What is financial freedom?
Financial freedom is the ability to live your life without having to depend on the income provided by a regular job. Sure, you may choose to work doing something you love (perhaps a career you couldn’t afford to pursue before), or chose to work on a part-time basis and spend more time with your loved ones, but you don’t need to work.
For most people, financial freedom is only really achieved much later in life. It usually only occurs after the age of sixty-five when the majority of people have saved enough money and/or have access to some sort of pension that they are finally able to retire and, hopefully, start doing the things they really want. Unfortunately, for some people, financial freedom may never be achieved.
How can I retire early?
I’m sure there are many ways people end up retiring early. Unfortunately, the most common ways that come to mind aren’t all that likely to occur. Things like winning the lottery, succeeding at some sort of get-rick-quick scheme, suddenly striking it rich, or unexpectedly inheriting a lot of money, are all things everybody dreams about but very few are lucky enough to encounter.
The real keys to retiring early and achieving financial freedom are:
- Devoting a small amount of time and energy each week in to planning what it is you need to do to achieve financial freedom (this will ensure you come up with a plan and ensure that you stay focused!)
- Living below your means until you amass the wealth needed to achieve financial freedom.
- Creating multiple streams of passive income using proven long-term investment strategies.
Unfortunately, the average person never really does any of these things. Rather than concentrating our time and energy towards building our own wealth, we usually spend all our time and energy creating wealth for the companies and organizations we work for. Moreover, because many of us are so exhausted at the end of the day from the hectic lives we lead, and because the task of creating enough wealth to retire early seems so daunting and so complex (it’s not), many of us never manage to take that first step towards financial freedom.
This can’t be you. You must devote a little bit of time and energy each week towards planning how you will achieve financial freedom, decide on some proven strategies that will help you achieve this goal, and then go out there and make it happen.
Are you living beyond your means?
Compounding the problem of not devoting enough time and energy towards achieving financial freedom is the fact that many of us have been conditioned since birth to live beyond our means. Our parents did it, our friends do it, and so we do it. We spend everything we earn the moment we get it, and if we don’t have enough money to get what we want the moment we want it, we resort to debt.
Not devoting time and energy planning for an early retirement, living beyond our means, and never creating other streams of income, are the main reasons that the majority of us are unable to retire until much later in life.
Think about it. If a couple earns enough money to buy an expensive home, what do they do? That’s right, they usually go out and buy an expensive home. It never even crosses most people’s minds that they don’t have to go out and do this. It doesn’t matter what size of home a couple can afford, they almost always go out and spend the maximum amount they are able to. Then they spend the rest of their lives working to pay it off.
Only a few people ever consider living below their means and using their employment income to create another stream of income (for example, using your employment income to buy two smaller homes and renting one of those homes out). Those few people, however, are the ones that will achieve an early retirement.
Stop buying money sucking maggots
While creating multiple streams of income and devoting time and energy towards planning for your financial freedom is important, the single biggest determinant as to whether or not you will be able to retire early will be how you deal with money sucking maggots. Money sucking maggots are purchases that never earn us any extra income and, more often than not, suck even more income from us after they get purchased.
In a society filled with over consumption, hyper-consumerism and a keeping up with the Joneses mentality, money sucking maggots are lurking everywhere. A house that is far more expensive than you can afford, a fancy car that you don’t really need, toys and gadgets that get used a few times and then forgotten about, or frivolous purchases that can add up to hundreds of thousands of dollars over an individual’s lifetime, are all money sucking maggots. If you want to retire early and achieve financial freedom, the first thing you need to do is to stop buying money sucking maggots.
Stop thinking like a consumer and start thinking like a corporation
The best way to think and act if you want to retire early is to think like a corporation. Unlike most individuals, corporations do not practice over consumption and hyper-consumerism. Corporations are designed to make money, and the most successful ones make more and more money every year they exist. You need to start doing the same.
You need to start thinking like a corporation and start running your financial freedom plan as though it is your own business. And if you run the business of your financial freedom using the same strategies used by successful corporations, you will succeed.
Why are corporations so good at making money? Corporations are good at making money because they use proven money making strategies. These proven money making strategies are taught in business schools all over the world and are adopted religiously by the largest most successful corporations around.
When it comes to people’s personal finances, however, these strategies are rarely taught to us by anyone and only get applied half-heartedly, if at all.
Proven Money Making Strategies
The following eight strategies are the main strategies used by successful corporations all over the world. If you use them you will achieve financial freedom.
- Having a well though-out business plan
- Concentrating on core competencies and creating multiple streams of income
- Relentlessly cutting costs and controlling expenses
- Strengthening financial acumen and getting innovative
- Investing in proven long-term investments (for most individuals this involves index investing, dividend investing, bonds, and real estate)
- Managing risk
- Using the power of leverage
- Saving as much as possible on taxes
If you get serious about applying these eight strategies to your financial well-being, you will be able to achieve financial freedom much quicker than traditionally thought possible. A little over ten years ago, my wife and I staunchly adopted these eight strategies. Seven years later, we became financially free. I detail exactly what we did in my book, Think Like a CEO and Get Rich and discuss all these strategies on this blog.
If you are absolutely committed to leaving the rat race and achieving financial freedom, you will succeed. The first thing you are going to need, however, is a plan. Let’s get started.