Financial Freedom E-Book

Gisela Enders

• Herausgeber: Books on Demand
• Kategorie: Ratgeber
• Sprache: Englisch

Seitenzahl: 284

Veröffentlichungsjahr: 2017

Beschreibung

For many people, financial freedom is a major goal. If they no longer needed to work for money, so much would be possible. For people who have to go to work every day that seems like paradise. But how do people actually live once they have reached the goal? Gisela Enders interviewed people mostly from Germany and Europe who are already financially free. She met very interesting people. Some who do not work at all anymore and others who spend every day working on their own projects out of sheer passion. Some who make their living from stocks and others who live from rental income. And others who live abroad and need very little money to live on. People who want to enjoy spending time with their kids and others who put all their passion into their own projects. Most of the people interviewed live frugally and from the outside, the only thing different about them is that they are rich in time. What would your own ideal life be like? A life that you planned yourself rather than one planned for you. You can put that plan into practice step by step. The ideas in this book will inspire you to consider a life beyond the rat race.

Leseprobe

Contents

Preface

Why Aim for Financial Freedom?

Is Work Our Life’s Purpose?

Has it always been this way?

Could unemployment be the solution?

How about a basic income for everyone?

What Would I Do if I No Longer Had to Work?

How did our ancestors live?

There’s more to work than making money

What Could an Ideal Life Look Like?

What would you do if money were no longer an object?

How Do You Achieve Financial Freedom?

The Path to Financial Freedom

Saving as much money as possible

A quick guide to investing

Passive income

Accelerating financial freedom by choosing the right location

Consumption Won’t Get Us to Our Goal

Just buy yourself time!

Reduce Your Cost of Living

Housing

Your car

Exotic holidays

Hobbies

Expensive Habits

How did the rules of 752 and 173 come about?

The power of habits

At What Point Can I Say I’m Financially Free?

Why Work If You No Longer Have To?

The Interviews

My interviewees – differences and similarities

Melanie Collects Apartments

Trilingual Freedom with Two Kids

Monika Has Been Financially Free for Four Year

Christian – Rich with Real Estate

Lars and His New-Found Passions

Alex – Free with Dividends

Brandon – Newly Retired at 34

Dagmar and Norbert – It’s Cheaper to Live in Other Countries

Jakob – A Lot Is Possible Without Kids

Striving for Financial Freedom

Finanzglück – with Real Estate and Stocks to the Happiness of Financial Freedom

Mr. RIP from Switzerland

With Dividends to Financial Freedom

Living a Life of Luxury below the Poverty Line

Marco – The Minimalist

A Mother on the Path to Financial Freedom

Conclusion

Preface

Financial freedom? What’s that again? Rich people who always have enough money? Of course we could settle for that definition. But it’s not the right one for the people who share their stories in this book.

Even though there’s no clear-cut definition of financial freedom, the one thing all my interviewees have in common is that they no longer have to work for money. In other words, they’ve come up with their own strategies, mostly through investments, to generate enough income to cover their living expenses. Despite this, lots of financially free people still work; many live modestly and go undetected in our society. So we can add something to the first definition: to live in such a way that you don’t need a lot of money.

When I was looking for people to interview I quickly realized that it’s relatively easy to find people who are working towards financial freedom. Especially on the Internet there are countless blogs on which people describe their strategy, their end goal and their journey. People who have already reached financial freedom are not as easy to find. They’re less vocal and they don’t have flashy status symbols that give them away. It took me a long time to track down some financially free people and not all of them agreed to be interviewed for this book. So I’m all the more grateful to the people who did talk to me, giving me an insight into their lives and how they got to where they are today. The interviews show that even people who no longer need to work still have to find their path in life. This path isn’t always easy; sometimes it’s just different. In any case, it presents new possibilities and opportunities. For many people, no longer having to work is a huge step towards freedom.

