So you must be wondering, what is financial independence? Today, I’m going to be outlining what I believe are the five critical steps to getting to financial independence. And what the heck is it anyway? Stay tuned. Hey, Frank Thomas here.
And today we’re going to be talking about my favorite topic, financial independence. What is it? What does it mean? Why should you care? And what are the five steps to getting to financial independence? Well, right off the start, what is financial independence? In a nutshell, financial independence is you don’t have a dependency on money anymore. Plain and simple.
Now that can look a lot of different ways. You could be buying businesses. You could have a great savings account.
But at the end of the day, you have some sort of financial vehicle that’s paying all of your expenses. And it doesn’t run out. Very important.
How do you get to financial independence? A lot of YouTubers, a lot of influencers will say to you that it’s really easy to get to financial independence. Let me tell you a little story. It’s not true.
Getting to financial independence can be very difficult. It’s not impossible. But really and truthfully, the one thing that’s going to be in your way more than anything else is you.
Yeah, you. And I just don’t know how to say it any more plainer than that. It’s your mindsets.
It’s the way you handle your money. It’s so many different things. But the whole idea here is you can get financial independence at 20 or at 100 years old.
It doesn’t matter. It really depends upon you and how you handle your situation. But this is kind of going to get into our five steps.
I believe the broad stroke steps to getting to financial independence. So let’s get started here. The very first one to getting to financial independence is to create a detailed financial plan.
How much do you need? What do you want in life? What do you have? How much is it going to cost for you to continue living? What perks do you want to have in your life? Etc. Etc. Etc.
And unfortunately, this does mean you have to learn how to measure your results. Measuring your results when it comes to money is a budget. You need to know what your monthly expenses are.
You’ll usually find probably about 80 to 95 percent of your expenses really don’t change month to month. 10 percent, a little more fluid. But most of your expenses stay the same.
So it’s easy to estimate and even estimate into the future what your expenses should be. And you can also plan things that you want to do in the future. Hey, I want to take, let’s say, two cruises a year or I want to spend three months in Hawaii or whatever it is.
You’ve got to lay all those thoughts into your budget and into your financial plan of the future. But you’ve got to have a detailed financial plan. What does it look like when you get there? Now the second one you have to lay out is how do you get there? And that will lead us to our next points.
To give you a broad view of what I’m talking about, basically it’s how do you take going from zero to having enough that either in reoccurring revenue that’s coming in or you have enough funds in the bank that is creating that reoccurring revenue and it doesn’t deplete. So that’s what we’re shooting for here. To get started we’re going to hit point number two.
What we have to do is we have to learn to maximize our savings and minimize our expenses. There’s a lot of great videos that talk about this. Everything from minimalism to job hacking, you name it, it’s out there.
Honestly and truthfully it’s a little bit of everything. In my particular situation it’s maximizing my potential income. Well how does that look? For example, five years ago I was making about $100,000 a year.
Today I’m making about $180,000 a year. What did I do? Did I work twice as much? Heck no, I’m actually working less. But the truth of the matter is I’ve just leveled up my game and got more credentials and got a little smarter and looked to the path of the future in my field of interest to see where I should be actually plotting my trail.
So that’s one thing. Another thing that I’m doing too is I’m creating secondary streams of income. One of my primary streams of income at this point in time is my savings account.
It’s generating over $1,600 a month in revenue returns and that’s not depleting it. Right now I’m just letting that stock up. I’m letting good old compound interest take its action.
But I’m also writing a book. In the past I’ve written software. I’ve created courses.
I’ve created pay-for-view simulcasts where I’m actually doing like a live broadcast where I’m teaching people how to do things etc etc etc. There’s just so many different ways to make this happen. But what you got to do is you have to maximize your savings and minimize your expenses.
Now let’s look at the expense side of things. You got to really manage your expenses. Know what’s coming out.
If you don’t manage your expenses, your expenses will manage you and that’s not nice. That’s not a good place to be. It comes down to deciding what’s important in your life right here and right now.
I have an expression that I like to use. Don’t rob from your future self. Consider every dollar that you spend today is going to be worth five dollars to you down the road and that’s a realistic estimation.
So if you go and spend that thousand dollars on a new telephone, you’re taking away five thousand dollars from your future, possibly more. You got to think of it that way. You have to think about what are your expenses that are reoccurring.
Do I have to pay as much as I do? I’m always looking and reevaluating my expenses. One of the things I’m going to be doing shortly here is I’m going to be reducing how much life insurance I have. This dude’s over 60 and life insurance is getting really expensive.
So I’ve also got lots of savings happening now. So why should I have as much life insurance? So I’m starting to shave off the top, shave off the top and that reduces my monthly expenses. Furthermore, I’m looking at other areas of our lives and I’ve already done this.
I’ve already shaved well almost 1400 bucks off our monthly expenses of stuff that we had to pay that we don’t have to pay anymore. You got to keep doing that. That’s a never-ending task, so to speak.
Let’s look at point number three. You need to learn how to eliminate high interest debt. This is a big one.
Man, I lived from debt payment to debt payment at one time. I was paying off everybody else’s bank accounts and not my own. I wasn’t paying myself at all at one time.
So you got to learn how to pay off these debts. Now, how do I handle it now? Do I still have a credit card? It’s probably even a better question. Yeah, I do, but the truth of the matter is how do I handle it? I pay it off immediately, pay it off right away.
I know that I have about a thousand dollars on my personal credit card and I’m paying it off. It’s got to get paid off. It can’t hang around because credit card debt is 20, 25, 30 percent.
