Dillon Carter

Entrepreneur, Hacker and Future Mad Scientist 🚀☕

Category: Personal Finance

The Homeless Millionaire: When having nothing means having everything and the Four Pillar Equation

The final domino fell. My family had been running an entertainment business for quite a while (I don’t mean like strippers but weddings) and decided it was time for them to expand. Like true moguls, they found a local rental company that was for sale. They went through all of the due diligence required and bought the company.

 

They immediately went to work to grow it and use both companies to influence the other. The only bad thing about this seemingly successful story was timing. It was 2008 and the US economy quickly slid into a financial gutter, waiting for the dust to settle before coming back out to play.

 

Like most when buying a company, they used leverage. A smart move in most situations and you couldn’t blame them for using that financial strategy, but when a bank calls your $750,000 loan, things become complicated.

 

They quickly realized we would lose our home and would have to file bankruptcy. Losing your home, at least when you still have an income really isn’t as bad as it sounds. We just went from homeowners to renters and my parents needed to rebuild their lives. Fortunately, we still owned the initial, still profitable but struggling first business.

 

It was a tough time financially, but we recovered fairly well. I learned a lot from that time. We’ve always moved frequently. Not for any reason other than my parents wanting to try a new place out. Always in the same city and within the same ten-mile radius. With each move, I began to loathe the process. Realizing how much shit (literally providing zero value) I, a then nineteen-year-old owned, was appalling, to say the least. How had I actually had enough life to hoard this amount of useless junk?

 

Eventually, I found myself removing a lot of my belongings that simply sat in my room and in my closet to avoid having to physically move it and re-clutter my next room. I donated what I could and trashed what wasn’t salvageable. I felt lighter. A weight was lifted that I didn’t even know was there the whole time. In essence, I found minimalism. Not the spiritual minimalism, but the Stoic, Spartan and ultimately practical minimalism.

 

Over time I became more content with less and my spending habits began to reflect that shift. If I had $100, I found something that I wanted and spent it. It wasn’t until I found a small book in my step father’s office called “The Richest Man In Babylon” that I took things a step further.

 

In one chapter of the book a rich man sends his heir-to-be son to another city with two things; a bag a gold and a clay tablet holding the “laws of gold”. Foolishly the boy loses the gold quicker than he could imagine. Unable to return to his father, as it would be shameful to do so he remembers the clay tablet. Immediately implementing the gold laws his financial life changes.

 

At a coming home feast put on for the son, he tells his story. The important lesson I took away from his story was in his return. Not only did he return the amount of gold his father gave him but did so with interest. Instead of the one bag, he gave his father three. He had something to show for his time and effort. After my time, granted a short period, I had nothing to show from my meager earnings. I had truly built nothing from my hard work and could show little of it.

 

Sure, I had all of this stuff, but what of financial security?

 

This lesson made me shift my perspective on value. Things can only provide so much value. I’m not a minimalist in a traditional sense, I wear $14,000 watches for god’s sake. I decided a new view on value needed to be created. A new perspective on a modern life. Instead of having a ton of things in our home, what if we were minimalist in the things that provide small amounts of value and invest more in things that provided more value? In essence, only paying the appropriate value in regards to the value we receive from what we own.

 

My Panerai 213 that I’ll get paid $800 to wear for a month

 

From this new perspective, I would argue a One Bag lifestyle while also using value to create more value. What the hell does that even mean…..

 

Instead of raising my expenses to consume, I would spend my money on things that would yield more value in my life in either time, new money or even income. I’ll wear the same thirty pieces of clothing that provide a minimal amount of value to my life, but then briefly own a $14,000 watch because it provides a short period of enjoyment (because I really enjoy horology), but can also sell that watch at a profit. Therefore getting my cake and eating it too.

 

Everything I took to Paris for a week fit into the small weekender bag above….Including a suit.

