If you want financial freedom stop spending all of your time at work.
I know, it sounds backwards right! Different to everything you learned from your parents and at school.
Well if you’re stuck in a 9 to 5 grind and want out, maybe it’s time to think differently?
Here’s a story about how we 10xed our net worth by learning to think differently about wealth. In this post we’ll share what we learned and what we did with that knowledge. There’s no catch dear readers. Once you read this, you’ll discover that you can do it too.
Living the Aussie dream
I started my money making life in my early 20s in a respectable job as a wage earner with a university education. Sound familiar?
As expected, I quickly worked my way up the ladder to an executive position and then fought tooth and nail to win a coveted diplomatic posting to one of Australia’s Embassies overseas.
When I won that posting, I’d worked for 4 years and amassed a measly $7000 in savings. Granted I was young and just starting out with basic household goods to buy. But it wasn’t a good showing for 7,800 hours of work. My wealth had grown by less than one dollar for each of those hours I’ll never get back.
But, about to embark on a well paid overseas gig, I then took that $7000 to a free financial planning session paid by the government and they helped me invest it in managed funds. They took their fees of course. Before I got on the plane I signed up to a stock market newsletter and bought a couple of stocks on the Aussie exchange. I had an inkling I needed to invest, but that was all I new to do at the time.
For the next three years I was living my dream – a diplomat in China earning Aussie dollars, spending Chinese Yuan with a large whack of my living costs paid by the government. All in return for being on call 24/7 as the frontline of Australian sovereign border to North China and North Korea.
It was a great experience and one of the highlights of my employed life.
The gravy was, at the end of that three year posting I came back to Oz with $160k in the bank. I felt rich! It turns out you can save a lot of your Aussie income when your living costs are in Chinese Yuan. And one of the stocks I bought took off to boot. Booyah!
Incidentally, I returned to Oz with $160k in my pocket right after the GFC. This was just as the 7% interest I was earning on bank savings began its free-fall to the 1% savings rates of today. A tangent, but a related one.
Back to the story….
With $160k behind me, I thought I’d take a leap of faith and change careers. So I went back to uni and re-trained in environmental science because, folks, that was all I knew to do… $15k in student loans later I had a Masters in front of my name. I didn’t think this way at the time, but all that degree did was put me in debt and prime me for another job as a respectable wage earner.
That new job came along and whaddayaknow I was suddenly a renewable energy expert kicking off a new career working the same old 9 to 5 grind.
When sh*t got real
3 years into that ‘new career’ the government I worked for was subject to its largest cut backs in history. 14,000 people lost their income earning jobs.
I was a contractor at the time. My head was at the front of that queue for the chopping block. As the main breadwinner – sh*t had gotten very real for me.
What to do, what to do? I had some cash in the bank but faced the looming prospect of unemployment. How did I get into this position?
I’d done everything I’d been told to do – I gotten good grades, a higher degree, a respectable job. I had parents who were wage earners and an unspoken understanding that this was also the path cut out for me. I’d worked hard and saved studiously. And yet, I was facing zero income and little hope of local reemployment due to cut backs
I remember I was angry and confused. Over the months I spent dodging and weaving to keep my job what crystallised in my mind from the anger in my gut was this – I didn’t want to be reliant on someone else for my financial security ever again.
Fast forward to 2020 and you hear the same familiar shattering of reality for tonnes of people across the globe.
But at that pivotal moment in my life, I realised I needed to DO different to GET different.
‘If you always do what you’ve always done, you’ll always get what you’ve always got.’
– Henry Ford
And so began my unconventional financial education. I say unconventional because it wasn’t about finance per se. Also, it was the first education I’d had that was not from a school or university. It was all about a subject I’d had zero personal experience with and one they don’t teach in class.
How the rich make money.
Lessons from a Rich Dad (how to build a wealthy mindset)
One of the first financial educators that came into view for me was Robert Kiyosaki. Kiyosaki is a well known financial educator and successful investor and entrepreneur. I can’t quite remember how I stumbled across him but looking back now I’m super bloody grateful I did.
Kiyosaki’s Rich Dad lessons opened my world and blew my mind. The Rich Dad teachings were just different to everything I’d learned and utterly challenged everything (I thought) I knew about money and wealth.
