The Fourth of July is a time to celebrate our independence as a country. Americans became free from tyranny in 1776, and we have never looked back.
But, as an American, are you free? Do you wake up every morning with zero debt and new money flowing into your account?
Chances are you are in debt and struggling to make ends meet. Does that sound like freedom to you? It sure doesn’t to me.
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Last year, I released the inaugural Happy Financial Independence Day book. We are back for part two this year and ready to help you celebrate your freedom by part 3.
The path to wealth. Most people struggle with the question of how to build wealth. The problem is that most people don’t understand wealth.
Wealth is not having a large amount of money in a bank account—this is static wealth. You can also consider this your net worth.
Wealth is having a massive difference between your income and expenses. You have assets to make you money daily—this is functional wealth. You can also call this passive income.
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The difference between income and expenses is cash flow. Having multiple streams of income can lead to massive amounts of cash flow. You can then reinvest your cash flow into more assets to further increase your cash flow.
A quick example. Let’s say you were building your base of assets for ten years. Your portfolio of assets looks like this below.
We have $19,000/month in passive income. Let’s say our expenses are $5,000/month. We have a $12,000/month cash flow. Cash flow allows the rich to get richer.
A Recession vs. USDC
Remember, this is passive income, not actively earned income that you make from a job. We don’t want to work for money; we work for income-producing assets.
High-value people don’t work for $100,000/year; they make $100,000/year passively. This is what true wealth looks like every month.
The rich get richer. So if you have all this income coming in passively, what do you do with your time? You can spend it with friends and family, travel, enjoy hobbies, etc.
The rich get richer because they can also find more assets to add to their collection. While we are off working for $30-40/hour, they look for businesses, stocks, and real estate deals.
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They may add $200/month to their income portfolio a month. But again, that is passive income. Thus, by the end of the year, they may add another $2,000/month to their totals.
Let’s not forget that their other assets also grow in capital appreciation and income. Their real estate goes up in value while rents also increase—the same for dividend stocks. Their businesses gain more ground, producing more income (making them more valuable).
How to get started. Do you see why they are getting richer? They are investing in income-producing assets while we are buying liabilities like cars, RVs, and boats.
However, it’s a new year and another Happy Financial Independence Day! If we aren’t free, we can set the groundwork to be closer to freedom by next year.
USDC vs. Series “I” Bonds
My wife and I became free within two years. In three years (June 2019 to June 2022), we went from struggle-mania of -$77,000 in debt to +$220,000 in a dividend portfolio.
Here are the four steps I wrote about almost 1.5 years ago in the book “4 Steps to Become Rich.”
- Pay down debt
- Lower expenses
- Create multiple streams of income
- Invest in assets
Pay down debt. Debt is what keeps us as In-Debt-ured servants and working hard for money. Pay your debt off as quickly as possible. Start with my Staying Debt-Free at Any Age series (20s, 30s, 40s, 50s, 60s, 70s).
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Lower expenses. You should always live below your means. That translates to looking at your income and living a lifestyle (roughly) 50% of that number. If you make $10,000/month, spend $5,000, for example.
You can reduce your expenses by eliminating student loan debt, cutting automobile loans, using coupons, and avoiding credit cards at all costs.
Create multiple streams of income. Relying on one income stream (most of the time, it’s your job) is risky. You can create income streams from almost anything, as long as you are consistent for 2-5 years.
The average millionaire has seven income streams, so you should slowly aim to add income every year. You can start with renting rooms and investing the cash. Dividends and room rentals give you two income streams right away.
Don’t Gamble with Retirement 7
Check out my How to Create Passive Income series (Beginner, Intermediate, Advanced, For the Average Person) for more on creating income streams.
Invest in assets. The final step is to keep investing in more and more income-producing assets. We don’t know what the future holds, so we must make as much passive income as possible while enjoying our lives, families, and relationships.
I like to use the example of one of your grandchildren who has a disability. Wouldn’t it be nice to supplement their lifestyle by paying for their housing or special needs costs?
You can prepare for the unknown by over-preparing what you do know. We know how to make money in our sleep. Money will solve 90% of your problems and 100% of your problems that don’t involve relationships.
Conclusion. Happy Financial Independence Day!! We may be heading into a recession, but that cannot deter us from our mission.
Preferred Shares vs. Treasury Bonds
What are your financial goals for next 4th of July? How about having 50% less debt or having $100/month in dividend income?
Once you tell yourself “enough is enough,” you become free—instantly. Once you say, “I’m sick and tired of being sick and tired,” you’re free.
Your mindset is the hardest part of getting out of debt, investing, and becoming wealthy. My Become CEO of Yourself series (part 1, part 2, part 3) focuses exclusively on financial mindset. Start there if you are having trouble with limiting beliefs.
Good luck, enjoy your 4th of July, and I will see you next year. Hopefully, we will all be in a better financial situation 365 days from today. Enjoy!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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