 

This idea had me coin the homeless millionaire idea. The old view of wealthy people held strong the idea of grand estates, closets filled with things you’d wear once a year and sheer wastefulness. The view on money should be that of someone who USES things to get more value instead of consuming them. There’s nothing wrong with owning a home, assuming it provides cash flow or pays for itself (like house-hacking). There’s nothing wrong with driving an Aston Martin, assuming you can enjoy it long enough for the excitement to wear off and then get out for what you put it. This idea would shift your perspective on what you own, turning your liabilities or expenses into actual assets.

 

You can afford anything you want, as long as it’s profitable.

 

If any statement in Today’s time could ever change your life, it’s the one above. Changing your perspective on value, ownership, wealth and on HOW you can do something versus IF you can do something is the key to an amazing life.

 

So could all of your belongings (besides furniture of course) fitting into a single bag, you driving an exotic car, wearing $14,000 watches and even traveling frequently lead to a more financially wealthy life?

 

Yea, I think so…

 

I know this isn’t the most clearly laid out podcast and the idea needs some work, but the meat is there. I’ve been working on this “new modern life”, the Four Pillar Equation financial idea for the last year and testing what I can to prove the concept and as time moves forward I’ll share more clearly laid out concepts for you to better understand this awesomeness that is positively plaguing my mind each day.

Three Cures for Freedom

I’ve found there are different kinds of freedom, although we love to use the word singularly in our society. I want you to really think about freedom for a bit. I’m not talking about the patriotic kind, but the natural, innate kind of way. You’ll find the following kinds of freedom:

 

  1. Freedom of Resources (money)
  2. Freedom of Location (travel)
  3. Freedom of Time (to be able to travel and use your money)

 

These different freedoms are amazing exclusively of each other, but true freedom comes from obtaining them all together as they magnify their benefits.

 

Have you ever thought about why you need a job? Have you ever questioned this “fact”? Those who spend every dollar they earn are slaves to their job and boss. They hold the keys to your freedom, because at any time they can easily throw you to the street to fend for yourself and because you spend the same (or more) than you earn, what will you do then?

 

You’ll most likely go into (more?) debt or ask family to bail you out. Those of us who live on less than we earn, save and invest the rest aren’t affected or even worried about being let go. I can speak from personal experience on this.

 

But we say we live in freedom, that we are free. If you have to wake up and do something you do not enjoy doing like going to a job because you need the money, you are not free. What would you call someone who is required, each day to work for someone else because they do not have a choice? I’m quite sure that is a similar definition of slavery.

 

This isn’t some manifesto-style post. This post is meant to make you question the life you live and to understand there are solutions to these problems we simply call life.

 

Freedom of Resources

 

Although many consider the only way to reach this freedom is through winning the lottery or going public with a company like Snapchat, the simple truth is that it’s much simpler and more in your control than others would have you believe.

 

In fact, it’s summed up in a very short blog post from my idol, Mr. Money Mustache who, with his wife, retired after only working 10 years with enough money to live on FOREVER…

 

It’s important to note that freedom of resources DOES NOT mean you have enough money to spend on stupid things and buy new cars each year. That’s foolish and a terrible financial decision that keeps many, even high-income earners poor. The goal is to live a great life, build wealth and be free. Not “look” rich, but to actually BE rich.

 

Doing my best to become a minimalist, I’ve found just how little we really need to live amazing and happy lives. Once you realize this, spending goes down 90%. This makes freedom of resources easily accomplishable. It also makes your life lighter by allowing you to move with very little and have everything you need. No checked bags, no semi-truck to move your belongings if you decide to move. Everything easily accessible and purposeful.

 

Zero waste and more money in the bank.

 

I’d love to make this part of the post longer, but the reality is that it doesn’t need to be.

 

We often think the things we have yet to learn are very complex and shrouded in the terminology we won’t be able to grasp. The truth is that it’s often simpler than our high school classes ever were. We simply choose not to take the time or find the right sources of knowledge.

 

Hopefully, I can help with that.

