Set for Life : Dominate Life, Money, and the American Dream

You can set yourself up for life as early as possible and enjoy life on your terms

The American dream, for most people, especially for those in the middle class, means consistency. It means buying a lovely home in a nice neighborhood and having an extraordinary life. It means after a 30–40–year career, we plan to retire using a formula that historically hinges on having saved 10 to 15% of our income and having invested in a retirement vehicle.

Without a plan for the future, you run the risk of working and only reaping little reward when you retire.

The hurdle with this formula is that it forces individuals to work for wage income for the better part of their day, during the best part of their week, throughout the best years of their life. At best, they will retire with a modest amount of wealth, late in life, and get forced to hope it’s enough to last. Those who will achieve early financial freedom must build wealth and acquire assets to produce passive income above what they need to live.

Frugality is the first step in the journey to financial freedom for a median wage earner

Frugality will help you amass your first significant capital. You will do this by focusing heavily on preserving your median income and cutting out spending where it will make the most impact. This kind of wealth–building will make the next phase of wealth creation easy and almost automatic.

Frugality means living on less but only so that you can save up enough to never live on less again.

Individuals seeking early financial freedom must do three things to achieve their goal:

• Accumulate tangible assets that produce financial dividends and appreciate

• Keep eyes open for investment opportunities

• Live as frugal as possible—a lifestyle that passive income can conveniently cover the major expenditure

These three basic concepts are not strange to those who understand the essence of building wealth. But, as many people are interested in making more money and learning to invest, only a few are willing to make the changes necessary to begin saving significantly more by cutting back on their current lifestyles. Some frugal lifestyle changes you can make include:

• Move closer to your workplace so you cut down on money and time you spend commuting daily. If you can negotiate remote work several times a week, great.

• Save some money to start a side business.

• Turn some of your properties (cars, houses, etc.) into income generating assets. Airbnb, Uber, and the likes are great platforms to use for this purpose.

Expenses hold you back from achieving financial freedom

If the average American wants to cut back on spending in a manner that might give them a real chance at reducing the time to financial freedom by decades, they must focus on the most extensive parts of their spending. This is because significant changes are going to have more of an impact than small ones.

Living in a cheap apartment proximal to the workplace is the most important thing you can do to start saving money. No other change will have a more significant impact on your spending, as a typical American, than where you choose to rest your head at night.

The American commute is a costly venture that reduces billions in wealth, damages the environment, and forces good people into spending years of their lives at risk daily behind the wheel. The price of commuting should be reduced or eliminated.

Folks with long commutes are less likely to be happy than folks without long commutes. You could slash the time and money spent on commuting if you got accommodation close to work. Choosing a location and work environment that requires daily use of a vehicle is a choice that can be avoided by moving one’s home or by moving one’s work.

Shortening your commute can make you happier, healthier, and wealthier. It can speed you down the path toward early financial freedom.

It would help if you can save up 50% of your earnings. If you're not there yet, you can make plans for it. You must endeavor to take pride in living frugally, handling your issues, and making decisions that help save you a lot of money each year. This decision will result in a healthier, happier, wealthier, and more exciting life.

Did you know? According to author Scott Trench, the most considerable fixed expense in the average American’s life after housing is their commute.

Stockpile a reserve capable of funding your frugal lifestyle for around a full year

Having saved and acquired an amount of wealth, you must position yourself to take advantage of opportunities and rapidly build the financial runway that will lead you to early financial freedom.

Three initial steps that you should complete if you seek early financial freedom include:

• Set up an emergency fund of $1000 to $2000

• Pay off all “bad debts” and build strong credit, and then

• Build up one year of a financial runway in the form of cash or equivalents

The first $1000 to $2000 in savings provides the financial peace of mind and cushion to avoid the daily expenses and mental discomfort of being broke.

As long as you have unsettled debts, there is no point in building an emergency fund beyond $1000 to $2000. The entire point of the emergency fund in step one is to avoid creating new lousy debt and preserve financial dignity when encountering life’s petty problems.

Bad debts must be paid off immediately and treated as a financial crisis.

Good debts can still delay financial freedom but may not need to get paid off early if money gets put to higher and better use in the meantime. While paying off bad debts and managing other debts, you should improve your credit scores as much as possible and increase your access.

Bad debts include debts serviced at high (10% or more) interest rates that incur late fees or that impact your credit score.

Focus on building wealth to make it easier to take advantage of the opportunity and rapidly create the financial runway that will lead you to early financial freedom. Focus on saving up enough to create new opportunities for yourself. Save up enough to the point where you can survive for an entire year without the need for wage–paying work.

Once you can save and pay off your debts, you will eliminate lousy debt from your life. You will gain the freedom and ease to remove yourself from an intolerable work environment with a yearlong financial runway. You will get well prepared to begin thinking about making the next significant leap forward in the pursuit of financial freedom.

You can turn your most considerable expense into an income providing asset

House hacking is a significant wealth–building step for the median wage earner with near typical spending patterns. You save so aggressively to put yourself in a position to easily take advantage of an investment such as house hacking. It’s a compelling way to eradicate one of the most significant expenses in your life and replace wealth destruction with wealth creation.

The following are ways the average American buys their first homes. Each method has different short and long–term financial consequences.

• Buying a luxury home

This type of purchase involves buying the most expensive home for which one can qualify. It consists of stretching oneself to the absolute financial limits to own the best possible piece of real estate in the best possible location. It’s the most destructive way to purchase a property, and sadly, it’s also widespread.

