investment

Independence Day
Crack the code to financial freedom, and you’ll never have to rely on a pay cheque from your boss again
By Brendan els

I

’m on a quest for the holy Grail. i’m

trying to crack the ultimate code. I’m searching for the answer to an ageold question that could unlock untold wealth and a lifetime of true freedom. That question: how can I become financially independent? As a wealth and risk manager, I think of financial freedom simply as having more than enough money, but not needing to trade all my time for it. Having money without having enough time to live life and enjoy what you love doing is, in my opinion, useless. Financial freedom is about independence, accumulating wealth and never having to rely on a payslip from your employer ever again. And in today’s uncertain job market, it’s a case of being less financially reliant on your employer and more reliant on yourself. Here are the secrets I’ve uncovered – and how you can use them to find your own financial independence.

Retired multimillionaire Curtis Goetz, who made his money investing and climbing the corporate ladder once said: “It ain’t about how much money you make, it’s how much money you don’t owe. I lived by these words my entire life and I have reaped the rewards of personally applying this philosophy.” Every successful business in the world works with a budget, and you should too. Spend less than you earn, and you’ll have money left over at the end of the month. That’s money you can use to make smart investment decisions.

Work less and make more
Why is it that our cultures still reward personal sacrifice instead of personal productivity? More hours at the office means more sacrifice. More sacrifice, we assume, means more self-worth – and in our mind this allows us to justify working ourselves into the ground and never actually getting ahead in the money game. The problem is, we are trading our time for money. And if you’re employed, you are trading your time for a flat pay cheque every month. Therein lies one of the biggest obstacles to becoming financially independent: not knowing how to successfully trade time for the maximum amount of money. The bottom line is that if you’re going to have extra money at the end of the month, you have to make more than you need to break even. I’m going to let you in on a little secret. The truly financially independent don’t trade time for money. That’s what makes the very wealthy so very different to the rest of us. If you run your own business, start automating your processes at the office, sell to better qualified prospects and let other people handle the non-critical issues that fill up your inbox. Start working on your business and be less involved in your business.

Make money and hold onto it
Yeah, yeah. I know you’ve heard this before. But the truth is, unless you have the fundamentals in place, you can make as much money as you like but you will never be truly financially independent. Unless you master the principles of money you will never hold onto it for very long. This is what you need to know: debt is a disease. Understand this, and you’re halfway there. Get rid of your debt as quickly as you can. Stop buying stuff for the sake of it. If you really need things in your life to boost your self-image, spend some money on seeing a shrink and get your issues sorted out. Your reckless spending habits will get in the way of your ability to make and hold onto money. And that’s the whole idea of becoming financially independent, isn’t it? Make money, hold onto it and then make more money.

Justin Hawes, managing director of Scan Display Solutions, suppliers of exhibition services, says: “Running your own business may be a step towards financial independence. Putting structures in place and having a good business model will allow you flexibility during your workday. This will free up your time to pursue other interests. As long as you are simply trading eight to 10 hour days for a salary, you will never get there.” If you are employed, then start investing in yourself – whether that’s furthering your studies, expanding your skill set or even improving your health. This is as important as investing in hard assets or currency. Become the best at what you do. When you have the skills to pay more than the monthly bills, making money will never be an issue – and if making money is easy for you, then becoming financially independent will be even easier. Kristen Hawken, senior recruitment consultant at human resource and recruitment company Search RSA, advises: “Stay ahead by skilling yourself up with current industry courses or by taking on extra responsibilities at work. Start taking a proactive approach towards your own professional development.” You get the idea. Before you can become truly financially independent you need to know what your time is worth – and then trade top dollar for it.