 

Freedom of Location

 

Travel, the one thing almost everyone wants to do but most never do for various reasons. I’ve finally been able to start traveling with my girlfriend. We spent four days in Oregon in a private cabin hiking, seeing waterfalls and enjoying hot springs for all of $25 for both of us. Next, we spent 5 days in Paris in a private and fully furnished loft in the middle of town. We saw palaces, catacombs and amazing artwork for a grand total of $250.

 

What did you spend your last $500 on?

 

I tell you this because freedom of location has never been more available than any other time in history. It’s easier now to find a job that will allow you to work remotely. Not just from home like a decade ago, but literally ANYWHERE in the world. As long as you have the skill set and perform, the companies do not care where you are. First a week it’s Paris, the next it’s Peru.

 

When you add the awesome hobby of travel hacking to a remote job and a freedom of resources, the world is completely open to you. No $1000+ plane tickets or expensive hotels. Try $100 flights and fully furnished apartments for $50 a night around the world. Cheaper in some locations.

 

Freedom of Time

 

Once you have a lighter life through minimalism, require much less money to be happy, are able to live and work anywhere you want to be in the world and have the financial resources to comfortably do so, you can begin to develop a freedom of time.

 

This is probably the hardest to accomplish as it takes a ton of patients from how I see it.

 

Freedom of time can mean many different things for each person, but for me, it means that each day I can decide what I want to do. I am not forced to do anything ever for whatever reason. I can still be running my business each month, but it won’t require time from me if I set it up right.

 

Also, because I’m working hard to build a business that is completely online, I should be able to have freedom of location, and because it generates a profit, I’d have freedom of resources. It’s quite difficult to have freedom of time if you don’t have at least freedom of resources. Unless you want to be a hobo. Technically they have freedom of location and time, just no resources. It’s interesting how missing just one of these freedoms, but having two others could mean the difference between being homeless and considered “rich”.

 

I think it’s important to work towards achieving these freedoms as they are leverage points that yield incredible benefits and bring us closer to actual freedom in life.

Knowing how much money you really need and how to automate the whole system for success

I’ve been working on a small book here and there and with the Amazon business taking off and starting my bachelor’s degree starting up, I wanted to publish some of my writing until I can fully write this book and complete it. In the meantime, I’ll be publishing a few chapters, although small, as blog posts for feedback.

 

How Much Do You Really Need To Retire?

 

     Have you really ever thought about quantifying the exact number you would need to retire and live the lifestyle you want? Most people just save as much as possible without any thought on how much is enough. In Tony Robbin’s latest book Money: Master The Game he explains how some people save more money than they actually need to. Instead, that extra money could have gone towards increasing that person’s lifestyle without their wealth taking a hit at all.

 

     In following chapters, we’re going to use the Dreamline Technique to quantify what your ideal lifestyle is and how much it would really cost, but for now, we’re going to focus solely on figuring out how much you need to retire with the exact lifestyle you want.

 

     How great would it be to retire and never make a financial or lifestyle sacrifice? You would have the house you wanted, the car and the lifestyle. We’re going to write down all of your current costs and potential future retirement costs to create a better picture of your expenses to better determine how much we’ll need in retirement.

 

     I want you to write out the following expenses (Financial Freedom):
  1. Rent or Mortgage payment:   $________ per month
  2. Food and Groceries:              $________ per month
  3. Gas, electric, water, phone:   $________ per month
  4. Car payment, transportation: $________ per month
  5. Insurance payments:              $________ per month
                                               Total:   $________ per month
Total monthly expenses: ____________ x 12 = _____________ per year (Financial Freedom)

 

     Knowing your basic annual expenses is the foundation of understanding how much money you’ll need in retirement to retire at your current lifestyle. At this point we haven’t added anything, just maintaining our current lifestyle. Now, multiply your annual expenses by 25 and you’re given the total amount you’ll need in a retirement account to retire and live off the interest and maintain your current lifestyle. Was it was big as you thought it would be? Was it more than you thought it was? This method assumes a 5% return on your money. The stock market has averaged a return of 7% over the last 200 years, but I’m assuming you’ll eventually want your retirement money in something a bit less volatile.

