The Path That Leads to Financial Freedom

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EMPLOYMENT: THE FINANCIAL TRAP

The way most people earn a living is to trade their time for money; whether you stack shelves in a store or perform open heart surgery – you are swapping your time for money.

The amount you are able to trade your time for is contingent on the value you provide; an attorney will often charge more for their unit of time than a janitor – because the service they provide has a higher perceived value.

The challenge, even if you are a highly paid attorney, is that there are only so many hours in the week that you can trade your time for money – and there is a ceiling people are willing to pay.  

This is why the majority of people that are employed, or self-employed are stuck on a financial treadmill where they are having to swap their time for money.  If they stop walking on that treadmill, the money stops, meaning people are having less and less quality of life as they are having to work more and more hours… plus, what happens if they get sick and aren’t able to work!

BUILD ASSETS

The solution to getting off this treadmill is to build assets.  The wealthy are taught not to focus on short term benefit (i.e. monthly salary) but to invest their time and resources into building assets that will mature and provide for them time and time again, in the future.  In many ways this could be compared to the homeowner vs. renter mentality.

When you build an asset, such as a number of properties that you rent out, even though there are a considerable number of financial burdens and responsibilities that come with being a professional landlord such as capital gains tax and conforming to fire regulations,  it’s like planting a fruit tree that will produce fruit each and every year… all you need to do is a little maintenance and watering.

Can you see the difference between someone making $400 per month in profit from each property they own rather than trading their time for money.  Imagine, now, if you had ten or fifty properties within your portfolio. That would be $4,000 to $20,00 per month.

Most importantly, with regard to the above, is that this income is generated passively in that you are not trading your time for money in the conventional sense of being employed on an hourly basis.

USE THE POWER OF LEVERAGE

Think of financial leverage this way.  An author writes a book and makes $1 per book sale.  They may have spent a significant amount of time writing that book, but once it’s published, it’s done – they are no longer swapping their time for money – they have an asset they can leverage time and time again.

Whether the book goes on to sell 100 copies or 100,000 – the income derived from the initial effort required to create this asset will be generated without them having to be physically present and swapping their time for money; hypothetically, they could be making money in their sleep – particularly if the book were to be selling internationally on a platform such as Amazon.  Indeed, they could be lying on a beach in Hawaii!

A further analogy is that of a musician; they put a lot of effort into creating an asset in the form of a song that is then leveraged time and time again.  If an advertiser, for example, wants to use their song they would have to licence the asset in order to use it for their advert – meaning, in broad terms, that each time the advert aired the artist that created the song would be paid!

The film “About A Boy” shows the power of this passive income.  Hugh Grant’s character lives on the royalties of his father’s one hit wonder that continue to generate income in perpetuity.  This is where most people make the mistake; they are trading their time for money they receive instantly… rather than building assets that generate long-standing income in the medium to long term.  This is the core difference in the mindset between an employee or small business owner vs. an investor or big business owner.

When you shift your mindset from that of trading time for money, and instead, focus on building assets – you start walking the path that leads toward financial freedom.  

What is financial freedom?  Having both the time and money to live with freedom.  The path may not be all sunshine and rainbows, indeed, it might be a long hard slog that in the first few years isn’t particularly rewarding, in financial terms – but people that are investing in their future in this way understand they are trading short term pain for long term gain!

DISPELLING A COMMON MYTH

You’ve probably heard the myth that you ‘need money to make money’ particularly when it comes to investing or creating assets.  If you plan to buy a few houses in order to generate rental income from tenants, then yes, that would probably be true – but thanks to the internet, today, someone with hardly any money, credit rating, or access to resources can become financially free.  Afterall, how much money did JK Rowling have when she wrote the first Harry Potter book?  

If you do have some capital behind you, then one of the quickest ways to make money is via the stock market.  Admittedly, it can be somewhat risky, but there are a number of applications and platforms that can help mitigate this risk.  The most important thing to consider with investing is that it can be treated like a lottery, which is totally random and blind – or it can be treated more as a science or art form.  The key point is that you need to gain the correct foundational knowledge and strategic insight to “win” at the stock market.

However, the thing with the stock market is that you do need some money behind you in order to create more money and there’s no guarantee you won’t lose the money you invest.  For this reason, investing in the stock market as a way to secure your financial future is probably not the most viable option.

Today, however, someone with very little in their bank account can make a six figure income within a short period of time by leveraging the power of the internet and in particular, content marketing.  There are thousands of people making big money on YouTube for example, and even more that create a simple online course on a topic they have great knowledge of and sell it via a blog or educational platform such as Udemy.

IN SUMMARY

In summary, the path that leads to financial freedom is to stop trading your time for money and start leveraging assets – be that a property, an online course, or something creative like a book.  Anyone can get started in today’s global digital economy… it’s just about taking that first step and having a leap of faith.

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