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Nightingale-Conant presents John Cummuta

The Myths & Realities of Achieving FINANCIAL INDEPENDENCE

Financial Independence.

What exactly does it mean? Well, Webster's Dictionary defines the terms this way:

Financial:
Pertaining to the science of managing money.

Independence:
Freedom from assistance by others.

So financial independence means the ability to manage your money in such a way that you have sufficient funds to live your chosen lifestyle without assistance from others. In other words, enough money to meet all your needs whether you work or not, because a job is really assistance from someone else — your employer.

Notice that this definition doesn't mention amounts of money or the symbols of having money that we often attach to financial independence. To some people financial independence might mean yachts, mansions, and expensive foreign cars; while to others it might simply mean never having to worry about bills again — knowing they will always have a comfortable home and the time and resources to enjoy their interests and hobbies. For many, not having to work a second job, or maybe just having sufficient income so their spouse could stay home with the children, would constitute financial independence.

What does financial independence mean to you? What would it mean to your life? How would your days and nights be better if you knew you had the resources to meet all your financial obligations for the rest of your life?

The easiest way to begin framing this picture in your mind is to think of a typical day. Not a special day, where you do something you might only do occasionally, but an average day, one that would be filled only with what you'd be doing most days once you've achieved financial independence.

• What time would you wake up?
• Would you be awakened by an alarm clock or by your body's clock?
• Once you arose, what would you do first? Second?
• When and what would you eat?
• What would be the main activity of your day?
• How would you spend the evening?
• What would determine when you went to bed?
• What would your home look like?
• What kind of vehicles would be a part of this typical day?

Spend a few moments in that daydream: in a typical day in your financially independent life.

Now ... are you really ready? Are you ready to make the changes to your present life that will allow you to achieve that kind of independence? After all, if no changes were necessary for you to achieve financial independence, you'd already be there.

If honesty forces you to admit your prospects for true financial independence are cloudy at best, then let's get on with figuring out how to blow those clouds away.

Ralph Waldo Emerson once said, "What lies behind us and what lies before us are small matters compared to what lies within us." What you have to determine is whether financial independence lies within you.

That's right ... you either have what it takes or you don't. You're either made of the stuff that yearns for selfdirection and self-support or you're not. Only you can examine the true you and answer this challenge.

In the late '80s I had to take the same inventory of myself. I had a growing business and was making great money. I had a beautiful house, fancy cars, and a private plane. Yet like most Americans, I was living up to the maximum of my income — and with the help of Uncle Visa and Aunt MasterCard, a little beyond it.

When I stared it right in the face, I knew my life was a house of cards and that when my working years ran out, I'd be in a real mess. Unfortunately, circumstances didn't even allow me that much time. My business was reselling another company's product, and when that company suddenly went out of business, it pulled us down with it.

My personal income dropped from really good to zero, almost overnight. That began the worst two years of my life. Panic-filled days, sleepless nights, relationship stresses, and the seemingly endless scramble to save my home and find another income source.

That nightmarish experience caused me to seek the true path to financial security and freedom. Not the hype baloney you read or hear from the pushers of what I call "The Solution Lies." Those are the people who tell you the answer to your problem is to make zillions of dollars — and you can do that by just buying their magical money-making scheme.

I knew there had to be a realistic system for achieving true financial independence. And I knew that such a system would have rules. Rules that are laws, like gravity.

Well, I found those rules. Once I did, the money map of my life sharpened from an indistinguishable maze to a clear route to my goal. I developed a plan for my life based on these rules and road signs, and I put that plan into action.

One year later, my wife and I had all of our bills other than the house paid off. Less than four years after that, the 26-year balance on the house mortgage was eliminated. And less than five years after that, we began living 100 percent off the proceeds from our investments. Working is now optional.

The incredible thing is that we accomplished all of this with the same amount of money we had been bringing home each month all along — our regular paychecks. If we had added more money into the system, we could have been out of debt faster and ended up with even more retirement savings.

In the process, I discovered that many of the central financial principles most people operate under are simply not true. I call these the Myths of Financial Independence. Disabusing yourself of these lies is an absolutely critical step on the road to wealth, freedom, and real peace of mind. I invite you to take that step right now:

Myth #1
You can use money the same way everyone around you uses it — and still end up financially independent.

The United States Department of Health and Human Services regularly conducts an extensive study of what happens to the average worker in this country by the time he or she reaches conventional retirement age (U.S. Department of Health and Human Services study). The pitiful results show that fully 95 percent of the people in this country DO NOT achieve financial independence by age 65, but rather they end up DEPENDENT on the government, or charity, or their families, or they have to keep working until they die. ninety- five percent. That's almost everybody!

These are working people just like you and me, people who went through their lives believing the myth that if they were just good employees and good consumers, they would be rewarded in the end. Instead, most of them end up struggling to survive on a Social Security check and/or a pitifully small pension. It isn't pretty. If you know anyone living on Social Security, visit with that person for a day and see if that's how you want to spend the "Golden Years" of your life.

The truth is inescapable. If you're using money like most Americans — buying things on credit, making monthly payments, trying to put away a few bucks each month, etc. — you're doomed to end up the same way they will: BROKE!

Myth #2
The responsible use of credit can enhance your financial well-being.

