The Basic Financial Independence Achievement Strategy (FIAS)
There may be many FIAS that exist but the most basic one I can think of evolves around these core points below:
- Reduce expenses.
- Accumulate assets.
Living expenses for example can be optimized so as to be as cheap as necessary to maintain the standard quality of life desired. In fact many people ask the question of whether to buy a house or rent? The answer to this depends more on the lifestyle and cost efficiency goals. It could be less expensive to do something and also provide the exact same quality of life so why go with the more expensive option?
Accumulating assets is simply to collect anything which can become or which already is an income generator. Because this is the crypto space I am sure most people reading this hav some idea on what sort of assets to collect by now. There are assets which appreciate in price over time so that you may spend down increasingly smaller amounts of the assets during liquidation and there are assets which literally pay income in some cases on top of underlying appreciation.
Growth based assets grow in price. Income generating assets generally produce a steady stream of income sometimes for multiple generations. If it can be rented, it can produce an income. If it can be sold, it can grow in price and be sold for a higher price than you paid for it. Remember this is not financial advice, so do your own research and follow your own conclusions.
@dana-edwards people are enslaved in the capitalist system. It is done with credit cards that enslave."you do not need to save money.withdraw credit from the bank.you pay in installments." this is a lie.they make you debt-borne and you can not get rid of it.do not use if you are not consciously using a credit card.do not fall into the trap of capitalist rule !!
Exactly, see this article: http://www.businessinsider.com/how-cash-flows-2015-1
@dana-edwards Thank you .i will look right now
Thanks for simply explaining this strategy. I think that eliminating expenses is a big part of this strategy at the beginning, in order to free up some cash to accumulate assets.
Regarding accumulating assets, growth based assets are important, but I prefer income generating assets (as I'm sure a lot of people do). I always try and accumulate assets that do both; my new blog series is all about generating passive income through cryptocurrencies and it focuses on investing in cryptos that may increase in value, but also provide a small amount of passive income over time. When it comes to physical assets, the property market seems to be a good space if you have enough funds to buy some properties to rent out, but I prefer doing work for equity. Working for equity can provide a great growth based asset income stream, as if you do work for some HPSUs (High Potential Start-ups), you can make a monetary ROI from only investing your time.
What do you think are better, growth based or income based assets?
I know I'm not who you asked but personally I think a lot of this depends on what the person is already taking in and which country they live in. Income-generating assets are nice but can greatly increase the tax liability for an individual. For similar tax-related reasons I think a lot of late-comers are hesitant to cash in on their crypto returns including places like Japan and Europe where the marginal tax on investments is huge, and part of this reasoning might be slowing the descent.
I agree with you there, taxes are really halting people from cashing out! Thanks for the response!
Income generating assets do have different tax risk which is exactly why tax efficiency is so important. This is why anybody who truly is wealthy really needs to talk to an accountant, a lawyer, and a financial adviser. All and any wealth will not last unless direct strategic actions are taken to preserve that wealth.
It see it like cost efficiency. To get the most out of every dollar. If a purchase can truly make me happy, or supply me with good memories, then I factor the value received into the cost paid. I think the mistake most people make is to use credit cards to buy stuff they don't need, or stuff which doesn't last, or stuff to impress other people but which doesn't make them happy or help them improve themselves (and with that grow their wealth). It's a challenge to be efficient but it's also one of the important ways to not just grow wealth early on but to maintain it for the long term (really long term, as in multiple lifetimes).
If we think in the context of not just our lifetime, but five lifetimes forward, then how much wealth do we really pass down? Some of it could be in good genes we have if we win the genetic lottery. Some of it could be in knowledge we pass down if we've had the sort of life to make us wise. Some of it could be stuff like homes, real estate, stocks, or crypto. The point is that during our lifetime if we achieve multi-generational wealth, in any form, then the biggest challenge becomes how to maintain it indefinitely.
We cannot take any wealth with us so by being efficient with how we spend we can have more to pass on because wealth will have more time to grow. A lot of what I'm saying is theoretical and based on research I've done from learning about some of the wealthiest families in history. These families with multi-generational wealth don't waste money on flashy crap but are serious about the topics of inheritance, marriage, wealth preservation.
Interesting, I've never looked at it from that perspective. I do agree though, buying things that have intrinsic value can be a big part of cost efficiency.
