How to Be Financially Independent - Common Sense Living Newsletter
 
Common Sense Living India

How to Be Financially Independent

Wealth
Life
May 27, 2014

 

Are you a doctor, lawyer, or other professional? How about a salaried employee?

If so, you're in a trap. And you'll never get out unless you listen to me today.

In my book Automatic Wealth, I talked about this "trap." Here's what I said...

At the end of the day, you are charging for your time. And if you want to make more money, there are only two ways to do it:

  1. Charge more per hour
  2. Work more hours (though there are only so many hours you can work and still have a life).

Professionals and top executives, you may be surprised to know, don't make as much money as you'd think.

As they improve their skills, they earn more for every hour they work. Eventually, they might even earn $1-2 million per year. To earn that money, they have to work hard. Often, that means 10-14 hour workdays.

But if you have extra streams of income, your income isn't dependent on the number of hours you work. You can make money when you are on vacation. You can make money when you are sick. You can make money when you are sleeping.

All you have to do is get the thing going and then hire a few superstar employees to do the work for you. You pay them a good salary and take the profits as they come.

If you are being paid by the hour right now, you know exactly what I mean. You may be earning good money, but it's hard to enjoy your success because you are always up to your eyeballs in work.

I have to send my sincere appreciation for the most thorough analysis you all provide on your recommendations. I appreciate your great newsletter. It's first-rate, indeed!

- Subscriber Mike C.

Retiring is an option. But when you retire, you lose your active income. That's not good. I know. I tried it for 18 months. I was rich and retired and happy to write poetry and paint bad paintings.

But I was always worried that I would run out of money or that one of my investments would tank. That is not financial independence. I promised myself that I would never fall into that trap again.

I'm a big believer in financial independence.

Being financially independent means exactly what it says: You are not dependent on anyone or anything to pay your bills.

How much you make has nothing to do with financial independence. I know plenty of doctors and lawyers who make high six-figure incomes but are deeply in debt and always worried about their future.

Having $1 million in the bank doesn't give you financial independence, either. Given the interest rates you can get on a bank account these days, $1 million is barely enough to feed and house a dog.

And having a substantial real estate or stock market portfolio doesn't necessarily make you financially independent. If you need to make, say, 6 or 8% on your money to pay your bills, you are not going to feel comfortable. You are going to go to bed each night worrying about the market. So What Is the Secret?

The secret to being truly free of money worries is to have multiple streams of income, each one of them enough for you to live on.

That way, if one stream dries up completely, you still have another or even another to fall back on.

Here's what I said about that in Automatic Wealth...

"Natural moneymakers make most of their money by practicing a single skill within the context of a single industry."

"Don't be fooled by financial gurus who tell you otherwise. But they eventually develop many streams of income." Many master wealth builders I know enjoy a dozen sources of income. Some are modest, some amazing. That's the great thing about creating cash flow.

"Although you never know what will happen with any individual income source, if you get enough of them started, one will turn into a river."

The Eight Rules for Financial Independence

When I decided to become rich, I began to keep a journal of thoughts I had about making money, losing money, and building wealth.

One chapter of that journal had to do with financial independence. And the eight rules I came up with then are the same rules I follow today:

  1. You can't truly trust anybody but yourself with your money.

  2. The harder someone tries to convince you to trust him, the less you should.

  3. However good a track record someone has, never believe that he/she can't suddenly start losing your money. In fact, if you are like me, the moment you invest will be the moment his/her track record starts falling apart.

  4. All markets rise and fall. Don't ever believe anyone who assures you that they can predict the future.

  5. If you don't learn to spend less than you make, you will never have peace of mind.

  6. Most of what you buy when your income is above $100,000 is discretionary. Don't fool yourself into thinking you need a big house or a fancy car. You don't. For my advice on buying houses, cars, and other important purchases, read my Living Rich series (part of the Wealth Builders Club). In this series, I discuss how you can live like a billionaire and enjoy the fine things in life for much less.

  7. In making financial projections for yourself or a business, always create three scenarios: one that shows what things will look like if everything goes as hoped, one that shows what will happen if things are mediocre, and one that shows what will happen if things fall apart.

  8. Know that the third scenario is optimistic.

Add these up, and you will come to one inevitable conclusion:

The only way to be truly financially independent is to have multiple streams of income, each one sufficient to pay for the lifestyle you want to live.

