The Early Financial Independence Mindset

As makers, product designers, artists and DIYs wouldn't you love to have the financial freedom to just let your creative side take off. I'm not taking about being just a weekend warrior anymore, I mean every day of the year! Here you'll find the strategies and mental models I formed to have a focused approach towards being Financially Free - aka - Work Optional by 40.

I'm a Maker, artist/designer, aka product guy so my ideal day was spending an entire day in my shop creating stuff. Most of my stuff, just by the nature of my work, will not likely produce consistent revenue. It's meaningful to me but it could take months or years to catch on in the market.. So this is how Financial Independence piece comes into play. I didn't want to work strictly on the projects that make money, I wanted to create, invent and tinker on the projects I love to work on, regardless of the potential revenue. In order to have this freedom 365 days of the year - you have to be financially free.

You maybe interested in traveling the globe, writing a book, spending more time with family, starting a hobby farm, joining the Maker Revolution, spending all of your time alpine skiing or maybe right now it's just a burning desire to get away from your boss! The more fuel on the fire the better! All of these reasons are great - so long as they motivate you to take the necessary next steps in the process - making the right shifts in your lifestyle to build financial momentum.

Buying Time, not Happiness.

As you start down the path of Financial Independence it's worth noting that money can't buy you happiness. As Zig Ziglar would say, "Happiness is not a when and where but a here and now!" That being said, money can buy a person's freedom so you can freely do what every it is that makes you happy.

Visualize this lifestyle - Imagine you have no debt and you don't own anyone on this earth a single cent. You own your home outright and you have an investment portfolio that generates a passive income for you year after year after year. You can work on your terms, how and when you want to. You don't have a boss to answer to but if you still choose to work and your boss asks you to do something unreasonable you can just flat out say "no". If something breaks in your house you can fix it without going into debt or worrying about what you have to cut back on this month to make ends meet. The best part is everyday you have the time and energy to work on the projects and passions that bring you enjoyment.

“Money if used correctly has the potential to buy you time”

In this lifestyle, You own your time! As Makers you can use this for money-making product pursuits, creative projects, experimental ideas, traveling the world or just spending more quality time with your kids in your product design shop. When you have the freedom of TIME you will likely grow in ways you never imagined. With TIME on your side you can simply pursue what makes you happy.

Now, everyone would love to have the good life, but not everyone gets it. In a world that has raised the standard of living for all Americans to a level never seen before and has made it so people are also more productive than ever before in their jobs why is it that this hasn't translated into early retirement by the time everyone is 50? Why do you see so many people diligently working until they are 65, 67 or even 70 in jobs they despise only to just live off of social security and food stamps? Shouldn't this abundance be enjoyed by those retiring right now? On the journey to Financial Independence there are many pitfalls that prevent people from having the good life. Let's look at some of the most common pitfalls on the road to buying time.

“ Wealth is what you don't see and prestige is a mirage.”

The essence of financial independence is having control over your TIME. That's not a fancy sports car, a McMansion in an overpriced sub, a vacation lake house, overpriced suits, or a sailing yacht. Nor does it require that someone reaches the VP level in their company or endure 100hr work weeks for a startup for years on end, having no life in the process, in the hopes of one day cashing in on your stock options.

In the game of wealth building towards FI you need stop judging wealth by what you see. If you see someone driving a Cadillac Escalade worth $100k the only data point you have on their wealth is they have $100k less than they did before they bought the SUV. Or even more commonly they are just leasing it which offerings no clear indication of wealth. We tend to rely on outward appearances to gauge financial success and when we have the extra cash on hand we upgrade our lifestyle to show our new level of success.

As it turns out the opposite is true, wealth is the truck not purchased, the home renovations postponed the exotic vacations canceled, the home not leveraged to the hilt. It's assets in your investment accounts that have yet to be converted into stuff you see. Wealth is what you don't see and prestige is a mirage. It may feel good having a big title at work or a new BMW in the garage but it's doesn't add long term value to your life or the lives of those you love.

“ Don't buy things that Rust, Rott or Depreciate.”

As you're seeking to find ways to get closer to financial independence you'll have to think twice about purchasing things that Rust, Rott or Depreciate. This could be a car, TV, 4-wheeler, top of the line lawn mower, Dyson vacuum, camper, RV, or a new sofa. Or anything that overtime loses more value than it captures for you. It's not to say you can't have those things it's just vital to distinguish between needs and wants. Most of American's need to have a car to drive to work but it doesn't need to be the latest model of the GMC Yukon Denali with leather interior. A 5 year old Subaru Forester could have got the job done at a fraction of the up front cost as well as reduced your ongoing expenses.

“ Debt is like swimming upstream with a weight vest .”

There are two major down falls to buying crap you don't need to impress people that you don't know. The first is the most immediate which is simply the lack of savings which you can't invest. The second which is a huge problem for many Americans is in order to maintain this lifestyle of consumption they have to go into debt to keep it going. For anyone that wants to retire, having debt is like swimming upstream with a weight vest. It can be done but it's nearly impossible to get anywhere. Yet the fact remains, the average American has a credit card balance of $6,200 and with the mafia loan shark level interest rates at 18% that means they are paying over a thousand dollars in interest alone every year! Debt is robbing them from being able to invest that money which if done so at 7% interest would be to over $100,000 in 30 years. If you're in this situation this is certainly step 1, Eliminate your debt in any way possible - start with the highest interest accounts and just chip away at them every month until they are gone. When you're living beyond your means its an absolute guarantee that accumulation of wealth won't happen. It doesn't matter if you're a doctor making $300k a year and spending $360k or a plumber making $65k and trying to live at $90k, the requirement is the same.

There are only a few exceptions to having debt. What I described above was focused around "bad debt" and this is simply buying stuff that you can't afford to have and that overtime looses value. However, if you're buying a rental house that will generate an income for you the mortgage is "good debt". You'll be able to leverage your money to buy an asset that will be fully paid off by the renter in 30 and ideally the entire time you own it it's generating a positive cash flow. So rental houses, farm land investments, and other real estate investments can be a great wealth pillar if structured properly. The key is it needs to make you more money than it costs you.

"Compound Interest is actually the special sauce in the entire retirement equation."

Once you start building up your savings and move beyond what's necessary for an emergency fund it's now time to start investing. It's hard to stress this one enough. Once you begin investing and only then will Compound Interest start working for you. The earlier in life you can start using this to your advantage to easier the journey will be. Compound Interest is actually the special sauce in the entire retirement equation. You need your money invested and working to create more money and then that money will make you more money on top of that and the cycle just continues until its astonishing to see. Let's say you want to get to $500k - Starting today with $1000 a month to invest will get you there just as fast as starting ten years later with $3,000 per month (at 7% interest). Compounding Interest is the rocket fuel you need to achieve early FI liftoff. Use it to your advantage today!

"Treat your own financial situation as a business."

For every Maker out there seeking to strike it out there on their own you can think of your own financial situation just as a business. The financial health of every individual, every company and every country for that matter is determined by what their income is relative to their expenses and how much their assets are worth relative to their liabilities. For the entrepreneurial types, itching to start a business, why wait - start today with your own finances!

Early Financial Independence can be accessible to anyone willing to make the mindset shifts and the lifestyle changes that prioritize their financial goals. Year in and year out if you're living below your means, keeping an emergency fund, investing every month consistently, compounding interest will take care of the rest. You'll start to see the prospects of early retirement and start to realize just how in-reach this future can be for you and your loved ones. Just like planting a tree the best time to start was 10 years ago, the next best time is today! Hurry, start today! Time is of the essence.