How to Become Financially Independent by Jim Rohn

How to Become Financially Independent

Presented by Jim Rohn

 

Mr. Shoate (Rohn’s mentor) told him when he was 25, “Mr. Rohn in my own opinion financial independence is a worthy goal.”

 

The reason he said this is because some people have an internal moral struggle with making a lot of money.

 

Once you get money out of the way, you can’t believe the other dimensions of your life you can work on.

 

If you could do better, should you?  Some use the moral question as an excuse.

 

Challenge yourself to see what you can become.  It’s not the amount that counts….its the extent of the reach that counts.  You should employ the full extent of your reach.  If you make $50,000 per year and you are capable of $500,000; you are a loser.  You must extend your mental personal capacity to its limit.

 

Mr. Shoate had a simple philosophy on this.

 

            How far should you go?                     As far as you can.

            How much should you learn?             As much as you can.

            How many books should you read?   As many as you can.

            How much should you earn?              As much as you can.

            How much should you share?             As much as you can.

            What should you accomplish?            As much as you can.

 

What could I do in comparison to what I am doing?

What could I do to extend my reach?

Am I fully employed?

 

The only way you can get money out of the way is to have plenty.

 

The time you’ve already set aside for labor is enough time to become wealthy.  If you are working 8 or 10 hours a day that’s about it, you can’t put in more.  But, if you better utilize that 8 or 10 and double or triple your income that would be o.k.

 

Working more and putting aside health, family, friends is short changing your self.

 

Financial independence is dependent upon the plan you have.

 

KEY:  It’s so much as what you earn, it’s what you do with what you earn.

 

The average person in the United States in their lifetime makes a half million dollars.  The question after that lifetime is where is it?  Some keep it, others don’t.

A good book to start with on financial independence is George Clason’s The Richest Man in Babylon.

 

The them of  The Richest Man in Babylon is “learn to live on 70% of your net income (after-tax income)”. 

 

The Richest Man in Babylon suggests the following for the other 30% of your net income.

 

Next the book suggests that you learn to be enterprising.  Profits are better than wages.  Be a capitalist.  Turn your income into capital.  Teach your kids how to have two bicycles.  One to ride and one to rent.  Teach your kids how to sell.  Once they make the sale, teach them how to set aside money for capital and money for   

 

            10% should go to charity or tithing.

10% should go to the increase of capital.

            10% for paying off your debts, then once they are paid, use it for investing.

 

           

A few more tips on financial independence.

 

1. Put together a financial statement.  Assets – Liabilities = Net Worth

                                                              i.      To get to where you want to go, you have to know where you are.

                                                            ii.      You don’t need to share this with anyone, it is for you.  Your first one may not be pretty.

                                                          iii.      Use it like a game.  Get excited about reducing your liabilities and increasing your assets.

                                                          iv.      It’s not the amount that counts but the attitude and the plan.

 

2. Keep strict accounts.

                                                              i.      You’ve got to know where it all goes.  The Rockefeller’s grandfather made them keep track of every penny they got and where it went. 

                                                            ii.      If your outgo exceeds your income your upkeep becomes your downfall.

 

3. Participate in capitalism.  Buy and sell something and invest the profits.

 

4. Get your family involved and excited about your plan.

 

 

Happiness is not contained in what you get but in what you become.

 

Make financial independence a game.

SEVEN FUNDAMENTALS FOR WEALTH AND HAPPINESS BY JIM ROHN

                                                                                          

                                                                           

1) GOALS                                                            

                                                                         

A CONSTENT PLAN FOR SETTING, REARRANGING, EVALUATING, AND STRENGTHENING THE PURPOSE OF YOUR GOALS.   

YOU DON'T WIND UP IN GOOD PLACES BY ACCIDENT.                                                                        

THERE ARE TWO TO FACE THE FUTURE.  WITH APPREHENSION OR WITH ANTICIPATION.                                                                             

DESIGNING PURPOSE IS JUST AS IMPORTANT AS DESIGNING OBJECT.                

                                                                          

PURPOSE IS MORE IMPORTANT THAN OBJECT.                                     

                                                                          

DID YOU ACHIEVE THE GOALS OF YOUR LAST FIVE YEARS?                         

 

NOW IS THE TIME TO FIX THE NEXT FIVE YEARS.  THE FIVE YEARS WILL SURELY PASS WHERE WILL YOU BE.                                                         

                                                                            

2)  A DETAILED MANAGEMENT PLAN FOR YOUR PRESENT RESOURCES.                 

                                                                           

THE KEY TO WEALTH IS NOT WHAT YOU EARN BUT WHAT YOU DO WITH WHAT YOU EARN. 

