While sitting in a northern Brazilian beach a year ago, it hit me for the first time that I'm truly financially free. This new freedom meant that I didn't need to look for a job upon my return to Australia. In fact, I didn't even have to go back to Australia. I could choose to go wherever and do whatever I want on any given day.
A year later, and both my partner and I are still enjoying this ultimate gift of complete choice. I am not rich as most people think when they meet me for the first time, but I don't need a job to keep up with my current lifestyle. The steady passive income stream I developed before and while traveling is enough to cover both of our expenses, and more.
But first, my story.
Committing to financial freedom
The road to financial freedom was not a straightforward path. I have worked my butt off since graduating with a Masters Degree in Information Technology Management but somehow managed to keep myself in debt. In fact, even though I earned a very nice salary as an IT manager, I found myself in even more debt after 3 years of full time work.
On April 14th, 2008 my bank statement showed a total debt of AUD$33,598.62. My credit card limit had been reached and I hit a financial all time rock bottom. The prospect of a day without being able to pay the rent left loomed like a dark storm cloud on the horizon.
I decided to start focusing on wealth creation and financial independence. To make my commitment even stronger, I opened a blog and publicly announced my new financial freedom challenge.
A few months later my commitment deepened following a car accident involving my parents. At that moment, I bought a one-way flight ticket, wrote a future resignation letter, and shared the news with my friends to further intensify my pledge to create financial freedom.
My plan was plain and simple: I would build informative and useful websites that generate passive advertising income. At the time I already owned one website which had a very small, yet recurring annual income, so I figured I could duplicate my little success into other areas to multiply my earnings.
Fast forward to today, and multiple passive income sources are allowing me a lifestyle of complete liberty.
So what have I learned?
1. Growing up from financial childhood.
I still remember those weekend summer nights in Melbourne when I spent hundred of dollars on going out with friends to bars, clubs and restaurants, all the while going further into debt. It wasn't only the money I spent, but also the time and energy I could have spent on wealth creation.
I have no regrets over that period of time; however, once I committed myself to financial independence, my poor financial habits had to change. Luckily, I had just finished 6 months of rigorous Ironman training so I had some fresh forms of discipline under my belt. For the next few months I translated hard work ethics and good habits from the fitness arena into the financial one.
I kept waking up at 5:00am every morning, but instead of doing my routinely 2 hours swim training, I sat at my desk and worked on my business. Instead of going on my usual long evening runs after work, I spent the time building databases. And rather than going on a 5 hours cycling practice on the weekend I strategized new business and investment initiatives.
Training also represents only one element of the Ironman equation. Resting, proper nutrition, and balanced lifestyle are all necessary components to keep the body fresh and energized during the day. So I drank lots of water, ate healthy food, had uninterrupted sleeps and consistently recovered whenever I needed. And same as any physical training program I kept a diary and tracked every element of my finances and expenses. In less than a year I managed to clear all my debt and have a nice, steady passive income stream. I finally grew up from my financial childhood.
Growing up financially involves breaking old unwanted habits and cultivating new and effective ones instead. I would highly recommend anyone who plans to go on a financial freedom expedition, to make a list of unhealthy habits and behaviors, as first step, and then monitor them on daily basis. Enjoy the ride!
2. Its not about the money - Wealth Vs Money.
Most often when we think about wealth we think about it in terms of money. People who earns substantial amount of money are considered in our society as wealthy, or in other words, rich. What we tend to overlook is that most people are dependent on their job alone for their high income, a job from which they might be laid off, only to be left with mounting bills and growing debt.
I had the same kind of mindset myself and played the 9 to 5 game for years, however, a prominent paradigm shift is required to create not only money, but true wealth.
Real wealth is created from assets that generate regular positive cash-flow. Owning an internet business, as in my case, that works without constant supervision, goes up in value, reduces debt, and produces a profit is a good example of a wealth-building asset. Other examples include: owning shares in growing and successful companies or owning a property that creates a net rental income on monthly basis.
Money can be our starting point toward building wealth, but money alone is not wealth. In fact, money's value decreases over time due to regular inflation, and with the cessation of the "gold standard" in 1971 by the US government, financial alchemy was achieved. Money is currently created out of thin air and backed by nothing. Money's value only exists in our minds and to the extent that we are prepared to accept it for real products. Perhaps, rather than arguing that recent peak prices of gold is due to its rare amount, a more suitable argument is that money's purchasing power is simply collapsing.