This may be the single most dangerous lie told to the American consumer. Only the merchants and the lenders benefit from your using credit. You DO NOT! All credit does for you is raise the price of the things you buy. And if you pay more for everything, over the years you'll be able to buy independence forever. You have to put in the most effort upfront. Then after a while, you can relax into a wonderful lifestyle and spend a lot less time and effort maintaining that lifestyle and income ... giving you time for your loved ones, hobbies, and maybe even dreams you have long since let go.

Reality #3
You must develop and maintain a long-term view.

If you hear yourself saying, "I really should pay off my debts and start building my financial independence fund, but there are a few more things I want first," translate that to, "I want to continue wasting my life, taking no action to build a better future, and I'll risk the consequences later."

If you live only for today's gratification and never really begin building a financially secure future — my estimate is that it'll cost you about $423 in lost future wealth every day you wait!

Reality #4
It takes more than a few weeks to build real financial independence.

My debt-freedom plan took just four years and seven months, and five years later I could live off my investments alone. That may seem pretty fast to you. But it did not happen overnight. I didn't find the goose that lays the golden egg. I just rerouted the money already moving through my life into a plan that allowed it to accumulate for my family's benefit, rather than the benefit of my creditors.

Beware of people telling you it can be done overnight. That's the lack of wisdom that feeds lotteries ... and lotteries are just a tax on people who don't understand statistics.

Just think of what that kind of independence could mean to your life. No more pressure from bills. No risk of losing your home, car, or anything FEWER things than people making the same income as you who pay cash instead of using credit. So using credit will actually diminish your lifestyle, not enhance it. The people using cash will be able to afford a better lifestyle than you.

Consider this: The only true measure of wealth is net worth — how much you own MINUS how much you owe. So owing money on assets you supposedly "own," like your house or car, reduces your net worth, thereby reducing your wealth. The only way to really achieve true financial independence is to own everything in your life and owe nothing. That's real wealth.

Myth #3
Pay yourself first.

The false belief here is that you can carry a load of debt and otherwise use money like everyone else around you, as long as you first put a little aside in some kind of savings or investment each month.

The truth is that you should PAY ALL OF YOUR DEBTS OFF FIRST, and only then begin paying yourself. It's the only way to dramatically accelerate your journey to financial independence.

If you think about this, it just makes sense. When you pay off your debts first, you then need less to live on each month because you're only paying for food, utilities, taxes, insurance, and any other minor expenses, leaving you with a lot of savable money each month. So it will only take months instead of years to save up a sufficient emergency fund. After that, your retirement investments will build rapidly because you're funding them at a high level each month.

Myth #4
You can get out of debt by putting a little extra on each bill each month.

To effectively eliminate your debts, you have to use the military principle of "massing of forces." This means you concentrate all available resources on ONE debt at a time.

This way, you pay the target debt off quickly, thereby recovering its monthly payment, which you will then add to the amount you'll mass against the second debt, and so on.

A quick rule of thumb would be to pay off your debts in order of their outstanding balances, working from the smallest balance debt to the largest.

By doing this, the amount you have available to "invest" in your debts will actually accelerate after each debt is paid off and you recover what used to be its monthly payment.

Targeting debts by interest rate is not generally the best strategy.

Myth #5
You need to learn how to "manage" credit.

You need to learn how to ELIMINATE credit from your life. The idea of "managing credit" is like "managing a drug addiction." There's no such thing as a good way to "manage" something that's damaging to your well-being.

Once you're debt-free, you'll never need credit again. If you want to move up to a better house, you'll just sell the one you own free and clear — maybe take a little additional money out of your swelling investment account — and buy your new house with cash.

That's how it works when you eliminate debt. When you just manage debt, you stay in the 95 percent group along with all the other financial failures.

Myth #6
To be successful, you have to work "smarter not harder."

Everyone I've ever met who has achieved financial independence will tell you that — at least in the early days — you have to work smarter and harder. The price of success must be paid in full, and it must be paid in advance. There are no shortcuts.

This is particularly true if you're going to try to build a business, even a home-based business, as part of your financial independence plan. Building a business takes more work than a job, at least in the beginning. It also offers greater rewards than a job, both financial and emotional. But you should never be fooled into thinking that building a significant revenue stream can be effortless. If you see that kind of promise in a business's advertising literature, they are lying to you!

It takes hard work to achieve financial independence, which is probably one of the primary reasons why 95 percent of people don't do it.

Myth #7
It takes OPM (other people's money) to make money.

I know from experience that this is simply not true. I built a three-time Inc. 500 multimillion-dollar-a-year business starting with less than a $100 investment, working out of a spare bedroom.

The most dangerous result of this myth is when borrowers realize too late that the "other people" you borrowed the money from expect to be paid back — WITH INTEREST! Like most shortcut-to-riches illusions, using borrowed money to build financial independence frequently has the opposite result. It accelerates your financial ruin.

Reality #1
If you're not already financially independent — or well on your way — you must change your financial behavior to succeed.

There are only two ways you can leave this article — changed or resigned. CHOOSE TO CHANGE. It's really that simple.

Reality #2
You have to be willing to put forth effort.

The only place success comes before work is in the dictionary. But you don't have to work hard at achieving financial else, because you'll own it all. No more worrying about the financial implications of life's "what-ifs." Being able to work if you want to, or not work if you don't want to.