                                                                           

WHAT TO DO WITH WHAT YOU'VE GOT.                                           

 

HOW TO BECOME FINANCIALLY INDEPENDENT FROM THE RICHEST MAN IN BABYLON.

       

LEARN TO LIVE ON 70% OF YOUR NET INCOME AFTER TAXES.

 

WHAT DO YOU DO WITH THE REMAINING 30%?

                                                                           

TITHE 10%                                                                      

PAY LAST 20% TO RETIRE DEBT.  

ONCE DEBTS ARE PAID, INVEST 10%.  

USE 10% AS CAPITAL YOU MANAGE YOURSELF (START A SIDE BUSINESS - DO A LITTLE BUYING AND SELLING).                                                                       

                                                                             

3) HAVE A DETAILED PLAN FOR THE USE OF YOUR TIME.                              

                                                                            

A GAME PLAN.

 

MAKE SURE IT’S WRITTEN. 

A 90 DAY WRITTEN PLAN.                   

OPERATE FROM DOCUMENTS NOT FROM THOUGHT.                                  

                                                                               

THE DEATH OF A SALESPERSON IS TO WAKE UP IN THE MORNING AND SAY WHAT AM I GOING TO DO TODAY?                                                                   

                                                                               

HAVE AN ACTION PLAN.  GET GOING PLAN.                                            

                                                                               

KNOWLEDGE IS NOT THE WAY TO BE SUCCESSFUL.  KNOWLEDGE APPLIED IS THE WAY TO BE SUCCESSFUL.  DON'T BE AN ACCUMULATOR.                                           

                                                                               

WEALTH = 20% SKILL + 80% STRATEGY                                              

 

YOU'VE GOT TO PLOT AND SCHEME TO GET THE MOST OUT OF LIFE.                     

                                                                              

A DETAILED PLAN BRINGS ABOUT DISCIPLINE.                                      

                                                                              

4) A CONSISTANT PLAN FOR THE GATHERING OF KNOWLEDGE.                          

                                                                              

YOU MUST DELIBERATELY SEARCH FOR IDEAS THAT WILL CHANGE YOUR LIFE.            

                                                                               

YOUR WRITTEN PLAN MUST CONTAIN A CONSISTANT SEARCH FOR KNOWLEDGE.             

                                                                              

GO TO THE BOOKSTORE.  GO TO THE LIBRARY (THE SEATS ARE FREE.)                 

                                                                              

SUCCESS AND FAILURE IS CONSISTANTLY DEBATING.  "WILL HE GO INTO THE LIBRARY?"

 

FAILURE "NO, HE'LL DRIVE ON BY."  SUCCESS "YES, HE WILL GO IN."               

                                                                              

YOU MUST SEARCH AND LOOK FOR IDEAS.  RARELY DOES A GOOD IDEA INTERRUPT YOU.

  

YOU HAVE TO GO TO CHURCH, CLASSES, BOOKS, SEMINARS AND LECTURES.              

                                                                              

YOU MUST LEARN FROM YOUR OWN EXPERIENCE.  LEARN FROM THE DAY. BE LIKE A SPONGE.

 

REFLECT ON IT, WHEN THE DAY IS OVER.                                           

                                                                             

EXPERIENCE IS COMMODOTY, VALUE, AND CURRENCY.                                     

 

"BOTH SUCCESS AND FAILURE COMES FROM SMALL LIFE EXPERIENCES.  IT DEPENDS ON WHAT YOU LEARNED FROM IT AND WHAT YOU DID ABOUT IT."  THINK AND GROW RICH.     

                                                                                

DON'T HAVE CASUAL CONVERSATIONS. DON'T BE CASUAL ABOUT THE DAY.

             

CASUALNESS BRINGS CASUALTIES.                                                  

 

ECONOMICALLY, SOCIALLY AND PERSONALLY.  YOU MUST BE INTENSE ABOUT THE DAY.  ABOUT BOTH THE POSITIVES AND NEGATIVES.                                              

                                                                                 

 KEEP A JOURNAL. ESTABLISH A LIBRARY.                                           

                                                                                

 5) A CONSTANT ASSOCIATION WITH PEOPLE WHO HAVE A COMMON INTEREST IN PROGRESS SUCCESS, IDEAS AND PHILOSOPHY.                                                 

                                                                                

 KEY PHRASE FOR THE DAY:  NEVER MISTAKE THE POWER OF INFLUENCE.                 

                                                                                

IF YOU WANT TO BE SUCCESSFUL, YOU'VE GOT TO GET AROUND THE RIGHT PEOPLE.       

