I read recently that just one in 10 Australians report that they have financial freedom.
It gets worse.
That’s because 9 out of those 10 people who do not have financial freedom do not believe they will ever have financial freedom.
But it gets even worse (if that’s possible).
That is because when you analyse those 9 people many are not on average incomes. Some are on high incomes and in some cases exceptionally high incomes.
So, the logical question to ask is ‘how is that possible?’
I think one of the reasons is because people assume that high income equals wealth. It doesn’t.
So, when I research these things, I found there are many ‘experts’ who will tell you how to get there. I don’t really gravitate to many of them. But there are a few real experts.
Tony Robbins is one such person.
But honestly, what is financial freedom? If you have read my book The Passport to Real Wealth and Financial Freedom, you will find there is no one definition. There are, in fact, many definitions and most do not know what they are. If you do not know what they are, how are you going to get there?
But for most people, financial freedom means being debt-free, living comfortably (but not necessarily being rich), meeting all monthly financial obligations with some money left over, and never having to worry about money.
At the moment, with inflation being super stubborn, high prices, and the cost of housing through the roof, it seems like financial freedom is near impossible.
But Tony Robbins says financial freedom is a possibility when you get someone who can not only give you pointers but also follow what they say themselves.
So here goes.
What is Financial Freedom?
Work out what financial freedom is for you. As I said earlier, in my book, I explain there are various levels of financial freedom. You need to work out what it is for you.
Tony Robbins defines financial freedom as doing what you want — taking an amazing vacation or buying your dream house — without having to worry about your bank balance.
On the other hand, achieving “financial independence” means meeting your financial needs without having to rely on anyone else. You have a steady income and the ability to pay all your bills each month. And you have money left over to save and invest.
Gaining financial independence comes before achieving financial freedom. And that is the bit you need to understand.
Once you have worked out what it is you are trying to achieve it can become easier. Try these ‘tips’ to get there.
1. Pay Off Your Debt
Financial planners will tell you that you should borrow and leverage investments.
That makes sense for investments.
It does not when it comes to your other debts.
I often see fancy cars being bought in businesses that are purchased on debt because either the business or they themselves do not have the funds to pay for it. The justification is that they ‘need it for their business’. Honestly, no business needs a Mercedes to operate. It will still function and operate with a Suzuki Swift.
Such debt I called bad debt. It provides no extra income but costs money in repayments.
Do not get me wrong. If you have read my blogs you know I have my own collection of cars and some are owned by my business. But the rule I have is simple. It must be paid for in cash.
So, eliminating all your debt (especially home loans and other bad debts) as soon as you can is crucial. Debt eats a hole in your wallet and makes it hard to invest so you can have financial freedom.
I hate credit card debt with a vengeance because it is a rip-off with high interest rates. Because of these high rates, it becomes very hard to get out of debt. The quicker you get out of debt, the sooner you can redirect more money towards your savings and investing.
2. Get your Saving Hat On!
If you haven’t already, be sure to allocate at least some of your take-home pay toward your savings each month. It’s best practice to have at least three to six months’ worth of expenses in an emergency fund in the event of a job loss, emergency medical expense or an unexpected home or auto repair.
Many do not think they can save but if you save first (put money away as soon as you receive it) and then spend whatever is left you will be surprised what you can put away.
Start Investing
Historically, investing has been one of the best ways to grow your money and build long-term wealth over time. Even starting small with minimal monthly contributions toward an investment account can help.
If you think your high income is going to give you wealth, then you are living in cloud cuckoo land. We have many medical professionals as clients, and over their careers, they would be in the top 10% of income earners in Australia. And yet many are getting into their early 50s and are now worried if they have even put away.
The 8th Wonder of the World – Compound Interest
The magic of compound interest allows for significant wealth accumulation. If you receive a dividend and reinvest this back in the shares, that dividend becomes an investment. Each dividend after that, you’ll be earning more dividend on the higher investment balance, which includes the previously earned dividend. You end up earning dividends on the dividend, boosting your investments further.
What’s the Number?
I do find it surprising that people want to retire with wealth, but they do not know what figure that wealth should be.
Deciding what your “number” is can help you achieve your financial goals faster because you now have something to aim for.
Your Beliefs About Money with Limit You
Keeping an open mind about money is key.
You might feel like financial freedom (or even financial independence) is impossible because no one in your family has ever achieved it. Or, maybe you don’t feel like you have the knowledge to achieve financial freedom.
If this is you, you are not alone. Remember that you were never taught this stuff, yet it defines your life daily.
Many of us are also subconsciously afraid of money and, in particular, wealth. Many associate wealth negatively and we have beliefs about what having a lot of money means.
During my coaching and business advisory sessions, these unconscious beliefs hold you back, and they need to be lifted. It means reframing your perspective of money and wealth so you don’t hold yourself back from achieving your financial dreams.
Investing and becoming wealthy is step 7, 8 & 9 of our 9 steps to working less, earning more and becoming wealthy. If you would like more information on this, email Hitesh at hitesh@wowadvisors.com.au or Ros at ros@wowadvisor.com.au. Or call us on 07 3161 9548.
