Having been financially independent since the age of 25, many people tend to ask me how I’ve done it and also what the secret is. While there is no one size fits all, there certainly are many lessons I learned along the way that can help you improve your financial well being no matter how old, or at what stage you are at. Financial independence is much more than just having accumulated enough wealth to survive or live comfortably. While those things are components of it, the true definition of financial independence is to be free of the mental strains that come with constantly having to chase money to maintain your lifestyle.
There are many people today who have accumulated enough wealth to live comfortably for the next 50-100 years, yet they choose to continue chasing money. So the real question remains: are they financially independent if they still depend on making money?
The reason this is of very high importance is because separating your emotions from money is the first step to true financial independence, and more importantly a pivotal barrier to break for Entrepreneurship as well.
You might be telling yourself that it is easier said than done, or perhaps that it’s impossible as money is part of everything and our survival depends on our ability to keep making more. Both are valid points, but not quite relevant to our discussion today.
No one doubts the importance of money in the scope of society, and no one is saying that money is not a means to survival. What I am saying instead is to look at money from a different angle, one that doesn’t involve constantly worrying about how you’re going to get it.
Be someone who makes money the secondary concern in their life, rather than the first. In other words, make decisions that are less focused on money, which is just a small portion of the equation, and instead set your focus on the outcome of the entire situation.
Let me give you a great example of this: Many of you I am sure have held (or currently hold) some sort of brokerage account where you trade stocks, or have attempted to do so. While you make a conscious choice to buy a stock with the hopes of making a profit, you sometimes make a premature emotional choice based on the fear of losing money, simply because the stock you hold has lost or is about to lose value.
While it may make sense to sell the stock, the way you perceive the sale does have a significant impact on the way you think and will think in the future. If you sell the stock based on the fear of losing money in the moment, then you are training your brain to reduce its risk tolerance.
If, on the other hand, you sell the stock after the research and make the informed decision that it is a losing proposition, rather than selling due to an emotional reaction, you are training your brain to increase its risk tolerance – despite the fact that the research you have done will have made you lose time, which could mean you lose more money.
The idea is simply that making choices in reaction to our emotions also means that you could have missed out on a significant rebound the stock would have, because you are operating blindly. Think about money as a tool, not a lifeline.
Remember that money is part of what we call the Second Circle: The Mastery of Society as dictated in the Third Circle Theory. The core principle is that money is used as a common denominator to establishing a baseline for success within a peer group. The more reasonable you are, and the more focused and logical you remain, the better chances you have of taking more money from your emotional peers and ending up taking some of everyone else’s money.
Those on the other hand who are afraid and do nothing with their money eventually lose it, and those who make hasty emotional decisions typically end up making more poor choices rather than profitable ones… eventually also being left with little or no money.
I valued time as a worker: While the early stages of my life revolved around working for others, I never stopped making every minute count for myself. While I wasn’t quite ready to be a business owner or entrepreneur, I found no reason why I couldn’t maximize my 40-hour per week stake no matter what I did.
This was quite simply brilliant and everyone can do this. All I would do was do my job and do it exceptionally well, and for that I was rewarded with more money. I simply figured that if I was paid to be at work, I might as well be very good at what I do and keep earning more per hour for the same time I spend there. Being exceptionally good at what I did allowed me not only to hit my incentive goals, it also allowed me to get promoted much faster than the average 3 years per position. I went from working in a supermarket retail bank all the way up to a banking executive in less than 3 years.
While this didn’t make me financially independent, it taught me early on how to value time, and make sure that if I were going to do something no matter if I loved it or just did it out of obligation, I would do it especially well. In other words, every day you spend working for someone else hating the job, and not being productive is one day further to financial independence.
While working in that place you hate may not be ideal, if you still choose to work there then make it count as with everything else you do in life. Regardless of how far you are from your goals, its better to take a step each day than to stand still for weeks.
I grew a tolerance for risk by risking everything: In my early 20’s, I was still working for others and had a side business (which today is known as VIPmotoring). At the time was still hustling at my job which paid 6-figures a year, and my side business was making an extra $3000-$5000 a month, but I was hardly satisfied and decided to take a stab at real estate.
Yes I was comfortable and enjoyed a great lifestyle, but it was not the lifestyle I believed I was capable of achieving. I started risking everything by using all my savings, maxing out a line of credit on my house, and taking out loans I could never afford to pay back if I failed. I had no guarantee that my job would last (I eventually was fired) and simply trusted that my thinking around the art of supply and demand would eventually materialize into profits.
I spend all the money I had buying lots where future homes would be built and bet on other people’s emotional weakness. I knew people wanted new homes and new homes were in short supply and high demand. The setup was perfect but it was risky. I realized then that the biggest setback I could experience was not to take the risk but rather sit there and do nothing continuing to live a good life.
