If you want to know how to become financially independent, then the smart and simple moves in this post will help you do just that. But before we dive into those steps, let’s first cover exactly what becoming financially independent means.
In a nutshell, financial independence ultimately means to be able to live from the income produced from your own personal resources.
In other words, getting to a point financially, where you no longer have to trade your time and effort for the money you need to sustain your day-to-day activities.
If that sounds like the financial independence you’re looking for, then keep reading, because I’ve found a good map. A money map!
The Money MAP
I first learned about becoming financially independent from a book I read on how to become rich years ago.
The premise of that book helped me finally connect the dots on what my geography professors kept yapping about years before when I was still in college.
I had a few professors who would always say….
“It’s all about real estate, It’s all about real estate.”
Every time I’d ask why …. They’d respond…
“Because they’re not making any more of it.”
Eventually, I took the phrase to heart.
It took me a few short years droning along in a cubicle before I would act on the insight. But, I eventually did. I kicked that cubicle job to the curb and dived into the real estate industry to become a real estate agent! After all, my professors did say… “It’s all about Real Estate”.
But, it was a misguided move. What I didn’t understand, was that real money is not made in helping people sell their real estate, no no no no.
The real money is made in the buying and selling of your own real estate. (Sure, some can make good money selling real estate, but it’s not where the wealth is at, and it’s not how you become financially independent.)
Oddly, this is a mistake many people make, but never learn from.
Fortunately for me, the pain of losing money and becoming less and less financially independent forced me to open my eyes.
Unfortunately, many people make just enough money to keep to their grind for years, maybe even decades, before realizing they’ve been on a hamster wheel all along. This happens for agents as well as people working a regular 9-5 all the time. They think that just because they are making money, they are making progress towards early retirement or financial independence.
I lost thousands and thousands of dollars trying to make moves chasing the “big” money as an agent. You could say they were bad moves, but, in reality they were a blessing, because it helped me finally see the light.
It helped me truly learn what moves it really takes to earn financial independence.
And guess what? That’s exactly what I want to share with you, my map. I am going to share what I learned. Why? Because, freedom is better when it can be enjoyed with others.
So here we go, here are a few simple moves you could start making today, to inch you towards becoming financially independent:
HOW TO BECOME FINANCIALLY INDEPENDENT
1. Invest in Real Estate
Once I realized riches come from being an owner of real estate, not a peddler of it, I did all I could to put my hard-earned money away.
I stashed away money as fast as I could, till I could make a real investment in real estate. To accelerate my acquisition of real estate I followed the 70-30 rule. This is what it looks like:
70 % of my income went to living expenses and fun.
30 % went towards saving to invest in real estate.
By following this rule, I was able to make serious progress on my investment goal, while still having some money left over to enjoy my life.
However, if you’re uber-ambitious and willing to work hard, a better savings strategy would look more like this:
40% living expenses (fun is put on hold till your real estate investment goal is reached).
60% towards investment goals.
Once invested in Real Estate, you can switch back to the 70-30 rule.
This is the plan I followed for 3 to 4 years to pay off all my debt, and then started stashing away all my extra money for a down payment. Once I had enough for my down payment, I went into predator mode. I become a stalker of real estate.
I sat and watched the market, and waited for just the right time to buy my own little piece of property.
So, once you acquire the means to pull the trigger on your own investment property, be ready, but not over eager to invest.
2. Don’t Just Invest to Invest, Invest Smart
But don’t just invest to invest, seek to invest smart. If you just buy a piece of property for the sake of owning it, you may accidentally throw away all your hard-earned money.
While saving much of my money, it dawned on me, that so many people were actually losing money in the real estate downturn that was happening at the time.
I didn’t want to become a statistic, so I read a few more books on real estate and got acquainted with market swings and economic cycles.
Understanding a little bit of economics is something you need to do if you ever intend to become financially independent.
Thanks to the research I did, it didn’t take long to realize what makes a piece of property a good deal and what makes one a bad deal.
So, I made up my mind to invest smart, and you should too. Buying smart means resisting the urge to jump in and buy any piece of new real estate that comes onto the market just because you can.
Buying smart also means learning how to spot value when you see it. It means buying low, in an area where property values are historically high.
3. Know When to Sell
After making an initial investment, a day will come when you’ll want to sell. It’s when you sell, that you’ll be able to reap your avalanche of financial success. The money you earn from selling will add to you net-worth and give you extra capital to make bigger and better future investments.
To figure out when the best time to sell is, you must become a student of history. You’ll need to learn that the markets rise and drop in cycles that span a few days, a few months, and a few years.
The more time that passes between each up-turn and down-turn of these cycles, the higher the stakes are for gains and loss.
After sitting on my investment for a few years, I decided to sell. I bought low, and I intended to sell high.
Now, they say timing markets is a crap shoot, but if you pay attention and use your intuition, you can tell when an investment is close to reaching its optimum price point (at least in the short term). For me, the potential for triple digit returns was enough to help me make up my mind to sell.
Some people would choose to hold in such a scenario, aiming for an even stronger return. But, it’s up to you. The longer you hold, the more you can make, but on the flip side, the higher the stakes become that the market can turn, and not in your favor.Now, as an investor in real estate, you’ll want to maximize what you get out of the sale. To do this, you need to make up your mind that you won’t just use any agent for the job.
