Reverse Engineering: A Financial Strategy for Ditching Your W2 with Passive Income

Are you tired of feeling limited by your salary and having to constantly keep trading your hours for money? If so, and if you have a desire to break out of the never-ending W2 rat race, then passive income might be the right option for you.

Passive income is income that flows to you consistently without you having to trade any more time in order to access it. It is called “passive” income because little to no work is required to maintain the income after it is set up. In this article, we will break down an efficient strategy that you can use to build your passive income and ditch your W2. Let’s dive into it.

Step 1: Identify How Much Passive Income is Needed to Safely Exit a W-2

For some people, the full amount of W-2 income will have to be replaced in order for a safe W-2 exit to occur. However, this is not the case for everyone. For example, if you are making $150,000 a year, but if you could comfortably live off of $70,000 a year, then you could safely exit your W-2 job with only $70,000 in passive income per year. So, you will need to identify how much passive income you need in order to get rid of your 9-5 W-2 job.

In order to do this, you should add up all of your bills so that you know exactly how much money you would need in passive income in order to be able to pay them off without working your W-2 job anymore. You should also include in this calculation the amount of spending money that you will need per year to make your life comfortable and to maintain a relatively similar lifestyle. This should be income that excludes your savings, as you never want to put all your eggs into one basket.