Have you ever heard the term “Savers are Losers”?
As sad as I am to admit it, I have to concede that it’s true.
I first encountered this idea in Robert Kiyosaki’s Rich Dad, Poor Dad.
If you haven’t read this book, I HIGHLY recommend you check it out. (It’s available for under $5 on Amazon). This book absolutely opened my eyes to why so many people who work so hard never achieve financial freedom.
Can All the Experts be Wrong?
The assertion that “savers are losers” flies in the face of pretty much all mainstream financial advice, what I call The Rules of the Nearly Wealthy.
Following the Rules of the Nearly Wealthy typically involves getting out of debt, building up an emergency fund and then pouring as much money as possible into qualified retirement plans like IRAs or 401(k)s to prepare for your golden years.
The focus of mainstream financial advice is all about saving: accumulating the biggest pile of money possible. Future income needs are often an afterthought, if it’s thought of at all.
If there is one lesson the average person needed to take away from the financial crisis of 2008-2009, it is that achieving financial freedom following the Rules of the Nearly Wealthy takes an incredible amount of luck.
I don’t know about you but I have no interest in trusting my financial freedom to luck.
Fortunately, there is a much better way.
Finding the Better Way
Earlier this week we talked a bit about Dave Ramsey, a financial coach who teaches the Rules of the Nearly Wealthy exceptionally well. So well that he has helped many thousands of people achieve much greater peace and security in their lives.
At the end of my last article I posed a question: which set of rules does Mr. Ramsey live by? The Rules of the Nearly Wealthy or Truly Wealthy?
Here’s my answer:
Dave is an incredibly wealthy man, and he got there by following the Rules for the Truly Wealthy.
See, Dave didn’t get enormously wealthy by investing in mutual funds in an IRA.
Dave got truly wealthy by creating a business that gushes cash day in and day out.
And therein ladies and gentleman lies the great secret differentiator between the Rules of the Nearly Wealthy and the Rules of the Truly Wealthy: cash flow.
Accumulation vs. Cash Flow
The Rules of the Nearly Wealthy focus on developing a large net worth, i.e. a large pile of money that will be of use someday.
The Rules of the Truly Wealthy focus on developing skills and assets that provide cash flow, i.e. a constant stream of income that is of use today.
This may seem like a subtle difference but it makes all the difference in the world.
A large net worth simply provides a vague idea of what your assets are worth today. It does not tell you how much value they will have someday. Plus, when most of those assets are locked up in retirement accounts with only a few investment options, they are of very minimal utility until you retire.
Cash on the other hand is real. Cash provides flexible options and is available for immediate use today.
Cash isn’t threatened by future rates of inflation and taxation. It is subject to the rates that exist today and as such it is far more valuable than a pile of savings locked away in a retirement account.
Changing Your Focus from Saving to Earning
There are an unlimited number of ways that one can build a portfolio of income producing assets to achieve financial freedom.
Stocks, bonds, commodities, real estate, entrepreneurial businesses; financial freedom doesn’t depend so much on which asset class(es) you choose to invest in.
Rather the key to success is developing consistent and reliable streams of income from your assets.
And the key to developing reliable streams of income is financial education.
Your financial education determines whether you will be able to make the leap from following the Rules of the Nearly Wealthy to following the Rules of the Truly Wealthy.
For example, Dave Ramsey doesn’t teach the Rules of the Nearly Wealthy because he is hypocritical. He focuses so much on them because he knows that that is what his average customer is ready to understand and follow.
Dave does in fact have programs that teach some of the Rules of the Truly Wealthy. But it takes a certain level of education on the part of his customers to be able to use those resources.
The key thing I want you to take away today is that to become financially free you need to do what the financially free do. You need to learn what it takes to be able to follow the Rules of the Truly Wealthy.
Remember that this is not about having a fortune. We aren’t talking about having a huge mansion, a foreign luxury car and a yacht.
Financial freedom is NOT about money or stuff. Financial freedom is about FREEDOM.
It’s about freeing up time from the burden of working to pay for life, so that you can spend your time doing much more worthwhile things.
You can do this! Financial freedom comes in stages, but you can start the journey today if you haven’t already.
The only thing that stands between you and financial freedom is decision, education and action.
I once heard someone say he “lost 100 pounds in a day, it just took his body 6 months to catch up.”
Financial freedom works exactly the same way.
Financial freedom is first achieved in your head. It involves making the decision to do what it takes to become financially free.
Once you’ve made the decision the rest is a matter of time, education and action. It may take 6 months, it may take 20 years before you can fully break away from the 9 to 5 grind.
But if you will make the decision and create a vision for yourself, it is only a matter of time until your vision becomes reality.
Financial freedom involves far more than I intend to cover in Lever Builders.
However, as financial freedom is one of the pillars in your Place to Stand I do want to share some of the concepts and resources that have been key in my own pursuit of financial freedom.
So stay tuned in the weeks ahead as we continue to explore this exciting topic. We’re going to talk more about why savers are losers, what you really need to retire, pursuing financial education, tools/strategies and I’ll try to debunk some common financial myths.