathway to escaping wage slavery. Follow the above and you’ll never be a slave.
That said, there is a whole other level of freedom available. This is real freedom—the ability to live life on your own terms. Ready?
Apply the value equation
Once you’ve invested in increasing your skills, it’s time to understand and apply the value equation.
Work is about creating value. The sales rep, truck driver, and UX engineer all solve unique problems, and in doing so create value for their employers and customers.
People tend to focus on how much money a job pays. This is a big mistake. Approaching your job this way frames your work as a simple transaction—I put in hours and you give me money. When you think transactionally you always get shortchanged.
Understanding the value equation will transform your perspective and how much you can earn. And, it’s relevant for employees and those who own a business.
To apply the value equation think in terms of how your job contributes to your company’s profits. Most jobs, except for sales or marketing, are a step or two removed from direct revenue generation, but that does not mean they don’t create value.
Here’s an example.
Let’s say you’re an entry-level web developer and you make $50,000 a year in salary.
If you ship two sites a month and each averages about $10,000 in development fees you’ll generate $240,000 in revenue in a year. Of course, that revenue has to cover your salary, taxes, benefits, as well as contribute to overheads and some profits for the owners.
Knowing this, you can have a productive conversation with your boss about compensation. You can talk about the value you create—how you’re contributing a good deal of revenue (almost five times your salary!), how you help keep the overhead and admin paid, and how you help the owners make a good return on investment.
The question now becomes one of aligning interests. You’re not asking for anything outrageous, but how much would it impact the business to increase your salary to $60,000? Not much, given how much money you’re generating. And, consider what would it cost the business if they lost you.
But, here’s where it gets really interesting. What if you could create even more value? Maybe you can make processes more efficient, or find a way to upsell customers, or maybe develop a recurring revenue stream for the company. These are the things that create amazing value and are the same things that can get you paid very well. Of course, people that only think about how much they get paid for doing a certain job never think this way and never come up with ways to create more value.
This brings me to another aspect of the value equation. Once you realize what it means to create value, you can not only enjoy more income from your employer, but you can start to think about ways to offer that value to the marketplace. I.e. start your own business.
The trick here is to de-commoditize your work. You’re not just a developer. You’re a value creator and you should be paid as such.
Invest in income-generating assets
Do you own any income-generating assets? If you’re like most people you have a 401(k). Of course you can’t touch that asset until retirement, but it’s there generating some level of income.
What else? If you’re like most, that’s it. You don’t own any other assets that generate income. Yes, your home might be an asset, but it likely does not generate income. You’ll cash it in someday and get the equity out of it, but regular income? Nope.
Smart people use their excess income (you know, that extra money left over from living below your means) to acquire income-generating assets. They do this because over time they can often generate more than enough income from these assets to live quite nicely.
These assets can include real estate, stocks and bonds, websites that generate revenue, a small business you own, or products that you sell.
To be clear, I am not talking necessarily about passive income. People get confused when they hear “income-generating assets”, thinking I am talking about some get-rich scheme where you set up a drop shipping company and sit back while the money rolls in. Of course a nice thought, but I am talking about any asset you own that can provide regular income.
Many entrepreneurs have multiple income streams. They get some income from their business, some from their investment properties, and some from their investments in the stock market.
I won’t advise what assets are right for you, as everyone is different. Maybe you love researching companies and keeping your eye on the latest market trends. If so, the stock market might be for you. Or, maybe you’re more of a hands-on person and love renovating your home on the weekends. You should consider investing in real estate.
Whatever you do, consider building a portfolio of assets that can generate income. You don’t need to make a killing right away, but if you invest over time and are smart about what you invest in, you may find yourself in the position of not needing a job anymore. Viola! You’re free.
And the nice thing about most income-generating assets is that not only do they produce regular cash flow, but they often increase in value over time. This means your net worth is growing as time goes by and you stand to get a lot of money when you decide to liquidate your assets.
Breaking free of wage slavery is a straight-forward process. It requires a fair amount of discipline and sacrifice at the beginning, but gets easier and more exciting the deeper you go. Control your spending, get out of debt, build your savings, increase your skills, apply the value equation, and invest in income-generating assets. Do these things and you’ll find yourself among the few who have broken free and are living life on their own terms.
I wish you the best on your journey to freedom!