I knew if I could learn to think differently in the Rich Dad way, I could ‘do different to get different’. So I focussed on reading everything I could from the Rich Dad education suite and attended Rich Dad webinars.
Multiple books and online events later I’d distilled down to six the take away lessons that resonated with me. These six lessons taught me to think differently about money.
Here are the lessons I learned, and what we did with them.
Lesson #1 – Become financially literate and learn the rules of money.
There are a bunch of rules that govern wealth creation and that are not taught in school. Who knew right?
If you want to make money you need to learn the rules of the wealth game and become financially literate. Not the finance degree kind of learning. The wealth building kind of learning. You need to learn about where to focus your time and effort, what to invest in, and how to keep the money you make.
What we did.
We put aside some of our surplus income each week to invest in our financial education. Not learning from schools. Learning from successful and wealthy people. In my spare time I read books, attended webinars and took courses. I focussed on everything the Rich Dad lessons had to say about money.
If you want to become more financially literate and learn the rules of money – start here with a Rich Dad webinar like we did. If you read on you’ll see how learning the Rich Dad lessons and rules of money – and then applying them – has paid off for us. We now have a life we couldn’t imagine when our Rich Dad journey started.
Lesson #2 – Savers are losers.
In school we’re all taught to get a job, save up, get a mortgage and pay it down with 100% interest over its life.
Kiyosaki teaches that this system is obsolete. Why would you save money when they’re printing more of it?
Savers have been losers since 1971 when fiat currency was de-pegged from the gold standard and government’s started printing as much money as they needed to keep economies out of trouble. Just check out the money printing that’s been going on.
People are still walking around scratching their heads 13 years after the GFC about why the stock market keeps going up and up and in Australia, the US and the UK house prices are hitting record levels. It’s not the price of these assets going up in isolation. It’s their relative value in fiat currency. If you’re saving your money in fiat currency, you are going backwards at a rate of knots. If you’re trading from asset to asset in the same market, you’re less impacted.
What we did.
In 2011 we took the $160k in savings we’d had in the bank for two years and decided to invest most of it. We have only ever kept an emergency buffer as cash in the bank since learning the plummeting value of fiat currency. Cash is trash peeps.
Lesson #3 – The rich don’t work for money. They have money work for them (by investing it).
Woaah, what? Takes a minute to wrap your head around, but news flash here – truly rich people don’t have jobs. They don’t work as employees of other people. They’re investors or entrepreneurs or business owners. They certainly don’t trade their time, in units, directly for money. So having a job was never going to make me rich or even financially comfortable. I was always just going to be trading my time for money. No way Jose.
What we did.
We set financial goals around not having jobs. We made financial plans that were reverse engineered with the single outcome of escaping the rat race.
When my friends were busy climbing the corporate ladder to VP and Managing Director positions, I was busy trying to get my ass out of a job.
We decided not to chase promotions at work because the higher up you go the more of your life they want from you. I had multiple friends over this period pushing me toward career ‘promotions’; so called ‘higher paying jobs’. It was clear that they thought I should have been doing better. Several bosses asked me why I hadn’t ‘taken the next step’. I remember smiling and mumbling something incoherent on these occasions. Explaining what I was actually up to seemed an impossibility. Where to even start?
Instead of the path expected of me, I found a wage earning position that paid well but that also had flexible working hour arrangements (accrued time). I spent my accrued work hours becoming more financially literate and investing every last effort and dollar into building my assets column – outside of work.
Lesson # 4 – An asset is something that puts money in your pocket. You home is not necessarily an asset.
This is an underpinning of the Rich Dad financial education – knowing the difference between an asset and a liability. The rich buy assets, the poor buy liabilities. Assets put money in your pocket and liabilities take money out of your pocket. Rich Dad financial education is practical because Kiyosaki talks about what kind of assets to buy and how he went about accumulating them from a time when he was stone cold broke-ass like many of us have been.
What we did.
We started to invest in assets. We didn’t even have a home mortgage at the time – we were renting – but we bought our first investment property instead of a home. Because of the Rich Dad lessons about assets and liabilities, we knew what to look for. We looked exclusively for an investment property that would put money in our pocket. A property that would produce an income in rent and capital growth. We bought a run down dual income property – three apartments on one title with three independent income streams.