When it comes to passing down wealth, I also never looked at that in detail. I imagine income generating assets that have very long lifespans are the best bet for this, but what exactly are those assets? I keep thinking if property.
That's interesting that you have researched some Of The wealthiest families in history. I didn't know that this was their method.. I think that I will try and adopt it to certain aspects of life! At the moment I have three income streams and I am really trying to add Steemit as a fourth at the moment. I personally don't have any income generating assets that provide a lot of income, although I do have a few generating small incomes that have the potential to grow. You have really sparked my interest. Thanks!
Couldn't agree more although I think full financial independence comes from accumulating both types you assets that you, not just one. This isn't to say that you shouldn't invest in cryptos, but I would argue that there is also a need to diversify into income assets - like real estate or even small businesses if you can - to help shield your portfolio and lifestyle from the ups and downs of the markets.
@dana-edwards very well said peoples should learn about the game of financial freedom as no one gain the liberty if ones work only in a limited routine. 9 to 5 work just give you a hand to mouth earning, but if you want to live a life where you could not get worried about money or your financial freedom is starting, then you must build some valuable assets.
Assets are those who give you earning on a regular basis. You can generate money by assets without loss the actual values of assets.
A successful businessman always builds assets first then he generates money from that assets and moreover after earning some handsome amount he again invests the money in making more assets. As assets are the best source of passive income with out building the assets you cant get the financial freedom :)
That's a good piece of advice my friend. At one point of time I could never control my expenses and I was financially very weak, then I made one habit of planning up my expenses for every quarter and making sure I save a minimum x amount of my salary and I started keeping track of all my expenses on excel which helped me a lot to get in track. Now I can't do without my excels.
On the saving part I also suggest people that save a good amount but dont keep on depriving yourself from everything, cause if you dont spend today you will not spend tomorrow also witg the fear of not having enough, and finally you will die leaving all of that
Reduce expenses (or just being frugal) is actually the 1st step of any strategy. It's no good if you're spending the returns. Remember, compound interest is the 8th wonder of the world.
The way I did it was thinking of it as an investment. If you save 100 out of 1000, you're making 10% each month. It also compounds, as those 1st 100 were invested, and so on.
As of the different types of investments, just apply portfolio theory. Be bold when younger, more cautions when older.
Most people never figure this out. There are people who become multi millionaires and somehow lose it. I mean if you have 50 million dollars not only can you be financially liberated for life but your children, their children, their children, and so on, can also be financially liberated, if you are strategic, smart, and focus on wealth preservation rather than buying lambos.
A lambo looks nice, until you crash it. Any gadget might be cool until it breaks. At the end of the day the actual good life comes from the relationships you have with the people who love you. It's the relationships that generate most of the happiness for most people, so this is the actual reward for achieving the financial independence. If people realized that it is about relationships and not "money" or "gadgets" or even "abundance" then the concept of wealth preservation takes on value. Wealth preservation is valuable because not only can you free yourself for life by becoming financially independent but if you really do the math, every additional $10 million dollars allows you to free another person.
If you are frugal you can try to maximize the amount of people you can potentially free. Maybe you want to set up a trust fund so your children don't have to suffer like you did? Maybe you want to take care of your parents so they can age gracefully? Maybe you have a wife who you want to allow not to have to take on a job she hates ever? All of it becomes possible with enough money but if a person spends it down on lambos, a mansion, a personal chef, and all that, then at the end of the day they have less to give to their families.
It's a choice each individual who achieves high net worth has to figure out for themselves. How much money to spend on themselves and how much should be specifically set aside for long term multi-generational wealth preservation. If you ever achieved just 50-60 million then you could put 10 million for each of your kids in assets which appreciate at 8% or so per year, which pay dividends on top, and which benefit from compound interest so such an extent that they'll each receive an income in the $200,0000-300,0000 range for life. If people really need more than that to be happy let them work for it.
Agreed. The best part is if you gain the habit of being frugal, it becomes a way of life, a mental quality, a life attitude. It doesn't change with wealth increase. Big wealth buys you time, which is a very, very expensive good. That's the best thing you can buy and, because is so valuable, you must preserve it. Then there's that, you can give to others, both time and money!
@dana-edwards Thank you very much for making us enlighten. I agree with your thoughts. but unfortunately this does not happen on the system. Banks and governments are pushing people to spend more. Of course, again if the person wants to save money. You can analyze your savings and make a deposit. The current global capital is turning away from this. We are not in this position
Thanks for sharing this
But CNBC said I should get more debt!