I hope that my interviews inspire you too to take a fresh look at your own life. Which aspects of freedom can you adopt already? Are you prepared to pay the price for doing so? The price most people pay is living a very frugal lifestyle and adopting a shrewd, fearless attitude to investing. Simple really, but despite this only very few people set out to achieve this goal.

When this book was first published in German, a British friend of mine contacted me and offered to translate it into English. She thought that lots of people in Europe and the rest of the world would be interested in reading it. I was very proud and very, very thankful - especially since she offered to work for free and asked me to donate the proceeds from the English version of the book to a children's home in Romania. I was very happy with this idea and we are both grateful that Robert (who is introduced later on in the book and comes from Romania) will make sure that the money goes to a place where it's badly needed. So in the name of the kids who will benefit from the proceeds of this book, thank you very much for buying it. I hope it will be as much of an inspiration to you as it will be a benefit to them.

Why Aim for Financial Freedom?

We normally grow up with a particular set of values. These include ideas about our career path. This traditionally involves 10 to 13 years of schooling followed by two to six years of vocational training or college and then one or more jobs. Then when you’re 63, 65 or 67 you finally get to start your well-deserved retirement.

In recent years or even decades, this idea of the “normal career path” has been falling apart. At the start of my professional career, I came across people at some of the larger companies who were celebrating their 30th or 40th anniversary working for the same employer. Some of the companies were later bought out and so I also had to witness how these long-serving employees were “liquidated”. Today this has become more and more the norm. People no longer start their careers with a particular employer and stay with them for the rest of their lives. They don’t even expect to anymore. And they no longer find the idea attractive either. Since the supposed security a permanent job brings with it is no longer guaranteed anyway, there’s no need for people to sell their souls to a single employer. Instead, lots of young people are getting to grips with fixed-term employment contracts and contracts for services. The nature of work is changing, and with it the status of work in general. Some people’s reaction is to search for a safe, secure job. Preferably a permanent one. In doing so they make a lot of compromises in terms of what they do, how they do it and how much of it they do. Other people try their luck with self-employment, forgoing the supposed security of having a job.

In my coaching sessions I see all kinds of people. Especially among the employees I’m sometimes astonished at how much stress and pressure people are prepared to put up with. It’s as if they’re trapped in the cage of work and the life they’ve built around it. That life costs money, and as a result people don’t have the option of working less or even stopping working altogether. They need to cover their costs, after all. But income and expenses drive each other up in a fascinating equilibrium. In the best case. I also work with people whose expenses are growing more quickly than their income. These people are then under even more pressure to hold on to their jobs at all costs. My self-employed clients are also under a lot of pressure. In the startup phase, they often make offers and set prices based on their living expenses. If their goal is to earn €6,000 a month, each month they need to sell 60 hours of their time at €100 each. If they can’t find enough customers to order and pay for those hours, they find themselves under even more pressure. This then often gives rise to a stressful vicious circle. The customer senses he’s desperately needed, but he doesn’t want to be so heavily responsible for another person’s income. Instead he wants to be free to order the service in question as and when he needs it, without obligation and without any sense of guilt if he walks away for whatever reason. To avoid taking on any such obligations, he doesn’t order the service in the first place or, if he doesn’t feel the pressure until later on, he quickly turns his back.

Of course I have to qualify all of this by noting that only people with problems turn up in my coaching sessions. No-one pays for a coaching session so they can tell the coach how great their employer is and how much they love their job, and no-one books startup or consolidation coaching if their business is already on fire. That means I have a selective view of the world. I’m sure there are also lots of employees who like their jobs and self-employed people who earn good money from meaningful, interesting projects. Such people will probably look somewhat incredulously at the group of people we’re going to talk about now.

