This article is classified "Real"
Before I begin a discussion on the subject of financial freedom, I believe
that I ought to explain what it is. Take the following, for example (all
figures are in pounds sterling - adjust as appropriate for your local
currency).
If you were to increase your income next month by 1 pound, without doing
any more work, most likely you would not notice the difference. Nowadays,
it's not even enough to buy a drink at your local watering hole.
Imagine then that the increase were not 1 pound, but 10 pounds still
without going out of your way to "make" it. Again, the increase is very
unlikely to be enough for you to notice it, though it is enough to take
yourself out once - maybe to see that film you couldn't afford to before.
The next step is more interesting, but still not anything fascinating:
an extra 100 pounds per month coming in whether you like it or not -
simply appearing in you bank account on the first (or whatever other)
day of each and every month.
Doubtlessly, this would make a difference to your lifestyle. It would
pay off those bills that always seem to be left over at the end of the
month - if, and this is a very big if for most people, you can budget
your money effectively. Maybe it would allow you to move to a larger
home - an extra 100 pounds per month in mortgage repayments substantially
increases the size of place you can get - or just pay off the one you are
already living in. Who knows, but there are not too many people for whom
it would not make at least a small difference.
Guess what, we now move to 1000 per month. No, it's not a huge amount of
income, but for the majority of the population, it isn't too far off what
they get paid anyway. This sort of automatic residual income is more than
just money: it is one of two other things, depending on what you choose to
do: either it is security, a cushion that will protect your lifestyle
should you become unable to perform the tasks that produce your primary
income; or it is time. If your job does not pay this much, and yet you
have this sort of money coming in on the side, there comes a point where
it is somewhat un-economical to continue with the job.
Take a moment to think about it (and if you need to up it by a factor of
2 or 3, who's counting?) How would it change your life if you had a
second income, equal to your primary income, that you did not have to
perform for: an income that would find its way into your bank account if
you made it out of bed or not? Would you continue working as you do, but
live elsewhere, driving a nicer car (not that the car you presently drive
isn't nice...), or take holidays in less crowded, sunnier places with
finer sand? Would you tell your boss that you were only prepared to do
(short) shift work, so you could get up when you felt like it, and head
home on your own command? Or perhaps you would pick up the phone one
morning and call in well ("Well, I ain't coming in no more.")
I do not know what you would do, but your mind has probably already found
a way to spend that extra 1000 every month. In deed, it is certainly not
difficult to spend that sort of money.
So we move on: 10000 each and every month!!
This is easily enough to make most people decide to give up work (except
the ones who have accumulated debt / overdraft / mortgage / etc in
amounts that would make most "normal" people sick. True, there are
some people who earn in excess of this amount, but how many of them have
any time? How many of them have spent a whole day (with the possible
exception of a Sunday) with their family in the last month? How many
people earning six figure annual incomes can afford to take a week or two
off - on a whim?
Far be it from me to suggest that there are not people who have this level
of freedom: indeed, they are the ones to look to for guidance in attaining
financial freedom, but more of that later.
Time now to get "silly." Actually, it is not that I consider the next
step silly, it is purely an increment of a factor of ten, like all the
others, but for some reason many people fail to be able to imagine it.
Whatever the case, it is the most fun one mentioned so far: 100000 per
month - in excess of 1 million a year.
Too much money for one person? That is a question for someone else who is
discussing ethics and beliefs, but if it is earned, there is no reason to
say it is too much for a single person. And let's be really honest here,
if that were your income, how much would you give away? (And anyone
answering all - or almost all - of it is either angelic, foolish, or
unaware of just how much 1.2 million is: you might give it away for the
first few months, but not for all that long.)
So, what would you do with this sort of residual income. Where would you
live? You would not have to wait more than a few short months to buy at
least a starting house in your location of choice. What car would you
drive? Half a year would (almost) buy you a McLaren F1, the most
expensive (as far as I know) car commonly available - yes, there are
antiques and other non-production cars that cost more, but they are a
totally different category. Where would you take your holidays? And how
often?
What would you do with all that time?
Who would you help?
Let's face it, would you bother about your gas and electricity bills?
(or would you just pay off the next ten years in advance to save yourself
a bit of hassle?)
When shopping for clothes, would you finally look at what you are buying,
or would you keep looking at the price tag to decide whether or not you
like something? In restaurants, would you look down the right hand
column first (as you do now), or would you decide what you want to eat,
and not worry about the size of the bill?
If you have ever thought that rich people were materialistic, find one
and ask him/her. If they have worked for their money (lottery winners
are not rich - or won't be for more than a few short years - and
certainly didn't work for it), most of them are not. They enjoy toys:
everybody likes toys, it's just that they can afford the ones everyone
else just drools over.
