Last Updated on
The # 1 reason people don't have what they want is because they don't know what they want. Clarity always leads to power.
The thing we all want is the power to choose and choice comes from being Financially Free!
Financial Freedom is living the lifestyle you desire without having to work or rely on someone else for money. This is achieved through passive income which is income without trading your time for money. The goal is to earn enough passive income to pay for your lifestyle. When your passive income exceeds your expenses, you are FINANCIALLY FREE! I focus on and specialize in teaching others to achieve Passive Income.
The first step is determining how much money you require per year to life the lifestyle you desire. To figure this amount, write the total amount you require per year and add 50% for inflation and taxes. For example if you require $ 100k / year your number would be $ 150k.
There are two main sources of passive income: Investment Income and Business Income.
Investment income is money working for you. For example if you are getting a 10% ROI (Return on Investment) or Yield you will need one million dollars invested to earn $ 100k / year.
Business income is a business working for you such as Network Marketing (MLM), Internet, Real Estate, Franchising, Distributorships, Laundromats, Vending Machines, Car Washes, Storage Units or any other turn key business.
It is best to have both sources of passive income working for you. If you don't have the money to invest, starting a business can generate the cash to move into investing. If you don't have a million dollars to purchase a franchise, Home Based Businesses are, in my opinion, the best way to generate business income.
One thing all wealthy people have in common is they are EXCELLENT MONEY MANAGERS. From my experience, they are not any smarter and they don't work any harder than most people, they just have a better plan and better money management habits. To become wealthy you must manage money well. Managing money does not mean you lose your freedom. It actually means you increase your freedom.
The plan I'm about share with you is by no means the ONLY plan. There are many plans out there. This just happens to be one that is very easy to follow and most importantly … It gets results! A vital key to managing your money is separating it into different categories or even accounts for specific purposes. All these percentages are flexible, in my opinion, except the Tithe. The percentages are simply guidelines. Forming the habit is more important than the amount. The beautiful thing about the following plan is that it can be applied by someone making $ 25,000 a year all the way up to someone making 25 million a year because it's all based on percentages.
1. Account One: Tithe Account
10% goes into this account. I recommend it's the first 10% and this money goes to places like churches, charities, the homeless, etc.
2. Account Two: Wealth Building Account (WBA)
10% goes into this account. After tithing, it's critical that you PAY YOURSELF FIRST !!! 10% of everything that comes in should go to YOU! If you'll do this you won't find yourself like so many Americans who come to retirement age with nothing to show for all the years they've worked.
This account is used for Starting Businesses, Investments, Mutual Funds, CD's, Real Estate and Stocks. You never spend your WBA money … NEVER … EVER !!! Everyone has heard of the Golden Goose. What did the Golden Goose lay? – Golden Eggs! You can spend the eggs but never kill your goose.
Poor and average people pay everyone else first and only save and invest if they have anything left over. Poor and average believe the reason they work is to earn money to pay for their lifestyle. Wealthy people believe the reason they work is to earn money to invest and create passive income models that will make them financially free.
3. Account Three: Major Purchase Savings Account (MPSA)
10% goes into this account. This money is used for major purchases including unforeseen emergencies like: Cars, Vacations, Weddings, Homes, College, Debt Elimination, Toys, repairs, replacements, etc.
4. Account Four: You Incorporated (You Inc.)
10% of your income goes into this account. This money is used for: Education in the form of Books, CD's, DVD's, Seminars, Personal Coaching, Mentoring, etc.
Make the commitment and get yourself educated. As one of my mentors said, "Working on a JOB will make you a living but working on YOURSELF will make you a fortune." The greatest investment you can make is in yourself. For myself, I was just getting by until I got educated. I have a college degree and I never took a single class from the time I started in kindergarten that taught me how to make and manage money. I had to get that on my own.
Benjamin Franklin said "If you think education is expensive, try ignorance." In the Bible, God said "My people perish for lack of knowledge" and "the meek shall inherit the earth." The meek are the learners.
5. Account Five: Expenses Account (EA)
50% of your income is used for necessities like: Groceries, Utilities, Gas, Mortgages and bills.
If you can't live on 50% of your income, you have two choices. Decrease your expenses or increase your income. You may be one of the millions of people that are financing a lifestyle that you cannot afford. The wealthy always have a plan with their long term goals in mind. The poor and middle class are usually short sighted. They usually choose immediate gratification over Financial Freedom.
6. Account Six: Fun Account (FA)
10% of your income is used for fun and rewarding yourself. If you're not having fun on your journey to financial freedom, you will quit. If you're constantly sacrificing in your life, your heart will grow sick and weary causing you to throw in the towel and give up.
Treat yourself to a round of golf, a trip to the spa, a date night, a concert or weekend getaway. I recommend you spend this money every single month or at least 1/4 of it.
A quick tip on Credit Cards
If you use credit cards you should be using cards that pay you cash back on all your purchases, points or rewards of some kind. This is free money and you're foolish if you're using cards that don't give you some kind of reward. For credit card balances, simply make a call to your cc company and ask for a lower interest rate. Tell your cc company you are going to transfer your balance if they don't lower your rate. If you receive offers with lower interest rates, consider transferring balance to accounts with lower rates. This is easy to do and should be done asap.
A quick tip on Children
Train your children in managing money and they will keep and apply this knowledge all of their lives. You can teach your children the habit of managing money. Children learn best by modeling. Teach your children to divide their money (allowance, gifts, etc) into separate accounts. Most children don't have an Expenses Account but you can implement the other accounts.
Common Fatal Mistakes
Most people make the mistake of thinking they will start managing their money when they get a lot of it. Most don't realize they'll have a lot of money when they start managing it. Anyone, absolutely anyone can become financially free if they work a plan. If you believe this article was valuable … Please pass this on to any and everyone in your email list and everyone you know.
Committed to Your Best,
"Empowering Leaders to Extraordinary Lives"