 

Now let’s have some fun. Let’s start crafting the lifestyle you’d want in retirement. I know for myself, I only ever care to increase my lifestyle, never to simply maintain it. So let’s start adding a few items on to our expenses and re-run the math.

 

  1. Total monthly expenses (Financial Freedom): $ ____________ per month
  2. Luxury Item #1:                                               $ ____________ per month
  3. Luxury Item #2:                                               $ ____________ per month
Total monthly expenses: ______________ x 12 = _____________ per year (Ideal Retirement Lifestyle)

 

Again, multiply your Ideal Retirement Lifestyle annual cost by 25 and you have your new retirement total needed to cover your ideal lifestyle.

 

     Now, the items you add can be whatever you want. I wasn’t even sure what I would want in retirement, but I knew I want enough income to do essentially whatever I wanted to do. For me, $116,000 a year in income seems pretty great to me, so my total retirement number is roughly $2.3 million. Quite a lot of money, but I know I can easily retire on less and still enjoy my life. Even if I only hit half of that number, I’m still doing quite well for myself in retirement.

 

     Now you should know exactly how much money you’ll need to retire living the lifestyle that you decide to live. In the following chapters, we’ll put this information to use within our automated system of building wealth.

 

 
Automation 
Ensuring your building wealth every single month

 

     At this point, you should have the exact percentage of your income that should be going to each account (or bucket) and can quickly get the exact amount that needs to be transferred to each account to reach your goals. The problem now is that I’m much too lazy to make these transfers every time I’m paid. Instead, I make my accounts work together to automate the whole process. Here’s what it looks like:

 

     Money comes into my Main checking account (My Inbox). Then, a few days later, Capital One (my savings accounts) pull a specific amount of money to each of my sub-accounts created for each of my short-term savings goals. Next, It’s time to invest. I don’t actually invest my money as that would take effort. Instead, I have Vanguard (my Roth IRA and Target Date Fund) pulls the amount I have allocated to investing in my account and invests it into a specific fund for me. Lastly, because I use credit cards to pay for everything possible, I pay off my credit card. This included all of my fixed costs.

 

     This is all done after a fifteen-minute setup and without me ever lifting a finger again. With 3 days my accounts will have paid all of my bills, saved for all of my goals, invested my money in a great fund and paid off my free spending, which I also put on my credit card. The only thing I needed to do is check my credit card amount to make sure I’m not overspending.

 

Setting Up Your Accounts 
 
     The first and main account you’ll need is a checking account that will act as your income inbox. All money starts here. I personally use Schwab Investor Checking as they refund any ATM fees up to $200 per month and are great to work with. Whenever you get paid, your money should go here first.

 

     Next are your savings accounts. For this, I personally use Capital One 360 Savings. They allow you to create “sub” accounts without actually needing to create new accounts. I have accounts for all of my savings goals – Vacation, home down payment, etc…

 

     Lastly, you’ll need an investment account. If your employer offers any sort of match for their 401(k), you’ll want to focus there first as it’s literally free money. I work for myself currently so I focus on a Roth IRA which is after tax money. So when I retire and take money out I won’t have to pay any taxes on it. I use Vanguard for their incredibly low fees and put most of my money into a Target Date Retirement Fund. This fund is amazing because its fees are so low, you can start with $1,000 and it will auto-reallocate for you. All that means is that as you become older, your money will be places in less volatile investments, preserving what you’ve built.

 

Making Your Accounts Work Together
 
     Here’s where the fun comes. we’re going to make everything work the way it should without us having to do the work ever again. The great thing about modern banks is that they have begun to work very well together and making transfers automated. So let’s setup our system.

 

     Our income should be direct deposited into our Main Inbox (checking account). This should already be setup and no further work needed. We will need to give access to our savings and investing accounts access though. In order to do that, log into you both accounts and find the transfer tabs/links. You’ll then add your checking account and create an auto-transfer either bi-weekly or monthly depending on how you get paid to transfer the specific amounts you have decided on for saving and investing.