Don't rely on your job alone, spend the time and ask yourself what type of assets you can start building right now. It's time to give up on the idea that someone else, either boss or government, is going to take care of you in times of financial trouble.
3. Consumerism vs. Minimalism.
After long months of hard work on my online business and the clearance of my debt, the time to leave Australia had arrived and I started the process of selling all of my stuff. You don't realize how much crap you own, until you move. I think I had an expensive collared shirt in every color of the rainbow.
Consumerism, the systematic fostering of the desire to purchase, and one of the reasons I kept myself in debt, is perhaps the 21st century's epidemic. We are constantly sold things we don't really need through advertising and slowly but steadily we become conditioned to derive happiness from what we buy.
What we tend to forget is that the more stuff we own, the more money it costs, the more space it occupies and the more time it takes to manage it. As we consume, we add to environmental degradation by using more resources and energy to produce, transport and dispose what we consume.
Minimalism, on the other hand, reduces our attachment to things, promotes simplicity, eliminates clutter and helps us move more freely in life. It's through long term traveling and my new downsized life that I managed to find contentment in what I already have.
I encourage trying it yourself. Make a list of a few things you don't use and give them to someone who might need them. Alternatively, you can sell them on eBay or similar, to make some investment money. I firmly believe that longer lasting happiness comes from who you are, not what you own.
4. The old "job security" myth.
The common mindset amongst most of our parents is to go to school, get a secure job, buy a house and pay the mortgage until retirement. That may have worked for our parents' generation, but the world has changed and so has the economy.
In today's fast-paced global society, nothing is secure anymore. The cost of living in the western world continues to increase, jobs are outsourced to other lower wage countries and skills needed only a few years ago are no longer current. Countries, such as Iceland, Greece, and Portugal are on the verge of bankruptcy and the U.S., with its consumption economy, and its massive $18 trillion debt, is not far ahead. Even pensions and retirement plans are in danger. Increasingly, these long-term securities are financed by borrowing and around the world it is more challenging and lesslikely to receive them.
Perhaps it's time to finally recognize that "job security" is simply a myth. I've been living with this kind of mindset for too long. Though I felt comfortable with most of my previous employers, each had the power to cut off my income using just two words and in doing so turn my world upside down. I was pretty much gambling on my luck with no financial strategy in mind and inadequate reserves.
Your financial situation might be even more sensitive than mine few years ago. If you have a family to support, a big mortgage, or other high ongoing recurring expenses, and you're dependent only on one stream of income called "a job", it's imperative that you start thinking of an additional income source and preferably passive. Don't wait for the next financial crisis to hit.
5. Earned vs. Passive Income
I'm sure you'll agree that it's much nicer to get paid while you're eating and sleeping than trading your time for money. The biggest limit with earned income (e.g. salary) is that you only have so much time and can only accumulate so much wealth. On the other hand, when you own a business or get paid based on results, there is no such limit. A website, for example, can serve unlimited clients and generate unlimited revenue.
When I began my journey I considered all of the cash-flow options. I went to real estate seminars, read books about commodity and stock exchange trading, but I finally chose to focus my efforts on the online world. An online business requires less investment of money (or even no investment in some cases, such as owning a blog), and perhaps more importantly, the Internet by its very nature, magnifies efforts by allowing you to reach more people with the same amount of effort.
My main focus was on contracting programmers to build sites that rarely need an update. For example, I designed an online dictionary (no data updates needed) that derives most of its income from contextual advertising solution offered by Google. Their code knows how to match up between advertisers and site's content so there is no need spending time searching for ones. Google even deposits the revenue directly to your bank account, making the whole process completely automated.
There are numerous ways to generate passive income. Examples include real estate rental, affiliate marketing commissions, original art royalties such as book, music or photography, interest from investments, dividends from owning shares in companies, and as mentioned above, on-line advertising revenue. Whatever model you elect to adopt, try to make it as passive as you can. Spend the energy and build something that frees you from the shackles of our modern rat-race society into a world of exciting possibilities. A world where you decide what to do in each and every moment. You can always choose to keep your job and work in your current role, however the big difference is that you'll work because you love what you do and not because you have to or need to work.
6. Clearing Limiting Money Beliefs
Here are some common beliefs around money: wealthy people are greedy; money is the root of all evil; money is not important; starting a business is risky; making money is hard;
If you hold any of these beliefs, you're setting yourself to a tough financial journey. For example, if you believe that rich people are greedy and you despise greedy people, how can you become something you feel contempt for? You'll always sabotage your success in order stay consistent with how you want to see yourself.
