In this post you’ll find a few strategies you can implement today to get you closer to financial independence.
We live in a time of accelerated progress where what used to be the norm or the best solution in the past, today doesn’t work anymore. Going to school for example, was synonymous with a secure life in the future as long as one finished its studies. Today, millions of teenagers go to university, from those even the ones who graduate cannot be said to have a guaranteed job the moment they leave university. Today going to school is the norm, so the demand for college graduates is smaller, since the supply grows every year.
From the past there is also the idea that one could stay in one job for life, and in the end of a carrier, able to retire and live of the money of the retirement. Today, this is less and less accurate since as new businesses are quick to arise, the same are also quick to fall, and with them the dreams of a comfortable retirement are dissolved to nothingness. There is no such a thing as a secure job anymore, and because of that, we can also say that there is no such a thing as a guaranteed retirement, assuming that your plan is to achieve it through a job. So, the new trend of today, and possibly even of the future is to become financially independent.
Strategies to achieve financial independence
1. What is financial independence?
According to Jim Rohn financial is the ability to live off the income of your own personal resources. This means not needing a salary to sustain your needs, and even if you so decide to take a year out from any money making activities, your bank account is not dragged down from the black to the red.
Taking this definition to heart, we can notice that unlike most people think of financial independence, this is not the same for everybody. Financial independence depends on the lifestyle each one of us have or want. If you live a life in which you don’t have many expenses, it will be relatively easier to achieve it. If you, on the other hand acquire lots of expenses on a regular basis, you’ll have to work harder to call yourself financially independent.
So, the most important thing to do before you employ any strategies to become financially independent is to paint a clear picture of what kind of life style you want to live. Notice that this vary from person to person, and no one can tell you what’s best. Just like in dating, only you can tell what is that set of traits a lover should have in order to make you happy. Only you can tell what kind of life style would most likely satisfy you and as crazy as it might sound, you might even discover that its less than you might think now. For most people what seems to be the picture of financial independence is the scenario in which they own a mansion and 3 helicopters, but for the same “most people”, chances are that upon reflection, true financial independence for them is a picture with far less than even half of that.
2. Money making more money
If we follow Jim Rohn’s definition of financial independence we can quickly find what we need to achieve it. Just like when we find the exact problem for which we need a solution the solution comes fairly quickly. Remember, the problem of problems is not in the lack of a solution, but in the lack of a clearly identified and circled down problem. Once we now what the problem is, the solution usually comes pretty intuitively. For the financial independence problem the keywords are “personal resources”. The idea is not to just accumulate resources, but resources of the kind that make you able to get more resources. In other words, the kind of resources that put money in your pocket instead of taking from it.
So, we find ourselves with two kinds of resources. On one hand the kind in which its mere existence makes us more money. Those include businesses you might own, stocks, houses(arguably), etc. For this kind of resources the one thing to remember is: appreciation. Meaning that they appreciate in value over time. On the other hand we have the kind of resources which decrease in value over time. Here the most popular are: cars, clothing, electronics, etc, where the moment they leave the store the price for which we can sell them is no longer the same, and whose market value keeps decrementing in the same way a radioactive element decays when outside the lab.
The formula for financial success as reported by Jim Rohn himself, as well as by Robert Kiyosaki the author of the book Rich Dad Poor Dad, is simple: accumulate as much as you can of the first. The problem is that we live in a society in which its more appealing to us to accumulate that what decreases in value as time goes by, and where the things that appreciate in value just like investments are labeled as a “should do”, but also deemed “unsexy”. Again the formula for financial success is simple, but not easy to follow for most people.
For the ones whose goal is to start accumulating resources that appreciate in value, the first choice tends to be investing. The problem with investing is that just like math it can easily scare most people away, even if mastering it can be life changing. Fortunately for us, unlike math, investing is easier to understand than you think. The main idea is that you buy businesses/parts of them on the search for growth. The more the businesses you invest in grow, the more your money grows. Think about a magic car which increases in value as time goes by. This increase in value could be represented as more seats that magically appear, an engine that grows by itself and a gas consumption that decreases the more you drive the car. Buying this car and driving it for a long time would result in more money in you pocket than for what you paid for the car.