I always believed I was worth having a great life, and I had to prove it to myself. The more I risked, the more I was willing to risk. It almost became like it didn’t matter that I would lose it all if I failed. The idea was simply that if I didn’t have what I wanted then I had to be willing to risk what I had to get it. Make sure to read Jordan Swerdloff’s success story where he shares how he himself also risked his last $10,000 after a major failure with is previous business and built an 8-figure company in just 3 years: http://www.secretentourage.com/success-stories/jordan-swerdloff/
I learned to take chances when others feared: in the 2008 housing and banking crash, fortunes were lost and opportunities were born. Most of the world feared the crash of the entire banking sector, especially after Lehman Brothers went upside down. While many bought into the media hype of a global economic crash, I felt very different towards the situation altogether.
I didn’t believe that banks like Citi or Bank of America would actually collapse. I was in banking at the time and with my knowledge I followed my gut and put the majority of my earnings in large stakes in those two banks. While my friends thought I was crazy exiting the housing market in 2006, and even crazier to get in the stock market in 2008, the logic was simple then and can be applied now as well.
When you hear everyone is doing something, then that’s the time to get out of it and when everyone else says something is a bad idea, then that’s the time to start looking into it. My neighbor was a cab driver who made 30K a year and owned 3 homes, and while it may have been a huge danger for him, it was an opportunity for many of us.
The message was clear: banks were unregulated and it was only a matter of time before that bubble had to burst, so getting out early was the only option. Make sure to check out the CEO of Alpha Home Flipping, as he shares some key ways he also takes advantage of bad economies: http://www.secretentourage.com/academy/nick-ruiz/
I discovered that money you work for is only as good as how long you are able to work.
While I was doing really well having one six-figure business, a seven-figure business, and no debt, I also felt like I was far from being financial free. I felt that regardless of what I wanted to achieve, I had to keep working for it to get there. While its ok to work hard, and even better to work smart, it’s still not as good as being able to make money without working. Understanding that concept, it’s clear residual income is the only way to accumulate wealth at a significantly higher level than trading time for money.
No matter if you are a lawyer, a doctor, or a construction guy; you will never be financially free until you understand that the amount you get paid per hour does not make you free, but rather the amount you earn off the clock is what adds up to help you attain freedom. As long as you trade money for time, you will always be limited as time is your most precious resource and it is very scarce. Finding a way to leverage investments, residual income streams in real estate, and more importantly in entrepreneurship can really make you feel like you are in 2 places at once.
You can still trade your time for money while you are making more money simply existing. Residual models don’t have to be complex; a subscription revenue model in a well-put together business can be powerful. I encourage you to recheck your current project and see if you can work towards implementing a residual model, rather than a traditional product to cost revenue. A great example of this is Robert Symiar in the Secret Entourage Academy who speaks about making over 8 million a year working just one day a week: http://www.secretentourage.com/academy/rob-simyar/
Understand leveraging assets, instead of buying into liabilities.
For those of you who know of me, then you know that I love my toys and I don’t like cheap toys at that. I have owned over 38 cars in 4 years; I love my exotic cars and crazy watches that are sometimes worth more than the cars themselves. People often ask me how I can get away with losing so much money buying and selling all these cars, and the answer is simple: I don’t lose any money. That’s right – I never do… well not never, there are times I lose $2-3K for driving a Lamborgini for 4 months, but I don’t consider that a loss at all since its mainly just taxes, etc.
When you start making money, it’s very easy to lose yourself into the domino effect of spending it on the luxury lifestyle you always wanted. While you can splurge, there is a right way to do it by leveraging the power of supply and demand. The idea is to buy cars and watches at significantly discounted prices, hold ‘em, enjoy them and use them before selling them for a break even of profit.
In other words what I did was learn how jewelers make money on you, and how car dealers make their profits, and undercutting them at their own game. You don’t need lots of money down, and you don’t need to have a dealer’s license. You need a computer a 10-15 min a day researching the market. You can learn more about it in the courses we have:
The point here is not to entice you to buy more things but rather make you look at buying the things you want from a business lens rather than being the sucker that loses 50% of their money on depreciation cause they buy a brand new exotic. Understand how to buy and sell the things you want so you can keep doing it, rather than go further away from financial independence. It’s the state of mind that counts, not the fact that you have enough to lose it so who cares.
The separation of FEAR:
The final chapter in achieving financial independence is what we discussed right at the beginning of this newsletter. It’s the ability to let go off the fear of losing money when you need it most that ultimately sets you free.
Remember that most people are afraid of investing cause they are afraid of losing and most people are afraid of spending money cause they don’t have that much of it, and that is exactly why most people stay dormant getting 2% paycheck increases yearly and find that stupid shit comforting.
You can’t become financially independent by being a pussy (no offense to ladies) and even though you’ll have to figure out the right way to start making a lot more money, you’ll still need to the right mindset to scale yourself up from there to that next level – and if you’re not ready to do that now, then when will you be?