The most wealthy and financially independent people I know realize something that most people don’t.
They realize that wealth—true financial independence—is not found in the amount of money that you have.
That is what most people believe… they think that if they have a lot of money saved that they will have this sense of independence.
And there is some truth to that…accumulating a lot of money is a great accomplishment in this consumer driven society.
However, money itself is not what the most successful people focus on in their pursuit for financial independence.
What does a million dollars mean to you?
If you had one million dollars, what would that represent to you?
I really want you to think about this for a moment. Imagine you have a stack of one hundred dollar bills in front of you totaling one million dollars.
What does it mean to you?
What is it doing for you?
Regardless of what you’re thinking right now, the money itself is useless until you give the money a purpose.
Is your purpose to simply have the stack of money providing you comfort in just knowing it is there? Or is your purpose to have that stack of money filling your checkbook every month with passive income it is generating all by itself.
I want to share with you this simple paradigm shift that I believe could be the most significant money lesson you ever learn.
You see, much of what we have been taught about money is wrong or misguided at the very least.
We are told to save money and are given arbitrary targets to shoot for like accumulating a million dollars by age 65 then retire.
There are many reasons this makes absolutely no sense but that is a discussion for another day.
What I want to concentrate on here is the stack of one hundred dollar bills I had you envision a moment ago.
There are two very important things to understand about your perception of this stack of money.
- If you spend the money, then it is gone forever
- If you put the money to work, it can create more of itself
Ideally, your money is producing money and creating more of it, and having more money is a good thing, right?
BUT there are many misconceptions about what this means and how to do this.
The average person will look to the stock market or use risky investments in an attempt to create more money.
There is a time and place for this approach when you are simply accumulating money. However, when it comes to creating financial independence for yourself, this is equivalent to gambling and is the trap many people unknowingly fall into.
There is a better way, and learning how to put your money to work like the wealthy is what I want to share with you.
A moment ago, I asked you what money represents to you.
Most people would say that there is security in having money, which is true. Life is difficult without having money.
The next question I asked was, what does the money mean to you? Most people would say that it is the hope of having financial freedom and not having to worry about money.
Again, it is something most everyone desires for themselves…the idea of financial freedom is appealing.
The last question I asked was, what is it doing for you? In other words, how is your money providing security and financial freedom?
I really want you to think about what I am asking. You see, simply having money is not enough! The money has to be playing its part in delivering what you desire from it.
A pile of hundred dollar bills may give you a warm and fuzzy feeling but it is not the answer.
This is where many people miss the point of building wealth and fall into the trap of believing that accumulated money is all that is involved with reaching their goal of financial independence.
Cash flow, not just cash
I see it day in and day out when talking with people who have accumulated a significant amount of assets in their retirement accounts.
They have followed the standard advice of saving for retirement to accumulate money for their future.
Yet, when they want to retire they look at their stack of hundred dollar bills and don’t know what to do.
They have the money but the money is not giving them what they need.
What do they need? – INCOME (Another word for income is CASH FLOW.)
They need money flowing to them from their stack of hundred dollar bills. The money is not the answer…it’s not the solution in and of itself.
But there is a problem…and it is a pretty serious problem.
There is this misguided belief that having money flow to them simply means grabbing from the stack of hundred-dollar bills.
They view it as money in the bank. If there is money in the bank and you need money, simply withdraw from the account.
That’s a problem…This process of taking from the stack of hundred dollars bills slowly depletes the stack.
Eventually the money is all gone!
How many times have you heard stories of famous movie stars, athletes and lottery winners having millions of dollars and filing for bankruptcy? Seems impossible until you understand what is happening.
They file for bankruptcy because they spent their stack of money and then went into debt in an attempt to salvage what they believed was their financial freedom.
They believed the stack of money was their freedom and spent the money. The stack of money is not the formula for financial freedom.
Financial independence doesn’t come from the stock market
Financial independence is having a consistent flow of income that is generated from the money…it’s not the money itself.
We want income without taking from the stack.
So, how do you do this?
First of all, stop believing some of the lies you have been told about money your whole life.
One of the beliefs people have is that the stock market will always go up over time and if you take from your stack the growth of the market will replace what was taken.
This is a fairly ridiculous concept considering the fact that the stock market does not always go up.
There are times when it goes down. There are also times when the market is flat or returns very little. So if you take from your stack and the market goes down what happens?
You end up taking a larger percentage of the stack, which compounds the problem and accelerates the depletion of your stack?