 

     Let’s say you get paid on the 2nd of the month. You’ll want your savings and investment accounts to make a transfer a few days later, preferably the 5th. This gives you a time buffer in case something happens with your payment. Then, on the 7th you’ll want your to pay off your credit card and bills that are automatically paid with your credit card. By the 7th you should only have what’s left over from saving and investing in your checking account. This way you know exactly how much you have to cover your expenses and what’s left over for free spending. You can easily have your credit card auto-payed.You can potentially run into an issue if you’ve spent too much though. The best way to combat that possibility is to maintain a buffer of 150% of your expenses in your checking account at all times. Think of it as a small emergency fund in case things go wrong.

 

     That’s all the work required to automate your finances and to begin building real wealth over time. At this point, you should know how much you need in retirement, have tweaked your spending habits, created the accounts necessary and automated the whole thing. Congratulations, you’ve done 90% more than the average American!


 I would really love your feedback on these two chapters. What did you like, what did you not like? These are first drafts and I intend them to be MUCH longer once finished. Please leave a comment below and let me know what you think.

Millionaire Math: How To Systematically Become a Millionaire Without Doing Anything

Side Note: I’m not a millionaire… So it may seem a bit wrong of me to describe how to become a millionaire to my readers, but really think about the logic of my words. This is the math and how to automate that math. 

 

It’s almost Christmas and I cannot be more excited for the coming new year! I’ve finally completed my AA degree and will be transferring to complete my BA in Information Systems soon. I can finally mark that off of my “Yearly Goals” list. I’ve been watching my girlfriend craft some amazingly festive peices like the “count down to Christmas” peice above, which gets me super into the holidays.

 

I wrote this post a while ago actually, but it just seems right to publish it now. I haven’t edited anything except adding this introduction and I believe it gets to the core of becoming wealthy, what’s required, in an easily digestible way and we’ll need to start with a story…

 

There once were two men; Bansir and Kobbi. These two men lived in ancient Babylon, rumored to be the wealthiest city in history. Bansir was a chariot maker and Kobbi was a musician. One evening Bansir and Kobbi realized how poor they truly were. Each had a talent and the ability to earn more, but money seemed to escape them consistently.

 

On this evening Bansir recalled the richest man in Babylon, Arkad, whom they grew up with. Bansir and Arkad had the same level of education and began with the same amount of money. Yet, one was the richest man in Babylon while the other struggled deeply.

 

Bansir went to the home of Arkad and asked why this was the case. Arkad told Bansir what he had done to become the richest man in the city and how any man can do the same. He followed the laws of money strictly and gave Bansir the first rule he must follow. Save no less than one-tenth of which you earn. He instructed Bansir to do so and to come back within a few weeks.

 

A few weeks had passed and Arkad asked what had happened to Bansir. Bansir responded that he had done as instructed; saving no less than one-tenth of his earnings. Arkad had taught Bansir the first rule of building wealth. Saving a percentage of money no matter what allowed Bansir to “fatten his purse” and build his first taste of wealth.

 

Such a simple rule to follow yet most of us fail miserably to follow it. What would happen if you saved 10%, 15% or even 20% of everything you earned over the course of a year? Would you be a wealthier person? Would you be able to pay off all debts?

 

 

The Basics of Living Within Your Means

 

We hear this all the time, but never put much real thought into it. Is living within your means actionable advice? What about saving no less than one-tenth (10%)? Could you start saving no less than 10% this week? Of course you could! So start!

 

By simply saving 10% you are ensuring that you do not spend 100% of what you make. This ladies and gentlemen is how early stages of wealth is built. It’s not by making some amazing stock pick or hitting the lottery. There is a system to building wealth, one that anyone can follow if he so desires.