Don’t buy the most expensive piece of real estate in the most expensive area with your first home purchase if you desire financial freedom.

• Buying a reasonable home

This type of purchase is one in which folks buy a home that is well within their means. While it’s more conservative than purchasing the most expensive piece of real estate possible, this type of purchase can also have long–lasting financial consequences that leave the buyer at the mercy of the market and needlessly delay early financial freedom.

• Buying a live–in flip

This purchase method involves buying a property with many “value–add” opportunities, i.e., a property that needs fixing. The buyer intends to take the house from a state of disrepair to a property in excellent condition. This choice gives the buyer the option to sell at a gain, rent for profit, or to continue living in a luxury home at a bargain price.

House hacking involves purchasing an investment property for rental purposes but living in one unit or bedroom. The owner gets to live for free or at a meager cost, while others pay rents covering mortgage. This method is the way to turn one’s housing expenses into a wealth creation tool.

How to earn more money so you can purchase more profitable assets

The point of making more money is to enable you to keep the extra cash for investment. And this investment is made in a manner that is reasonably likely to produce usable net worth and spendable passive income to fund early financial freedom.

The goal is to pursue opportunities that are likely to offer you the ability to scale far beyond your current level of income rapidly.

Much like frugality, increased earning potential must be pursued by dissecting one’s resources and ruthlessly cutting unnecessary spending. There are three simple things that median wage earners can do to sell their time and their talents for more income:

• Develop highly sought–after skills

There are many assets out there that guide how to go about picking up highly sought–after skills. Find a high income skill you're interested in and give your all to mastering it. This choice is one of the best ways to scale a career quickly.

• Taking control of one’s future income

Most full–time salaried jobs offer security and consistency. Those performing well at a large corporation know where their next paycheck is coming from at all times and understand what their future looks like if they continue to do well.

If your business or career prevents you from taking control of your income, you need to find a way to change that.

Pursue new opportunities to become financially free

There’s this perception that rich people have some kind of unfair advantage over everyone else. People feel that they must be doing something underhanded to accumulate millions of dollars when most people have so little. There’s an emotional reaction that something isn’t right in the world regarding the distribution of wealth and income.

Financial freedom is the only way to combat and remedy wealth inequality.

Income inequality becomes a problem when it combines with wealth inequality.

Income inequality doesn’t make much of a difference at the end of the day. The primary problem is not that the elite athlete Calving Johnson earns 200 times more than a regular earner, for example. The problem is an inequality in wealth. We must seek financial freedom no matter what.

The goal is to replace wage income with passive income. Wealth and passive income are not to be pursued simply for the luxuries they afford but total and early financial freedom is the ultimate goal.

Investing in stocks and real estate is advantageous even though it’s also risky

Investing in the stock market, and more specifically, index funds, will not make you rich quickly. But you can obtain an average result with little to no effort. The fact that this type of asset accumulation is so mindless and so effortless is its advantage. If you pursue this path, understand that the only way you will hasten early financial freedom is by continually increasing the difference between your earned income and your spending. You will have to constantly make more money and spend little money to eventually reach a point where stock investments can deliver early financial freedom at a conservative, safe withdrawal rate.

If you wish to purchase an asset that increases in value over time, stocks are the way to go. 

Here are reasons real estate investing is an excellent investment approach:

• Rental properties build wealth through income from rent, appreciation, and loan amortization.

• Real estate investors have much more say and control over their investments than those who actively invest in the stock market or other publicly traded securities.

• Rental properties give sufficient room for leverage. The act of leveraging is buying real estate with a loan. It allows the investor to control more property with less money and offers opportunities for intelligent investors to build wealth and move toward financial freedom.

• Successful investors can sell off deleveraging properties and buy new, larger ones to generate even more rent and potential appreciation. This cycle can significantly speed returns and is tax–advantaged if a knowledgeable investor has a good broker.

Conclusion

You can achieve early financial freedom and free yourself from the constraints of wage–paying work. By developing your financial runway, you will be free to pursue your hobbies and passions, and you will be free to start businesses or organizations that can change the world.

The first step toward early financial freedom is developing a solid positive monthly cash flow and creating around one year of the financial runway through saving.

Eliminate distractions and wasted time, and associate with people and organizations that are synergistic with the goal of financial freedom. The pursuit of early financial freedom doesn’t have to consume your leisure time, but it should get woven into your life — where you live, where you work, how you transport yourself, and what you discuss with friends, family, and coworkers.

It's hard to attain financial freedom working for a boss. But of course, hard doesn't mean impossible. Start and grow businesses if you can. That's about the most common way to get rich. However, we all know that not everyone is cut out to be an entrepreneur. And if that happens to be you, don't worry because there's another way out: investing. If you make considerable sums of money monthly and keep chunks of it aside for investment, you increase your chances of getting rich. Even if your salary is not much, you can start small and grow your investment portfolio gradually.

As you save for investment, consider real estate and also be on the lookout for money–printing opportunities. You'll find them if you search carefully. Never forget: Get rich. Stop working for money. Set yourself up for life.

Try this

Calculate your net worth. This action will help you know if you are making progress towards financial freedom or not. To do this, separate your assets from your debts. If your result is negative after finding the difference between the two, your usable net worth is negative, and you have to increase your income.