[Podcast] Here’s why property investors develop financial freedom | Money Habits of the rich | The steps to financial freedom

Today’s episode is unashamedly about becoming rich and getting more money. 

I’ve often said that money’s important in those areas where it’s important and not important at all in other areas.

But any problem that can be solved by money isn’t really a problem, is it? 

So please let me show you how you can obtain more money.

First of all, we’re going to explain why property investors develop financial freedom.

In my mindset moment, we’ll talk about some of the money habits of the rich. 

Then, I’m going to share the steps you need to take to develop financial freedom. 

It’s a process, it takes time.

There are no get rich quick schemes here. 

But if you’re patient and follow a proven strategy, money doesn’t discriminate.

You can have as much of it as you want.

Why property investors develop financial freedom 

We dream of it, work for it, and plan for it.

But can the average Australian develop financial independence? Yes.  

If others have done it, you can too.

Wealthy people don’t do different things, they just do things differently. And you can learn to do the same. 

Not everyone works hard for their money.

The rich earn recurring passive income.

That means that they control a money source that makes money for them even when they’re not there.

This is how business owners or property investors build wealth.

When it comes to how people make money, we can all be placed in one of four categories. 

Employees – Employees trade hours for dollars. They really only get what’s left after the government takes its share in taxes. 

Self-Employed – a self-employed person owns a job. They want to be their own boss, but often they’ve simply swapped one boss for many bosses, called customers or clients. Self-employed people aren’t business owners, but they do have an advantage over employees, in that they get to take advantage of tax deductions that allow them to pay their business expenses before being taxed on what’s left over. 

Business Owner – A business owner owns a system and people work for them. They don’t have to be at work in order for the business to run. They invest their money in an idea and a business system, then let that investment – in the form of a business – work for them. 

Investor – Investors don’t have to work because their money works for them. This is the group that you want to belong to if you hope to be wealthy someday. Investors convert money into wealth. By building your own property portfolio with income-earning residential real estate, you are taking the steps to move from employee to investor. 

Money Habits of the rich 

• The rich know how to work full-time at their job and part-time on building wealth.
• The rich save their money and spend what’s left. Learn to live on 70% of your income after taxes.
• The rich contribute to their communities by giving to charity. Of the 30% of your income remaining, 10% of your income should go to charity.
• The remaining balance should go into savings. When you have sufficient savings, you can begin investing in growth assets.

The steps to financial freedom

Many Australians have chosen to invest in property to develop financial freedom and get themselves out of the rat race.  As they take their investment journey they fit into one of the following five Levels of Wealth. Let’s have a look at these more closely and see where you sit: 

Level 0 – Financial instability

Since most Australians live from pay cheque to pay cheque, they are Financially Unstable. If they lose their job or have an emergency, such as an illness or the car breaks down, they have no money reserves to cope.

Level 1 - Financial Stability

To achieve this most basic level of wealth: 

1. You’ve accumulated sufficient liquid assets (savings or money in a line of credit) to cover your current living expenses for a minimum of 6 months.

2. You have private medical insurance and some life insurance to protect you and your family’s lifestyle should you become ill, disabled, unable to work or if worst comes to worst – suddenly die. 

Level 2 - Financial Security

Now you have accumulated sufficient assets, such as a substantial property portfolio, to generate enough passive income to cover your most basic expenses. These would include; 

• Your home mortgage and all home-related expenses.
• All your tax payments and the interest payments on your loans and debts.
• Your car expenses. 
• Your grocery bills and minimal living expenses. 
• Insurance premiums including medical, life, disability and your house.

Level 3 - Financial Freedom

You’re financially free when you have accumulated sufficient assets to generate enough passive income to pay for the lifestyle you desire, not necessarily your current lifestyle, and all of your expenses, without ever having to work again. 

Level 4 - Financial Abundance

A small group of sophisticated property investors achieves Financial Abundance when their portfolio works overtime. They’re free of financial pressures and have so much surplus income that after paying for their lifestyle, all of their expenses and contributions to the community (often through charity work or donations), their asset base continues to grow. 

Climbing to the top of the investment ladder

So how do you climb the rungs to the top of the property investment ladder and achieve financial abundance? Here are 4 steps you can take: 

Decide you want to become wealthy. Most Australians dream of financial independence and want to be wealthy, but never make a firm commitment. If you don’t truly commit, life gets in the way and you get sidetracked. Choose the date you’re going to be financially free, then put it in writing, make a firm promise to yourself and tell others so you have no excuses.   

Invest in your financial education. If you’re a beginning investor focus on increasing your financial education. To fast track your success, keep reading books, going to seminars, watching DVD’s and learning from people who’ve already achieved what you want to achieve. 

Don’t wait until you know it all to get started, because if you do, you’ll never take the first step. One of the things I learned early in the piece is the paradox of knowledge: The more you learn, the more you realise you don’t know.  

How do you know when you know enough to start investing? 

When you have the courage and conviction to take action, knowing that you’ll never know it all, but you’ll learn more along the way – educating yourself as you move up the investment ladder. 

Surround yourself with like-minded people. There’s no such thing as a “self-made millionaire”. Even financially independent investors surround themselves with a smart team of advisors and professionals as well as other like-minded individuals. Get a mentor, join an investment club and associate with others who have similar aims to you. If you stop associating with people who are negative and point out all the things that can go wrong, and instead surround yourself with people who are positive and will spur you forward, you’ll reach your financial goals much quicker.    

Links and Resources: 

Michael Yardney

Metropole Property Strategists

Metropole’s Strategic Property Plan – to help both beginning and experienced investors 

Some of our favourite quotes from the show:

“The rich and the poor both start with the same amount of money. They just have a different philosophy.” –Michael Yardney 

“Be really, really careful who you listen to. Because if you listen to what most people listen to, if you follow the people that most people follow, you’ll never get to financial abundance, because that’s not what they’re aiming for.” –Michael Yardney 

“The lovely thing about money is it really doesn’t discriminate.” –Michael Yardney 

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