When I was 6 years old, I had no idea what the concept of “a job” was. All I knew was that every single night, this so-called “job” would take my mom away from me. My innocent little mind had no idea why she had to leave for 8 hours at a time.
As I grew older, I began to understand the harsh truth: She really had no other choice. To live in this world cost money and how we were all taught to make money was to trade it for our time.
And as the cost of living goes up, the more hours of our life we have to trade for it.
By the time I went to college, my mom was already working 16 hour days just to make sure that I could attend a proper education.
Thanks to her I was able to do just that. But here was the down side.
I barely ever saw her.
If she wasn’t working then she was sleeping. If she wasn’t sleeping then she was working. Her entire life consisted of only the two and nothing else. She was willing to do whatever it took just to make sure that me and my sister would live a better life.
But all that hard work comes at a price.
I knew deep down it was slowly killing her. She no longer had any time for herself, for her health, or for her family. She was committing spiritual suicide as she was stuck at her job as a nurse, working the day shift AND the night shift just to make ends meet, when all she really wanted was to be with the people she cared about.
Now here’s the thing..
The entire time she made really good money. And because of her, our family was able to stay afloat financially. But what was the point if she had to trade 16 hours of her life just so that we can merely get by?
That didn’t sit well with me. And when I got to the point of being so fed up seeing her super stressed, depressed, and unhappy..
I knew that I had to do something to fix it.
And so began my 3 step journey towards financial freedom. Will it be hard you ask? Absolutely.
But will it be worth it? Most definitely.
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Defining Financial Freedom
Before we can go through the actual steps, let’s first define financial freedom. It is a point where you no longer have to work for money due to the following:
- You have multiple streams of income from different sources coming in
- You have an obnoxious amount of money in the bank and are living off the interest
- You were born into family royalty and never had to work a day in your life and because of that normal peasants like us that only had sticks and our imaginations to play with when we were younger hate your guts
But I digress..
Financial freedom put in more simple terms is:
monthly cost of living < passive income coming in
Now this doesn’t happen overnight. This is going to take years, a whole lot of effort, and several days of crying in confusion. But if you follow this step by step guide, you can accomplish this sooner than you believed.
RECOMMENDED AUDIO BOOK: Tony Robbins Money Master the Game
Step 1: Hit Financial Security
Now before you can even think about hitting financial freedom. Your first goal is to hit financial security. What does it mean to be financially secure?
Income coming in < monthly cost of living
Income coming in = cost of basic needs
If you can find a way to work on your side hustle part time while working full time at your job, and your side hustle covers your basic needs, congrats! You have hit your first step towards financial freedom!
But before you can get there, you need to learn some simple financial concepts.
Do You Manage Your Finances?
Before you can hit financial security, you need to first learn the art of managing your money. Here’s why.
Mike Tyson, a boxing legend worth upwards of $400,000,000, shortly became $ 38 million IN DEBT because he had no idea how to manage his finances.
The reason? Because his cost of living was more than the income that was coming in. But he’s not the only one to blame. Most people are spending more beyond their means. The worst part is, they don’t even know how much it is they are spending until it is too late.
So the first step towards financial freedom is to begin tracking every single expense that you have on a monthly basis. Seriously, try it out for a month. Whenever you swipe your credit card put a note in your phone and add it all up at the end of the month.
You will be surprised just how much you are actually spending.
The goal is to get this number as low as possible so that you can save the rest and make that money work for you in the future steps.
What is the Cost of Your Basic Needs?
Another thing you also want to do is start keeping track of how much you spend for your basic needs
- What is your cost of rent/mortgage?
- What is the cost of utilities?
- How much do you spend on food?
This is the bare minimum you need to survive. And if you can pay for this with an online business or job then you are “financially secure.” The moment you understand this number is the moment things started getting really fun.
For example these were the monthly cost of my basic needs:
- Rent of Apartment and Utilities = ~ $700
- Cost of food = $400
- Total cost of basic needs = ~ $1,100
How to Budget Your Initial Income the Right Way
After initially being stupid about my money in the beginning, I knew that I had to increase my financial literacy. I began reading books by Tony Robbins and T Harv Eker on how to exactly manage my initial cashflow source. What they all recommended is dividing your income into separate financial “buckets.”
Here are the rules of the financial buckets:
- Each bucket is there to be spent on a specific purpose
- You cannot mix income from one bucket and place it in another.
