I remember when I first understood the concept of financial freedom.
The lights went on.
I got it. I understood building wealth. I understood saving my money, earning more money, and investing the difference — and how this could compound to a lifetime of prosperity, freedom, choice, abundance, and the ability to stop worrying about money.
I got it, and I wanted it.
Then I pounded sand in frustration for months, YEARS before anything clicked. I wanted so badly to get started, yet I had nowhere to direct those efforts. Sure, I could bring lunch into work and start cooking dinner at home. Sure, I could make little decisions to buy less expensive meals out and forgo things like video games and pricey trips. But forgoing things like nights out as a single guy in my early 20s? Forget it, that’s going to happen. Dates? Gonna happen. Skiing? Gonna happen. Rugby (my favorite hobby)? Gonna happen. Saving significantly more than I was at that point in time? Seemed impossible.
So I tried earning more. I tried working second jobs, tutoring, driving Uber, and all sorts of stuff like that to make a few extra bucks. The problem was that this too cut into my free time, and there’s only so many hours of minimum wage work that you can take after working a full-time job.
So I tried my hand at picking stocks. I tried beating the market. I tried options, short sales, and all that junk. That didn’t work either, and not only did I fail to get average returns, I actually lost money!
The point is that there really wasn’t much I could change to get more “serious” about financial freedom — at least not in the short-term.
But I was wrong.
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What I’d Tell My Former Self
Looking back, I’d tell myself, “Scott, it was THEN that you won this game of money and financial freedom. It was THEN that you mastered the basic fundamentals that have gotten you to where you are today, and those things will get you to where you are going.”
Those frustrating times — that WAS the point where I took control over money. Even if the markets crash, if I get sued, if I lose my job, and if everything goes to hell, I’ll be fine because I understand and want financial freedom. It’s because of that frustration, that desire that I know that even though it felt like I was losing, that it felt like I was getting behind, that’s when I actually got ahead.
In this article, I want to relate to all the folks out there who finally “get it” — the folks who understand financial freedom and what they need to do to start working towards it. This is for all those folks who understand what needs to happen, but can’t figure out how they are ever going to get there. I want to let you know that I know how frustrating this can be for you. You see all the other folks here on BP getting ahead and feel left behind.
You feel like there’s so little you can do and that the little things you can do are so meaningless that it seems laughable to bother. Little things like saving $4 on a Starbucks coffee and drinking the lousy stuff at work. Why bother with that?
If that’s you, then you know that you need to start saving more. You know you need to build passive income and start investing in real, tangible assets that can be harnessed today, not in 30 years.
You know that you need to be frugal. Or get a second job. Or get your real estate license. Or whatever it is you need to do to begin pulling ahead and working towards financial freedom.
It’s not rocket science. In fact, it’s simple.
But Here’s the Problem
You’ve got two kids who need daycare while the two of you work.
You’ve got a nice house, and you aren’t going to sell it.
You’ve got reasonable-ish cars that you might not have bought if you knew what you know now, but selling them doesn’t really make sense and would be a major life alteration.
You’ve got a 401(k) plan. You’ve got home equity. You’ve got a good, maybe even great, job. But you can’t seem to accumulate cash. At least, not enough to make a meaningful difference in your life. Certainly not enough to make a big purchase like a rental property or small business/franchise. You know that it is the result of your past financial decisions, decisions that seemed so right, so normal, so widely accepted in the past that you are in this position of stagnation right now. You accept that and are a little frustrated with your past self.
You know how to build wealth. You know that this is an important goal, and that it’s not hard, it just requires some changes. You know why you want to start down the path towards financial freedom. The problem is just that you don’t know how to start. You don’t want to make drastic changes like selling your house, your cars, or going headlong into playing games with self-directed IRAs or something like that — at least not yet. You don’t want to take out big new debts when you can barely come up with a few hundred extra bucks saved at the end of each month as it is!
