Achieving Financial Freedom
I was getting my haircut last week and I noticed a sign on my barber's mirror - he will no longer be there starting in September. His place is one of the most popular barber shops in town so it seemed kind of odd that he would close up shop. I asked him where he was going and if he was selling his business.
He did sell it and he planned to become a corrections officer. I was completely shocked. Wow! What a change in professions.
At nearly the age of 40, he felt he needed to move on and get another job with better benefits just to hopefully retire in another 20 years. His reasons were most because of the pension.
My Goal is Financial Freedom
I recently asked the difference between Financial Independence and Financial Freedom. As my barber spoke more about his plans, it made me think about the idea of Financial Independence.
Now don't get me wrong, I have absolutely nothing against his new profession. I'm a military guy as you know, and I look at us as being on the same team. But, he probably earned a lot more than I did in his 20's and now he's looking for a new profession so he can retire in 20 years. I definitely earned a lot less in my 20's, but now I don't need to work anymore.
This example really illustrates my point that reaching financial independence isn't about how much you earn, but instead it's about your mindset. I really feel bad for the person who is changing professions and signing on to another 20 years in a new career, just to be able to stop working some day.
I believe 100% that achieving financial independence is entirely about one's mindset... Even writing that, I still feel like one piece of the puzzle is missing.
Why Financial Freedom is so Important
I write most articles in one sitting, then go back and edit them the next day. This article has taken me several days over the course of two weeks. I start writing and then I start thinking and reading...then the article never gets done.
For some reason I couldn't put my finger on exactly what I wanted to say. I was missing some piece that needed to be in here.
I could write fifty articles about Financial Independence - it's an easy topic to write about. I wanted to write about Financial Freedom and it's a bit harder. I know generally what I feel about the topic, but conveying it is hard.
I was reading through some partially finished articles, ideas, thoughts, and other things that I keep as drafts on my site. I found this gem:
Then I realized that this is what I was missing. I was pointing out the trick is to earn money where money is worth more, and spend it where things cost less. The only way to do that is through investing and achieving the ultimate goal of financial freedom. A job can never achieve this.
And this is exactly why Financial Freedom is so important. You can retire on a much smaller income once you give up the things that tie you down here, and go spend your money somewhere that you have vastly more purchasing power.
You see, the average salary here is around $50,000. In a nice city in China an alright wage is under $1,000 per month or $12,000 per year. It's really quite a bit less than this, but I'm going on the high side for argument's sake.
So, if there was some way you could earn your 4k per month but retire and live in a nice city in China, or Portugal or Central America or wherever, you would be living like a king.
To illustrate my point further, when I was traveling in China this year, I read an article that said the top 1% of income earners in that city were filing taxes with earnings over the $40-50k range. You'd literally be in the 1%!
The same rules apply in the U.S.
If you could make passive income to replace your NYC salary, then move upstate or to a suburb, you'd effectively be doing the same thing. We all know $100k salary in LA is like earning $40k in the fly-over states.
So we can apply this idea domestically as well.
How I'm achieving my goal of being financially free
Well, I can't write a how-to yet because it's still a journey. For now, I have drastically cut my spending in order to save way more. I've cut nearly $2,000 per month in budgeted spending so far (I'll follow up on that one).
I've made moves to purchase more property and pull more rent out of what I already have.
I'm also mentally preparing by changing my mindset about what is 'necessary' and what isn't.
It's still a work in progress.