4. Know ‘Who to Use’ to Sell
If you want to keep more of your hard-earned money, you must do your homework on who is going to sell your assets. Due diligence is essential for safeguarding money.
Here is the best way you do this with real estate. You find the best agent that is most likely to get you the most money from the sale of your property. The key word is “you find”.
You don’t simply rely on an agent your friend or relative suggested. That’s what everyone else is doing, and it will get you what everyone else is getting; Average returns on the sale of their property, instead of maximum returns.
Here is what you should do:
Spend some time analyzing the sales data for the top 20 agents who are making sales in your area. Create a spreadsheet and analyze how many sales each agent has made.
Then, if the information is available to you (some states don’t publish such info freely, like Texas), collect the sales price and the original list price that each agent sold their last few homes for. You can find this from Zillow.com
Then, analyze the list to sales price ratio to see which agents are selling houses closer to the list price. You’ll also want to analyze the length of time it took each agent to sell the property they had listed, the shorter the time-frame, the better.The result of this homework will lead you to the agent that is selling homes closer to their list price, in the shortest amount of time. Finding such an agent will help you keep more of your proceeds on the sale of your home.
No, this is not a guaranteed approach, but, it worked very well for me.
5. Secure Your Money, But Make it Grow
Earning lots of money is never the end of the story. Once you have money, the next challenge is figuring out how to keep it all.
All too often people earn a killing, but either spend it all or lose it all. So please, do not spend your proceeds on “things” that won’t bring money back to you. You can’t become financially independent without your money working for you.
Now, if you want to keep your hard-earned money, you must find a way to secure it.
Here is one simple way to ensure your money continues to earn you more money over time, with minimized risk of loss.
Quick disclaimer: there is always a risk of loss with investing. Hopefully you know that. There’s even a risk of loss with savings accounts, it’s low, but the risk is still there.
To secure your assets in a way that will help you safely become financially independent, all you need to do, is divide your investment money in the following ways:
33.3% in Real Estate
33.3% in Growth Stocks
33.3% in Bonds
Simple, safe, smart.
6. Invest in Digital Real Estate
After gaining a few wins in the game of real estate, it dawned on me, that the internet is a form of real estate too.
The internet has similar qualities as the real estate we buy in the real world.
Much like actual real estate, where there is only a finite amount of space, the internet is finite to the degree that there are users giving existing websites their attention.
Real Estate that is beautiful, unique, or allows for more convenience to people due to its proximity to places people want or need, makes it more valuable, and more valuable real estate always demands a higher price.
And just like real estate, websites that create content or experiences that add value to visitors, attract returning visitors, and the more visitors a site gets, the more valuable the site becomes.
And the great thing about the internet, is that it will always make room for those who find a way to create the best user experience for others.
Growth of Internet Users from 1990 to 2014
At the moment, there are roughly 3.2 billion people across the world using the internet, and this number is only going to increase. The people and companies that are already set up and in the game, will have the advantage when it comes to winning the attention and loyalty of online users. And in case you didn’t know….
Remember this, with physical real estate you are limited by the amount of capital you have available to invest, but with digital real estate, you can literally create the best and most valuable asset with a little effort and a pinch of innovation.
If you’ve got drive and staying power you should invest in digital real estate, because it is one of the smartest moves you can make to become financially independent.
7. Build Perennial Income
Perennial income is income that is permanent, constant, and continually reoccurring. And one of the simplest low-cost ways to add perennial income to your financial game plan, is by publishing either a book or an ebook.
When you create a book, you are creating an asset. So long as it’s a book that adds value to others, and people are willing to buy it, it can become a money-making tool all on its own.
And it’s super simple to do. I said, simple, not easy. But, it’s an option that can open another stream of income for you with a little effort and focus. With every stream of income you get flowing into your bank account, the closer you get to becoming financially independent.
8. Begin Dividend Growth Investing
Becoming financially independent can be accelerated with this simple financial move. It is a financial move that is extremely accessible, and all it requires is for you to intelligently place your money into companies that pay you monthly or quarterly for you to house your money. This approach is known as dividend growth investing.
With this simple strategy, all you do is buy stocks that pay you back in the form of dividends and have been growing those dividends for a significant number of years in the past. Dividend growth investing is all about setting aside some of your money today for an income stream that will continue growing and paying you well into the future. Joseph Carson explains this concept extremely well in this video, watch it here.
More Simple Steps to Become Financially Free
Here is a powerful video that provides a few more simple steps you can take to become financially free. It’s worth watching, because it does a great job making the case why we should all strive to become financially free. Enjoy:
Video Credit: Matt D’Avella (Subscribe Here)
Final Words on How to Become Financially Independent
There is no definite, sure fire, easy way to financial independence. What I’ve shared with you can and will help you become more financially free, but only if you make the effort to apply what you’ve learned.
Don’t mistake these smart moves for an easy button though. Why? Because there are no easy-buttons when it comes to financial independence. Hell, there are no easy-buttons when it comes to life. So, you might as well embrace the challenge.
If you make some of the simple moves laid out for you, and you tattoo the process below into your mind, you can just about guarantee your ability to achieve financial independence.
If You Want to Become Financially Free, Do Not Forget This Map:
Till you reach your aim,
PS – If you truly want to become financially independent someday… these supporting resources can definitely help: