The Financial Independence Road Map For Online Entrepreneurs
You guys! I am super excited to be sharing this post with you, because it's something that I'm REALLY passionate about and I wish more entrepreneurs were doing.
It's not blogging, although I'm passionate about blogging too...
And it's not your social mission, although we'll touch on that in this post.
Actually, my passion of the day today is FINANCIAL INDEPENDENCE.
You heard that right. We are going to talk about MONEY! Specifically, I'm going to show you how to take the money you earn in your business and invest it in a way that makes you financially independent much sooner than 65.
Because who wouldn't want to be financially independent? Can you imagine what it would be like to simply live off of the cash your investment dividends pay out every year?
Investing might sound scary right off the bat, but actually it can be very, very simple.
Let me put it this way...
If you've ever wished that there was a money tree in your back yard that kept growing dollar bills for you year after year, well, this is basically it!
Investing in index funds is just about as close to a growing a money tree as you can possibly get in the real world.
And don't worry, I'm not going to recommend any complex investing strategies (in fact, I highly discourage them!)
And I'm DEFINITELY not going to pitch you some too-good-to-be-true rare investing strategy that promises to make you millions overnight. Nope, I don't have any of those.
Instead, we're going to talk about straight-up index investing. No frills, no fuss, no crazy fees, just super easy set-it-and-forget-it index funds.
So if you've ever thought to yourself "Man, I wish I could just spend an unlimited number of days traveling the world and washing elephants in Thailand and checking out amazing coffee in South America..."
Well, this post is for you. So buckle your sassy seat belt, and let's dive in!
1. Cut Your Spending To Grow Your Business
First things first right?
This is one you've probably heard a million times over, BUT! I've actually got a totally different reason for suggesting it, so stay with me.
The first step to financial freedom is to cut some of your unnecessary spending each month.
Aim for at least $250 saved. If you can, try to shave off five or six hundred. When you really get down to the nitty-gritty and go through your bank statements with a fine-tooth comb, you'll be surprised by how much unnecessary spending you do every month.
That goes for me too! When I went through my statements a few months back, I found out we were spending $900 a month on groceries! I nearly had an aneurysm. I mean it's not like we're "foodies" or cheese connoisseurs or whatnot.
So I got that whipped into shape.
Your unnecessary spending could be anything. Groceries, pedicures, a Sephora addiction, maybe you're a tad bit Amazon happy... No judgement! We've all got our things.
So what should you do with that money one you've stopped spending it?
I'm glad you asked! (Or maybe you didn't, but you know I'm going to tell you anyway.)
That brings me to the second step in the financial independence road map.
2. Redirect That Money And Invest It In Your Business
Are you ready for the second step? I hope you are, because this one is FUN.
The second step is to take that money that you're reserving every month and INVEST it in your business's growth and money making capacity. For you this might be hiring a business coach, investing in online courses or memberships, or maybe it will be hiring a virtual assistant to help you 10x your business growth.
The idea is that if you invest in your business's growth upfront, you'll start making big profits much quicker than you otherwise would. And these profits are what drive the next three steps in this process.
Plus, all that stuff is a tax write off. Isn't that great?!
3. Pay Your Social Mission First
Are you surprised I said this?
Come on, I know you're a little surprised. I mean, we all love our social missions but what does that have to do with financial independence?
A few things, actually!
First, if you've told your customers and the world that a portion of your profits go to a specific cause, you really have to honor it.
But there's a second big piece here that directly applies to you becoming financially independent!
I'm going to tell you something that nobody else wants to say out loud.
Are you ready?
Here it is.
Your social mission has a second purpose, and that is as a marketing tool you can leverage to grow your business even faster.
It is something that your customers will love, that they will talk about, that they will spread the word on, and that will effectively increase your profits year-over-year.
Now I'm not saying that for profit businesses only use this as a tactic to make more money. And I'm not saying that this is the only big reason you should take on a social mission. Hell no.
But what I am saying is that increasingly people want to do business with other people and companies who have committed to making the world a better place in a real and tangible way.
And if YOU are that company, guess what! Those people are more likely to want to spend their money with you then with a competitor who doesn't try to make an impact on social issues.
The big takeaway here is that when you take on a social mission for your business, your business will then grow at a much faster rate and thus speed up your path to financial independence as well.
4. Kick Your Debt To The Curb
Ready to tackle the hard part?
I hope you are, because the fourth step on the path to FI is to PAY OFF YOUR DEBT.
Remember that amazing business growth you created when you invested in your business?
That's your dream money. And to get to your dreams, you've gotta first kick the crap out of your debt as fast as possible.
Here's the full, honest truth.
You can't be financially free and live out your days swimming with the dolphins and becoming a kale obsessed yogi when you owe someone. I know, bummer.
So how exactly do you get out of debt anyway?
Well, there are a couple of ways and each of them is hotly debated. A couple of the most popular methods are the avalanche and snowball methods.