                                                                                 

WHERE DO YOU GO WEEKLY FOR YOUR INTELLECTUAL FEAST?                            

                                                                                

WHERE YOU LIVE AND WHO YOU'RE AROUND DOES MATTER.                              

                                                                                 

MAKE SURE YOU HAVE A PLAN FOR ASSOCIATION OF PEOPLE WHO BELIEVE IN IDEAS AND PROGRESS AND PHILOSOPHY AND SELF-DEVELOPMENT AND POSITIVE THINKING AND ALL OF THE SPIRITUAL APPLICATIONS OF OUR LIFE. 

 

MAKE SURE YOU HAVE THAT TYPE OF INFLUENCE. BECAUSE IF YOU DON'T YOU WILL WIND UP WHERE YOU DON'T WANT TO BE,  

WEARING WHAT DON'T WANT TO WEAR, DRIVING WHAT YOU DON'T WANT TO DRIVE AND MAYBE DOING WHAT YOU DON'T WANT TO DO.                                               

                                                                              

6) A CONSISTANT PLAN FOR DEVELOPING ALL YOUR SKILLS.                          
                                                                               

NEVER CEASE DEVELOPING SKILLS - NO MATTER WHAT AGE.                           

                                                                              

THE KEY TO THE GOOD LIFE IS PERSONAL DEVELOPMENT.                              

                                                                              

WHAT YOU BECOME IS MORE IMPORTANT THAN WHAT YOU GET.                          

                                                                              

THE MAJOR QUESTION IN LIFE IS NOT WHAT ARE YOU GETTING BUT WHAT ARE YOU BECOMING.                                                                     

                                                                              

WHEN TAKING A JOB DON'T ASK WHAT YOU WILL GET BUT WHAT WILL YOU BECOME.       

                                                                              

THE KEY TO THE GOOD LIFE IS PERSONAL DEVELOPMENT.                             

                                                                               

DEVELOP ALL OF YOUR SKILLS.  (LEADERSHIP, LANGUAGE, COURTEOUSY, DIPLOMACY)    

                                                                              

7) A CONSISTANT PLAN FOR FIGURING WAYS TO LIVE UNIQUELY.  LIFESTYLE            

CHALLENGE:  HOW TO HAPPY WITH WHAT YOU'VE GOT WHILE YOU PURSUE WHAT YOU WANT. 

                                                                             

FIGURE WAYS TO LIVE UNIQUELY WITH WHAT YOU ALREADY HAVE.                       

                                                                              

TIP = TO INSURE PROMPTNESS, GIVE IT UP FRONT.  DON'T TAKE A CHANCE ON POOR SERVICE.                                                                      

                                                                               

NOTES FROM EIGHT STEPS TO SEVEN FIGURES BY CHARLES B. CARLSON

NOTES FROM EIGHT STEPS TO SEVEN FIGURES

BY CHARLES B. CARLSON

Carlson took 170 individuals into account who invested their way to $1 million.  He surveyed ordinary people who saved their earnings.

Buffett – Washington Post, American Express, Coca-cola, Well Fargo, Gillette

Example:       A.J. Wright – started at age 25 and had $1 million by age 55

                        Philosophy:  “Save 10%”

                                                “Give 10%”

                                                “Spend the rest after taxes”

Example:       Saul is age 76 with $2 million.  He didn’t start investing until he was in                        his sixties.

                        Philosophy:  “Buy blue chip stocks with no intention of selling”

Most don’t reach seven figures because they want to consume today and still have seven figures later.

To participate in the survey the person needed $1 million in investable funds excluding their homes.

Survey participants:

o   80% were male

o   Average age was 60 years old

o   Average was married 32 years

o   Average income was $151,500 annually

o   Median income was $115,000 (1/2 below ½ above)

o   Most are retired and receive income from investments

o   1 in 5 are divorced (national average is 1 in 2)

o   Average number of kids is just under 2 per household

o   80% have undergraduate degrees

o   50% have advanced degrees

o   Average number of jobs held is 3 (national average number of jobs held is 13)

o   Average years at current job is 19

o   Less than 30% maintain a monthly budget

o   40% do their own taxes

o   They’ve investing on average for 30 years

o   Average portfolio size is $2.7 million

o   More than 85% had no investment experience prior to starting

o   On average they hold 44 stocks

o   Only 3% have ever declared bankruptcy

o   60% said their parents were important or very important influences on their investing

o   More than 80% classified their parents as frugal

o   Only 18% classified their financial records as average or below average

o   Only 19% have ever bought options

o   Only 6% have ever bought futures

o   Less than 30% own gold

o   Only 15% have ever sold a stock short

o   48% use the advice of brokers and 15% use the advice of investment newsletters

