Let me give you the one thing, the simple step that makes the difference, the golden goose – the money secret, the little thing that no one else knows. The thing you must do if you want genuine independence, to have financial freedom.
I can tell you exactly what it is you need to do, it is a formula and it is the same formula that has worked since Roman times – really, it has worked since money became a thing.
Before I give you the step I want to explain a couple of things to you.
Not having debt is one of the best things that can happen to you. Debt is mainly borrowed money spent on stuff that goes down in value – and very effectively mortgages your future income, ties up your future income for the benefit of someone else. The reason debt is so prolific, is because it is such an easy way of using money as a resource, as a lever. Debt, from a lenders point of view means a source of future income without physically having to turn up and earn it.
Working, trading your time for money means your income is always going to be limited by the amount of time you have and your hourly rate. You can only work so many hours in a day and your rate of pay can only be as high as – the rate, the person paying you is prepared to pay for that work.
Eventually, you run out of time – death. You don’t know when that is going to be nor do you have any concept of it being now or later. It will happen when it happens. Sure, you take an educated guess but really don’t have any idea when.
Then there is running your own business. Sure, this allows you leverage, you can use ideas and processes to get your money working for you. This is a proven method and of course it works.
Provided your business is more than a one man show – then you get the chance to boost the earnings ability of your money.
Lastly, there is investment. Taking part or all of your money and placing that into something that will work for you. Investing in company shares for instance. Each investment you make buys part of that company, part of its workforce, knowledge, buildings, and processes. Provided the company makes a profit then you will be rewarded in the form of a dividend – if you like a payment of interest and potentially some capital growth. All you need to do for that is to sell your share at a higher price than you paid for it.
Investment allows further leverage, you’ve traded your time for money, what doesn’t get spent on stuff and living can be invested.
The returns from the investment (income and capital growth) is money you have not had to work for. The very best kind. Once income is paid to you, it can’t be taken away, it’s yours forever. You can reinvest that money, combining the money you have worked for and the money you have not – and grow and even bigger pot of money that can now work for you.
I hate this phrase – virtuous circle – but that is what the above paragraph explains. Leverage that is ongoing and never-ending.
With all of that in mind there are a few questions you need to ask before you make decisions about your money. Before you spend it or invest it you need to make sure that you are clear about what you are about to do, what I call being mindful.
Your money is a valuable resource, once spent it never ever comes back to you. It has gone forever and will not return. Which leads me to the one answer to the question…
How do I become financially independent at some stage in my life?
Spend less than you earn and invest what remains.
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