by Eddie Patin
(from the Financial Freedom and Achieving Business Success article series)
For many years now, I’ve been aware of the difference between working your life away and achieving financial freedom. Long ago, I chose the road of financial freedom, even though I didn’t understand it, and I’ve still got a long road ahead of me.
Today, even though our culture seems more educated, and we have an infinite expanse of knowledge waiting at our fingertips, a lot of people still don’t quite grasp the concept that no matter how hard they work as employees now, living their lives, paying their bills, growing their families, and gliding paycheck to paycheck, what’s going to happen if and when they can’t work anymore? When they stop working, the paychecks stop coming in, but bills and expenses go on, and life as they knew it comes to a horrifying stop. And that scenario is for the retired, the injured, or the laid-off (becoming more and more prevalent these days).
And what about the person who hates what they do and just doesn’t want to work anymore? They still have to find a way to pay the bills. Without thinking beyond the popular ‘work for a living’ mentality, the only option is to get another job—which they may or may not enjoy—but a job nonetheless that will eat up their time, keep them away from their family, and leave them with nothing more on the day that job ends than when it began.
Robert Kiyosaki, author of “Rich Dad, Poor Dad”, refers to this as the “Rat Race.” Because that is, essentially, what it is. We are rats, running in a wheel. We make money, we spend money. We go to school, get good grades, go to college, get a job, make a family, buy cars, buy a house, accumulate debt, pay our mortgage payments, have backyard barbeques, work, buy a plasma TV, pay interest, paint the house, spend our paychecks on beer and pizza and braces and new clothes. Trade in the old car; get a new car. And we’re usually just a few paychecks away from financial disaster. Living our lives, but stuck in a financial rut. We run around and around that wheel and never get anywhere. And what happens when we get old and retire? There aren’t any pensions anymore. Do we hope that our kids will simply take care of us? Or the government? Or do we work as Wal-Mart greeters or burger flippers until we’re ninety?
When I was in my early 20’s, I was going to college. I was fretting over doing something that I loved and making little money, or getting an education for something I didn’t enjoy, but would make me a lot of money, so that I could focus on my dreams when I was older. Despite the thought I was putting into my future, all of the options tumbling around in my young mind would have left me stuck in the rat race, never seeing the big picture. I wasn’t aware of investing, or financial literacy, or using my creativity to make my own way. But I knew something was wrong. I had been trained to think in a small box of “go to college, get a good job, and I’ll be set for life.” I could sense a shift in perspective coming, but I didn’t understand it.
The change that was coming was the rejection of the conforming, fearful employee mentality, and the expanding into the other areas of the “Cashflow Quadrant” (which I’ll get into in the next article). My mind knew that the world as I knew it, as I had been taught to know it, didn’t make sense, and my subconscious was reaching for more creative and empowering directions. I found that the only way to live was to seek out financial freedom.
Financial Freedom. It is usually defined as being self-sufficient with finances, being debt-free, perhaps having lots of money to spend, or being retired early with enough money saved up to live out the rest of your life. It means different things to different people, depending on what they want out of life, and the different sort of lifestyles they need to be content.
To me, financial freedom is a fairly simple concept. Imagine the lifestyle you want. Before you go nuts with riches and luxuries, think about what’s really important to you. Money can be very important to people who don’t have money, but it’s really just a means to an end. My ideal lifestyle is rather quaint compared to the stereotypical American dream. Once you’ve got your target lifestyle in mind, financial freedom is about living that lifestyle without having to work. That’s it. You might choose to work, but you’re not required to.
The way to achieve financial freedom is through “positive cashflow”. Everything else stems from there. Positive cashflow means that the money coming in is more than the money going out (to bills, expenses, debt, etc.).
When you work as an employee, you have cashflow coming in through the income from your job. But, when the job goes away, so does the cashflow. So the goal is to get cashflow coming in that isn’t reliant upon your job. Cashflow that is not reliant upon you spending your time to get it.
Time is our most valuable resource, because we only have so much of it. Money comes, and money goes. You can spend money, and always get more money. But when you spend time, it’s gone. So you want to get as much money as possible for as little time spent as possible, so you can use your time for what you really want to do. When you’re financially free, you should be able to live the life you choose without having to spend your time (or at least spending very, very little time) working for it.