 

I remember when I first learned this rule and began to follow it. I had more money than I’ve ever had ($5,000 cash) and at 20 years old that was rich to me. Not only did I have more money, which helped me to build my starting wealth I also still had plenty of money to live a rich life. I ate the best foods, I bought what I wanted and I traveled. I did all of this freely because the first thing I did when I got money was sent 10% away to a hidden account. Therefore, whatever was left was mine to spend.

 

Eventually I got wise and realized that I could cut back on things without losing any happiness and save even more money. That’s when I realized the power of investing my money and making it grow. This was the exact moment I realized my passion for finance.

 

Start saving no less than 10% of everything you make and send it away to a hidden account. This money is NOT to be spent, but to be grown.

 

 

The Passive Strategy That Works

 

Every dollar you save is a slave. Every dollar has the ability to yield more dollars (their children if you will) and each of their children becomes another slave working on our behalf. Our goal is to quickly amass the most amount of slaves as possible. Money is a tool, keep this in mind!

 

The best way to make this as painless and thoughtless as possible is to set up some sort of automatic transfer. If you know how much you make every paycheck, figure out what percent you want to save (no less than 10% of course!) and make sure it automatically transfers after your money is deposited into your bank account.

 

There is something magical with this simple system that many never feel or even understand. You never lift a finger, yet every month you are building wealth…

 

Check your hidden account every few months and see how powerful and simple this is. Once you see how much you have, you’ll quickly want to invest it for growth.

 

 

What Happens In 10 Years

 

Hopefully you understand how simple this is and have already begun setting up your system. I briefly asked you to think about how much money you would have after a year saving 10%-20%, but I want you to think about what 10 years would look like. Every single year you saved no less than 10%, how much would you have? This is without any investment or compound interest!

 

Let’s assume I save no less than $400 every single month. Let’s look into the future:

1 year: $4,800

5 years: $24,000

10 years: $48,000

20 years: $96,000

30 years: $144,000

40 years: $192,000

 

I think it’s safe to say you have a high likelihood of living for the next forty years. The future is looking pretty good. You’ve saved no less than 10% and have amassed more money than most have ever seen.

 

What if you got a 3% raise one year? Would you buy a new boat or would you add that 3% to how much you save, taking you from at least 10% to 13%?  3% over forty years would yield a massive amount of added wealth. We’re talking math here people, it’s pretty simple and you can do it on your iPhone.

 

Now, we’ve only looked at the numbers of savings. What if we took this money and invested it? Another rule Arkad told Bansir. Invest your money so that it may multiply and work for you. If all we do is save our money, it will never work for us. The wealthy know that your money must work for you constantly. So if we took our savings and put it into say a Lifecycle Fund and assume a 7% return on our money, where would we be?

 

Let’s look at the numbers:

Starting Capital: $4,800

Annual Addition: $4,800

Years To Grow: 40

Interest Rate: 7%

Total Value After: $1,097,203.33

 

So in 40 years you would be a millionaire… This is a $905,203.33 difference! So why haven’t you started investing yet? Imagine if you increased your monthly contribution from $400 to $500….

 

That leaves you with a Total Value After of $1,371,504.17.

 

A difference of $274,300.84!

 

This is not rocket science and you can become wealthy by working understanding simple finances.

 

In Summary:

Save no less than 10%, but save more if you can

Invest your money in something with minimal risk like a Lifecycle Fund

Watch the compound interest grow your money as it begins to work for you

Automate the system to ensure success!

The Self Sustaining Investment Strategy That Isn’t Biased To Your Income

Over the past few years I’ve become increasingly interested and quite nerdy about personal finance and retirement. It really dawned on me the reason we do what we do within our society. We are all working towards a singular yet different goal. The vast majority of our society only work because they need money.

 

Duh Dillon…….

 

Really think about that and reframe it. This is a very simple goal to achieve yet most of us fail early on and pay for it later in life. If we are working towards this retirement goal, why do we spend the vast majority of our time working towards it? Do we even have to?

 

What if we could create a self-sustaining and passive investment portfolio early on that scales up incredibly quick and the capital comes from somewhere other than our income.

