Like many of you reading this, my goal in life is to be able to do what I want, where I want, when I want. In other words, I am in the pursuit of ultimate freedom.
Unfortunately this isn’t entirely possible without being financial equipped and prepared. For example, if you want to quit your day job and pursue your dream of becoming a professional surfer then you need to make sure that you are able to still provide for yourself and for any dependents you have. This includes things like your rent, school fees, health care fees and so on – you get it.
The point is, to really live a free life you need to have some level of financial literacy to allow you to enjoy life in the way you want without a worry about not being able to pay for something.
I myself am on this journey to financial independence and am simply sharing with you changes to lifestyle choices that I have learnt through my wealthy mentors and have found to be effective.
1. Set Your Big Life Goals
It is pretty hard to motivate yourself and stick to plans or regimes when you’re not sure exactly what you’re trying to achieve. Now, setting goals like “I want to be rich” or “I want to own a home” is a little too vague and might not be enough to light that fire within you to do whatever it takes to hit your milestones. To the extent possible, be specific and try to set goals that seem to be a little out of reach.
For example, if your goal is to “have a net worth of $1,000,000” maybe rephrase that to “have a net worth of $2,000,000 by the age 30 with 75% of assets comprised of real estate”. This goal now has a deadline, an overall direction of how this is going to be achieved (i.e. through real estate) and most importantly, it’s going to set your standards higher as to what you need for your goal to be achieved.
2. Automate, Automate, Automate
We as humans find it naturally difficult to be disciplined – we would instinctually choose the route that is easier or provides us with more immediate and short-term satisfaction – look up “present bias“ on Google to read more about this.
When it comes to saving and investing, this lack of discipline of course does you no favours so the best solution which I have found is to automate the saving and investing process. This is as simple as either asking your company to route a portion of your savings (let’s say 20%) to a separate account which you don’t touch or, have your bank do something similar to an investment account which you use to buy shares. The less choice you have in being able to use this money, the less stress it is on you and of course much easier to forget about.
At first, you may feel that 20%, or whatever number, less in your spending money is way too much but be amazed at how you are going to adapt to this new and challenging situation.
3. Invest To Grow Your Money
If you’re wondering how the rich get richer, it is mainly because they put their money to work. Now what does this mean? It simply means that instead of having to trade hours for dollars, you are leveraging your hard-earned income to create more money and the simplest example of this is the stock market.
If for example you have $10,000 sitting in your cash account without any returns, investing this in an ETF, such as ticker symbol VOO, that follows the S&P 500 (top 500 largest companies listed on the US stock exchange) you will earn a return on average of 8% per year. So if in 2020 you purchase $10,000 worth of stocks this will grow to $21,589 across a 10 year period (i.e. 2030) – this is without adding anymore into the original $10,000!
Now, there are of course downswing and upswings in the stock market which will fluctuate the value of your investment portfolio but through the dollar cost averaging technique (I will go through this in detail another time) this really doesn’t matter and at the end of the day you will be better off in the long run.
Starting earlier with the stock market is a no-brainer. I honestly wish that my parents had told me when I was younger to begin investing because I know without a doubt (and by looking at historical figures) that I would’ve been in a much better financial position – still love you Mum and Dad!
4. Learn To Become More Valuable
A lot of financial independence content out there focuses on saving, which is important, but I believe that one of our priority focuses when striving for financial independence should be steered towards being able to provide more value to society, which in turn will mean that your earning power will increase. If you think about many of the wealthy people around you, be conscious of how much value they are providing to society in contrast to you – this is the difference.
Now, I’m not saying that it is directly correlated and of course it is subjective to the recipient of the so-called “value”, but the general rule of thumb here is more value equates to more financial reward (i.e. money).
So my suggestion to you is to focus on learning more skills, taking on new challenges to gain more experience, and connect with different networks of people to become more valuable as a person.
Now being in this transformational era where robotics and artificial intelligence is exponentially improving, we have to be very mindful of what skills will become redundant and similarly what skills will become highly in demand. For example, it is said that EQ (emotional intelligence) capabilities are going to be highly in demand across the new few decades which makes sense since a lot of the menial and repetitive tasks will be handed-over to robots and artificial intelligence.
5. Health Is True Wealth
No amount of money will ever be able to buy you health. Period.
Some may argue that having money provides you with the ability to access better health care, which is true, but at the end of the day it is simple habits that we do day-in and day-out that make the big difference.
The funny thing is, so many people aren’t completely oblivious to what needs to be done to live a healthy life but simply find it difficult to disciplines themselves. Everyone knows that to be healthier you have to eat a more balanced diet, eat less processed foods, exercise more, sleep more, and so on. Then why don’t they do it?
I think this brings me back to this point about setting goals – without a strong enough “why” it is very difficult to become disciplined and stick to plans. So if your goal here is to become financially independent to have the choice to travel the world, you would need to be healthy in order to experience and enjoy your adventures in full and not have to worry about a sore back or knee.
Bottom line, get your daily exercise in and eat healthy (at least 80% of the time).
These are only some of many habits that my wealthy mentors have taught me and have proved so far to be effective so do your own research to find what others may suit you better. Even if you start slowly, a day at a time, to begin implementing new positive life-changing habits, I know that your journey to financial independence and ultimate freedom will be a lot faster than what you may expect it to be.
Until next time.