Looking for Freedom?
According to the most recent surveys, 49% of all Americans are living paycheck to paycheck. Millennials are crippled financially by student loan debt that is now a 1.5 billion dollar crisis. Most of our future retirees do not have enough savings for retirement.
The journey to financial freedom is steeper than ever. We get bogged down every month paying lofty home mortgages, car payments, utility bills, student loans, credit cards and so much more. Expenses can add up very quickly, and before we know it, we are trapped in our very own rat race.
Is financial freedom actually possible?
The answer is yes! BUT just like any other thing in our lives that actually mattered, it will take sacrifice and a lot of hard work to make it happen. We need to make a conscious decision to improve our financial position and just take one step at a time. It is all about getting started!
The big question: Where do I start?
The short answer: Saving money!
"It's not how much money you make, but how much money you keep"
-Robert Kiyosaki
I know, this is not the sexiest answer. But, the universal truth is you need money to make money. Investing or business ventures all require capital for you to get started. Don’t worry! I am not going to tell you to stop drinking your Starbucks coffee or to cut coupons from the newspaper to save a few bucks, because these things actually have very little impact on your finances.
A deep dive into your finances should tell you that your 3 biggest expenses are as follows: Housing, Transportation and Food. You should tackle these 3 things first and strive to keep them as low as possible. Here are some ways you can save money:
- Housing. This is typically your biggest expense. This may account for ~30-40% of your monthly expense. The most efficient way to decrease your housing expense is through house hacking. House hacking is a strategy where you buy an investment property with multiple dwelling units (duplex, triplex, quadplex or a single-family home with a mother in law suite ) and use tenant rent to pay your mortgage. Now, if you don’t want the headaches of being a landlord, I have good news! You can always hire a property manager to take care of the property for you! If you implement this strategy, you can eliminate your housing expense entirely. You will be living for free and start to build wealth as your property appreciates in value and tenants pay down your debt every month.
- Transportation. Cost of transportation include car payments, maintenance costs, repairs, and gas. One of the biggest mistakes people make in this department is buying a brand new car. A car is a depreciating asset. Cars lose 60% of their value after the first five years of ownership. The cost of ownership of a 5 year or older car is significantly less because the depreciation curve favors you. So, your bottom line transportation costs will be significantly less when compared to driving a brand new car. For fitness enthusiasts, another way is to try riding a bicycle to and from work! It saves you money, gives you a decent amount of exercise and also helps to protect the environment.
- Food. Learning to cook your own meals is a good way to save money and start to eat healthier. Dining out is expensive. Restaurants on average charge about a 300% markup to be profitable. You do not need to stop eating out altogether, you just can start out by preparing 1 – 2 meals at home per week. This small step will save you ~1600 dollars on average, per year and will multiply the more often you cook at home.
Personal story
I save 50-70% of my hard-earned income using a combination of the techniques outlined above. I have been consistently doing it for the past 6 years now, with the goal of financial freedom. It has not been easy. My weakness – cars. I always liked driving brand new cars, it’s a personal preference that had cost me money. Moreover, I go into cycles of getting the urge to buy a “cool” sports car and convincing myself that I don’t really need it fairly often. My wife helps me a lot to keep me in check.
I have managed to keep it together and so far it has been very rewarding. Using all the capital we saved up, we primarily invest in multifamily real estate properties in Florida.
I am finding a lot of success in buying small apartment buildings. These income producing properties are self-sustaining. The rental income is cash flow positive even after covering all the expenses of owning the property, including mortgage payments, taxes, insurance and professional management. The passive income from the properties will replace the income from our jobs. This gives us options, to do more of what we love, and the opportunity to spend more time with our two adorable kids.
My family is my “why”. They are the reason for all my hard work and sacrifice.
What’s yours?