As an example, if two people - one a multi-millionaire and the other your
average Joe - both crashed their cars, who would be more upset? The
millionaire, who wrote off a 100000 pound Ferrari, or Joe, who's beat up
old banger was worth twice as much when he filled it up with petrol? (It
is those who don't have much who value the little the can get so highly:
it is they who are really materialistic).
So, back to the idea of financial freedom. Just what is it? To put it
simply, it is having enough money coming in, that you no longer need to
work for, that you can buy back your time, and you can create true
security.
Of course, a definition of security would be helpful here. Security is
being in a position whereby whatever happens to you, you have previously
established a solid financial net for yourself and your family. How
many jobs are secure? If a pilot's eye-sight shows even the slightest
signs of deteriorating, he is out in the cold before he knows it. If a
doctor looses the use of a hand and can no longer perform operations,
his enviable salary goes flying out the window. Anyone else who becomes
incapacitated in any way will find that, according to their boss, they
"are no longer capable of performing their job to a satisfactory degree
that they are worth employing."
Security is being in a situation whereby whatever the external events,
it makes no difference to your lifestyle.
(Some people think that pension plans and insurance policies are the
answer to their security worries, and I would not wish to say anything
that would denigrate the very useful service these people provide: I
simply must ask at this point, how secure are these plans. Are you, as an
investor, the one controlling what happens to your money, or could the
company involved belly up and die?)
Financial freedom is a degree of personal freedom that most people never
experience; not because there is anything stopping them, but because they
do not understand the difference between price and cost. Price is a one-
off amount. Cost is a long-term pricing system, based on usage, or
overall expense.
What I mean by this is that the average person will work for about 45
years, at (for simplicities sake) 50 weeks a year, putting in 40+ hours
each and every week. This is only 8 hours a day, but it adds up. It
totals 90000 hours, with nothing to show for it at the end. The "price"
is low - just another eight hours - but the cost is life (the statistics
on people's abilities to support themselves once they reach retirement age
make for shocking reading).
The alternative is to go out and do something different from the masses
(more on that later). It is usually assumed that the entrepreneur will
work anything from 12-18 hours per day, 6 or seven days a week (let's take
100 hours a week as an average), for all 52 weeks in the year (but for
simplicity of calculations, let's say 50 again).
That means that one year for the entrepreneur is 5000 hours. If it takes
him a whole eighteen years to build up a business that is self-sufficient
and no longer requires him to put in any of his time (and most achieve at
least semi-profitable stability after 5-10), then time-wize he will be
equal with someone who had a job, except that he finished 27 years
ahead!! - and is most likely making far more.
In other words, though the day by day price of living a normal life, with
a job, is perhaps lower, the cost far exceeds that of seeking financial
independence. Which would you rather: to put in twice the effort now so
you can play for the rest of your life, or spend every week looking
forward to Saturday until finally you retire with not only not enough
money (or the health) to enjoy it, but not enough money to keep you in the
lifestyle you were previously accustomed to.
Thus the great question that is bound to be asked: "So Rick, what do I do
to become financially independent?"
There are probably as many answers as there are people who will ask that
question, and I have no intention of listing any of them. All I will
suggest, (having heard it time and again from people who have achieved
financial independence on a massive scale) is that you read positive
books, listen to inspirational tapes, and attend self-development and
other motivational functions. Also, if there is someone who is already
successful in the area you finally choose for yourself, go to them as a
student, learn from them, learn from their mistakes, model yourself after
them.
Do what the average person in the streets is not prepared to do. Get out
of your rut (a rut is nothing but a grave without ends). Be like the 5%
who can afford to enjoy their lives when they reach retirement age.
Now, I am in no position to give a list of good generic tapes (the ones I
listen to are specific to what I am doing in my pursuit of financial
independence), but I can recommend some books (in no particular order -
asterisk (*) indicates must-reads for everyone even vaguely interested in
some level of higher success, but then, they're all good).
The Magic of Thinking Big*, David J Schwartz
How to Win Friends and Influence People*, Dale Carnegie
How to be Rich, John Paul Getty
Millionaire Mentality, Dexter Yager
Awaken the Giant Within, Anthony Robbins
Do It!, John-Roger and Peter McWilliams
Unlimited Wealth, Paul Zane Pilzer
Over the Top, Zig Ziglar
The Popcorn Report, Faith Popcorn
Any (auto)biographies of highly successful people.
Anything recommended to you by someone who has what it is you
truly desire.
That's all from me on the subject of financial freedom, at least for
tonight. All that remains for me to say is this: I'll see you at the top,
on the beaches of the world, whichever route you choose to take.
Dare to live your dreams.