When it comes to money, we're all conditioned from a very young age by our environment. We model our parents' beliefs, we conform to the norms of a society, we learn how to think and act by the media. We act based on past programming. We do all of that and then justify our behavior.
It's only when I examined some of my beliefs that I could see how my own thoughts were holding me back from creating wealth and abundance. Like many others, including my parents, I believed in retirement at the age of 65. Nowadays, I don't believe in retirement at all. Why would I like to retire from something I love? This only pushes me further to only doing what I love to do.
Before you commit to creating financial freedom, explore your beliefs around money. Identify which scripts you run and which beliefs you may be holding subconsciously. Once you know what holds you back, create new empowering beliefs and expand them step-by-step. If you can grow your passive income to $100 a month, for example, push on to $200, and keep going from there. Taking baby steps in such a way allows you to push the boundaries of your beliefs around money little by little, until you've reached your ultimate goal.
7. Few thoughts on fear.
Most of us play the game of life in a very safe manner and steer our life toward security. The main concern is survival and our dominant life strategy is not to lose.
Living based on security is living based in fear, which is probably the most powerful hindrance for our financial growth.
I was no different. Fueled with the fear of failure, I became satiated by a steady paycheck. The truth is that failure creates life experience, and a necessary component for business success. The more life experiences you have, the more skills you will acquire and the wiser you will become.
For years I was fed by society that starting a business is a risky move. The truth is that relying on one source of income is riskier and that starting your own business doesn't have to be risky at all. Your first business doesn't have to be the "next big thing". Ignore the glamour and divert your attention to simpler things with little or no investment, such as an informative website that can earn you passive income now.
If you have any fears regarding the world economy or the state of your current job, and you don't take any action, you leave yourself stuck in the same place. Instead, take full responsibility and see that your financial situation is a result of actions (or lack of actions) you have made in the past. The longer you wait before making the leap, the more difficult it can become. You might have a greater family obligation, slightly less youthful energy, and a big mortgage loan on your shoulders. Use fear to motivate yourself to take action, or even better, put the fear aside and just take action. Get in the game now and expand your comfort zone. New people will come into your life, more ideas will pop up in your mind, and new business opportunities you cannot foresee will constantly arise.
8. Financial freedom commitment
Becoming financially free is not a stroll in the park. It takes time, courage, focus, knowledge, mindset, and more than anything, commitment.
Are you willing to work 15 hours a day? Wake up at 5am and work on your business? Give up some of the comforts of your current lifestyle? Say "No" to people, events and situations that are not in harmony with your project?
One of my favorite things to do before I committed to my financial freedom project was to explore new restaurants on regular basis. I did it together with my girlfriend at the time and we usually shared a nice bottle of wine between us thoughout the night. When I decided to end this little splurging routine and instead spend the time working on my new business, it didn't work very well for my girlfriend. The fact that it would benefit both of us in the long term didn't matter and she could not accept or support my newly chosen lifestyle. I was determined to honor my commitment and dump my fancy lifestyle. There was no turning back. Needless to say our relationship ended not long after.
We all put conditions on what we're willing to do and sacrifice in order to succeed. If you want to make this project successful, 100% commitment is needed. Not a percentage less. Your commitment would be demonstrated, not by enthusiasm or the amount of money you invest, but by putting your full force into achieving the goal and investing every minute of your precious time in it. If you can't find enough time, given your current schedule, scale back other activities, work on weekends, or even consider taking time off work to get your business rolling. Do whatever it takes. No excuses.
When you reach the place of not needing to work, a surprising and wonderful thing happens. You want to work. And the difference between the two words, "need" and "want" is quite remarkable. It's perhaps the difference between fear and love. The fear of not being able to survive without a paycheck, compared to the love of doing what you want to do, no matter whether you're paid or not.
If there is one message I want to leave with you today, it is that financial freedom and wealth in general, are much more than having money in your bank account. Real wealth is about gaining a continuum of enriching life experiences, it is about playing the game of life in an exciting and meaningful way, and perhaps more than anything, it is about having the time and freedom to live your life doing what you love.
No one can promise me that my current financial freedom will be guaranteed forever, but one thing I know. It has been a fun journey.
Live life on your own terms!
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