Apply this Basic Strategy to Obtain Financial Independence

Apply this Basic Strategy to Obtain Financial Independence. Buy income producing assets and generate enough income so that you don’t have to work for wages. It is that simple. However for some reason most people fail to see, or fail to act on this basic strategy. Let’s dive in deeper on this concept to fully maximize its benefit.

Self-Awereness Check

In an earlier article I made the case a hunger to succeed is indispensable to obtaining financial independence.  Unfortunately, must of us aren’t hungry enough to think how a hungry person thinks and to see what a hungry person sees. 

It is important to pause to consider the things we may not be aware of.  Keen investors are able to see what many people can’t see.  Keen investors can see that working for wages alone is futile.  Eventually, this realization becomes a vehicle to obtain financial independence.  Other people are either unable to, or unwilling, to look beyond working for wages. 

Why Never Buying Income Properties Would be Foolish

Today I’ll touch on this very simple strategy to obtain financial independence.  A good way to illustrate this strategy is with the game of Monopoly.  Imagine playing this game, collecting $200 as we pass Go, never buying a property, but simply collecting $200 and paying dues whenever we land in someone else’s property.  Imagine doing this over and over, without a plan to change our strategy.

Playing this game in such a way would be a waste of time.  Never buying a property would be foolish!  No one that knows the game would just collect money without purchasing properties.  After all, to succeed at the game you must purchase properties to earn more income.

People understand this basic strategy when playing this board game.  For some reason, many people fail to see how this very same strategy also applies in real life.  Sadly, other people understand this strategy, but lack the drive or knowledge to apply it to life.

In either case, people that fail to apply this basic strategy will continue through life, earning wages, without increasing their wealth.  Many of these people will reach retirement age only to find out their savings and investments are not enough!  By then it will be too late to change strategies. 

Collecting Wages is Important When You are Starting

To be clear, collecting wages is important at the start.  When starting out in Monopoly, as in life, we need to be diligent about collecting wages.  In real life, we need to guard any good paying job, so it provides that constant wage that will be necessary to purchase properties.    

The goal in real life should be to buy as many income properties as possible.  The idea is to generate enough money through income producing investments that working for wages will no longer be necessary.  In other words, owning income producing investments will eventually lead to financial independence.

Yet, to get going on this strategy it helps to have an income source. So, if you have a good paying job you must protect it. At the same time, you should be looking for ways to increase your income.

The FIRE (Financial Independence & Retire Early) Crowd Will Get Burned

For the last few years, much has been written about financial independence and early retirement. I tend to think this is really just a catchy acronym. Financial independence is a real thing, but I believe early retirement talk is just a passing thing. This is because true riches comes from enjoying the simple things in life. One of those things is our labor. The moment we cease to enjoy our labor we cease to experience true riches.

Early retirement may sound appealing now, but I predict most of those playing with this FIRE strategy will eventually get burned. I know plenty of financially successful individuals that retired early only to return to work for one reason or another.

Saving money and growing your nest egg through investments, rather than acquiring income producing investments may work for some, but it isn’t the best strategy. 

A Better Strategy than FIRE

When I retire, I would much rather have assets that generate good and constant cash flow, than a sum of money in the bank.

Imagine at some point in your life you purchased an apartment complex that provides some modest monthly income. During the first few years you invest time and effort into making this investment as profitable as possible. Perhaps during these early years you had an onsite manager that reported to you and handled basic tenant related issues. Life is good as you have established some modest cash flow.

Now imagine that you’ve reached an age in life where you want to travel more and you want to be less involved in managing your investments. Perhaps you’ve acquired two or three other income producing properties. One simple solution would be to hire a property management company that will take care of ensuring your investments continue to produce money, for a fee.

In this case you’ll be less active in managing your income producing investments, but you’ll still have the ability to roll up your sleeves and get involved with your investments whenever you want.

Another possibility would be selling one or two of your properties utilizing seller financing terms. In this case you’ll have a good source of monthly income and you would have reduced the number of properties from say three to one. Again, you can decide how involved you want to be with your last remaining property.

Purchasing Income Properties May Seem Difficult – All it Takes is Knowledge 

Purchasing income producing properties may seem difficult to some readers starting out on their journey to financial independence.  To make this happen it is important to gain sufficient knowledge, to save money and to search for the right opportunities.  We’ll discuss all of these steps in the future, but first we’ll dive deeper into self-awareness. In the next article, titled Know Yourself to Gain More from Life and Business, I share some ideas that I’ve explored to gain self-awareness, in my journey to continue learning.

As always, please drop me a note and let me know what other areas of business and finance you’d like to explore. Then, I’ll write more about your suggested topics as we pursue knowledge, financial success, and financial independence together. In addition, you can also follow me on twitter at @Cash_Keen