You see, there’s a small group of people who do things completely differently. Who’ve retired early – so early that they don’t like to call it retirement. Whose lives are not what most people would call “normal”. My encounters with financially free people have been absolutely fascinating. At a women’s discussion group about financial topics I met Monika, who we’ll hear more from later on. In summer 2016 we set off together for Budapest to meet other financial bloggers. There I had the opportunity to meet people who on the one hand lived very modestly while on the other hand were aiming to give up working for money much earlier than normal. There was Monika, who reached her goal of covering her day-today expenses through investment income aged 45. She was relatively late to the party. Brandon, for example, was planning on leaving his job the following month at just 34. And Emma and Robert had reached their goal with two children while also still in their early 30s. Fascinating. I noticed how quickly I reached the limits of my imagination. Just stop working? But what would you do all day? Where would you get your recognition from? I’m always happy when I get the chance to help people in my capacity as a coach. When through working with me they start to see their lives from a completely different perspective, which often paves the way for incredible changes. I don’t do that simply because it earns me money, but because it gives my life a purpose. I also liked my previous jobs as an employee. Well, on second thoughts I have to qualify that too. After all, I quit for a reason. With my first permanent job as the managing director of a youth organization, it eventually became obvious to me that I had to go. I’d reached a point at which I felt I was too old for my youth organization. Which then surprised me, by the way, by hiring a woman four years older than me as my successor. So much for preconceptions about age. But that’s another story. After that I worked for an environmental organization. So I was working for the “good guys”. Even so, after five years I’d had enough. I was bored. I didn’t want to spend any more of my time on ineffective discussions or unmotivated employees, and solving problems didn’t ignite passion in me anymore either. What was clear to me at that point was that I’d encounter similar issues at other employers. So switching jobs wouldn’t help. The only option left was to become self-employed, so that’s what I did. I fully expected that I’d have to work a lot once I was self-employed, probably more than I did as an employee. At the beginning I used to add up the hours in my head. Eventually I stopped because no-one cared about my hours. Now I just keep an overview of my income and concentrate instead on the progress and transformation of my coachees. When I blog or write books, it’s either the access data or the sales figures that count. That’s how I measure the “value” of my work. I derive motivation and recognition not just from the money I earn, but also from the feedback I get. Would I give that up just because I had enough money? At first I couldn’t imagine it.

So I was all the more eager to find out about the motives and ideas of financially free people. Do they all meet up on a tropical beach somewhere? Do they have endless amounts of money? Budapest surprised me. Financially free people seem to be very frugal. Otherwise they’d probably never have managed to save enough money to achieve financial freedom in the first place. During our first walk together through the city we passed a fast food restaurant. One person had already been there and said, “Hey, there’s a tap in there where we can refill our water bottles. And if we can find out the code on an old receipt, we can all go to the bathroom too.” So 15 people stampeded into the fast food restaurant. They all went to the bathroom, refilled their water bottles, and disappeared again. Without leaving a single cent in the restaurant. And so it continued for the whole four days. I had exchanged €200 – that’s normally what I need for four days in a big city. At the end I still had €120 left. Financially free people eat out very cheaply and don’t spend much money otherwise. Did that mean we had less fun? I wouldn’t say that. At times I’d have allowed myself a bit more luxury, but I definitely had an enjoyable four days.

But still, why were all these people aiming to eliminate paid employment from their lives? Simple. None of them could imagine working as an employee for the rest of their lives. They had all had too many bad experiences for that. Not awful experiences. But periods of too much pressure, too little appreciation and the hollow feeling of having to go to pointless meetings or work on pointless tasks. I found Jill’s point of view interesting. She’s a Scottish optometrist who loves her job. Even so, she’s still been able to gain something from her husband Brandon’s dreams of financial freedom – namely the independence factor. She talked about a key experience she’d had: a negotiation with the head of the clinic she works at. She already had some savings, enough to last her a while even without her job. Now she wanted to take three months off to go travelling with her husband. What did she learn from the negotiation? It makes a huge difference whether you have to ask permission or whether you can simply tell your boss about your plans and suggest that you can work out together whether it’s possible for you to return to the same job afterwards. That you’re going no matter what. By the way, her boss went out of her way to make it possible for her to return to her job.

