It’s not how much money you make that determines whether you live a life of financial freedom, it’s what you do with it.
In Tony Robbins book, “Money-Master the Game” he tells the story of Theodore Johnson who worked for UPS and never earned more than $14,000 per year. Having a conversation with a senior colleage, Theodore mentioned that he could not save because he didn’t have any spare cash left over each month.
His colleague allegedly pointed out that if he had to find money to pay the taxman or face prison he would most certainly be motivated to find it. He urged Theodore to think of saving and investing as a tax on himself to ensure his future self didn’t end up in a worse situation than prison. Moneyless and homeless. That got Theodore motivated and he managed to carved out 20% of his income each month and consistently invested it until he retired 50 years later with a whopping fortune of $70 million.
On the other hand there are countless stories of celebrities who have made loads of money and still ended up bankrupt. According to the tabloids Michael Jackson was spending $20 to $30 million MORE than he earned in the years before his death. Nicholas Cage had made $150 million in his acting career prior to declaring bankruptcy in 2009. How to lose $150 million? Buy a haunted mansion, a private island, a collection of shrunken heads and spend $276,000 on a skull of a tyrannosaurus Rex!
The list of the fortunate’s unfortunate financial outcomes is endless. What differentiates the financially successfully from the less successful ?
“Spend what is left after saving”, Warren Buffet summed up the first requirement in this quote. Although this seems obvious it is not so easy to implement. When we are starting out in our careers and barely making it paycheck to paycheck it seems an impossible challenge. As we progress in our careers or our businesses and earn more it seems our lifestyle always costs that little bit more than we earn as lifestyle creep sets in and we keep on acquiring all the material trappings of success. It is easier to focus on immediate gratification rather than getting excited about saving and investing for the future. This behaviour keeps us stuck in the unhappy loop of barely scraping through the month and constantly wishing we could earn that amount that will make us happy.
The most empowering action we can take is breaking the cycle of earn and spend by taking control of our money. The simplest way to do this is creating a conscious spending plan. A plan that is consistent with our values and not what we believe society expects of us. Our money flows will become aligned with creating a financially stable future supportive of our goals.
The second requirement is consistency. Building financial freedom is a slow burn. It is simply a persistent and regular contribution to our savings and investing. No bells, whistles and quick wins.
I think of it as pushing a small stone up a snowy mountain. As we push onwards and upwards the stone collects more and more snow and keeps on growing. Eventually we reach the top of the mountain with a gigantic snowball which then rolls down the other side collecting even more snow, totally without us having to do anything. Our asset is now working for us and building more wealth.
The third and undoubtedly most important requirement is an abundant mindset. An abundant mindset acknowledges all the gifts that the universe has bestowed, expresses gratitude for all the mirackes of life and has faith in the limitless possibilities of the universe. When we operate from this expansive mindset we are open to possibilities, expect to find solutions and enjoy every step of the process. It is an open, curious and optimistic approach to life. It is a simple thought pattern to cultivate – if we start by noticing all the things in our lives that we are grateful for. This practise is self fulfilling as the more we notice and celebrate, the more there is to notice.
The journey to where we want to be begins with the first step. If we start where we are now, save what we can and consistently focus on growing our investments we are on the path to financial independence.
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