- If you spend all the money in one bucket you cannot get money from the other bucket.
After reading a bunch of books on these “buckets” this is the way I organize mine. I have 3 buckets. One of which is the one that I live off of now while the other two are for my future.
But for now, lets talk about the bucket that is providing for my basic needs and some fun.
This is exactly what T Harv Eker recommends:
- Put 55% of your income into necessities: rent, food, gas, bills, etc.
- 10% in Long-Term Savings for Spending
- 10% for Play
- 10% for Education (books, seminars, coaching)
- 10% in Index Funds (betterment.com)
- 5% for Giving
All of these categories, or “mini buckets,” are organized under the main bucket of providing for my basic needs. I pay myself the minimum amount of salary that can satisfy each one of the percentages.
For most people they can get by with just a $3K-$5K salary before taxes.
And what did I do with the extra income?
I created two other buckets known as my Legacy Buckets.
But more on that later on 🙂
Step 2: Hit Financial Independence
So once your cash flow business continues to grow and you no longer have to worry about a job to provide your current lifestyle, congratulations! You have just hit financial independence:
Income coming in = cost of current lifestyle
Once you’ve hit financial independence, your goal is to now live below your means. Or as the book The Richest Man in Babylon calls it, “Control thy expenditures.” And the best way to do that is to minimize your lifestyle while the money in your legacy buckets continue to grow.
How to Minimize Your Lifestyle
Did you know we don’t need that much to be happy? We really only just need 3 activities.
- An activity that makes you money
- An activity that keeps you healthy
- An activity that keeps you creative
Knowing this, I realized that I could minimize the hell out of my lifestyle while still having an abundance of happiness if I just picked up my belongings and moved to Thailand.
Here’s why I did it:
- As long as I can make money from my laptop, I could work anywhere in the world
- Cost of living in Thailand is a lot cheaper allowing me to eat as much healthy foods as I want while practicing Muay Thai every other day
- There are a bunch of travelers from all over the world that I meet on a daily basis
- I can focus my creativity 100% on this blog and YouTube channel
And here is the biggest reason,
The $1,100, that I was already spending on my basic needs in the U.S., can now have more of it allocated for fun since my cost of living has went down considerably. (My apartment for example is only $250/month lol)
Meaning I was able to do things like:
- Swim with whale sharks
- Jump off of waterfalls
- Fly to a new country every single month
- Eat out every single meal
For A LOT LESS than it would cost in a first world country.
This is powerful because not only will I have money accumulating much more rapidly, I can actually enjoy my life and turn it into the action adventure romantic comedy movie that I always wanted to without worrying about wasting money since everything in Asia is so damn cheap.
How to Avoid Lifestyle Inflation
Remember that example of Mike Tyson that we talked about earlier. This is the reason why he was $38 million in debt.
As shown in a blog post on earlytorise.com, he spent:
- $4.5 million on cars and motorcycles
- $3.4 million on clothes and jewelry
- $7.8 million on “personal expenses”
- $140,000 on two white Bengal tigers
- $125,000 a year for their trainer
- $2 million on a bathtub for his first wife, actress Robin Givens
- $410,000 on a birthday party
- $230,000 on cellphones and pagers during a three-year period from 1995 to 1997.
This is exactly what you don’t want to do with your money. The moment people that don’t have financial literacy gain a considerable amount of income that they aren’t used to, they do dumb shit like this.
That is the number one reason why you see everyone that has won the lottery either broke, depressed or dead within a couple of years of winning it. They have no idea what to do with their money so they just spend it on useless things.
The best way to avoid lifestyle inflation is to stick to living the same salary that you were living off of in the financial security stages of it.
For example for me, any money that I make, I don’t see. I only see my salary that I pay myself on a monthly basis. So whenever I have the urge to buy nice things, I don’t look at my business bank account and only look at my personal income before deciding if I should by it or not.
And since I am technically “an employee” to my business, I also end up getting taxed less as I filed it as an S-Corp LLC (I have no idea what this means but I know its good. If you want more tax advice consult a tax professional or attorney lol)
Diversifying Your Income
The next thing I did in this stage was that I began to diversify my income. The reason for this is I wanted more income streams coming in in order to fill these Legacy Buckets as fast as possible – in the next section you will see why.
From eCommerce, I diversified into the following:
- Affiliate marketing
- Informational Products
- A Book
- Physical Product Sales Funnels
- Other Streams of Passive Income
But here is the important part.
