Luke Milholland CFP®,ChFC®,CLU®

Expense Planning

Earning a healthy income is a good goal, but is it THE goal?

I think not.

Earning a good income is often the driving motivation for people who choose advanced educational tracks (think doctor, attorney, engineer, etc.), climb the corporate ladder, or start their own business.

While there is nothing inherently wrong with a good earned income, there is one issue: You have to keep earning it

Don’t get me wrong, if you earn a good income congratulations are in order, no doubt.

But now what?

If all you ever do is earn a good income, do you succeed financially? Maybe.

It depends on what you do with what you earned.

As the saying goes, “it’s not what you earn; it’s what you keep.”

A good earned income is like a scalpel. In the right hands, it can save a life. In the wrong hands, well…it could just as easily be the death of you (at least financially speaking).

It’s easy to fall into the trap of thinking that earning more money will solve your financial woes. While it certainly can, it can just as easily dig deeper holes. Without the right habits, mindset, and emotional relationship with money, all more money will do is add zeros to your problems.

As a financial planner, I have learned to never judge a book by its cover.  

Let’s look at a quick example

While these are examples, I have seen VERY similar things in practice:

Client A makes $500,000 a year

Client B makes $50,000 a year

Who is doing better? The answer seems obvious at surface level, but let’s look deeper.

Client A spends $600,000 a year

Client B spends $40,000 a year

Now, who is doing better?

Client A is going backwards to the tune of $100,000, while Client B is saving $10,000 per year.

Again, it’s not what you earn, it’s what you keep.

I hear a couple of you out there saying, “Yeah, but I bet Client A is having more fun!”. Yes, the toys are bigger for sure. But therein lies a deeper financial problem. What direction do “toys” (fancier cars, bigger boats, etc.) go in value?

Down. They all go down in value.

And that’s how you wake up one day at 62 years of age saying, “Oh crap. What happened? I earned a good income, but I’ve got nothing to show for it!”. And then you have to keep earning that good income…for as long as you possibly can. Whether you want to or not.


Okay, so what about you?

You who are out there saying “but I make a good income, and I am a saver. What about me?”.

Well if that’s you, give yourself a big pat on the back because you are positioned to make huge strides.  Let’s go back to the original question. I earn a good income, now what? Now it's time to start building passive & portfolio income.

There are three types of income:




Earned Income is income earned from you putting in physical time at your job, career, or business (i.e. a paycheck).

Passive Income is income earned from rental property, limited partnerships, or businesses in which you are not actively involved (i.e. a rent check or profit distribution).

Portfolio Income is income earned from investments (i.e. dividends or capital gains).

So if good earned income isn’t the goal, what is?

The ultimate financial goal is to build passive and portfolio income to the point you are no longer dependent on earned income.


Does that mean you quit working? I hope not.

Hopefully you love what you do and want to continue for love of the game. And if you don’t love what you do, now you can focus your full energy on pursuing whatever it is you feel you were put on this earth to do!

A good earned income is fuel. It’s a catalyst. It allows you to enjoy today and be generous along the way. Your good earned income allows you to accelerate your ability to build passive and portfolio income.

Don’t be the person that wakes up years from now thinking, “Oh crap”.

Be the person who plans, the person who thinks ahead. Be the person who wakes up one day and finds themself in the luxurious position of "work optional". The person who can live the life they want solely off of income generated from passive and portfolio investments.

Be the person who then continues to work for a worthy cause using their time and talents to have a bigger impact in the world, but not because they are dependent on a paycheck.


Time flies. Begin today. Plan wisely. Steward well.

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