Related: The Secret the Rich Understand About Building Wealth (And No, It’s Not All About Cash Flow)
I get it.
And I’ve got some good news for you.
You’ve Already Won
This is the worst part. This is the worst phase of working towards accumulating wealth. It’s all uphill from here, as far as how you feel about your finances. And I’m here to tell you that you aren’t alone in feeling this way. Everyone I know who “gets it” wants to suddenly go off to the races. They feel, terribly, that they are behind, that they could have done it so much better if they knew what they knew now, but that their previous choices have left them stuck.
The good news is that you’ve won when you start to feel like this. You’ve already won, when it feels like you’re losing.
Here’s why — it’s because you’ve turned the corner in your decision-making process. You will explore the options available to accelerate this whole wealth thing. You will seek out opportunities to save. You will ponder the reality of making drastic changes in your life to make drastic financial moves. You may not be able to take action, or you may decide against it, but you’ve already won because you want to and will make gradual changes towards that goal from here on out.
That feeling doesn’t go away. Or at least it won’t until you are well on your way, or even past your destination.
You’ll notice it with little decisions at first:
- You’ll buy some LED light bulbs because you understand that they burn less electricity than regular ones and will save you a few bucks per month.
- You’ll take out the bike for a few errands instead of driving.
- You’ll start cooking healthy and delicious meals, instead of eating out at restaurants.
- You’ll start shopping at Costco, in bulk, to save on routine items you use.
- You’ll gravitate further towards the hobbies you love that are a bit cheaper.
Excellence is a Habit
These types of decisions won’t feel like big wins, but they are. They are great first steps towards building up significant cash to begin investing and building passive wealth. But more importantly, these types of decisions lead to bigger ones:
- When you get that raise and Christmas bonus, that will go straight to the investment fund.
- When the car breaks down, you’ll trade it in for cash, plus a far more economical one.
- Your kids will start to move to public schools, and you will find ways to drastically reduce the cost of providing a loving home and day-to-day situation for them.
- When it comes time to move, you’ll pick a place that is both incredibly affordable and incredibly convenient to your work/school, etc. and invest the equity from your first home intelligently.
- You’ll still take the match on your 401(k), but you’ll gradually begin accelerating the wealth you build in after-tax accounts that you can deploy to your benefit today.
Absolutely none of this will happen overnight. In fact, most of it won’t happen even in the next year. But gradually, your choices will begin to snowball. Gradually, you’ll find yourself stockpiling cash, and you’ll enable yourself to deploy it in real, life-altering investments. Gradually, you’ll find yourself becoming wealthy.
In fact, you’ll go from frustrated to bored — if you are doing it right. You’ll just continuously save more, earn more, and invest the difference. It will go on for years. It’ll start with some stocks and bonds, then a year or two in, you’ll find you have enough to buy some real estate. You’ll then find yourself in position to buy some more. The game never ends, and if you’re doing it right, with a large cash reserve and plenty of cash flow, it may never have any exciting plays. It just becomes bigger and bigger until you decide you are content to let it go on autopilot.
I know it’s frustrating right now and that you want to be in this position of rapidly saving and moving towards financial freedom. I can feel your frustration because I’ve been there.
In fact, pretty much everyone I know who has caught the financial independence bug (and isn’t already a super high earner or poised to receive an inheritance) goes through this. It’s normal. You aren’t doing it wrong. You aren’t behind. You will find yourself in a different position in a year, two, five, and ten.
You’ve already won!
Just listen to that voice in your head that wants you to get towards financial freedom and pounce on the opportunity to alter your lifestyle in ways that advantage both your current lifestyle and put you on the path towards financial freedom.
Then, pounce on opportunities to earn more and invest in great businesses and opportunities.
Trust me, soon enough, you’ll be feeling great about both where you’re headed and in how far you’ve come.
What habits have you adopted into your life to help you reach your goal of financial freedom?
Please share your experiences below with a comment!