Many of you don’t believe in achieving financial freedom although many are achieving it as we speak. By taking care of your personal finances and applying the key principles in this blog post, you too can achieve the financial freedom you desire. Start learning the fundamentals today because a little work pays off.
Your beliefs about money
Positive attitude, the law of attraction… you all heard that before. Surprisingly it is in fact important. If you don’t believe you can improve your financial situation or that you can achieve financial freedom… Guess what? You’ll never meet that financial goal!
Study your past mistakes in your finances, analyze them, why were they mistakes. Heck, I’ve made a thousand mistakes and I continue to make mistakes each and every day. Don’t moan or complain… Learn from them! For example, if you lost money in an investment, why did you lose your money? Was it because you weren’t educated enough to make a solid decision? Was it because you followed the herd? An act of god maybe? Whatever it was, learn from the mistake and don’t blame others for it. It’s your life, you should be in control and you should take financial responsibility seriously. Don’t let this event paralyze you. Learn, review and try again!
The most important thing to achieve financial freedom
Assets need to outweigh liabilities. Not only in terms of money but you too should be an asset and not a liability. If you don’t add value to the world and only take, profit from others or sit on your butt all day you are a liability and you need to start taking action to improve yourself first. It’s only after we feel good about ourselves that we can go out and change the world. Because of our positive feelings and actions we can start to accumulate assets in the form of money.
Money has no value
Money is money and money is wealth? No, money has no value and if you can understand this you’ll be less consumed with chasing the dollar signs. What if you were stranded in the desert for days and the first person you see offers you a million dollars or a bottle of water, what would you choose?
If you have to choose between saving your child’s life with a hundred million dollar surgery or financial freedom, what will you do? Your ethics are important too. A little side note here: Frankly, if someone looks down on you because that somebody is rich and you are poor… We all have to wipe our own butt after taking a shit. Just saying. Alright, back to the money. Our money is nothing but a vehicle to get you from point A to point B, or a tool to help us build our homes and our lives.
It is a tool, nothing more.
Money built the world and is a tool. A tool must be well maintained to do its job. The tool can also be used to build more tools. With the tools we can build a business, a factory that creates more tools or we can invest our tool in a toolmaking business.
“Stop trading your useful tools for stuff you do not need!”
Without financial goals you do not know where you are headed so start analyzing your financial situation, your work and your relationships. Basically everything in your life is connected to your personal finances so you need to be honest with yourself. You need to know who and what your assets are, who and what your liabilities are and plan accordingly. Don’t let the liabilities of life become an obstacle and I know that’s sometimes hard to do. Sometimes you have to take a painful look at life.
Financial freedom means investing in your future, making your money work for you. The problem is that most people think they can’t free up the necessary cash to start investing. We’ll talk about this later.
I first want to show you how much you need to save every month to become a millionaire, depending on your age.
Our first example in this case is a 20-year-old planning to retire at 65. He wants to be a millionaire with as little effort as possible. For our calculations we’ll use a 10% yearly rate of return. He has nothing saved yet.
86.26$ a month is all he needs to save.
Our second example is a 30-year-old planning to retire at age 65. Guess what, he also wants to be a millionaire with as little effort as possible and he also gets a 10% return on investment.
He already needs to save 237.71$.
The 40-year-old with the same goals:
Difficult for most people but he needs to invest 676.43$.
The 50-year-old still has dreams but he is in for a struggle:
Would you be able to invest 2126.68$ a month?
You can do your own calculations with our retirement savings calculator.
How do you free up the necessary cash to start investing?
I just want to show you the magic of compound interest once again and teach you how to calculate the opportunity cost for unnecessary expenses. Once you know what an item really costs you, you’ll start thinking twice before you spend it. We’ll use the same cases as above, retirement at 65.
The 20-year-old spends 1 dollar, if invested that 1 dollar could grow to 73 dollars. If he spends 1,000 dollars on a big tv, it costs him 73,000 dollars in retirement savings. 10,000 dollars spend on a motorcycle costs him 730,000 dollars in retirement!
The 30-year-old spends 1 dollar, if invested that 1 dollar would grow to 28 dollars. He chooses to buy a new 1,000 dollars lawnmower. It makes his neighbor jealous but it just cost him 28,000 dollars’ worth of retirement money. He really wants to make a trip around the world costing him 10,000 dollars. He had a lot of fun for sure but he could have taken more trips in retirement with his 280,000 dollars in his investment account.
The 40-year-old spends 1 dollar, if invested that 1 dollar would grow to 11 dollars. His wife is pregnant again and he feels the old baby stuff aren’t good enough anymore. He decides to buy a new crib and car seat and spends a 1,000 dollars. Looks great but it just cost him 11,000 dollars in retirement. His wife needs a car to now so he’s spend a 1,000 dollars already, money is tight so he buys a used car for 10,000 dollars costing him 110,000 dollars in retirement.
The 50-year-old spends 1 dollar, if invested that 1 dollar would grow to 4 dollars. He’s having fun, taking his family on a weekend trip costing 1,000 dollars spending in fact 4,000 dollars in retirement money. On the weekend trip he sees a cool boat, small but hey, fun guaranteed and he spends 10,000 dollars taking 40,000 dollars away from his retirement account.
So if you are young, start thinking about the time value of money! If you are in your 50’s, every dollar helps!
“Unless you are making a lot of money and you can put enough aside, you’ll have to make compromises between your NEEDS and your WANTS.”
Do your own calculations with our compound interest calculator.
Learn more and start paying yourself first.