Make money while you sleep
This is the ultimate Time versus Money trade-off: the ability to have little or no input with maximum monetary reward. Consider Google: it’s the perfect example of a business that allows its founders to collect money over and over while they sit on a beach all day. The way I see it, there are only two ways that you can make money while you sleep. You either have to have a large investment
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as with any investment. van Niekerk. My current project. you aren’t going to be earning very much return on a safe investment. how do you start up something while you’re still employed? And how do you buy yourself enough time to get established before you can give up your corporate shackles? Start by looking at what you’re passionate about or what you’re really good at. You need something you can work on in your evenings and weekends. the less you’ll have to rely on somebody else. and provides you with enough income to keep you satisfied while giving you time to explore other opportunities. Woodhouse. www. It’s a great business model – once all the work has been completed upfront. Build that into a business plan.“Persons in formal employment often have a written contract of employment containing an express provision regulating outside work. “I used my expertise to set up a number of Web-based businesses. and hold on even when the going gets tough. Look at a business that you can manage yourself and build it up slowly. R T/ g Be careful that you don’t infringe on your current employment contract. there are pros and cons. low-cost and flexible. If you’re mad about mountain biking. A unit trust investment will give you more access to other asset classes like equities and property.” Once you start generating a small revenue stream. Create your buffer If you’re going to bail on your day job and hit the beach with your surfboard instead. Alternately.investment GettinG rid of your debt. But we’re talking about you becoming less reliant on your employer and more reliant on yourself for money – so the idea is to start investing immediately in some form or another. Start out by getting rid of your debt.” . which does allow you to act quickly if you see an opportunity. Just remember that. stay with selling and hire an accountant to count all the money you make. Stick to what you’re good at. Start a home-based business and take advantage of technology. ongoing maintenance and tax can dent your hopes of becoming a property mogul. municipal rates and taxes. Similarly. employees embarking on a second career must consider and reflect carefully on an activity that might create a conflict of interest. a share portfolio is also a great investment. and then completely non-reliant. Cash in the bank is the safest option to begin with. i S T O c k p H O T O . c O m k T O c S TA O T O . director at specialist employment law firm Perrot. That’s your best investment because it will allow for better cash flow month to month. But a cash account is fairly liquid (it gives you easy access to your money). In most cases it takes a lifetime to accumulate enough wealth to achieve this end goal. that’s your best investment portfolio that simply ticks over and only requires that you manage your money. “This is particularly true in larger enterprises where an employee is prohibited from any other work or activity that might interfere with his or her current employment. solid investment because it offers capital growth (the value of your property increases) and it also offers income streams through rental. provided you understand the risk of investing.” warns Rob Perrott. if you’re retrenched suddenly. quit your day job and never look back. you’ll need a large amount of capital. Write your own pay cheque There is no greater reward than doing it for yourself because. “The Internet is exploding and there are opportunities everywhere. if you keep investing in yourself and if you keep looking for opportunities. m e n ’ s w e a lt h S e b r e M r y r 0 1 0 9 f PTua be 2 200 P H O T O G R A P H s i SU R T k p H l l A E c O m A l l E R y S T O c k . but because investment is based on a risk and reward scale. Look for companies that offer value. The object of investing is to create a situation in the medium to long term where you become less reliant.za. Here I’m talking about a business that operates without you getting involved in its day-to-day running. Even if there is no contractual or policy provision. eight-hours-a-day effort. the business is automated and pretty much runs itself with little or no human intervention. A full-time job is going to limit the amount of hours you can put into a small venture. Unit trusts are easy to manage. The more money you can save. The question is. or you need to create income streams that run on autopilot. But there is a trend. if you’ll pardon the cliche. you’ll soon be on the road towards complete financial self-reliance.co. Matyolo Inc. it’s that financial independence is not an exact science. a cash account will let you draw an income from the By ARTHUR JONES investment overnight without having to worry about foreclosure letters from the bank. on your guaranteed pay cheque from your employer. My advice? Hedging yourself in more than one asset class is the best route to go. If you’re great at selling stuff. so look at a business with low overheads. the sky really is the limit. and combine that with what really gets you ticking. ramp it up slightly or get more involved until you reach a stage when your small venture is starting to look like a full-time job that can pay the bills.” says Gareth Daniell of Webphase Marketing. You need a small business that doesn’t require a full-time. look at starting up a business in that area. Forget the hype about trying to become the best at everything. Property is a good. Fluctuating interest rates. don’t start an accounting business. allows visitors to get online comparative quotes. The bottom line If there’s one thing I’ve learnt as a wealth and risk manager. Then jump in.insurancehound. If you become money smart.