So, the goal is to grow your cashflow, and decrease the time spent doing it. In other words, find ways to make money that don’t need you to be there, working by the hour, to get it. There are many ways to do this (more on it when I go into the “Cashflow Quadrant”), including investing (in stocks, businesses, network marketing, or business franchises), or royalties (from books and inventions), real estate (home rentals, shopping center rentals, apartment buildings), and other more creative options.
Bills, expenses, and debt all play a part, too. All of those things take away from your cashflow. If you can reduce your bills and expenses, and systematically eliminate your debt, then that’s less money being paid out monthly to the banks, credit card companies, etc., and more contributing to your positive cashflow.
Once that cashflow from all of your investments (that’s called “multiple streams of income”) is earning enough to pay the bills and give you the lifestyle you desire, you’ve got it! Financial freedom. Then, you don’t have to rely on that day-job. The money comes in from your investments, your businesses, etc., and is enough to pay the bills and your lifestyle expenses while all you have to do is the minimal maintenance to keep them going. Or, at that point, you could take some of the extra money coming in, re-invest it, and make even more, in an ever-increasing positive spiral. At that point, you can sit back and do nothing (if that’s your dream), or you could find what you really want to do with your life and make it happen, now that you have the time and freedom to do it. You could even keep working, if you want to, but not because you HAVE to.
These things are more complicated than I make them sound, of course, but that’s where you’ve got to do your research. Learn all you can, gain experience, and increase your “financial literacy”. That’s the language of money, investing, and business. The things we weren’t taught in school. The more you learn, the more confident you’ll become, and the easier it will be to take the road less traveled by—and enjoy it.
After college, I moved to Las Vegas to pursue a dream. I rented out a room in a house, where I found that my landlord was in the early stages of chasing financial freedom through real estate investing. During that time, in 2002, I was introduced to lots of materials on financial literacy and investing, including the famous “Rich Dad, Poor Dad,” by Robert Kiyosaki. Since then, I’ve read several of his books, bought his game, “Cashflow 101”, and attended an excellent seminar on stocks trading. If you haven’t read “Rich Dad, Poor Dad”, you should. Despite all the hype about it, it really does open the eyes of someone living in the box of the conformist/employee mentality. I’ve also read several other books about trading, financial literacy and freedom, business, and self-empowerment by other authors—all working towards a financial education. It’s all part of the process, and it’s good to read everything you can. Invest in yourself first.
Well, I spent a long time learning about it, and not doing it. It wasn’t until years later, when I quit a ‘secure’ day-job (because I was tired of working for idiots), and tried to start up a personal training business when the mind-set really set in. I wanted to do something productive and be my own boss, to be directly responsible for my own results. And I failed. I failed because I refused to sell my services. I fell into a common trap for personal trainers (“the clients will come to me if they’re serious”), and I constantly justified my bad choices, and the business failed. At that point, my mind was forced to be entrepreneurial to survive, doing home-based personal training where I could, doing computer repair services for individuals and businesses, painting address numbers on curbs for a small charge, and being as creative as I could with business and marketing so that I could pay my bills.
Now, today, in another city, with the knowledge and experience gained from my own forays into business, I am working on my financial freedom. Through investing, business, and intellectual property (book royalties), I am growing my multiple streams of income. I am writing these articles and running these websites so that you, who are also looking for ways to grow your cashflow, could have the opportunity to join the same business opportunities I am involved with, and leave here more knowledgeable and hopefully inspired to grow your cashflow and get out of the rat race.
For more details about the mindsets involved in the rat race, and getting OUT of the rat race, READ ON, as I describe Kiyosaki’s “Cashflow Quadrant”.
By the way, I make a lot of references to the materials written by Robert Kiyosaki and his business. I believe in the sanctity of intellectual property, so I’ll quote where I need quoting, and I won’t try to pretend I created any concepts I didn’t. In fact, if you go to my links / suggested reading page, you can find direct links to his website, and links to purchase his books and board-game, “Cashflow 101”. His books are excellent, if you take the parables with a grain of salt. There is a lot of knowledge to be gleaned from them.
