TIP 29

PLAY FOR FINANCIAL INDEPENDENCE

       I’ve been rich and I’ve been poor. Believe me, honey, rich is better.

SOPHIE TUCKER

Once you have started setting aside enough savings for a six-month reserve (Tip 27) and have gotten into the habit of saving 20 percent of your income (Tip 28), you may be ready to play for financial independence. Don’t go crazy—I said play. Make this a game and just see what happens. If you haven’t done the previous steps, going for financial independence may seem overwhelming, in which case skip it for now and come back later when you are ready. The game will still be here waiting for you. Financial independence means that you have enough money or revenue streams that you never have to work again. You can live comfortably off the interest. If you work, it is a choice—you do it for the pure joy of it. Now this is a game worth playing. You may have nothing to lose except a load of debt.

The first step is to realize that anyone (yes, this means you!) can play this game. You don’t have to have a huge income, inherit money, be born into wealth, or win the lottery to play this game. Second, decide how much money you really need to be financially independent. Most people tend to overestimate this number and think in terms of millions. But I’m not talking about living a life of glamour. If you lived very frugally or creatively, you could live off the interest of $250,000. This would generate $25,000 a year or $2,083 a month invested at 10 percent. You could live on the interest of $250,000. And if you did any work at all, your lifestyle would go up. If you think this idea is crazy, read the book Your Money or Your Life by Joe Dominguez and Vicki Robin. It will help shift your perspective.

One of my clients figured out that if she and her husband saved $2,000 a month for 15 years, they would be able to retire at age 40 and live on an annual interest income of $30,000. Another client opted for a creative lifestyle, cleverly avoiding high New York City rents by living in his sailboat moored on the upper west side of Manhattan. This enabled him to pursue acting and other creative jobs without financial stress. My colleague, Thomas Leonard, lived and conducted his coaching business from a very plush camper van, keeping his monthly expenses low so he could invest his money in creating CoachU—one of the first coach training programs, which he later sold for millions. If you are willing to think and live outside of the traditional box, you may find that you don’t need as much money as the “expert” financial advisors recommend, and you may find that you are happier because you are living your own life, doing what you love to do. My clients are amazed to discover that once their emotional needs are satisfied and they are living in alignment with their core values, they naturally spend less. So much of our spending can be an attempt to compensate for feeling dissatisfied in life and unhappy in our jobs.

Just by being on the path toward financial independence, you will start attracting better opportunities and more interesting people. You’ll find that you soon have the money to invest in other moneymaking projects. I made an audio program, Irresistible Attraction: A Way of Life, that I would have been reluctant to invest in if I didn’t have the financial reserve already in place. The audio program creates a handy income stream. I did the work once, and now I make a profit every time I sell an audio program. Not only is it a moneymaker, but it has paid off in other ways: people who like the Irresistible Attraction audio program often want to try coaching. The audio program is an inexpensive way for potential clients to get a sense of what coaching has to offer. There is some truth in the saying, “It takes money to make money.” However, it often doesn’t take nearly as much as you think!

Another benefit of having extra money is that you will start thinking bigger than you ever have, and since your thoughts lead your actions—hold onto your hat—you may be in for an exciting ride. Beware of get-rich-quick schemes. Apparently, most people attracted to these have big debts and are often under-earners. That’s what many of these schemes are banking on—the deadly combination of desperation, greed, and ignorance about investing.

Let’s assume that $250,000 is your figure for minimal financial independence. How will you get there? If you created a way to save or earn an extra $100 a day, you’d be there in 10 years and still have weekends off. You could start a sideline business, work part-time in the evenings, get more education or training for a higher-paying job, or cut your expenses by 50 percent and invest the savings. Do a few of the above and get there in record time! This is not rocket science, just consistent savings over time. The operative word here is consistent.

Open a separate savings or low-cost, indexed mutual fund and call it your financial independence account. Even if all you can save now is $10 a day, start playing the financial independence game. More ideas will come to you once you begin. Remember that cutting your expenses is usually the fastest way to start. Most people get fixated on making more money when it is actually much faster and easier to simply cut your expenses. Look at your big-ticket fixed items such as rent, mortgage, and car payments. One of my clients in her early sixties and her husband are selling their large family home and building a smaller one that perfectly meets their needs now that the kids are grown. They will eliminate the last of the mortgage, build the new, smaller house to specification, and still have some money left over to invest. Don’t get trapped into thinking that downsizing means suffering—reducing your costs often improves your quality of life. My client and her husband are thrilled that they won’t have to do so much work to maintain the new home.

Do not worry if you can’t come up with $100 a day right away. It is perfectly okay to start small. If you spend a few dollars a day on eating lunch out, bring your lunch instead and put the money you save in a jar or a “nest egg” at home. Lots of small changes (and small change) add up quickly! Alternatively, you can keep enjoying your coffees and lunches out if you make some big changes, such as downsizing your house or buying a used car instead of a new car. (I’ve never bought a new car.) You might find it easier to make a few big changes that save thousands rather than scrimping on the little things like coffees out. The secret to enjoying saving is to cut out the expenses that don’t give you the greatest joy, enabling you to spend on true pleasures while also saving for the future.

You don’t have to wait until you reach your financial independence goal to start reaping the benefits. Just knowing that you are taking consistent action toward your goal and that you are on the path to financial freedom will dramatically reduce your stress and anxiety. You won’t fear getting old and having to rely on your family to take care of you. You will be calm and secure in the face of crisis knowing that there is a cash reserve on hand. This is essential to attracting the things you want in life. The more money you have, the more opportunities you will attract. You will be more appealing to employers because you don’t need the job—you are doing it because you love it. You have nothing to lose by playing this game and everything to gain.