Why W-2 Income is the Most Expensive

Picture of by Dr David Phelps

by Dr David Phelps


our regular income, which comes from trading your labor for money (i.e. your profession or career) is the most expensive way to earn a living.

 Here's why… 

First, it is dependent on you. It requires your time, your labor, your stress, your having to be physically or mentally present. This all steals from your freedom and your ability to choose.

Second, it is the highest taxed income. There’s no escape or loophole for this.

Third, your ordinary income is very vulnerable because it is dependent on your health. What happens if you suffer an injury or get chronically sick? Yes, there’s insurance (which is important) but it doesn’t help you get back out there quicker to keep doing what you do in order to pay your bills. There’s a lack of sustainability in terms of your ability to continue on.

Fourth, your ordinary income is also vulnerable to industry disruption, as seen with the COVID mandated shutdowns (which disrupted the entire nation’s industries). Another example is a disruption specific to one industry, such as certain skills being replaced with new technology. You may find one day being forced to change the way you make your money, which is not good if you’re caught unprepared.

Lastly, your regular income is vulnerable to government regulation, which is getting worse and worse. It makes it very difficult for small independent business owners to do their work and maintain an income standard, while also building their wealth. The direction of the economy won’t make things any easier either – rising inflation, rising interest rates, stringent insurance companies, labor shortages, supply delays, etc.

All this to say, you need diversity in all forms of income.

Now, I’m not saying that your ordinary income is bad or unnecessary. Yes, you should focus on what you do and being the best at it, but you also need to multiply that out; it should not be your sole focus point. Just building wealth and accumulating assets is not enough. You have to have cash flow.

That’s why I love real estate. Real estate has always been the best Plan B wealth building model that I could find. In over 40 years of doing it, and helping hundreds of other dentists build their Plan B retirement plan, I’ve seen how it provides them the certainty to know they have enough.

That's what most people don't have today. When you have that Plan B behind you, you know that you have the peace of mind and security to take care of yourself and your family.

If you want to learn more about investing professionally and passively, I have a book that may help you get started. Click here to request your free copy of From High Income To High Networth.

To your freedom!

– David

P.S. Whenever you’re ready, here are some other ways I can help fast track you to your Freedom goal (you’re closer than you think) :

1. Schedule a Call with My Team:

If you’d like to replace your active practice income with passive investment income within 2-3 years, and you have at least $1M in available capital (can include residential/practice equity or practice sale), then schedule a call with my team. If it looks like there is a mutual fit, you’ll have the opportunity to attend one of our upcoming member events as a guest. www.freedomfounders.com/schedule

2. Become a Full-Cycle Investor:

There are many self-proclaimed genius investors today who think everything they touch turns to gold. But they’re about to learn the hard way what others have gained through “expensive” experience. I’m offering a free report on how to become a full-cycle investor, who knows how to preserve and grow capital in Up and Down markets. Will you be prepared when the inevitable recession hits? Get your free report here.

3. Get Your Free Retirement Scorecard:

Benchmark your retirement and wealth-building against hundreds of other practice professionals, and get personalized feedback on your biggest opportunities and leverage points. Click here to take the 3 minute assessment and get your scorecard.

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