When I began to develop multiple streams of income, I did it the "chicken entrepreneurship" way. I started out small and built slowly. I never took large risks. And I never gave up my day job.

These are the income streams I have today:

  • A local rental real estate portfolio
  • An international rental real estate portfolio
  • An interest in a half-dozen companies
  • My consulting income
  • My income from bonds
  • My income from dividend stocks
  • Plus, there's one more stream I'm about to add. It'll let me earn 5% per year, tax-free.

Each of these streams is greater than the amount of money I spend every year. So if five of them suddenly disappeared, I would still have enough income to live on without diminishing my lifestyle.

And to back that up, I have a stash of hard assets that I could live on for the rest of my life.

That is a lot of financial security. I don't know anyone else who has that much. Maybe it's a reflection of how deeply untrusting I am. Or maybe it means I'm simply more independent than most people I know.

You don't have to emulate my plan. But if you want financial independence, you should think about having more than one or even two streams of income.

We realized that a lot of our subscribers are not yet wealthy- or as wealthy as they'd like to be. Many of them are starting from scratch, and they want to know what to do to increase their income and get to the point at which they can have these income streams.

To answer this need, we created a specialized program tailored for the not yet wealthy...the Wealth Builders Club. We first opened it to membership in the US with astonishing response.

The fact of the matter remains that you cannot reach financial independence through stock investing and options alone. You need to increase your income through different avenues and opportunities. Not only does the Wealth Builders Club bring you income-generating ideas but it also explores other distinct programs that benefit the unwealthy.

Right now, the Wealth Builders Club India brings members the following:

  1. "The Extra Income Project." This is a brand-new, unique program designed to help you create a second or even a third stream of income. As I have explained many times, including above, "There is no faster or surer way to become wealthy than by creating extra income and allocating it toward one's investments."

    It features essays on my favorite extra-income opportunities. These include ideas for making extra income from your current career, plus many great ideas for accessing extra income from side businesses, freelancing, investment "jobs," and so on. In my opinion, this is the most important series of the entire club.

  2. "The Real Estate Project." The largest portion of my wealth has come from investing in rental real estate. I am convinced that this is best time to buy rental property in my 30-plus years of investing. This series brings you individual "lessons" on how to profit from the rental real estate market.

  3. "Retire Next Year." We developed this program after we learned that many of our members want to retire in fewer than seven years - yet aren't financially ready to do so.

    As a consultant to "International Living" magazine for 20 years, I know dozens of ways you can enjoy a happy, rich, and fulfilling retirement in beautiful places around the world and even in the United States. Like the Extra Income Project, this program has two parts: my essays and a series of "how-to" manuals or blueprints, if you will, on how to replicate these exact lifestyles anywhere in the world.

  4. "Living Rich." This is one of my pet projects. It is not about adding income or investing, but it's about living richly on the income you currently have.

    I'm always telling the PBL staff that living rich has very little to do with how much money you make or how many millions you've socked away in brokerage accounts.

    In a series of essays, I will tell you about how to enrich every aspect of your life, from the house you live in to the car you drive, to the vacations you take, and so on.

  5. "How to Start a Million-Dollar Business for $25,000." This will contain all of my best ideas about entrepreneurship from the 2,500 essays I wrote at Early to Rise and my six best-selling books on entrepreneurship, business management, and marketing.

I want to say how much I appreciate the education your newsletters are giving me, particularly, the broad view of building wealth and allocating one's assets.

- Subscriber Marge B.

This Wealth Builders Club is the most thorough wealth-building program out there, and a first of its kind in India. It's the best place for you to work towards achieving financial independence.

Our goal is to help you become wealthy in fewer than seven years. If you are not already a member of the Wealth Builders Club India, membership is open for a very short time. Please click here for more information.

Best,
Mark

 
 

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3 Responses to "How to Be Financially Independent"

Monica Malkani

27 Dec, 2014

Dear Mark, Your articles are really inspiring! I have been trying to become an entrepreneur and thought of a few ideas in the last one year, but nothing has fruitfully materialised. My thinking cap is still on and hopefully with your ideas and essays I will get some good ideas on starting my small venture and build wealth for my family. My family and I love travel and good food and I would like to have extra income to be able to enjoy life apart from saving and investing!

AVINASH KUMAR GUPTA

26 Dec, 2014

I APPRECIATE THE IDEAS,REALLY REMARKABLIE ...a brain storming process has started in me...

Ravindra

30 Sep, 2014

yes

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