The Financial Equation that Will Set You Free!
I have a good friend who works in an area of the US that has more than itsshare of poverty. He called me the other day with a very broken heart. Hewas feeling badly for the people around him who simply do not allowthemselves to get set free financially. I could feel the pain he was feelingbecause I too, very often wonder why it is that some people experiencefinancial independence and others do not. It really is a mystery.
But how to get financial independence is not a mystery!
Rather, financial independence is a very simple thing. Truly! It is hardwork and takes time, but the process is very simple! In fact, financialindependence can come from following a very simple plan. All of the books onfinancial independence can ultimately be boiled down to this basic equation. It is an equation that is as simple as it gets. In fact, it isn't even amultiplication problem, it is an addition equation! And we all learnedaddition in the first grade! Just as 1 + 1 = 2, so does this POWERFUL yetSIMPLE equation add up to your financial independence!
What is this equation? Get ready, your life is about to change forever ifyou will allow yourself to understand and live by the simplicity of thisequation. Here it is:
Smart Decisions + Good Math = Financial Independence
Let's break it down and take a closer look. First the Smart Decisions, thenthe Good Math.
Go to college. Get educated. I know that somebody will say, "Yeah but mostof the people on the Forbes 400 never went past high school." Well so didmost of the people on the welfare line! Most people aren't Bill Gates or SamWalton. Most people who earn between $100,000-$150,000 a year are collegegraduates. "But I'm forty! I can't go to college." Yes you can. You will be44 when you get out and have 21 years of a much better income. The fact isthat most good jobs and careers go to those who have educated themselves. Itis still the surest way to a long-term large income. Still don't want to go to college? See the last item under smart decisions.
Get better training. At the very least go get some training in your specificarea of expertise. The promotions will go to those who are the best trained, so become the best trained! Take a course, even if your employer won't payfor it, because eventually they WILL pay you for it!
Work hard. I have found that the many hundreds of high achievers who I knowpersonally who have become and are becoming financially independent are hardworkers. Every one of them works long hours. They sacrifice for the securitythey are shooting for and have attained. I know, we all get emails that say,"Financial Independence in 10 hours a week." Let me ask you, do you knowanybody like that? I don't. No one. Even the success stories you here in theget rich quick industries show you that they worked HARD!
Develop yourself. Become a better person. Better people get better jobs andget paid better dollars! Make sure that every day you are becoming a personwho is on the growth track, raising yourself to a higher and higher levelwith each and every passing day! Eventually your development will catch upwith you and your income will soar!
Stay out of debt. This is the smartest decision you will ever make. NO Debt! You know what? I have ONE bill I have to pay every month. That is mymortgage. But that's a debt! Well, without getting into an argument, I consider it a forced investment with the added benefit of providing me and myfamily with shelter! I do not consider a mortgage a debt. I mean car debt, stereo debt, and consumer debt of all kinds. It is possible. It can be done. And it will provide you with financial freedom!
Own your own business if you can. So you don't want to go to college. Okay. Or maybe you did go to college and you just want to make sure that you makeas much as you can. Well, the smart decision is to own your own business. Most millionaires in America are the people who own their own businesses. Itwill take a lot of risk, a lot of hard work, and many ups and downs, butowning your business gives you the opportunity to accumulate great wealth, because the profit is all yours. There are plenty of opportunities to ownyour own business and I would encourage you to strongly consider thealternative for many reasons, of the best of which is the opportunity toachieve financial independence.
Spend less than you earn. One plus one equals two. We learn that very earlyon. Eventually, we learn negatives and we learn that one minus two equalsnegative one. Simple right? Yet many people live their lives in such a waythat they spend more than their income and destroy their opportunity forlong-term financial independence. There are two things you can do to make this "good math" work for you. Youcan increase your income so that it outpaces your spending, or you candecrease your spending. You increase your income by making the smartdecisions listed above. You decrease your spending by making hard choices. One of these must be done if you are going to achieve the kind of long-termfinancial independence you desire.
Put money away into investment vehicles on a regular basis. If you are goingto achieve financial independence, you will have to put away moneyregularly. This is the math principle of addition. Don't laugh: most peopledon't get this. Or if they do, they don't practice it! Whether it is everypaycheck, or the first of the month, or quarterly, or however you can doit - DO IT! When you hit 65 years of age, you will be glad you did. And ifyou put away enough and into the right investments, you may just be thankfula lot sooner than that!
Let your interest accrue. This is compounding and it is powerful! If youearn twelve percent on your money every year, do you know how soon it willbe until you have twice as much as you started with? At first thought youmay assume that it is one hundred divided by twelve, or eight and a thirdyears. Not true. There is an investment rule that is called the rule of 72.That is, divide 72 by what average interest you make and that is how manyyears it takes to double your money. In this case, at twelve percent, yourmoney doubles every six years! This works because you earn twelve percent onnot only the original amount but the interest you earned as well. Start with $100 and the next year you have $112. If you take the $12 outthen you will only make twelve percent on $100 again. If you let it accrue, you will make twelve percent on $112. This will cut almost two years off ofthe time it takes to double! Where the real power comes in is over longer periods of time. Let's saygrandma dies and leaves you $25,000 when you are eighteen. You can do anynumber of things with that money.
1. Buy a snazzy car. Not a good idea, though most eighteen year-olds would do just this.2. Invest the money and take out the interest every year. This is nice. It throws you $3000 every year and over forty-two years you make $126,000 for doing nothing and you still have $25,000!3. Here is the real deal! You leave the money alone for forty-two years at twelve percent (about the long-term average for the stock market). At the end of that time you decide to retire and go to the investment summary to see how much you have. What do you find? You find that your money doubled seven times and that leaves you with 3.2 million dollars! Can you retire on that? You bet you can.
You can achieve financial independence. You can live the life you havealways dreamed of. You can have a life where you have enough at all times, especially in the end. It is possible. You just have to make smart decisionsand use good math!
As a refresher, here they are again:
Go to college. Get better training. Work hard. Develop yourself. Stay out of debt. Own your own business if you can.
Spend less than you earn. Put money away into investment vehicles on a regular basis. Let your interest accrue.
Chris Widener is a popular speaker and writer as well as the President of Made for Success, a company helping individuals and organizations turn their potential into performance, succeed in every area of their lives and achieve their dreams.