Financial Freedom is a Simple Equation

My son is going though his second bankruptcy. This is a terrible time for him, with financial decisions he wishes he didn’t have to make and moral decisions he knows that his grandfather would abhor. I could feel the pain he was feeling because I too, very often wonder why it is that some people experience financial independence and others do not. It really is a mystery.

How to get financial independence is not a mystery however!

Rather, financial independence is a very simple thing. It is hard work and takes time, but the process is very simple! In fact, financial independence can come from following a very simple plan. All of the books on financial independence can ultimately be boiled down to this basic equation. It is an equation that is as simple as it gets. In fact, it isn't even a multiplication problem, it is an addition equation! And we all learned addition in the first grade! Just as 1 + 1 = 2, so does this powerful yet simple equation add up to real financial independence!

What is this equation? Get ready, your life is about to change forever if you will allow yourself to understand and live by the simplicity of this equation. Here it is:

Smart Decisions + Good Math = Financial Independence

Let's break it down and take a closer look:

Smart Decisions:

Get a solid academic education. You might say, "Okay, I get it, but most of the people on the Forbes 400 never went past high school." So did most of the people on the welfare line! Most people aren't Bill Gates or Sam Walton. Most people who earn from $100,000 to $150,000 a year are college graduates. "But I'm forty! I can't go to college." Yes you can. You will be 44 when you get out and have 21 years of a much better income. The fact is that most good jobs and careers go to those who have educated themselves. It is still the surest way to a long-term larger income. If you still don't want to go to college, see the last paragraph under smart decisions.

Get more training. At the very least go get some training in your specific area of expertise. The promotions will go to those who are the best trained, so become the best trained! Take a course, even if your employer won't pay for it, because eventually they WILL pay you for it!

Work hard. The many high achievers I know personally who have become and are becoming financially independent are hard workers. Every one of them works long hours. They sacrifice for the security they are shooting for and have attained. Yes, everyone gets emails that say, "Financial Independence in 10 hours a week." Let me ask you, have you met anybody like that? I haven't. Not a single one. Even the success stories you here in the get rich quick industries show you that they worked HARD!

Develop yourself. Become a better person. Better people get better jobs and get paid better dollars! Make sure that every day you are becoming a person who is on the growth track, raising yourself to a higher and higher level with each and every passing day! Eventually your development will catch up with you and your income will soar!

Stay out of debt. This is the smartest decision you will ever make. No Debt! If you have one bill to pay every month, your mortgage, that's a debt! But it is an investment with the added benefit of providing me and my family with shelter! There fore, I don’t consider a mortgage a debt. I’m talking about luxury debt for a car, a home entertainment system, or any kind of debt that does not improve your education, therefore building for your future. It is possible to postpone or live without the luxuries today so that you can build your financial freedom.

Own your own business if you can. If don't want to go to college, or did go to college and you just want to control your destiny and finances, the smart decision is to own your own business. Most millionaires in America are the people who own their own businesses. It takes risk, a lot of hard work, and many ups and downs, but owning your business gives you the opportunity to accumulate great wealth, because the profit is all yours.

Good Math:

Spend less than you earn. We learn 1 + 1 = 2 very early on. Eventually, we learn negatives and we learn that 1 – 2 = -1. That seems very simple, right? Yet many people live their lives in such a way that they spend more than their income and destroy their opportunity for long-term financial independence. There are two ways you can make this "good math" work for you. You can increase your income or you can decrease your spending. Increase your income by making the smart decisions listed above. Decrease your spending by making hard choices. One of these two options must be taken if you are going to achieve long-term financial independence.

Invest on a regular basis. To achieve financial independence, you will have to put away money regularly. This is a math principle of simple addition, but most people don't get it. Or if they do understand it, they don't practice it! Whether it is every paycheck, or the first of the month, or quarterly, or however you can do it – simply do it! When you hit 65 years of age, you will be glad you did. And if you put away enough and into the right investments, you may just be thankful a lot sooner than that!

Let your interest accrue. This is compounding and it is powerful! If you earn twelve percent on your money every year, do you know how soon it will be until you have twice as much as you started with? There is an investment rule called “the rule of 72.” That is, divide 72 by what average interest you make and that is how many years it takes to double your money. In this case, at twelve percent, your money doubles every six years! This works because you earn twelve percent on not only the original amount but the interest you earned as well. Start with $100 and the next year you have $112. If you take the $12 out then you will only make twelve percent on $100 again. If you let it accrue, you will make twelve percent on $112. This will cut almost two years off of the time it takes to double!

Where the real power comes in is over longer periods of time. Let's say someone dies and leaves you $25,000 when you are eighteen. You could do any number of things with that money:

1. Buy a snazzy car. This is not a good idea, though most eighteen year-olds would do just this.

2. Invest the money and take out the interest every year. This is nice. You have $3000 disposable income every year. Over forty-two years you make $126,000 for doing nothing and you still have $25,000 in your investment!

3. Here is the real deal! Leave the money alone at twelve percent (about the long-term average for the stock market). At the end of forty-two years you decide to retire and go to your investment summary to see how much you have. You find that your money doubled seven times leaving you with 3.2 million dollars! Can you retire on that? You betcha.

You can achieve financial independence. You can live the life you have always dreamed of. You can have a life where you have enough at all times, especially in the end. It is possible. You just have to make smart decisions and use good math!

To review:

Smart decisions:
· Go to college.
· Get better training.
· Work hard.
· Develop yourself.
· Stay out of debt.
· Own your own business.
Good math:
· Spend less than you earn.
· Investment some money regularly.
· Let your interest accrue.