The Stock market
When it comes to investing in a variety of businesses, the stock market is the one place where you can both make a fortune and go broke literally overnight. There instead of owning the full completeness of the business, you own only a part of it, and this part is represented in the form of shares. In essence the more the business itself grows, the greater the value of the shares you own, and soon you find yourself in the same position of the car that grows in value the more you use it. Unlike the car, on the stock market its not guaranteed that the businesses you invest in will appreciate in value, so more than just buying any shares that look good for the sake of it, if you want your money to grow you also need to know what shares to buy based on the relationship of their price to the underlining business.
Just like in the music industry we see on the stock market the potential for great wealth accompanied by also a great likelihood of failure. If you do figure a way to distinguish the worthy stocks from the unworthy ones, the stock market can be said to be one of the closest things to a ticket to financial independence.
3.1 Investing in a business
Although the stock market is a place where you can find a bundle of businesses to invest in, nothing forbids you from looking for the businesses you want to invest in by yourself. There are countless stories of business investments that were found outside the stock market and proved to be great investments, and the one that stands out, is the fast food chain Mcdonald’s.
Read here: The story of Mccdonald’s start
So, its possible that your best investments might be the ones you look for by yourself. The ones that are not open to the public and that you have to convince the owners to sell you a part. We can argue that this is to some extent safer to do than to buy stock in the stock market. The reason for this being that for the businesses that are not selling shares in the stock market, there isn’t as much pressure to use finance trickery to get potential investors into believing that the business is worth more than it actually is. Just like when a person is not openly looking for a partner doesn’t need to mask its flaws to possible mates. You can look for investments by yourself, and this should by no means be discarded as a potential strategy to bring you closer to financial independence no matter how difficult it might be to get people who are not open to sell, to be open to selling to you. Notice that the same kind of knowledge to pick good stocks is also implemented in finding good businesses to invest in by yourself.
4. Starting a business
Another commonly taken route most people try on their financial independence efforts is to start a business. This is the best thing you can do if apart from pure financial independence you also want to be your own boss. This enhanced sense of freedom however, doesn’t come for free. In the exchange for not having anybody telling you want to do, you become responsible for knowing what to do, as well as to telling others what to do. As the old saying goes, “there is no such thing as a free lunch”, and depending on how you look at it, starting a business can be said to be a representation of just that.
There are many ways starting a business can bring you closer to the financial independence dream. The first and most common is through the growth of the business. Since you own the business, you’re also entitled to all the profit the business makes. Your biggest advantage comes from the fact that you don’t have the usual salary cap that comes from having a boss. As Jim Rohn once said: “profits are better than wages. Wages make you a living, but profits make you a fortune.”
The second and not as common way starting a business can make you financially independent is by going public. If your business is attractive to investors, you can sell parts of it to the public in the form of shares, and as the business grows, those shares appreciate in value. This is how the owners of many businesses that went public on the dot com bubble got to literally become millionaires overnight.
As promising as starting a business might seem to be, the chances of failure are said to be as high as the rewards that might come from it. It’s common knowledge these days that over 60% of the businesses that start at any given time close by the end of the first year of operation. This doesn’t mean that you should avoid start a business, but that you should be aware of the kind of work and learning you might have to do in order to become successful at it.
At the core of any financial independence plan lies the ability to make money, and in order to make real money one has to know how to offer something of value to the masses. So, instead of relying on already made strategies to make money, you can invent your own by holding in mind the idea that all people need to give you the money you want is value. The good thing about the word value is that its not bound to any single thing. Value is relative from person to person, and varies from time to time.
To summarize all we learned from this post, on the look for a plan to achieve financial independence there are at least two things one needs: find out what financial independence is for itself and how to offer value to get the resources and money one needs to achieve it. One problem most people face when they first think about making money is the guilt that society makes them feel. Money is associated to greed and greed to the sense that one is evil. For this, the great Jim Rohn also has something to say and it goes somewhere on the lines of: “It’s not so much what you earn, but what you do with what you earn”.
It is all about knowledge and experience 😉
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