Key Insights That Will Help You See More Possibilities

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Position Yourself on the Time and Wealth Grid

Being wealthy doesn’t happen by accident. It’s a conscious choice you need to make. A person who is financially independent does not work for money. Instead, they organize their finances so their money works for them, generating more income than they spend.

The scourge of modern-day life is many people work so hard to pay for their lifestyle they then have no time to enjoy what they have.

The wage “slaves” are those who work at minimum wage jobs — they have little wealth and must work long hours just to make ends meet. They may even have several jobs.
The unemployed have loads of discretionary time, but little or no assets.
Employees trade their time for money. They work hard to earn a decent wage and do so their entire lives.
Business owners have plenty of wealth but usually no discretionary time with which to enjoy their assets. They are consumed by their work and keep on acquiring more lifesteyle assets, even though they will never use them.
A person who is financially independent has money and the time to enjoy it. He or she works, not because they need to, but because they enjoy what they do. They then use their wealth as a means to an end to live a fulfilling life rather than getting caught up in owning more and more.

It’s important, every once in a while, to pause and think about where you currently are on the wealth/time grid. In terms of leading a happy, balanced life, financial independence is clearly the optimum goal to have.

Invest Your Time Actively and Your Money Passively

In a nutshell, this is how you become financially independent. The real accumulation of wealth begins whenever you start realizing the true value of your time and learns how to invest it effectively for long-term returns.

Strangely, the overwhelming majority of people do the opposite — they invest their time passively and their money actively. That is, they fail to maintain rigorous control over how their time gets used and then hire brokers to manage their investments for a hefty cut of any profits.

To actively invest your time means to decide where your time will be spent rather than having other people or circumstances dictate how your time should be allocated. In essence, your time should be consciously allocated over four basic areas:

1. Learning — obtaining the know-how and knowledge required.
2. Earning — applying what you know.
3. Living — doing what’s required to be healthy.
4. Giving — to others or the community at large.

Keep in mind how much time you decide to allocate to each of these four areas will vary according to your stage in life. Usually, early years are learning oriented, middle years are earning focused and later years devote more time to giving and living.

Money, on the other hand, should be invested passively — using no-load, low-cost index mutual funds that reflect the performance of the entire stock market. A passive investment plan is very simple:

1. Choose how to allocate your investment funds between domestic stocks, international stocks, bonds and cash. For example, you might decide to allocate your investments:

50% in domestic stocks

20% in international stocks

20% to bonds

10% in cash

2. Buy no-load low-cost index funds that reflect your allocation.

3. Take 10% of every dollar you earn and add it to your investment fund.

4. Check your portfolio every year. Do nothing if it is within 10% of your original allocation. Rebalance it if your allcoation varies more than 10% from your plan.

Keep Wealth Building Simple

Simplicity is the key to wealth building. Use the 80/20 Rule to manage your time and compound interest (the Rule of y72) to earn financial freedom. Instead of earning to spend, earn to invest and build your $1 million nest egg.

The master key to becoming financially independent or wealthy is to keep things as simple as possible. The simplest ideas really are the most effective and powerful. In fact, all you really need are two rules to do well:

1. The 80/20 Rule — which says 80% of your personal effecetiveness will come from 20% of your activities. Therefore, to use your time productively, do those few activities, which ahve a high payoff and ignore all of the other more trivial items.
2. The Rule of 72 — to determine how many years it will take an investment to double in value, divide 72 by the rate of return. An investment paying 8% per year will double every 9 years. Once you understand this rule, you’ll realize how just a small investment made regularly and consistently will grow to a sizeable sum thanks to the benefits of compound interest. And that, in turn, will motivate you to harness this wealth-building engine to become financially independent.

That’s it. Those two rules are literally all you need to know and apply to become wealthy. The more you try to introduce other complexities, the less your returns will be. To maximize your wealth-building program, understand and then apply these two rules conscientiously.

Realize You’re Probably Going to Live Longer

Thanks to advances in the biosciences, your life expectancy is increasing. Plan yourself financially for many years to come.

To make an increased lifespan comfortable, you need to do three things:

1. Get and stay fit.
Resolve to take care of yourself physically and emotionaly so you have the good health to enjoy the opportunity to live longer.

2. Create your own endowment for the future.
Start thinking like a capitalist rather than an employee. Even if you keep your regular job, do some consulting projects or write a book in your spare time. Use that extra income to invest for the future. Resolve to build a retirement nest egg of more than $1 million on the back of the Rule of 72 and the 80/20 Rule. As a ballpark figure, work on the estimate you’ll need a nest egg that is 20-times what you want to receive as an annual retirement income.

3. Understand delayed gratification is not denied gratification.
Most people don’t even think of working hard right now so they can have the bonus of retiring early. Instead, they live from one paycheck to the next. To be certain, it will take some time and effort to achieve financial freedom, but the results will be well worth it. There is a wonderful quality of life attached to being financially independent, so much so that it is well worth foregoing some luxuries today to build a much better tomorrow.

The Millionaire In You