Sorry, but you don’t. Why should you be exempt from working and worrying about money when everyone else has to? What’s so special about you?
The concept of retirement didn’t exist anywhere in the world until 1889. In the UK, a pension only started being paid in 1909. Even then, it was just for those aged 70 and above: a milestone reached by only one in four people at the time.
So roughly speaking, we can say that 100 years ago most people worked until their bodies broke down. Yet you want to down tools in your 30s/40s/50s and swan around doing whatever you feel like?
Fine – I’ll try to help you. But I’m warning you now: you won’t like the answer…
Finding a short-cut
Could anyone become financially free if they just went on the right free seminar then whipped out their credit card for the right £997 mentoring package?
No, of course they bloody couldn’t. The magnetic pull of financial freedom is powerful enough for many people to suspend their critical thinking faculties, but come on:
- If the person selling you the product is financially free because of the system they’re teaching, why are they trying so hard to sell to you? Is it because they’re passionate about helping others replicate their success? (Clue: No.)
- If it really is so wonderful and so easy anyone can do it, wouldn’t more and more people have rushed into the opportunity and saturated the market already? Surely the world can only support so many Airbnb hosts, Bitcoin miners and importers of tat from China. Oh, it’s a secret known only by insiders? Then see Point 1: why are those privileged insiders paying to advertise their secret to you?
Will some people who’ve attended any given seminar achieve impressive things? Yes, a few will – by working tirelessly at it, having some degree of pre-existing skill or aptitude, and benefiting from a bit of luck. Those people who’d probably succeed at anything they put their mind to.
But you don’t want to put in the work, or need skill or luck. You want a short-cut. And they don’t exist.
20 years of discipline
The world isn’t set up for ordinary people to make enough money in a short space of time to sustain them for a lifetime.
This is a huge generalisation, but on the whole it will take at least 20 years of hard work, strong earning, relentless saving and smart investing for the average person to accumulate sufficient assets to retire on.
Should you accumulate those assets by investing in a 70/30 or an 80/20 mix of stocks and bonds? Should you allocate 5% or 10% to emerging markets? Should you choose this fund with a 0.2% fee or that fund with a 0.3% fee but slightly more diversification of holdings?
It makes barely any difference. If you can maintain your discipline and earning power for at least 20 years (and get lucky so nothing major gets in your way) you’ll largely be OK. If you can’t, you won’t. And the average person can’t.
Don’t send me your spreadsheets. I know some people have done it faster, and I know small differences in portfolio construction and fees can add up to big numbers over time. None of that changes the broad point.
How to become financially free
I’ve been dropping a hint the whole way through. Have you noticed it?
I keep mentioning that the “average person” can’t do all manner of things. So that’s your answer to how to become financially free: stop being an average person.
Be the most valuable employee
If you left your job today and within a month your employer could have someone else sitting in your chair doing the job roughly as well as you can…you probably won’t become financially free.
The way to earn a lot is to be irreplaceable for a company that has the means to pay you a lot. Come up with great ideas. Bring teams together. Generate huge sales numbers. Only then can you demand more than average.
Then invest a large proportion of that big salary for long enough, and you’ll become financially free. Eventually.
Help more people
The maximum amount you can earn as a dietitian in the NHS is £36,000. Yet I know dietitians who provide their services online and earn far in excess of £100,000.
What’s the difference? Scale.
The amount you earn is determined by how much people value what you can do for them multiplied by the number of people you can reach.
Build a business
Building a business is just another way of getting scale: by bringing a group of people together to provide something valuable, you can reach more people (i.e. sell more).
Be a great investor
Use your knowledge, insight and research skills to find a small company that’s about to grow explosively.
Use imagination, persistence, project management skills and a willingness to take risks to build a block of flats, or add value to a tired old house.
Making average investments will get you average results. Making great investments can be life-changing…but it’s not something just anyone can do.
Do you deserve it?
These are all proven ways to – eventually – become financially free. They’re all hard work, they take time, most involve some risk, and they involve skills that the average person doesn’t have.
But here’s the good news: everybody starts out below average.
When anyone starts their first job or first business out of school, they have very little to offer: they’re the least valuable employee, or they run a disaster of a small company.
Everyone improves over time. But most people improve only slowly, and stop when they get to the level of comfortable mediocrity achieved by their peers.
If that’s where you’ve stopped, you don’t deserve to be financially free.
By all means, keep looking for short-cuts and loopholes that will let you cheat the system and achieve success you don’t deserve.
But my recommendation would be to forget all that, and instead transform yourself into someone who achieves the type of things that financially free people have done. It won’t be quick. It won’t be easy. But eventually, it’s all but guaranteed to work. And if it doesn’t? Well, you still have valuable skills and attributes you didn’t have before, plus all the self-esteem and opportunity that goes with them.