I’m not one of the wealthiest members of this community. So, why am I writing an article for financial month?
Because what we (my husband Pat and I) have been able to achieve is FINANCIAL FREEDOM. We have the freedom to do what we want, when we want, where we want, and how we want. I don’t have to work if I don’t want to work. I love what I do and choose to work 20 weeks of the year. Pat works 4 days a week and has a long weekend every weekend.
We have a wonderful life, free from financial stress. We are debt free. We have a good retirement fund, separate substantial “wealth investments” providing passive income, and other savings equivalent to many years worth of living expenses at our current lifestyle.
You don’t have to be a multi-millionaire to be able to do this. Neither does it mean living so frugally that you never do anything. We still travel overseas regularly and haven’t done without anything.
So how did we achieve this on average incomes while also raising our children?
When I was in my 20′s, a wise friend recommended reading a simple book called “The Richest Man in Babylon” by George Samuel Clason. It is a simple story with many tried-and-tested easy lessons for accumulating wealth.
Here are the lessons we learnt from the book.
1. Pay yourself first.
“Gold comes gladly and in increasing quantity to any man
who will put by not less than one-tenth of his earnings
to create an estate for his future and that of his family”.
It is recommended that you put aside 10% of whatever you earn. (Here in Australia there is a system where 10% of what you earn goes to compulsory superannuation – similar to the retirement planning available in the US. You can only retrieve your money when you reach retirement age).
That’s fine, but we were more concerned with accumulating wealth for financial freedom before we reached retirement age. So in addition to this, we decided to put aside 10% of my net income, which we have now increased to 15%. Set up automated transfers for your savings to make sure you pay yourself first.
If you don’t create the habit of putting aside a portion of the money you earn, at the end of your life you could have little or nothing to show for all your years of work. You could be in the 93% of people who end up dependent on some form of assistance and not being able to live how they would like to.
You have to overcome any money illusions you have – such as money is limited. You may be saying, “I only have a certain income, and all these bills have to come out of it. If I try to save money, I won’t have enough to pay the bills.”
There is a powerful metaphysical secret. If you pay yourself first and save, you’ll attract more money. (The other book that was so impactful for me and really explained this principle was “How to Make One Hell of a Profit and Still Get to Heaven” by Dr. John Demartini. I can’t recommend this highly enough!!!)
2. Live below your means.
Pay yourself the 10% first and then you have 90% left to live on.
It’s important to do a budget. We track our monthly earnings and keep a record of all our expenses. You have to know where your money is going. You also have to define the difference between a need and a want. Many of us have the habit of spending more as we earn more. It is best to maintain your current expense level and tuck any extra money you earn into savings. Controlling expenditures means living below your means, and hence accumulating wealth faster.
Being debt free is important. Certain debt is understandable. Few people have the money to write a cheque for a house. Borrowing money to start a business many also be acceptable, but borrowing money for other reasons is probably a mistake. When you owe somebody money, they have power over you. You have to go to work, even if you don’t want to, because you have to pay back your debt.
We certainly use credit cards, but are careful to pay it off each month before we have to pay any interest. You don’t want to still be paying off the credit card debt for the holiday you took last summer, the pair of expensive shoes, or the Christmas presents your kids no longer play with.
We live in a society of “I want it now” and we just use credit to get it. In our grandparents day that wasn’t possible. You had to save for things and if you didn’t have the money, you didn’t get it. As simple as that. It is this sort of discipline we need to apply to get financial freedom.
The greater you value wealth, the more disciplined you’ll be.
3. Make your money work for you
Obviously we want to invest this money and take advantage of compounding interest. Get some advice if you don’t know much about investing.
As suggested in Dr. Demartini’s book, we use a pyramid of investments:
Every level of investment from the first up has at least the amount of income you make in 2 months. The first level is just placed in an easily accessible account. The next level is something like a term deposit, or highly rated bonds. The levels go up with higher returns and some level of risk. The point is that you don’t put your money straight into stocks until you have these levels in place.
When a level of your investment pyramid is full, leave it alone and go on to the next, but allow the interest in each one to accumulate there.
Until you manage money wisely, don’t expect more money to manage.
4. No risky investments.
5. Your home is a big expense.
A lot of people think it is an asset, but it is actually an expense. It does not produce any passive income and in fact also requires maintenance. Many people buy big homes that really stretch their resources and feel financial stress with the mortgage repayments. The lesson here is to live below your means and buy a home you can comfortably afford.
