Over the past several months I’ve had dozens of discussions with family, friends and colleagues surrounding various topics related to investing in order to achieve financial freedom. These discussions have blurred a number of different topics – What are the best investments? What exactly is financial freedom? How do I approach an opportunity? How do I get over my fears? And the list goes on.
Today I’d like to cover one of the most important topics to achieving financial freedom. This topic in particular revealed both significant discomfort and resistance from the majority of my colleagues during our conversations – saving for financial freedom!
Saving for financial freedom isn’t a new concept. It’s not even a complicated one, it’s simple, spend less than you earn and save the rest; optimally save as much as you can. After all, if you aren’t capable of saving, you won’t have very much money to invest towards achieving your financial freedom! Ironically, in almost every instance where the topic was brought up, the reactionary comment was something along the lines of “I can’t save any more money; I’m already barely getting by!”
Each time I heard this comment, I simply called their bluffs and raised them a peek into their expenditures… the revelations were scary! Almost every instance uncovered a plethora of unnecessary expenditures, exorbitant acquisitions and unnecessary upgrades. After a bit more digging into the past, previous salary increases surfaced revealing reactionary adjustments of their lifestyle to consume the additional revenue that had become available within a matter of weeks! This is absolutely terrifying!
Ironically all of these expenditures are the very actions that have been ensuring that my family, friends and colleagues have been obstructing their own path towards financial freedom, essentially delaying financial freedom practically forever (well… an astounding average of approximately 71 years away)!
The easiest way to achieve financial freedom is to focus on saving rather than trying to optimize investment returns. Average annual historical returns in the stock market are approximately 7-8% after inflation is subtracted. If you become a masterful investor, you may be able to gain a few additional percentage points higher than the average. On the other hand, if you become a skilled saver, you can easily save 25% per year. In fact, many individuals have been able to save more than 50% of their incomes by eliminating unnecessary expenditures! Together, frugal saving and educated investing creates the fastest and least stressful path to achieving financial freedom. I won’t get into the details of saving but if you’re interested to learn more, check out the blogs of Mr. Money Mustache, Early Retirement Extreme and others who have already achieved financial freedom. Whenever you’re trying to learn something, it’s always best to choose a teacher that’s already mastered the skill you’re trying to learn. Start with this simple case study so that you can relate to the values of saving. Spending only a few minutes each day reading articles will be all it takes to motivate you to further sharpen your saving prowess and help you to reach your goals of achieving financial freedom.
Remember, the more expensive your lifestyle is, the longer you have to work to build up an enormous investment account. Start practicing frugality and invest those savings wisely. Don’t want to learn investing? That’s perfectly fine, start with the couch potato approach and you’ll still beat 50% of the world’s most reputable investors. You’re welcome, now go get started today!
Founding Partner, Amplified Investments