Lesson #5 – The rich use the income from the their assets to live and reinvest the surplus into into more leveraged assets
The Rich spend time building up their asset column and then use the income their assets produce to buy what they want. The poor stay poor buying liabilities like big homes, cars, holidays and gadgets that they can’t afford – to look rich.
The rich buy assets using other people’s money (good debt) and manage risk. The poor take personal debt (bad debt) to buy liabilities or are fearful of taking on debt at all.
What we did.
We started to use good debt strategies with our investing. The multi-family property we bought was leveraged at 90% so that we could make our own money go further. We kept as much as our own cash as we could to renovate the three apartments and increase the rental income.
By renovating our first investment property we had created some equity so we used that to buy another investment property leveraged at 90%.
We managed the cashflow from our wage earning jobs and our investments carefully – something Kiyosaki also teaches. And we always kept a buffer in case things went wrong.
The next step we took was to invest in our financial education again. We learned how to supercharge the rental income from our 4 investment properties. If you want to learn more about how we did this, you’ll find the details here.
Lesson #5, about using good debt and not getting into bad debt, was as much about what we didn’t do as what we did.
When our peers were dropping $700k on homes to live in and taking on massive personal mortgages, we didn’t. Instead, we paid $40k with a $360k bank loan for a modest little cottage right by the beach. It was a house we knew we could one day turn into asset that put money in our pocket. We invested our surplus income and sweat equity into renovating the cottage, mostly DIY.
As we watched our friends and peers buy new $50k cars with finance straight off the showroom floor, we didn’t do that either. We bought both our cars as either demo or second hand models no more than 2 years old and paid cash for them.
When maxing out your credit cards on retail therapy and expensive nights out was the norm, we didn’t buy stuff we didn’t really need. Instead, we used our rewards credit card to get maximum value from our home offset account (reducing our interest payments and getting cashback). We paid the credit card in full every month and rolled it into a mortgage package so the bank waived the annual credit card fee. This credit card strategy uses smart structuring and is a total home loan interest killer. It’s something a lot of folks can do, but simply overlook.
Lesson #6 – Taxes are your single largest expense. The rich don’t pay taxes – the educated upper middle class pay all the taxes.
Kiyosaki teaches that high paid employees pay the most taxes. Just look up income tax rates around the global versus company tax. The worst place to be if you want to keep the money you earn is an employed professional.
Corporations pay less tax than individuals as an incentive from government to create tax paying jobs. Investors pay the least taxes.
The lesson we took away? If you want to keep your money, earn it as an investor or in a corporation. Far out brussel sprout. I couldn’t believe I’d been a tax mule all these years and so ignorant about it…
What we did.
We structured our investments in trusts and companies. We focussed on moving our income streams from the highly taxed employee basket, to the low tax corporation basket. Eventually we’ll move more and more of our income into the investor basket.
We currently earn and then spend and then get taxed for 75% of our income.
Before our Rich Dad education we earned, got taxed and then spent for 100% of our income.
Changing the way we earned income has reduced our personal cost of living by thousands per year due to favourable company tax rules. Our net worth has also benefited by $130k to $170k by using the rules of money we learned from our Rich Dad education.
The final word – our wealthy mindset results
Building a wealth mindset and applying the Rich Dad concepts that we learned in the Robert Kiyosaki webinars has set us financially free. I’m happy to report that I’m no longer an employee. 🙂 I’m free to do what I want each day – which is play with our beautiful Vizslas, set up our new home, start our homesteading project and write this blog.
We’ve also just bought that new home with cash – all part of the financial freedom plan.
Our net worth is over 10 times what it was when we started applying the Rich Dad rules of money.
We live off the income generated by our assets via tax efficient company structures.
Any surplus income we have we look to reinvest in other income earning assets.
We work as we chose to, because we’ve got new goals in life. Mostly, we enjoy life and our time is our own.
None of this required epic mastery of anything special. We just learned to think differently, build a wealthy mindset and do what the rich did.
Thanks to Mr Kiyosaki and his Rich Dad.
Til next post – have fun, be happy, do good!
And if this post got you thinking about your financial future maybe get yourself to a Rich Dad webinar and please – share the love!