o   Of those that use brokers, more than 40% use a traditional broker (full service)

o   1 in 5 belonged to an investment club and have done so for an average of 8 years

o   60% admitted to acting on a hot tip

o   These tips panned out about 20% of the time

o   Two-thirds track their investments with a personal computer

o   One-third inherited money but in most cases it had little effect on their finances

o   Most used money saved from their paychecks

o   70% spend $500 or less on investment research

o   More than 35% spend $250 or less on investment research

o   Only 9% spend more than $1,000 per year on investment research

o   Most spend on average 12 hours per week tracking their investments or about 2 hours per day which is ½ of what most Americans spend watching television each day

o   More than 50% call themselves growth investors

o   Around 25% call themselves value investors

o   Around 16% call themselves growth and value investors

o   Well over 50% invest at least monthly another 28% invest at least quarterly

o   A slight majority consider themselves to be conservative, 26% aggressive, 14% both

o   Most fear a prolonged bear market and taxes most

o   75% hold their investments for at least 5 years

o   40% hold their investments for 10 years or longer

o   Only 8% hold their investments for 1 year or less

o   48% have an average tolerance for risk

o   38% have an above average tolerance for risk

o   13% have an below average tolerance for risk

o   1 in 4 attempt market timing

o   70% consider taxes important or very important

o   ¾ invest in what they know

o   1 out of 2 does believe individual investors can beat the market consistently

o   Most participate in a 401(k) and invest the maximum

 

Common Success Factors across All

1.     Start now

2.     Establish a Goal

3.     Buy only stocks and stock mutual funds

4.     Swing for singles

5.     Invest every month no matter how small the amount

6.     Buy and hold and hold and hold

7.     Take what Uncle Sam gives you (401(k), IRA, Roth IRA)

8.     Limit shocks to your finances    

 

Example:       Robert Cole age 56           

                        Started at age 28

                        Currently has $1.2 million portfolio

                        90% in 401(k)

                        Took 12 years to reach $50,000

                        Took 15 years more to reach $1 million

Fear drives most to invest.

Example:       Peter H. started investing at age 47

                        At 58 years he now has 7 figures

                        His advice is “Just right that first check.”

Step 1:           Start Now

Popular Excuses:

I don’t have the money to invest.

Most millionaires started small.

They stretched their paychecks.

They paid themselves first, even if it’s only $5 or $10.  Get in the habit and then it grows.

They are frugal.  They look at their spending habits.  They don’t eat out.  They pay cash.  They drive cars until they stop.

They want a better financial future more than things.

Some worked second jobs.

They use “found money”.  Gifts, tax refunds, home or property sales, inheritances

I don’t have enough money to invest.

You just have to find the vehicles.

DRIPs       (minimums rarely above $100)

401(k) (as little as 1% pre-tax)

Mutual funds (monthly ACH purchase)

I don’t know enough.

You must seek out information.

Books, newsletters, magazines, investment clubs, T.V., radio, internet

Internet and library are the best

www.better-investing.org

www.aaii.org

Continuing education classes at community colleges

I don’t have the time.

The average adult spends roughly 28 hours per week watching T.V.

You must look at your priorities.

Most millionaire investors spend an average of 12 hours per week.

I’m too young.

If time is the most important part of this process, then how can you be too young?

Use stocks to teach a child.

Registration of child’s account:

In your name – you control

Unified Gift to Minor (UGMA)

Dividends at child’s rate

At age of majority – control of account goes to the minor

Offer kids matching funds

Use DRIPs (Coca-Cola, Walt Disney, Hasbro, Mattel)

Mutual Funds

I’m too old.

Many millionaires didn’t start investing until their 50’s, 60’s and 70’s.

Average millionaire portfolio was nearly $2.2 million and took an average of 30 years to accumulate.

The first million takes much longer than the second or third million.

If it takes 22 years for the first million, it will take only 7 years to accumulate $2 million with no further investment at 10%.

Beginning at 35 years of age you need to invest $650 per      month to reach $1 million by 60 years of age.

Beginning at 40 years of age you need to invest $1,200 per month to reach $1 million by 60 years of age.

Beginning at 45 years of age you need to invest $2,200 per month at 11% to reach $1 million by 60 years of age.

I don’t have a broker.

You don’t need a broker.

Dividend Reinvestment Plans (DRIPs)

Mutual Funds

The market is too high.

There is never a bad time to invest and get started.

            Step 2:           Establish a goal.

Any goal, it really doesn’t matter what it is as long as it matters to you.

                        Example:      

Retire early

                                                Pay for college

 

            Maintain purchasing power

            Leave good estate to children and grandchildren