Entrepreneurs

Financial Independence In 3 Years Instead Of 30?

It is possible to become financially independent in three years, especially the coming three years?

Retirement planning promotes a 30 year plan of saving, scrimping and cutting back in the hopes that discipline and patience will payoff. So when someone becomes financially independent in one-tenth of that time, was it because they took more risk, hustled harder or was it just luck?

Most likely, it’s none of the above. You don’t need to take risks to get rich, but learning to manage it is helpful. Hard work won’t help if you have the wrong methodology. Cutting back isn’t the answer either, people don’t just “shrink” their way to wealth. Obsessing over what can be cut or reduced is finite and leads to a mindset that is unlikely to create wealth.

So if the answer is not risk-taking, hard work or cutting back, how can you gain substantial wealth in three years? I’m going to break it down for you, but first, there are a few steps to consider and criteria to know how to navigate in order to stack the odds in your favor.  

How To Recover Your Cash

Before we get into wealth creation, let’s look first at keeping more of your money. There are four I’s to recovering your cash that will have a big impact on these three years.

First is the IRS: make sure you’re not tipping the government. The majority of business owners overpay on their income tax. Look to maximize your deductions and reclassify your income to pay less on what you earn. This requires a proactive approach of meeting with a tax team that may include an attorney, tax strategist and even a cost segregation engineer if you own a commercial building.  

Next up is interest. This is about restructuring loans, renegotiating interest rates and reallocating resources if you have underperforming assets that could be used to pay off high-interest loans.  Interest rates are low right now, look to refinance and lower your interest rates.  

The third I is investments. Protect the downside, eliminate non-performing fees and look to create cash flow with them immediately.  

Finally, insurance: eliminate inefficiency or duplicate costs by having the right design.

Criteria For Gaining Financial Independence

Recovering cash is important, but, if you don’t have all the pieces in place before you start, you won’t get to where you want to go.

First, don’t borrow to consume. If you have loans beyond car loans or mortgages, your cash flow is going in the wrong direction. Instead, if you do borrow, only use loans tied to assets that produce cash flow. Examples would be a business or the right piece of real estate.

Expand your means with the right relationships. A catalyst is an amplifier relationship. This person believes in you, connects you to people and opportunity and sees the potential in you, perhaps even more than you do. If you have two or three catalysts in your circle of relationships, even better. This is also the right time to remove toxic relationships in your life. 

Finally, you have to forgive yourself for past mistakes and face any pain that has caused you to lose confidence, kept you from loving yourself, or destroyed your self-esteem. You don’t need money to make money. That’s what people tell you when they want your money. Wealth creation all starts with you, your mindset, and your ability to deliver value.  

The Value Equation

Wealth is a function of your Mental Capital and your Relationship Capital. So many people get this backwards. They want to put financial capital at the beginning of the equation instead of at the end. 

The value equation is: Mental Capital x Relationship Capital = Financial Capital.

Maximize your Mental Capital. What are your ideas? What knowledge do you have? Can you share unique strategies, insights, or wisdom that will offer value to the world?

An oft-repeated saying on this topic is: “It’s not what you know, it’s who you know.” To that I say: “If you don’t know anything, nobody will want to hang out with you!” One of the most precious forms of capital is what’s inside your head, so how can you bring that to people in order to serve them and solve problems?

On the other hand, Relationship Capital is key.

It’s an overlooked resource that actually has the greatest potential to grow your wealth because people are the only true assets. Relationship Capital comes in the form of networks, organizations, customers, friends and family.

Who are your friends? I consider friends the people who want me to succeed and are willing to support me. They’re the people I can count on and I want to spend as much time as possible with them. On the other hand, there are people I’m friendly with who don’t share my values, are constantly creating drama, or even in some cases, take joy in seeing me suffer. I will politely decline any invitations from these types of people because I don’t want to invite them into my life. If you have the mental capital but aren’t getting the results you want, examine your relationships.

Business As The Bridge

Business is the bridge between your Mental Capital and Relationship Capital.

Wealth is about value creation. It’s about leveraging your Mental Capital to provide value to as many people as possible, or simply serving those in your orbit with the highest possible impact and focus. It’s not about leveraging money. If you borrow money without the right Mental Capital, you take unnecessary risk. For example, if you buy real estate without knowing how to cash flow that piece of property, risk is created.

But with the right Mental Capital and the right relationships, you give yourself a huge advantage by minimizing risk.

You don’t need to have all the resources to be financially independent in three years, you just have to plug financial leaks, turn accumulating assets into cash flow, and become a better investor by surrounding yourself with the right team and increasing your Mental Capital. To be a better investor and create more cash flow It’s about your Mental Capital—identifying and utilizing the unique value you can offer. It’s about your Relationship Capital: who you spend your time with and how much value you offer them.

Value creation comes from a willingness to serve others and solve problems. 

If you have a clear path to do that, you can capitalize on the massive wealth transfer taking place.

 

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