How do you make more money? Learn from the experts
If you want to learn how to make more money, the best thing to do is study the strategies used by those entities whose sole purpose of existence is to create more and more money every year. Those entities are large, successful corporations. These corporate strategies are not overly complex or difficult to implement. They can be adopted by anyone. Unfortunately, they rarely are. They are the keys to unlocking an early retirement and financial freedom.
Over the last few centuries, many large successful corporations have perfected the art of making money. At the time of writing this, corporations such as Colgate-Palmolive, Johnson and Johnson, Proctor and Gamble, 3M, and Coca-Cola, have paid out a stream of increasing dividends (a sum of money paid out at regular intervals) to their shareholders for over 50 years. These corporations have effectively been able to create a never ending stream of passive income for their shareholders. Just like these successful corporations, this needs to be your plan too. To achieve financial freedom, your ultimate objective is to use their strategies (listed at the bottom of the page discussing financial freedom and discussed throughout this website) to create a never ending stream of rising income that can allow you to live the life you really want.
How to create a never ending stream of passive income
How do you create a never ending stream of passive income? Sop buying money sucking maggots and start creating cash cows. In a nutshell, this is your plan. If one was to describe the key to achieving financial freedom in just one line, it would be this.
The reason corporations succeed and people don’t is that corporations are constantly cutting costs and using their time, energy and resources to create new streams of income. People, on the other hand, spend the majority of their income on money sucking maggots and never get any of it working for them. Every dollar you can save and get working for you gets you one step closer to financial freedom. Financial freedom is achieved one dollar at a time, and the more dollars you devote to this purpose, the closer you get.
Financial freedom, however, is not something that can be achieved overnight. This plan is not a get-rich-quick scheme. It is a plan to achieve financial freedom far quicker than most by using proven money making strategies. The peace of mind and the rewards you will achieve by following these strategies, however, will be well worth the effort.
Investing money like a powerful corporation
The first thing you need to do to if you want to invest like a successful corporation is come up with a well-thought out plan that details exactly how you are going to achieve your goals. Have you ever heard of any successful company that doesn’t have a business plan? How about a successful corporation that is not fully committed to executing its plan and generating more wealth? Of course not. There is no way any business can succeed without a well-though out plan that is consistently referred to and flawlessly executed. A corporation will also not succeed unless it is committed to generating more wealth for its shareholders.
Neither will you. You are your corporation’s only shareholder and you must have a well thought out plan to generate more wealth and you must be committed and focused on achieving this goal.
The business plan shown below is an example of a plan similar to the one my wife and I used to achieve our financial freedom. The plan is taken from the book I wrote, and the chapter references beside each point refers to the chapter in my book that discuses each point in detail.
You need to come up with your own business plan for financial freedom. If you don’t come up with a detailed plan and commit to following this plan, you will not retire early or achieve financial freedom. It is as simple as that. Just like the plan below, make sure your plan contains targets, goals and actionable items. Vague references as to how much money you will need to retire with and how much you will need to invest each month will not help you to succeed. Well thought out targets and goals, complete with actionable items that detail how money will be saved, how much will be invested, what these investments will be, and what return you expect to generate, will.
Financial Freedom Business Plan
- Our goal is to be financially free in ten years. To be financially free, we will need the income from our investments to total $60,000 a year and we will need to be mortgage free. We will achieve this by doing the following:
- Building a financial freedom fund of at least $1.6 million that contains stocks, bonds, and real estate investment trusts (REITs). We would like our financial freedom fund to yield roughly 3.0% and offer investment income of approximately $48,000 a year. The income produced must keep up with inflation.
- Renting out our basement suite in our primary residence for $12,000 a year.
- Our strategy is to concentrate on our core competencies and use our employment income to purchase income producing investments. These investments will eventually lead to our financial freedom (see chapters 2 & 3).
- We will adopt a series of strict cost cutting measures and live well below our means. Our goal is to live off of one person’s employment income. We will devote the other person’s employment income and all the rental income from our basement suite to our financial freedom fund (see chapters 4 & 5).
- We will invest $4,000 in employment income and $1,000 in rental income (basement suite) each month. We will pay ourselves first by having all of this money automatically deposited into our investment account. That way, we will not be tempted to use this employment income before we can invest it. We will make purchases with these deposits on a monthly basis (see chapter 3).
- We will contribute the maximum we can to all our tax-advantaged savings accounts before investing outside of these accounts. We will also constantly look for ways to save on taxes (see chapter 10).
- Our investments will be made in the stock market, the bond market, and the real estate market. We will diversify so that 50% of our holdings are in stocks, 25% of our holdings are in real estate, and 25% of our holdings are in bonds. We will always invest for the long-term, use proven investment strategies, and only buy investments that we hope we never have to sell (see chapters 7 & 8).
- In the stock market, we will purchase low cost index funds or low cost ETFs that focus on dividend paying stocks with a history of rising revenue, rising income, and rising dividends (see chapter 7).
- In the bond market, we will purchase low cost exchange traded funds that offer a mix of fixed income securities (see chapter 7)
- In the real estate market, we will purchase REITs or low cost ETFs focusing on REITs (see chapter 7) and purchase rental properties that generate positive cash flow on a monthly basis (see chapter 6).
- We are targeting a compound annual growth rate (CAGR) of 7% on all our investments (see chapter 1). With this estimated return, it will take 15 years to reach our targeted savings of $1.6 million. Therefore, in order to meet our target of being financially free in 10 years, we will need to use a strategy involving leverage.
- To achieve our target of financial freedom in 10 years we will need to borrow to invest. We will borrow to invest when we believe the long-term returns will be higher than the cost of borrowing. We will never borrow more than we can afford to lose or buy any investments that we may be forced to sell should they experience a temporary decrease in price. In this regard, we will position ourselves to handle a 50% drop in the value of all our investments without the need to sell. We will also invest for the long-term and position ourselves to comfortably handle all the interest payments that will be associated with this debt (see chapter 9).
Keep your plan top of mind and pursue your goals with vigour
Corporations don’t only succeed because they use proven strategies and have well thought-out plans, they succeed because their plans are top of mind and because they pursue their goals with vigour. Corporations are absolutely committed to achieving their goals. You need to be absolutely committed as well. After you come up with a well thought-out plan that is based on proven money making strategies, you need to have this plan front and center in your mind and you need to go out there and make it happen.
The plan above uses the strategies discussed in this website to achieve financially freedom. Some of these strategies include drastically cutting costs, using leverage, investing with proven strategies, and avoiding as much tax as possible. Of course there is much more to all these topics than can simply but put on one line in a business plan. My goal is to use this website/blog to go over all these topics, and other topics related to financial freedom, in detail.
Other topics such as thinking outside of the box, getting innovative, and developing your financial acumen will be absolutely key to achieving an early retirement This is where we will start.