The snowball method essentially says that you should pay off your debts in order of the smallest debt up to the largest debt. This method appeals to your behavior by giving you little wins that pump you up as you pay off each small debt and progress towards the larger ones.
Sounds pretty good, right?
The avalanche method takes a more mathematical approach, and insists that you spend the least amount of interest total by paying off your debts from the highest interest rate debt to the lowest interest rate debt.
This kills off your high interest balance quicker than Snowball will, but you can also find yourself in a situation where you're plugging away at a single large balance for months or years before you see it gone. And that could be a little demoralizing.
So which one am I supposed to pick?!
Just my personal opinionated opinion...
I think you should do whatever the heck works for YOU.
Personally? I went with the snowball method and found it super effective for me. BUT! I definitely know some people who are more mathematically inclined than myself (ahem) and who have fared much better using the Avalanche method.
You do you girl. I'm just here for support! (And coffee, but that's besides the point.)
5. Know Your FI Number
Before you even start investing, it's important to know how much money you actually need to live the life you want to live.
You might be surprised to find that that number is lower than you thought it might be!
So, how much money do you actually NEED to travel the world? How much would you need to move out to the countryside and create that homestead for rescue animals you've been dreaming of? What does your dream life cost?
Let me show you how the math works out! (I know, groan.)
When you invest in the stock market, the Standard Withdrawal Rate (which is the rate generally accepted as a safe amount for you to pull out each year while still preserving the principal cash pile) is 4%.
So for example, if you think that you need $40,000 per year or $3,333 per month to do whatever the heck you want to do, then you'll need a million dollars in investments to make that happen.
Because... 4% of a million bucks is $40,000.
The point here is to make sure you start with the goal in mind. You need to know EXACTLY how much money is needed in investments for you to stop working entirely.
But what if you don't want to stop working anytime soon? What if you love your work so much that you intend to do it for most of your life?
That's a great question, and I have a pretty good feeling that many of you heart centered entrepreneurs are going to feel that way! I certainly do.
If that's you too, that's a great thing! If you plan to still maintain an income, you're FI number actually goes down.
For example, if you're hoping to retire early on $70,000 per year, and your business is happily humming along at $50,000 per year, you really only need a half million dollars to make up the other $20,000 per year.
How cool is that?!?
Can you see how your business plays such a huge part in determining not only your reader's lives and those impacted by your social mission, but also your life as well?
Your business is a money making machine, and when used for good, it can positively impact hundreds of thousands or even MILLIONS of people throughout the world.
You have so much potential in you to effect incredibly beautiful change in the world. All you have to do is believe it, harness it, and unleash it on the projects you know will make a difference.
Can you imagine what the world would be like if even 100 entrepreneurs were able to help thousands of people each? What if 10,000 entrepreneurs took part?
This, my friends, is how the world changes.
This is how a small number of people can make the biggest possible difference in their lives and their families lives, and also in the lives of people they will never see or meet.
6. Invest At Least 20% And Increase As Profits Increase
Now we're picking up some steam! If you just paid off your debt, or you didn't have any debt to begin with, girl you freaking rock! Seriously, you're killing it right now.
With a rocking business and no debt, you're just a hop and a skip away from being so free Amsterdam has already put a sign out for you.
This is where you start INVESTING like a mad woman!
I highly recommend you start by investing AT LEAST 20% of your profits. Not to scare the pants off you, but 50%, 60%, or even 70% is the way to go.
I mean when you think about it, the standard suggested investment rate is 15% in order to retire at 65. So if you want to become financially independent sometime in the next 10 or 15 years, you're going to have to up your investment rate dramatically!
Still with me?
I know this is probably something you haven't heard of before. And I'm probably coming across as a crazy woman even suggesting it. But...
You can start small. Dip your toes in, and realize that the water is warm.
As you put more and more money into your investments, your interest grows and compounds over time. It's only a matter of years before your investments have created enough dividend income every year to pay you a yearly salary. (Yeah, its basically free money, every year, forever.)
When this happens, you are set. You have freaking made it. You are free to do just about whatever you want, and if you've made it this far then you've also made a huge impact on the social mission that you committed to when you first started.
Not only that, but in addition to you're crazy awesome investments, you also have a sweet ass business that you love (if I have anything to say about it!), and that makes a difference in the lives of your customers and readers who are gaining so much by learning from you.
This is what I call the Triple Win, and it's my goal for every entrepreneur out there today. A business is a powerful thing, and done right it can serve you, your customers, and the rest of the world.
A well-run and thoughtful business can give you a sense of purpose and the financial freedom to do what you want with your life. It can bring the solutions to your customers and readers who desperately need help with whatever it is they're struggling with. And it can funnel hundreds of thousands or millions of dollars into effective solutions to global crises.
THAT is the Triple Win and its exactly what I am pushing YOU to achieve in your business, starting right now.
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