We can discus statistical probability, but the truth is that no one knows what the market will do. There is no way to predict its results.
Sequence of returns can be devastating to an income strategy and is not something you can control no matter how smart you are.
In order to keep your stack of hundred-dollar bills, you have to really pay attention to what you have control over. One thing is for sure, you don’t have control of the market.
If we rely on things we cannot control we are leaving our self exposed to the possibility of seeing our stack go away. (No one wants that.)
Financial independence doesn’t come from hoarding money
Now another common belief is at the other end of the spectrum, and is this mindset or fear of losing money that results in basically burying the stack in the back yard.
It is hard to imagine this as a viable income strategy—unless you believe that the money itself is financial independence.
But the reality is that buried money cannot be used. If you dig it up to use some of it, the stack is getting smaller which diminishes the independence you thought you had.
So, this approach isn’t going to deliver the results you are looking for since burying your stack of hundred-dollar bills is not going to create any income.
We have to stop looking at these extremes of focusing on the stack of money and realize there is a better way that most people seem to ignore.
…Everyone except those successful people who have figured this out.
For those who have figured this out, they know where to focus and they keep their attention on it.
They focus on putting their stack of hundred-dollar bills to work for them to create consistent income.
Instead of spending from the stack, they use the stack to create income that can be spent.
If you spend the stack, the stack eventually goes away along with your income, forcing YOU to be the source of income and starting the process all over again.
This defeats the purpose of what financial independence is all about: not having to work to meet your income needs.
Creating an income strategy
You see, the definition of financial independence is having your money work for you to create consistent income instead of you having to work to create income.
If you are only interested in having a stack of hundred-dollar bills then you’ll never experience the financial independence I am talking. You will still have to work to generate income or live in fear of running out of money.
That’s not what I would call being financially independent.
The sooner you realize that money itself is not the answer but the income the money generates is, the sooner you can begin to experience true financial freedom.
If you have successfully accumulated stacks of money in your bank, investment and retirement accounts, then you need to realize that you are only halfway there. There is still work to be done.
You must take the money you have and create predictable streams of income that will deliver financial independence.
What you have done to accumulate money will not be the same method you use to distribute income from your money. It does not work that way and here is why:
An accumulation strategy is not the same as an income strategy.
Don’t be misled to believe that you can save and invest to accumulate money then remain invested as you always have and begin distributing money to yourself.
And I’ll take this a step further; simply reducing your perceived risk from stocks to bond isn’t the answer either.
Risk and Consistency
People have been misled into thinking that investing in the same things but with less risk is the answer, but reducing risk while doing the same thing still carries risk and volatility.
Regardless of whether you have a high-risk portfolio or a low risk portfolio it is all the same method. Investing in a typical stock, bond, ETF or mutual fund leaves you exposed to things outside of your control, which can result in depleting your stack of hundred-dollar bills.
The bottom line is this: the most important thing when it comes to using your money is creating income and having consistency in your:
You cannot confidently rely on your stack of hundred-dollar bills to provide for your income needs without these things.
Otherwise you may find yourself dipping into your stack and ultimately running out of money.
Here is a simple example of what I am talking about…
Think of a chicken. The chicken can provide a meal by producing eggs to eat. This chicken can do this day after day for you.
If you harvest the chicken for a single meal, you no longer have the chicken working for you and have to go out to get another chicken.
Your stack of hundred-dollar bills is the chicken and the income generated from your stack are the eggs.
This is the mindset you have to have around money if you want to experience financial independence for yourself.
Your focus has to be on having your stack of money generate income.
Setting your mindset straight
It’s not gambling your stack in the stock market. Forget about using things such as mutual funds, ETF’s, stocks or bonds.
And it’s not protecting your stack by burying it. Forget about using bank accounts, CD’s or a home safe.
Commit to using programs and strategies that are income generating. Focus on creating and protecting your income.
If you have been following me for a while, you know that my approach to all things relating to money is getting your mindset straight before moving money.
The reason I feel so strongly about this is that there is too much nonsense being taught about chasing returns and accumulating money.
Until you get your mindset straight and realize how you will actually use the money you have, none of this will make any sense.
Once you realize what is important for achieving financial independence, the sooner everything will come into focus for you.
It’s not about rates of return, it’s not about fees, it’s not about picking the best investment, it’s all about cash flow!
There are no short cuts, there are no get rich quick solutions, there is no secret pill, there is only common sense.
Want to learn how this is done? For help implementing this strategy, you can schedule a complimentary consultation with our team.