 

I’m never able to save as much as I would like. I know exactly how much money I need to retire and the sooner I get there the better. I believe that our singular goal in life should be to obtain this amount of money as quickly as possible because it grants us complete freedom to do as we wish.

 

My goal in this post is to help you reframe your perception of money, how much you need and a self-sustaining strategy to automate investing capital and decrease your retirement age.

 

With all of that said, let’s dive into the good stuff!

 

Retirement Numbers and Reverse Engineering:

 

Before you can begin to build your strategy you need to know what success is. How much do you need? If you thought $10+ Million, you may find you need a lot less.

 

There are three levels of retirement we are going to focus on in this post. Each one should be considered a milestone and each one grants you 10x the amount of freedom as the previous level.

 

Financial Security

 

Security is ground zero, your first milestone and the least amount of money you need to effectively retire early on.

 

Let’s do a few calculations to see our monthly expenses:

 

Monthly rent/mortgage payments:______ per month

Food, household:______ per month

Gas, electric, water, phone: ______ per month

Transportation: ______ per month

Insurance payments: ______ per month

 

Total basic monthly expenses:______  x 12 =  ______ per year

 

This is your minimum annual income you’ll need to cover expenses for life, without working to be financially secure. If we assume a 5% return on our investment we can run another simple calculation to determine what the total we’ll need to achieve this goal.

 

To do this calculation we take our annual expenses and multiply them by 20 which assumes our 5% return rate.

 

______ annual expenses x 20 = ______ total needed.

 

Financial Independence

 

Now that we know the minimum amount we need to live forever off the interest of our investment accounts we can work a little on lifestyle. Financial Independence is another layer on top of Financial Security.

 

Let’s figure out how much money it would take to maintain your current or ideal lifestyle. This number is more easy to calculate if you track expenses through a tool like Mint.com which allows you to see your spending over a given time.

 

In essence, if you make $100,000 a year and spend $100,000 a year, your annual Financial Independence number would be $100,000 a year. Multiply by 20 and you’ll need exactly $2 million in your retirement account.

 

If you haven’t already, sign up for Mint and begin automatically tracking your spending habits without changing a thing. Financial Independence is about continuing your current lifestyle without sacrifice.

 

______  monthly spending x 12 = ______ per year

 

______ annual spending (including monthly expenses from Financial Security) x 20 = ______.

 

It is important to include everything within Financial Independence. If you have a monthly boat payment and a second home, include it within the calculation.

 

Absolute Financial Freedom

 

This is our final level of financial freedom and it’s mainly suited to calculate your most ideal life. For this level you need to sit down and really think about all of the things you want and their costs. Want to drive an Audi R8? Find out what the monthly cost would be and use it within your calculations. For this formula we will simply call these items Luxuries.

 

Monthly Financial Independence ______  + Luxury #1 ______ + Luxury #2 ______ + Luxury #3 = ______ Absolute Financial Freedom.

 

Absolute Financial Freedom ______ monthly x 12 = ______ annually

 

Annual Absolute Financial Freedom ______  x 20 = ______ total needed.

 

Now you have three levels of retirement; Financial Security, Financial Independence and Absolute Financial Freedom.

 

So, what were your three totals? Was it less than you thought it would be?

 

 

The Self-Sustaining Investment Strategy:

 

Now that we know where we are going, it’s important to create a system that ensures we get there as quickly as possible. I want to retire as early as possible. Not because i’m lazy, but because I want to feel what true financial freedom feels like and be young enough to actually enjoy it with those I love.

 

So, how do you create wealth as soon as possible, regardless of how much money you make? You need to create a system of automation. A system that is self sustaining and in no way influenced by your income. Most books would suggest you start your own business like it is the easiest thing to do. Even if you already own a business, could you invest 100% of your profits and not once pay yourself? Probably not. That’s why you need a separate system all together.

 

I’ve written about profitable websites before, but I’ve never delved so deeply into how huge of an asset they really are.

