The world of financial independence is governed by universal dynamics: supply, demand, wealth, greed, etc. These dynamics are as old as civilisation itself. Winning the wealth-building game is about recognising and exploiting those dynamics, not denying them. If you are not yet wealthy and are worried that you will never be able to achieve financial independence, take heart. Here are four easy steps you can climb today even if you are in your late forties.
Accept the fact that you and only you, are completely and solely responsible for your current financial situation, be that good, bad or ugly.
You can choose to react defensively to that statement, but read it again. I didn't say you were the cause of your current situation, but you are responsible for it. By taking responsibility for your own situation, even it is "not your fault" - you assume 100% responsibility for your financial future. And that's a good thing. Hoping for something, someone or an event to fix your financial problems is both futile and foolish. Precious time keeps on moving forward as you sit and wait.
Once you accept the reality that you, and only you are going to be your own salvation, the sooner you can get busy changing your fortune. The key benefit of this way of thinking is that you will rid yourself of all the anger and frustration that you have probably been carrying around for years. Gradually as you apply your new thinking into actions you will start to feel the opposite of anger and frustration, you will begin to feel financially capable.
You have to set realistic expectations. I can't tell you how many times people I have sat down with have scoffed at the idea of making 5-10% returns - they want investments that double and triple in a few years otherwise they are not interested. The South East Asian region is a great example of this mindset. I remember making a presentation to a small group of investors about an investment that I liked and in fact had just placed funds into - my prognosis was that it was likely to yield approximately 8%pa over the next 5-10 years - had a scalable business model that could lead to an IPO in the future. One attendee got up and walked out informing everyone that unless it could give a 10-1 return he was not interested in what I had to say. Wealthy people never voice this idea. It is always either people who are yet to achieve wealth and sometimes stockbrokers.
Yes 10 -1 returns do happen, but they are very rare. Your chances of achieving financial independence by researching and picking out 10 - baggers as they are referred to in the industry is akin to winning the lottery.
8% is a good rate of return. If you get an 8% return, you will double your money every nine years. If you get a 12% return you will do it in just six years. You can become very independent by doubling your money every six years. Warren Buffet the most successful investor of all time and the third richest person on the planet has averaged 19.8% on his investments over his entire career - should you really be gambling on making returns five times greater than the greatest investor on the planet?
Understand how the wealthy really create and preserve their wealth. You along with most other members of the public have been brainwashed by the media in recent times by reading stories about individuals who invested every cent they had in a business idea that exploded into a multi-million dollar empire. These are great and inspiring stories, but they are not normal. For every individual that got wealthy this way there are thousands that went broke doing the same thing. Respect to those that have achieved this, they were shrewd and brilliant, but they were also rare exceptions.
When you accept this reality you will come to realise that it is very very difficult to become wealthy or financially independent by investing in only one way. You must open your mind to different types of wealth building strategies.
You have to recognise that your net investable income (the amount you have left after spending and saving) is the single most important factor in determining how quickly you will become financially independent. The truth of the matter is, you will never become financially independent unless you invest enough money! Your budget is your most important tool here. Every pay-cheque you get - first cover your necessary expenses (bills, mortgage etc) then put some money towards saving and investing. Then and only then - after you have "paid yourself" do you add to your spending account.
Don't complain that you don't earn enough - I'd wager that it's more than a lot of people make, be grateful that you earn that much. Accept responsibility for your own future, refuse to complain, criticise or condemn. If you are willing to do all of the above you will succeed - it's just time, growth and commitment - but it's all up to you.