What is financial independence? Is this question even worth asking nowdays? Things seem so hard financially for all of us. Rising student loans, rising mortgages, the rich getting richer, and most of us have been standing still or going backwards for years now. And frankly we do not know why. We work hard, try to save, we ‘do the right thing’, and still we struggle. We are all finding it too hard, unfair and most of us are at our wits end when it comes to money.
I hear you! I hear you loud and clear. Most of us are not in as good a financial shape as we would like. Despite all the information out there, all ‘the experts’, things seem so conflicting and confusing. And then there is the glass barrier between knowing and doing.
This need not be the case. In fact, with improved information, technology and changing opportunities, most of us should be on a clear and simple path to financial independence.
From years of working and researching outside of the traditional mainstream thinking on money, I slowly gained clarity. From this work, a comprehensive concept of Financial Independence (FI) began to emerge. I wanted a crystal clear concept, so I could define strong goals and build a pragmatic plan to achieve FI.
In time, FI emerged with the following important elements-
- Money Machine. People who master money have a ‘money machine’ that manages strong cash flows, and then converts them into assets for further cash flows. Saving is the foundation for strong cash flows.
- Compounding. These cash flows are then compounded over time for further growth of both cash flows and assets.
- Beyond Money. The money machine and compounding over time allows people to be beyond money. They do not have to exchange time or labour for money, their money or wealth machine can provide it for them, indefinitely. They are free of money concerns, and so can maximise choice and lifestyle design.
- Passive Income. Most people who have mastered money do not believe in trading time for money. They learnt early it is far better to work hard once to create passive income from assets, either intellectual assets in business, or through traditional assets, such as stocks or real property.
- Purpose. Perhaps the most important element of FI is purpose. All people who have mastered money start with a powerful purpose, and they end with a higher purpose.
Now, what is your concept of financial independence or freedom? Pause on this for a while. You might like to jot something down. Do you have a time-tested plan to reach it? Do you have a money or wealth machine that can get you there?
Most of us start out answering ‘no’ to all of these questions. That’s ok. In fact, the less we know the better. The more we ‘think we know’, well not so much. Why? Because nearly all of us start out being over confident when it comes to money. We all think our money skills are ‘above average’. This is interesting, because most of us learnt about money and money management in very haphazard ways. The truth is, most of us start out not knowing, and crucially we don’t know ‘what we don’t know’. This confusion comes from a lack of education and psychological issues, such as the Overconfidence Bias. Financial education and psychology also explain key trends, such as rising personal debt and consumerism.
It is true to say, we must master ourselves first, before we can master anything, particularly money.
By Lee Spano, Creatness International www.creatness.com
© Copyright Lee Spano. All rights reserved.