This kind of starts like a “dear John” letter, doesn’t it? For our young readers, a dear John letter was what soldiers used to receive from their girlfriends when they were away at war to let them know they had run off with the milkman.
No, I am not writing to let you know that I am breaking up with you; however, what I do have to say is probably going to break your heart, so please take a seat for what I have to tell you next.
Financial freedom is not what you think it is, simply because you never spend enough time to actually ponder what life would be like if you did not have to worry about money anymore. Don’t lie to yourself, you know it’s true.
We all have a preconceived notion that being rich is for Hollywood actors, pro-athletes and lotto winners. Like no one else has the ability to take days off work and lay by the pool sipping espresso martinis. So, if being rich is only for rich people, then we never give it any really serious thought.
However, we do try to set ourselves up for retirement: to have a better quality of life, to have something for the future and something for the kids… oh, won’t someone think of the children!!
But we do it half-heartedly. Yes, I am talking to you. We buy shares our financial planners tell us to buy, we buy property because a property broker told us to buy it, and that’s about it. I am not saying you rush in blind; only stumble in with your eyes half open.
Why did you buy those shares or even just let your financial planner buy the shares they do? Is it just because they said so? What makes them more competent than you? Yes, absolutely, they are qualified and do this all day for a job so, dollars to doughnuts, they are always going to be better at this than you, so listen to their advice. My point here is: have you completed a course in share trading? And if not, why on Earth would you let anyone invest your money into something you personally do not understand? It’s your money, your future, so why not make an effort to educate yourself? – there are thousands of short courses online that you can do in as little as five minutes a day.
The same principle is applied to buying an investment property. We buy property like we are drowning in the ocean and it’s the first buoyant object that comes our way. Rarely do I find someone who has sought out a second opinion from different property brokers. Do you know anything first hand about the location or even the nature of the property or even how qualified that property broker is? An online certificate in real estate takes about two weeks to complete full-time . At that point, you can mosey on into any real estate agent and ask for a job. I hate to tell you, but almost all property brokers, selling property off-the-plan do not even need that qualification; they are just sales agents. Furthermore, if anyone ever mentions “negative gearing” as an investment strategy, just hit them with a brick and bury them in the backyard..*
Ok, so that is a general rant about those investment classes and about educating yourself in general. Now, let me answer the question about how this relates to financial freedom.
Financial freedom is when you have the ability to not go to work… well, to not go to work ever again. You have enough money either banked or being made passively that you are not required to work for money.
So, the question you need to ask yourself is: when are your current investments going to achieve this for you? Not if, but when. Because that is the whole point of investing, isn’t it? To create an income or amount of money that lets you change the course of your life, to stop working your current job or to buy that super yacht, otherwise why invest? If you are already happy with your current situation and happy to do the same things for the next 60 years (yes, 60 – people live very healthy lives into their 90s now, so go for a walk and eat less protein), if you are happy living as you are, then don’t bother investing. Just go out and buy that red convertible and live your best life.
However, if you are like the average investor, then the purpose of investment is freedom, and you should be able to answer this question with no hesitation: how long until your current investments achieve you financial freedom? Is it two years? Maybe six years? Or is it more like 180 years? And don’t laugh, I have seen a lot of long-term strategies in shares that would take over a century to build up enough funds to be able to replace a yearly income for 40 or more years (again, don’t assume you are going to work till you are 70 and die at 90.) Whoever sets up that plan for you is as useful as the guy selling negative gearing, so make sure you have another brick on hand and plenty of room in that hole in the backyard).*
And this brings us to the “dear John” part of the story. Hopefully by now, you have realised that the love affair you have had with your current investment strategy is a summer fling and it’s time you took things seriously.
The first step is to educate yourself. Please take the time to do a few online courses. I am not saying don’t use professionals. Please always run everything by a professional because they definitely know more than you, but if you are going to be an investor, don’t be financially illiterate.
Look for strong investments. One of the fastest ways to create a passive income is to own equity in companies. You don’t have to go out and start a business, but you can invest in other people’s businesses, owning a small amount of equity in as many companies as you can to generate a solid passive income. After all, if the object is to make money, why wouldn’t you invest in something that people come in and hand cash over for every day? I will put in a disclaimer here: investing directly into businesses can be risky, make sure you seek l advice from professionals, such as solicitors and accountants, and again, educate yourself. Do not give the first charismatic person you find your hard-earned cash because it sounds like a good idea. Understand the language they are speaking and why they make the decisions that they do.
So, in summary, the first thing to do is to make an investment plan. Only you can truly know what your goals are and where you want to be in life. Secondly, work out how much money you need to achieve your goals and then research all of your investment options. Thirdly, take the time to educate yourself in those fields. You do not need to invest overnight. Take six months or a year and complete some courses while you leave your money in the bank.
I will leave you with this, you do not need one million dollars or five million dollars in the bank, you only need to earn your current yearly income passively. It’s irrelevant whether that amount is 60,000 or 200,000 dollars a year. Once you a achieve this amount passively, you are richer than most of the millionaires I know, because they still have to go to work, but you have 100% of your time back.
So, stop messing around and just go be rich!
Thanks for reading.
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*We would like to state that no financial or property brokers were harmed in the creation of this article and that we do not advocate the murder of any individuals even if they do promote negative gearing as a sound investment strategy.