Why I will be financially free in 5 years
If you know me, then you know that I always have crazy dreams and ambitions. When I was in high school I wanted to get married at 19, I got married at 20. I also wanted to have kids before I’m 23, I’ll have my first baby right after my 22nd birthday. I now have a crazy dream/ambition to be financially free in 5 years. So I plan to be able to retire when I’m 26 years old.
That wouldn’t be so hard if you made more than $100,000 per year, but you don’t. It would also be easier if we didn’t have a baby on the way, but we do. In fact, I plan to achieve this by starting with $20,000 in consumer debt and earning a combined income of about $40,000 per year, before taxes. It’s not much to start with.
I know people who have made over $100,000 in their lifetime (30+ years of work) and are still not financially free. So what makes me think I can do it, when so many other people have failed? Well let me explain why I think I’ll be able to be financially free in just 5 years (by the time I’m 26).
1. I think in terms of cash flow, not net worth
Many investors think in terms of net worth. They want to have a net worth of more than $1,000,000 or if they buy shares for $10,000, they want to sell them a week later for a profit, thus increasing their net worth. On the other hand, I think in terms of cash flow. When I buy something, I don’t care if its value goes up or down, I care about the cash flow it generates.
If I buy a house and it makes me $30 a week then the value goes down 20%, I won’t care as long as it still makes me $30 a week. That’s $30 a week that I don’t have to work hard to earn and it’s money I can live on or reinvest. I’m not trying to ride the real estate market higher and bail out before the crash, I’m trying to generate as much cash flow as possible.
I know this doesn’t seem like a big difference, but many people can’t be financially free because they focus on making money, instead of generating cash flow.
2. I am always learning
You can almost always ask me “What book are you reading right now?” and I will have an answer about some book on money or real estate or stocks that I am reading. You can also ask me “What have you been learning this week?” and I will almost always have an answer for you. I’m always applying myself and I’m always learning more.
The more financially educated I become, the richer I will naturally be. When you know better, you do better, and that creates better results.
I don’t have the financial education right now to be financially free right away. But I have the next 5 years to learn and learn, and all of that knowledge adds up and makes me smarter with money over time. So I know that I have the accumulated knowledge of 5 years of study ahead of me and I know that this knowledge will certainly help me become financially free.
3. I am not only willing to take risks, I want to take risks to learn
Many people are too afraid of losing money that they never make money. A true investor seeks to learn something from every trade he makes. I am not afraid of risk and I know that by taking risks and taking steps of faith you learn. As long as I learn from every risk I take, I can make a lot of money in the long run.
If I go into a property business and end up losing $50,000, then I’ll be a little upset, but I’ll be fine with it as long as I learn something. It may cost me $50,000 now, but that learning experience will probably earn me millions in the future.
4. Having financial intelligence attracts money and people with money
Having financial intelligence attracts money and people with money. Maybe I’ve been studying money completely for 2-3 months and I’m already attracting people with a lot of wealth, because I know what I’m talking about. Many people have a lot of money but don’t know what to do with it. Some inherited it some got lucky so they are really good at their jobs but most of them know nothing about investing and making your money work for you.
Financial intelligence is the intelligence to use money to gain more freedom and happiness for oneself and others. This is usually accomplished by making money work harder for you, so you can earn more and work less. I know how to find positively oriented properties, most people don’t. I know how to leverage money from banks to increase ROI, most people don’t. I know the basics of tax law and how to legally earn more and pay less tax and most people don’t. I know how to make money work more so you can work less, and people don’t.
Knowing what I know naturally attracts money. Everyone is afraid and greedy when it comes to money. My knowledge taps into your natural greed for more money (which isn’t always a bad thing) and reduces your fear of risk (because I’m educated in what I’m doing). So even though we only earn a combined income of $40,000 per year, we can attract much more than that thanks to my financial intelligence.
5. I will use leverage
Leverage is basically doing less with more. I plan to use the leverage of other people’s money and other people’s time to become rich. Starting with other people’s money, I will use money from banks to buy my investments. You could make a 10% down payment and the bank will pay the remaining 90%. My tenants will then pay all my expenses and neither the bank nor my tenants will make any profit on the investment. I pay 10% and get 100% of the profit. So if I put $10,000 into a property that’s worth $100,000 and the tenant pays my expenses. If that property goes up 5% I earn $5,000, which is 50%/year of my initial investment.
Leverage can significantly increase your return on investment and that is why I will be able to be financially free in 5 years, because I will use leverage to earn more with less.
6. I love the game
I really enjoy the game of money. I enjoy learning about money, I enjoy using money, I enjoy investing money. I enjoy business, corporations, investments, property, stocks, and anything else that has to do with money. Some people play poker as their game, some people play golf as their game. Money is my game, I love it and I want to win.
My love for the game pushes me to learn more and be better, it pushes me to practice and it pushes me to be good at it. The love of the game will push me hard until I am financially free, then it will push me further to get better and better.
7. Know my ‘why’
I sat down and talked to a few people about their investments. I always ask the question “Why do you want to invest?” The funny thing is that most people don’t have a clear answer to that question. I have a clear answer to my why and that clear answer drives my investment decisions. My why is:
So that I can have all the free time I want to spend with my family, and so that I can have a platform from which to talk about people’s lives.
I want to be financially free so I don’t have to work, but I can spend time with my wife and children. I also want to have a lot of money because having a lot of money automatically makes people want to listen to you. If I were a billionaire, you would want to hear what I have to say because everyone wants to be rich. By becoming wealthy, I then have a platform to speak into people’s lives and cause change for the better.