The Secret to Financial Freedom
#1. The Only Real Definition
#2. What Does It Mean to You?
Why The Rich Are Getting Richer
Have you heard this book title before? If not, it’s worth a look. It was written by Robert T Kiyosaki and if you would like to learn how to gain financial freedom I encourage you to read many of his works. They get right to the heart of the definition. I believe to be financially secure means NOT to work for money. We are all taught in school to find a job – exchange our time directly for a wage or salary.
However, the very rich do things differently. They let their money work for them. In other words, they create a passive income through a variety of sources and they take advantage of what Mr. Kiyosaki calls “phantom income”. Does this mean they never work? Not all. I expect many do but there are others who hire people to manage all of their property investments. They have choices.
The return they receive is much, much more than simply being paid for their time and this is what I say is financial freedom. It means we can do whatever we wish whenever we like without having to worry where the next dollar is coming from.
And so what does this mean to you?
- You can focus on staying healthy
- You can spend time with loved ones and friends
- You can pursue hobbies or interests to your heart’s content
The world truly becomes your oyster.
Ways of Becoming Wealthy – That Just Don’t Work
#1. Trading Time For Money
#2. The Small Business Owner
#3. Buying a House
#4. Investing in The Stock Market
The Poorest of the Poor Work 9 to 5
The majority of folks work at “regular” jobs exchanging their time for money. It is what we are taught in school. When we receive our money we pay taxes – on almost everything – as a percentage, we pay much more than the “rich”. Hey, it’s our own fault. I used to blame the wealthy but really they are just playing by the government’s rules. There is a very different set of rules for the well-to-do.
Saving to buy things we want takes time and if we take out a loan for a house, for example, it takes us years to pay it off with our after-tax savings. Do you see why very few people or anyone for that matter can become financially secure by working at a company for their lifetime? Do you see why so many people can’t seem to get ahead? Working at a normal job will never make you financially secure.
Are You Willing to Give Up Family Time?
Being a small business owner or self-employed sounds like a good idea and don’t get me wrong many people in this category can live very rewarding lives. However, they are still trading their time for money. My father, for instance, was a medical professional. He worked tirelessly all of his life, but he was never home for his family. He made a decent salary but he was financially illiterate and also paid high taxes.
Like small business owners, he had to pay employee salaries and office expenses out of his earnings. The owner of a Tim Horton’s franchise (coffee shop) is in a similar position. And stuff happens. Just recently the minimum wage in my province jumped from $11.20 to $14.00 an hour. They are going to need to absorb the extra cost somehow. The point here is they have to use their own hard-earned money and people don’t have time for family or other interests.
Why Buying A Residence is Not Really An Investment?
Let me explain. We buy a house. We need to make the monthly mortgage payments plus interest. This is done with the after-tax money we have saved. Therefore, the total cost of the house is the tax we paid plus the mortgage and the interest on the loan. Now in the future, we can sell the house and get our money back. We can also receive a home equity loan but we will need to pay it back with interest, eventually. So this all costs us money.
Now the rich purchase rental properties and the tenants pay the mortgage and interest with their money. In addition, the wealthy borrow to buy the properties. They don’t use any of their own money. As a matter of fact, when the property appreciates they can withdraw the value of the appreciation and reinvest it. Increasing their cash flow and wealth. This is one reason why they are very well off and we are not and buying a house to live in isn’t really a way to become rich.
Are You Good Enough to Avoid a Crash?
It sounds like a good idea investing in the stock market. Once again, for many people, it has made them a lot of cash. However, the market is quite volatile and unless you really know what you are doing you can be caught off guard. My father invested and I saw his monthly retirement funds decrease steadily over the years. One of the reasons is due to the economy and the rest to changes in government regulations – the government needed more money.
Another example: I had a friend while living in Japan. A Canadian such as myself. We would always chat about the future. How could we possibly afford to retire? His idea was to buy company shares. His salary was $100, 000 a year. So he was able to build up a fair amount of equity over the years. The trouble is the market crashed twice – once in 2008 and again in 2015 (I think). He lost thousands of dollars and had to start all over in his late fifties.
What I Recommend You Do?
#1. Start With An Online Business
#2. Educate Yourself About Money
#3. Become A Professional Investor
Automated Passive Income is A Great Start
First, I want to say if you are debt-free and have a steady income I would skip this step and learn everything you can about money and becoming a professional investor. However, if you were like me carrying a load of debt with no regular job then this method is one way that could definitely help you reach your goals.
Of course, you will need to work diligently and you won’t be paid for the original work you do for several months but the pay-off will be fantastic. Start an online affiliate business – or any kind for that matter. You build a website which is like a piece of real estate that you own. People will visit and eventually buy whatever you are offering.
The beauty of this is you only need to do the work once but the customers will keep coming for years. It’s called passive income. This will provide you with ample income to take care of your living expenses and as in my case pay off the bad debt. You can go on to outsource further work providing you time to do things you enjoy or learn about investing.
The Second Step: Learn The Rules
The top 1% do things differently. They are where they are because of two things: Debt and Tax. First, they have good debt meaning they borrow money to invest in assets. The second is they pay little or no taxes. Why? Because the rules or regulations for the rich are different. We need to understand these rules and how to use them to our advantage.
Let me give an example. If a fast food business has $1,000, 000 in taxable income then it owes the government about $450,000 dollars. Let’s say it also has a real estate business (part of the parent company) with a depreciation value of $1,000,000, then the fast food business pays zero in taxes. The company is $450,000 richer.
If it seems a bit complicated don’t let it bother you. There are many excellent books and teachers around that will help you understand and you will have your own experts at some stage advising you too. The most important thing is to get started reading while building your passive income stream.
I would also like to suggest starting off reading Rich Dad, Poor Dad.
The Dream is Within Reach !!
Lastly, it is time to start investing in properties. Presently I have no properties but this is the goal I am working towards. I want to borrow money to buy properties and have the tenants pay off the mortgage and interest. I will re-invest the appreciation value into more properties because it will be tax-free. When this is done in the correct way there will be an additional increase in cash flow as well as being the owner of these assets.
There is much to learn and much to do on this journey. I know you can do it too. If you have any questions I’d be more than glad to answer them below or feel free to send me an email. For the many that have more experience than I on this topic please share your comments with us and enlighten us on how we can work towards our goals of living a better life.
And of Course …
There are many paths to becoming financially free, however, you are more than welcome to join me at my community to get yourself started.