It’s tough to get 30 percent on a good investment. I can get 12, 14, 15 percent but not 30, definitely not. So I got to pay those high interest debts off and you need to as well and you need you got to get to a place where you don’t accrue more high interest debts.
Another for example is I’ve got a car in the driveway that’s approaching seven, eight years old. Now I’ve looked at it and the mechanic has said to me you got to fix this and you got to fix this and you got to fix this and in the near future but they got to be fixed and it’s easy for me to go oh I need to go get another car. What’s a new car or even a relatively new car like a used but gently used car going to cost me compared to just fixing what I already have? Is it exciting? Is it shiny and new? Is it a new drive? Has it got new gadgets? No it doesn’t.
I’m just keeping up with what I already have but what is it going to cost me? The difference is astounding. I looked for what I’d like to get 40, 50,000 dollars used. How much is it going to cost me to fix the ride I already have? Less than 20.
Guess what I’m going to do? Leave it at that. Number four here is we need to learn how to invest wisely. We eventually want to get to a place where we’re creating a monthly slush because we need to eventually put money away and we can be putting money away to build to buy businesses which bring reoccurring revenue.
There’s just so many different ways to make that reoccurring revenue. Personally I’m taking the easy route. I know the stock market.
I’ve played the stock market and it’s all different forms over the years so to me it’s not easy but it’s not hard anymore either. I understand the stock market. I understand how it works.
For me I can invest there and like I said I’m getting right now my latest estimations just on dividends I’m making about 14 and change percent across the board on all my savings. My emergency fund account which is like liquid cash is making about 11 but the fact of the matter is I had to learn lots of things about the market and how to read the market and I know how to read charts and I know how to gauge the overall feelings of the market and I don’t get freaked out when things go down like I’ve seen people come to me and say oh my stock has went down 40 percent what do I do and I’m like well don’t realize the loss and I remind them did you buy a good company? If the answer is no then you need to sell the stock and take the loss but if you bought a good company you wait because the stock will recover. For example I bought a bunch of 3M stock in a tank that went down 30 percent and I was in the red.
I was bleeding on 3M stocks but now it’s in the green and I feel that it still has another 30 or 40 percent growth place so it’s possible that I could see a 20 percent rise in the next 12 months on 3M so am I selling that stock? Heck no. Did I take a bath on it for a while? I did but I never realized the loss on it but again that’s learning to invest wisely for growth in the long term. A lot of my strategy when it comes to investing in the marketplace especially the stock market is around dividend stocks or dividend ETFs, exchange traded funds, because I want to be in a place where I get a guaranteed income on a monthly basis and if the stock market drops by 40 percent who cares? My dividends should be only influenced a very small amount.
The dividends should just keep flowing like a wheelbarrow that’s dumping the money at the door every month so to speak and I’ve also know because I’ve done my detailed financial plan, I’ve minimized my expenses, I’ve gotten rid of debt and in learning how to invest wisely I’ve learned how much I need on a monthly basis so I can build a non-depleting fund. In other words it will never deplete if anything it’ll grow with inflation and continue to pay us based upon inflation which is exactly what we want. Number five.
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Very easy to do but let’s get into number five here. Create multiple strains of income. This is really important.
This is the number one way to see financial independence sooner than later. There’s a lot of great YouTubers that talk about buying laundromats and buying this and buying websites and you name it to turn around and generate cash from them and these are all good ideas and you need to try a few of them. Are you going to lose a little bit of money along the way? You absolutely will.
I promise you that but in the long run you’re going to make way more than you’ve ever lost. So you need to try all these things but you need to create multiple streams of income. When I was running my software business a few years back the software business was generating anywhere from four to ten thousand dollars a month but the business as a whole was generating well over fifty thousand dollars a month in revenue.
How did it do that? Multiple streams of income. We not only sold the software but we sold additions to the software. We sold tutorials.
We syndicated and worked with other software producers and we helped them sell their software so we got royalties from that. There was just so many different ways that we could create income that it was just crazy. There was one month we actually created almost two or three hundred thousand dollars of revenue which is insane and it just happened.
There was one month we decided to run a end of the year Black Friday course which was how to use YouTube to generate revenue at the time and what we did was we made it a limited entry. I think it was a flat fee of $105. I don’t know why we chose $105.
It just sounded like a good number but that’s what we did. We chose $105 or $100 or $99 but it was around $100 US and we had a whole bunch of people sign up and we worked probably 30 hours all said and done and we made $30,000 from that. We literally made a thousand dollars an hour.
Hey if I can make a thousand bucks an hour from my day job right now I’d be all over like like crazy but it’s not that easy but when you’re doing something to the masses with lots of eyeballs it gets a lot easier so you need to find ways to create multiple streams of income. I recommend looking at YouTube. Type it in multiple income streams and see what comes up.
You might be amazed. There might be stuff out there that you’re not necessarily trading more time for money but you find a way to invest some of your money to make more money from that money. You understand what I’m saying? So do check that out but you got to do all these five steps.
These things are really important. If you want to be one day unchained from a J-O-B, just over broke, or a job you need to learn to find and achieve financial independence. Like I said whether you’re 20 or 60 it doesn’t matter.
What you got to do is you got to seek it and I’ve had people come to me and say well what am I going to do? I’m 65 or 67 years old. Hey if you’re still breathing you’re not done and you can get done okay and done in a good way not a bad way. So I say reach out and seek it.
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