Which leads us onto a first world problem.
What do you do with all that money that is coming in?
How do you set yourself up for a secure future?
My wife Katie and I were starting to think about how we set ourselves up a few years ago and we started reading books about financial independence which led to us reading a lot of blogs about financial independence and eventually flying all the way to Ecuador to go to a Chautauqua (sit around chatting event) to meet some of the gurus of this world.
What does financial independence mean?
Rough definition is that the income from your investments is more than your outgoings. When you have hit this point, you are financially free and you don’t need to work anymore if you don’t want to. This provides security for when you get older or if you want a bit of time off every now and again. Even if you love what you do you still need a holiday every now and again!
I thought it was important to share with you some of the thoughts about this end game and how to get there and what to do.
Let’s start with Robert Kiyosaki’s Quadrants. I read this a long time ago and it took me many years to move around the quadrants.
Employee – This is where you work for someone else.
You turn up to work, you work your hours, you get a salary and you go home. Each month you swap your time for an income. The thing that keeps people working as employees is the need for a steady income, the fear of risk and the comfort of a job.
There are good jobs and there are bad jobs.
Self-Employed – This is where you start to work for yourself.
You go out and find your own customers, you sell something, you deliver a service you work hard for other people and earn money directly. The nice thing about this model is that you can earn as much money as you like, there is no cap set by salary just by how much you can get done and how creative you are. The downside is that if you don’t sell anything, do any business you don’t earn anything. But if you have followed our sales and marketing guides then you should have a steady stream of business coming in!
Business Owner – this is where you have moved from working day to day doing the activity to owning the business or working on the business as Michael Gerber said.
How do you know if you have turned from self-employed to a business?
The Revolver Test.
Place a revolver to the head of the person in charge of the business and pull the trigger,
(please don’t actually do this, it is a thought experiment)
and you see if the business survives!
If the business operates itself without you then you are a business and not self-employed. The aim of a business owner is to make him/herself redundant so the business operates without him or her working in it every day. This way you can work on the business and choose where to focus.
Investor – this is where you take your money and invest it into assets that produce a return for you even if you are not working. Examples of this are equities (stocks and shares), property and other types.
This is what I want you to think about doing with the money that you earn from your business.
Take that money and invest it to create a return for you which then allows you to choose when and how you work. This gives you long term peace of mind, security and safety if anything ever happens and you can’t work anymore. It also allows you to take more time off to be with your kids, go travelling or anything else. You can move to investor from any square. You can take your savings from your job and invest it, you can take you profits from being a sole trader and invest it or you can take your dividends from your business and invest it.
You don’t need to be a business owner to do this.
The key is that you take your excess profits and invest it to create a stable and bright future.
Katie and I have been studying this for some time now and working towards our financial independence and I wanted to share some of the resources and ideas that have helped us on our journey and inspired us.
Read this article by the fabulous Mr Money Mustache:
The shockingly simple maths behind financial independence
The basic principle is that if you take the amount of money you need to live on each year and multiply it by 25 then you have the amount of money you need to invest to retire.
Read the article. It made such a difference to my life when I had a target to aim at!
How to Invest
One of the books that had the biggest impact on our investment strategy was “The Simple Path to Wealth” by JL Collins NH. We met Jim in Ecuador after reading his book and I am so impressed by the clarity and focus with which he explains investing in the stock market.
This changed our entire investment strategy and helped us to become comfortable investing in the stock market. When I was 19 my dad persuaded to invest my life savings (£7,000 at the time) into the stock market in a high-tech fund and I lost all of it. It took me 20 years and many books to get comfortable investing in stocks again.
This is another Jim Collins idea that really has helped me in my business career. Having savings, having investments has meant I have become bolder in my actions, braver and less desperate for work.
When I was starting out I felt like I had to take any business that comes my way because I was desperate for the money. This has changed over the years and now I only take a job if I feel it is right, if I feel like I can add value and if I feel like I will enjoy working with the other people.
Having my investments behind me means I can wait for the work I really want, not be desperate to take every opportunity and to be bolder in my actions and communications.
Start to build up a pile of FU money; not so you can say F You but for the confidence that it gives and the freedom it gives to wait for the projects, jobs and business that you really want to work on!
There are no get quick rich schemes
If you are out there looking for a miracle business formula, a way of making money quick or a shortcut round doing the work. I can tell you I have never found it and I have wasted quite a lot of money in the search for it.
In the end what has worked for me is working hard, building value in my business, delivering value to other people (the true path to wealth), living below my means and then taking that profit investing it into assets that deliver a return.
Stop waiting to find the get rich scheme, stop waiting to find the shortcut and get on with working towards financial independence by creating an income doing something you love.
There is a slight caveat. When you get this business building stuff and investing right it is incredible how fast the money starts to flow. Focus on adding value to other people’s lives, work hard, give it time and space and never give up!
Learn Learn Learn!
The more I learn in life, the more I study, grow and expand the more progress I make. I was set on a learning and development path many years ago when a friend thrust “Notes from a Friend” a book by Anthony Robbins into my hand after I had lost my job and my girlfriend.
That book sent me on a learning journey from book to book, to course and beyond.
I have learned so much from the great people that came before me and I wouldn't be where I am today without these books, courses and podcast.
Here are the ones I would recommend for learning financial independence:
At the PopUp Business School, we always say build a business doing something you love and it will never feel like work. And I truly believe that.
That does mean that you shouldn’t be prudent and invest as you go along.
At any stage your life situation might change, you might have to move, stop working because of health or just get bored of what you are doing and want to try something else.
If along the way whilst you are working on your business, you save and invest it buys you the freedom to do what you want later on in life.
Nothing would make me happier than if you took our support and built a business doing something you loved and then took that profit, invested and created security and freedom to go alongside the work that you love.
The entire PopUp team wish you all the best in your business and please let us know how it is going.
This Step by Step Guide to building a business and being an entrepreneur has been a labour of love for the last year. I hope you have enjoyed it and had as much fun implementing it as we have had working on it for you.
Alan, Simon & The PopUp Team.