Even though we could afford a home twice as much as our current home, we are happy. It is in a location we like, has enough space, and we are very comfortable. We have easily paid it off. That’s the other important thing – pay off your mortgage as soon as possible.
Some people will advise you to put all your extra money into the mortgage. I believe you need to do that as well as start saving. It is important to not only become debt free, but also to simultaneously build wealth. Savings has a positive psychological effect.
6. Have a retirement plan.
As I mentioned there is a compulsory 10% of earnings diverted to retirement savings (I don’t believe that this alone would not be enough for the average person to live in the lifestyle they are accustomed to). We will also have our “wealth investments” that we never touch under any circumstances.
Our “wealth investments” are where we put the 10% or 15% off the top. We do not touch this under any circumstances. Its sole purpose is to provide financial independence.
Financial independence is generally used to describe the state of having enough personal wealth to live, without having to actively work to sustain your lifestyle. For financially independent people, their assets generate income that is greater than their expenses. It doesn’t matter how old or young someone is or how much money they have or make. If they can generate enough money to meet their needs from sources other than their primary occupation, then they have achieved financial independence. In other words, enough money to meet all your needs whether you work or not.
To some people financial independence might mean mansions, private jets and luxury cars. To others it might simply mean having a comfortable home, time, and resources to enjoy their interests and not being forced to work at a job they dislike just to pay the bills.
It is this that allows us to work as little as we do. When we retire we will use these funds.
7. Invest in yourself
The best way we can increase our earnings is to invest in ourselves. Become a master at what you do. Over the years I have attended innumerable seminars, done lots of study, and lots of personal growth things too. This has helped me to be the best possible version of me, and I believe others see that in too. You feel more confident and naturally attract the right people, places, and things to you.
Obviously everyone reading this feels the same, as you have all invested in yourselves by doing Lifebook.
Until you value yourself, don’t expect others to.
8. Track your wealth
You need to know where you stand financially. This can be a tough exercise but you have to face the truth of how you earn and spend your money in order to know where you are going. There is a big difference between wealthy people and those who are not – wealthy people know their net worth, while the poor do not pay particular attention nor care at all about tracking their assets and liabilities. In order for us to develop a plan to be wealthy, we need to learn how to track our wealth so that we may know where we want to go, and create a plan to get there.
When I wanted to start my own business this is the book that influenced me tremendously “How to Make One Hell of a Profit and Still Get to Heaven” by Dr John Demartini.
By applying what I learnt here I was able to open a brand new chiropractic office and go from no patients to seeing 2.5 times what the average Australian chiropractor sees in just seven weeks from opening. This obviously had a huge impact on my finances.
These are the most important keys I learnt from this awesome book:
* The secret of Be-Do-Have. How am I showing up? Who am I being, and how does that affect what I do and ultimately what I have?
* How to discover my true vision and what I love to do.
* What having financial freedom means to me.
* The principle of fair exchange and why I have to pay myself first.
* The power of certainty, love, gratitude, appreciation, and presence.
* How to value myself more, and how this affects my net worth.
* A crucial factor of growing your self-worth is loving what you do. Unless you feel you’re making a meaningful contribution to the world, you’re unlikely to allow yourself to receive great rewards for your time here.
* If you take responsibility for your life and ask quality questions about how to fulfil it, you become a magnet for opportunities. *People and money are irresistibly drawn to energy, enthusiasm, and certainty.
* The importance of having a cushion in your business equivalent to 2 to 3 months of earnings in liquid capital. This means you won’t be subject to your emotions – elated if you have a really high profit or depressed if you don’t earn much in a day or week.
* With this cushion in place, you’ll be less reactive and more able to stay centered and follow the wealth-building principles. It also means you’re not coming from a place of desperation, and can choose who you want to work with.
* Dr. Demartini’s formula for business explosion:
- Know your business purpose and objectives.
- Organize your financial house.
- Focus on high priorities.
- Fill your mind with what you’d love and allow no idle time.
- Know your costs, set your fees, and stick to them.
- Continually raise your standards and your fees.
- Organize your place of business so it’s clean, efficient, and beautiful.
- Throw away anything that doesn’t serve your priorities, and throw away anything you wear that doesn’t make you feel like a multimillionaire.
- Put your heart into your business.
- Treat your business with love.
So it doesn’t matter where you are at this point in time, or how old or young you are. The important thing is that you get started.
It’s a simple fact that those who plan their lives, their careers, and their finances go further and end up with more life and wealth than those who don’t. Sounds like reason enough to me!!!