- Personal Finance
10 Steps to Financial Freedom
The Elements of Your Empire
Are you tired of working for you boss? Do you want to take endless vacations? Do you want financial freedom? "Rich Dad, Poor Dad" by Robert T. Miyasaki inspired me to think about how to make money work for me instead of me having to work for money. So I set out a goal for myself; Start one income stream at a time. Then maximize each streams earnings power. Reinvest all profits to achieve the magic of compound interest.
In the first year it took a lot of hard work and reading, but since I was passionate about my goal it was all fun. And the prospects I had about the rewards I reap today and long into the future also provided me with inspiration. In the process I also learned a lot about myself. It is important to reflect on your strengths and weaknesses in relation to the alternative streams. Also, remember to let passion be your guide, that will prove important for your perseverance - which is the key to success.
My assumption is that anyone interested in this concept will want to make it simple, so I have narrowed down the key concepts for sustainable success. So what are the ten elements that goes into the multiple streams set-up?
- Choosing your streams
- Day job
Below I will go into greater detail of the significance of each point.
This book is the ultimate book on the concept of multiple streams of income. Robert G. Allen goes through several different parts of the "mountain range" you need to build to have the money flowing down in your lake of cash. He goes into detail with each one of the streams. His writing style makes it a very easy read. After going through all of the different alternative streams he guides you through how to put it all together and manage yourself while you're at it. Highly recommended!
The Significance of Each Point
1. There are a wide variety options when choosing your streams. It is important that you choose them with the subsequent nine points in mind. I will here list the ones I have employed with great success:
- Investing (value investing in alternative asset classes such as stocks and commodities)
- Real estate
- Music publishing
- Book publishing
- Rental business
- Product development (patents)
- App development
- Game design
- Ad finance blogs
2. Without passion for the source of the stream you will not have the foundation for the necessary perseverance. So I suggest you write down a list of possible streams - you can use the books below to guide you. Then go through and highlight the ones you have a passion for.
3. Use the Pareto principle (the law of the vital few) to focus on the 20% that gives you 80% of the results. In my case it is the investment and real estate businesses.
4. Make sure that you only put your energy into creating things that automatically generate income for years to come. Preferable not too dependent on direct contact with customers - since you do not want them to interfere with your freedom.
5. In times of stress for one of your stream you will not be in trouble if you have a diversified portfolio of streams. Make sure that they are truly independent of each other.
6. Make the magic of compounding work for you. Interest on interest is the greatest thing ever. In this way your profits will snowball into something truly great.
7. Frugality is especially important in the beginning of your empire building. You don't want to squander future income generators. So adapt a cost conscious life style and enjoy the simpler things in life. In the end they might just be the best. To hear my daughter's laughter is more dear to me than anything else.
8. Become an expert in each of your streams to maximise the earnings power. You can also use this expertise subsequently in writing income earning blogs and books.
9. In order to succeed in building your income streams empire you need perseverance in great amounts. But if you love what you do the perseverance comes for free.
10. If you have a day job - don't quit until you are generating at least the same amount as your salary. I would also recommend to save as much as possible as a back-up for a rainy day. I saved up a full annual salary. That is a nice cushion for any unexpected events - even though I have never been forced to use it, I actually invested all of it to generate more profits in the end.
Please feel more than free to add any comments on ideas on streams below. Good luck with your empire building!
The concept presented in this book is very much about disconnecting the human element from your savings account. In order to gain more control over your monthly savings David Bach argues that you should make the transfers of funds from your monthly salary as automatic as possible. In order to build the cushion I mention in my article, this is actually a very useful idea. Because honestly I had the tendency to increase my spending in parity with my salary increases. David Bach's concept has made me more disciplined with my savings. He has many good points in his book and I really recommend you pick it up.