Seriously though great advice! It’s crazy to me many don’t understand these principles. Seems many are brainwashed
financial independence is is very important for us......we should have no restriction to use money in a legal way......even crypto...........thank for sharing
it so helpful post.
accumulating assets over reducing expenses,am I right here?
Personally,I go for option two. Why live below my means when I can expand it? That's what I ask myself. Why would I want to follow the popular opinion of living below my income,when I can actually,in the same time and space,increase my income exponentially.
Maybe it's just me,but reading Robert Kiyosaki and Donald Trump for most parts of the day has a way of making one think big financially.
Great write-up man. One of the best I've seen with the KISS principle.@dana-edwards,you seem to prefer the second option of
You would be wrong. My expenses are quite low compared to most. Some liabilities such as college loans and tax must be paid. But I do not go and create new liabilities for no reason.
It all depends really. If you have enough assets generating enough income then you can support a more expensive lifestyle. So when I say "low" I guess it would be low compared to a lot of other people but not quite where I want to be. So I would say if you can for example not have a credit card, not have a mortgage, not have a car, not waste money on over priced clothes, then yes you're reducing expenses. But the amount of expenses you have to take on depends on what it takes to make you happy individually. So low for me could be high for another and high for me could be low for another.
I guess I do understand your POV now. Since we all are different,then,we can not follow the same investment plan. With different expenses,lifestyle and desires,different plans would fall into place.
As to the people you cite, I personally am not going to name any names in particular but on a totally unrelated, totally not talking about them note I will go ahead and say that you should be very, very skeptical of anyone who claims to make loads of money with a system that you can buy courses in or books in. When they're making more off of these other products that are based on the appearance or image of someone being successful you should wonder why they aren't spending more time doing what they claim they're so good at.
The general rule of thumb with business is that if you have room to expand and markets are doing well, then expand as fast as you can, but make sure that your liabilities do not overextend your leverage position and debt ratios or you won't be able to move fast enough to cut down on those expenses before markets go south. And if you are a behemoth and have dominated the market you occupy, then you can worry about cutting costs if the roi of capturing more customers is too high, or you do not control the demand for your product in the first place.
So, say like previous era in the US where rates are low it's profitable to borrow as much money as you can to grow, but in a coming era of fiscal tightening and higher rates your business would implode if you had loans extended 5+ years that you could only pay off when business was growing.
Self help books exist to provide motivation and moral support to what you've already decided you want to do. The best books to learn how to do things vary of course. The problem with going from books is that often the best information is outdated by the time it gets into book format. Look at the blockchain space for example and see for yourself that by the time it gets into a book it's already a few years old. The best way to get knowledge is not to just read books but to observe people and do what you see working.
If someone else is doing something and you can see them getting a lot of money doing it then you can do the same in a lot of cases. Of course you never want to copy someone exactly but once the formula for success is discovered you can run with it and add your own uniqueness.
I fully agree with this stuff. I think it is always important to consider assets for yes the long-term growth so you can profit off of it but yet, like you said, liquidate smaller amounts in order to fund things. I really think this is important. Every time we add something to our budget we go through it and reduce something as well in one way or the other. I feel we have made some calculated risks and have a bunch of safety investments as well, but it's all about the best possible asset your money can buy and reducing other stuff to help fund that. Great post.
Great!!! You are awesome@dana-edwards
Sound advise, if only people would heed it. When I was selecting the assets to accumulate (RE years ago as well,but that market is troubled on many levels), it was only for those that would help my portfolio and ultimately financial independence.
With several crypto assets, that can develop passive income as well as captial growth... it is a greater possibility for the masses than ever before.
It really is a simple concept when you boil it down. Spend less than your net income, that's it. If you are making 50k a year but spending 40k a year and have a 15k line of credit debt, the only one you're hurting in this situation is yourself. Banks don't care about you, all they care about is your money. Credit card rewards are usually cheap gimmicks, that come no where near covering the amount of monthly interest you pay when you carry debt. Kind of why I like crypto, all assets that have huge growth potential
Crypto is an asset to me, one that will buy me financial independency a few years from now. Most people either put money aside to save, or they buy things on an impulse. Buying something that increases your wealth (aka investing) is on a total different level. And When it comes to investing in crypto, due diligence is the key.