As someone who retired at 28 with enough passive income to last me the rest of my life without working for another employer, here is the secret to how I quit the rat race 40 years ahead of schedule.
Here is the Financial Freedom Trifecta:
If fully maximized and working simultaneously, these 3 components will accelerate your ability to acquire financial freedom. If ONE component is missing or under-utilized, the speed you can financially retire will be greatly reduced.
Let’s go over the 3 components in detail:
#1. Income Generation. To start, one must generate some sort of cash inflow, most likely through a job at first. Since most people don’t have enough capital, ideas, or the personal skills necessary to become a successful entrepreneur, income from jobs is usually the first step towards financial freedom.
This doesn’t mean you have to go to college, possess an MBA, and work a 9-5.
In fact, debt from education drags net income earning down. Income from plumbing, contracting, tutoring, and other jobs in the service quadrant of DG’s 4 S’s are JUST as valuable and meaningful as roles within the white collar world. In fact, there are lower barriers to entry and higher payout rates in blue-collar jobs rather than traditional white-collar jobs.
You have as much of a chance of retiring as a waitress (I once was) or as a 9-5’er (I once was). Unlike what our parents tell us, it’s not true that you must go to college to “succeed” in life. The reality is that you don’t. In fact, education has blighted many peoples’ lives before theirs have even begun. Just ask the people with trillions of college tuition debt looming over their futures.
Financial freedom doesn’t care what schooling you have or what color collar you toil under.
#2. Optimize Cost of Living (COL). When incomes rise, most people increase their spending habits. They go on bigger and better vacations. They buy (or lease) that BMW and Chanel purse they’ve always wanted. They upgrade to rent a bigger home. They may even buy a house.
This is usually how the rat race starts. The paycheck becomes a crutch to start paying for the acceleration of increasingly rampant consumerism. To reach financial freedom, COL has to be controlled with self-discipline as the antidote. Due to increased capital from #1, one should be able to leverage that capital to do a number of cost reduction measures. For examples, tune into Daily DANDAN Podcast episode 76. Once COL is controlled and minimized, one’s income will now be truly growing.
#3. Lastly, money is useless if you save it. Investing gives passive income earning power to your money. This is what people mean by “having your money work for you”. This means investing a large portion of your income into investments. Of course, investing can be risky, however, it will be almost impossible to become financially free if no amount of risk is taken.
This is where you can pick your poison and increase your level of expertise in certain investment buckets. Whether it’s cryptocurrencies, international stocks, real estate (domestic or international), if you want financial freedom, YOU NEED TO DO THIS.
There is no escaping risk when trying to achieve something that 99% of people worldwide don’t have.
There is only 1% of people who live completely financially free. To become one of the very few, risks have to be taken. The sooner, the more, and the more frequent you challenge yourself to invest, the faster you’ll get to the promised land of freedom.
This trifecta is not easy to master. However, you can take steps today to start increasing your knowledge and behavior patterns to start incorporating principles each leg of this trifecta represents.
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