 

For our system, we will be using three strategies of purchasing these assets and how to scale your investment cash flow.

 

Before we jump into the strategy, let’s go back to our levels of financial freedom. For now, use your monthly Financial Security number and multiply it by 2. If your monthly number was $3,000, your new number is $6,000 per month. The reason we double our monthly number is because we want to reach our total within 10 years instead of 20.

 

This number is our new target monthly cash flow for our system. We want our “portfolio” to scale itself until we reach our monthly number in profits. We scale up quickly by reinvesting our profits until we reach this monthly goal. Once we have reached this goal, we hold these assets for 10 years (or enjoy the cash flow!).

 

How The Strategy Works

 

The current purchasing multiple of a profitable website is 20x of its monthly profits. This means we are able to purchase a $500 per month asset for $10,000. The downfall is that it takes us 20 months until we break even again, however the good news is that once we do reach break even, we can reinvest to purchase another asset to double our cash flow from $500 per month to $1,000 per month.

 

After the next 20 months (with 2 sites in our portfolio), we have enough saved up to purchase 2 more sites which brings our monthly cash flow from $1,000 to $2,000.

 

It is important to keep in mind that the above example is only for $10,000 sites, yet this system can be scaled up by purchasing $20,000+ sites which yield $1,000 or more in monthly cash flow.

 

Starting Where You Are | Three Levels:

 

Strategy Number One: Starting With Nothing

Strategy Number One

 

For a lot of us, $10,000 isn’t just laying around for us to invest so we are left, unfortunately with a prolonged investment strategy.

 

Our goal now is to get our first asset without coming out of pocket. What I found was the estimated monthly payment for $10,000 personal loan was lower than the $500 cash flow and would still be paid off in 20 months. Instead of being able to purchase another site after the first 20 months, you are forced to either replicate the personal loan or simply wait another 20 months until your reserves have built up enough to purchase another asset.

 

From 0 to 20 months you have zero cash flow, but the asset is building. From 20 to 40 months you now have a cash flow asset that will begin building your reserves to be scaled and have the opportunity to replicate the personal loan to purchase your second asset that will payoff in another 20 months.

 

After 20 months you have $500 cash flow and another asset being paid off until profitable after another 20 months.

 

 

From here, you reinvest 100% of your cash flow to as many assets as possible for scale which find you into Strategy Number Two.

 

Strategy Number Two: The $10,000 Investment

Strategy Number Two

This level is basically the same thing as Strategy Number One except you have the capital/cash to invest into your first asset which begins yielding cash flow from month one. After the first 20 months, you purchase your second asset and after the next 20 months, you can purchase two more assets totalling four profitable sites that yield $2,000 per month.

 

You do have the option to invest cash in your first asset and take out a personal loan for a second asset in order to speed up the process from the start.

 

 

Strategy Number Three: The $100,000 Investment

 

Although $10,000 sites would be our focus from the start, it would make more sense to focus on larger assets instead of caring for 10+ assets within our portfolio. Eventually we would want to sell a percentage of our assets in order to replace the income of three sites with one, keeping our portfolio small for easy management yet maintaining the same amount of cash flow.

 

Because we are reinvesting 100% of our profits the system is self-sustaining and easily scalable.

 

Note: For these examples I have not factored in taxes, although I would put aside 30% of all profit each month which would prolong the system, but what can you do.

 

 

Turning On The Cash Flow:

 

This is all well and good, but you may be seeing the cash flow and wondering what it would be like to make $5,000 each month with relatively small effort. The good news is that at any point you can turn off the investing and turn on the income. I would of course suggest that you not do this, but then again this is your life.

 

You may find that your ideal life could be had now instead of later which is a wonderful thing. In addition to that, emergency do come up and disasters happen. Having the cash flow in place to easily shift into income to support yourself is very appealing to many, including myself.

 

This is what true freedom is like. The ability to control your entire livelihood with ease and autonomy.

 

 

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