I followed the SAME RULE. Paying myself the MINIMUM salary and putting the rest in the legacy accounts. No matter how much you make, remember the goal with this is long term wealth – not short term gangster rapper money.
Step 3: Hit Absolute Financial Freedom
Now this is the time where you can buy that pony you always wanted or spend $2 million on a bathtub like Mike Tyson did. This is because you have more money coming in from multiple streams of income that you know what to do with.
The best part is, this is all happening while you eat, sleep, and shit. You are still getting paid at this point.
“If you don’t find a way to make money while you sleep, you will work until you die.” – Warren Buffet
The reason because of that is now, instead of trading your time for money, you are making your money work for you.
Every dollar that you now make turns into a slave that will loyally work for you 24/7/365 days a year.
And it is not just because of your income streams that you made from when you diversified your income. This money is coming in because of those secret legacy buckets that I am having you put most of your income in.
What are these legacy buckets?
Well for the time being I only have two legacy buckets:
- One bucket for Multi Family Home Real Estate
- One bucket for investments in my own ideas or someone elses
Legacy Bucket #1 Multi Family Home Real Estate
So why real estate?
“90 percent of the world’s millionaires have been created from: investing in real estate” – thecollegeinvestor.com
Well the thing about real estate, is it is not going anywhere. Where technology can change, the hottest trends can switch, the business that has remained the most consistent since the birth of tribes is real estate.
So all the money that gets placed in this legacy bucket goes straight into finding deals that can return anywhere from 10-20% of the capital that is invested. Now I am not here yet, but my goal is after a couple of more years of traveling and building up my legacy bucket, i’ll go back to the U.S. and focus solely on looking for multi family home deals to park my money – hopefully following in the footsteps of the badass real estate mongol Grant Cardone.
Legacy Bucket #2 Investing in Ideas
Now this is something that inspires the hell out of me. A couple months back I heard this story of Elon Musk.
“My proceeds from the PayPal acquisition were $180 million. I put $100 million in SpaceX, $70m in Tesla, and $10m in Solar City. I had to borrow money for rent.” – Elon Musk
Here is a man, that gave him self no limits. And because of this, has created an impact that will last long after his time.
Now I don’t want to risk it all like he did, but I always thought it would be really cool to create an idea in my mind and use the money I have to bring it into existence. And if that doesn’t work, I could just be like Tim Ferris and focus my time on finding the future Facebook, Uber, or Airbnb – like companies that haven’t been created yet.
Either way, the money that will be in this bucket will be solely used for turning ideas into reality while growing my net worth even further.
BONUS Step: Legacy Wealth
Now if you stay on this path, there will come a point where all the wealth that you created will surpass you. I like to call this legacy wealth: income that will last throughout multiple generations.
Growing up, my family never really had much, and it sucked. When I got into entrepreneurship I always fantasized what it would be like if no one in my family and extended family had to work ever again.
Hopefully they don’t turn into fat, depressed, pieces of shit like what happens to most people that don’t have to work.
Instead, I fantasized what type of impact we could create. Think about it, if all you had was money and time, you can literally influence the world around you and create things that before only existed in your mind.
Its literally mind blowing what legacy wealth can bring.
For example ever wonder what the Kennedy family actually does? Almost absolutely nothing. Since their family line has been practicing the laws of financial freedom for a long time, they now have a fortune that is $1 billion, provides for 30 family members, and defies death and taxes.
But it wasn’t always like that for them. It started a long time ago from one family member that made the decision to preserve his wealth long after he was gone.
The question now is will you be that person that changes the game for your family and future family forever?
Final Thoughts on Financial Freedom
I personally don’t need a lot of money to be happy. What I do care about is gaining as much amazing experiences as possible. But this would have been IMPOSSIBLE for me if I never made my own decision to start my journey towards financial freedom.
Now I am nowhere near creating the “legacy wealth” that I want – that is going to take years and years of my life. But what I can say is that I am proud and excited to be the first in my family to take financial freedom seriously. Not just for me but for everyone I care about.
Right now you may not be where you want to be financially. But making the decision today that enough is enough can cause a chain reaction that will help not only you but everyone you love in the future.
So don’t put it off any longer. Choose one of the cash flow businesses mentioned in this blog post, diversify your income, and begin your journey towards pure passive income today!
Question: What is your current plan towards financial freedom? Leave a comment below!
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