So I’d already understood that having a financial buffer gives you freedom. I know that from my own experience too. At the moment my reserves – which of course are supposed to be for my retirement – would be enough to last me for several years. Of course I don’t normally touch them. They’re for my retirement after all. But I’m still happy that they’re there and that I can fall back on them temporarily if I need to. I don’t always have enough coachees and because some funding programs don’t pay out until the end, it can sometimes be a year before the money hits my account.

But would I ever want to stop working completely? What would I do? Well, the people I talked to had lots of ideas about that too. They’ll tell you about their ideas in more detail in the interviews. I quickly learned that the goal isn’t to lie around on the couch all day. But in a way it is too. Besides the desire for a certain degree of idleness I also heard lots of ideas for various projects. Many people blog, organize meetups, help other people and pursue all sorts of different interests. Not always with the intention of earning money, but more with desire to follow their own curiosity and be able to try things out.

Financially free people ultimately buy themselves time – time that they can spend however they like. They can use some of the time to earn money, but they don’t have to. The whole point is that they don’t have to do anything just because other people tell them to. In that sense, it’s not actually about money at all. Money is just a tool. What the people I talked to “buy” is time and individual freedom.

Is Work Our Life’s Purpose?

Our lives, indeed our whole identities, are heavily influenced by work. Most people don’t say that they do such and such a type of work, but instead use the phrase “I’m a …” Our identities are largely defined by our jobs. It’s not only what we actually do that’s important, but also our job titles. And the enthusiasm with which we embrace our responsibilities and our supposed importance. As a result, many people can’t imagine working part-time. They need to be available around the clock; often far more than the 39 or 40 hours a week agreed in their contract.

Has it always been this way?

We often assume that our working lives follow principles that have remained unchanged since the dawn of time. That indeed can’t be changed. We simply can’t imagine things being any other way. I tried to find out whether we’ve always worked this way. Just taking a quick look at my own relatives told me a different story. At least for us women, things have only changed fundamentally in the last 50 years. Now we’re allowed to work. For many women however, allowed to has already become have to. But let’s go a bit further back in time. In actual fact the world has always been divided, so to speak. Some people worked, others didn’t. But even this situation developed slowly over time. For many millennia, humans were hunter-gatherers. They fed themselves by hunting animals and gathering fruit. Their salaries were paid in the form of a rabbit, or maybe a handful of berries. If that wasn’t enough, they had to work a bit more. If they had too much, they invited the rest of the tribe in and shared with one another. I don’t suppose any of them ever thought about their work-life balance. Since they didn’t spend the whole day hunting or gathering, they had a lot of free time anyway. That was normal; probably no-one gave it a second thought.

In Ancient Greece and Rome work was seen as something base and undignified that a citizen should have as little as possible to do with. The civilized person talked, philosophized, negotiated and possibly also made business deals. Strenuous, monotonous work was done by slaves because work itself was seen as tedious, dull and as a distraction from real life. Real life was definitely not considered work, but was instead concerned with training the mind and body.

So when did the idea of work as a meaningful activity come about? Did the Christians introduce it? It wasn’t them either. The early Christians at least also had a negative view of work. The yoke of work that God laid on Adam was clearly understood as a punishment. This changed somewhat in the Middle Ages. Monks in England declared manual labor to be a type of physical prayer. As long as menial work didn’t prevent them from praying, it didn’t damage the monks’ reputation. During the Renaissance a distinction was still made between mental and physical work, although handicrafts grew in importance and were highly valued. But even artists didn’t do all the work themselves. They had the ideas and laid the foundations for a work of art, but the actual work was still seen as inferior and accursed and was readily delegated to “lowly people”.

Everything changed with Martin Luther and John Calvin. Not immediately of course, but they laid the foundations. They defined work as a virtue bestowed on people by God or with which people could please God. The Protestant work ethic crossed the Atlantic with the Puritans. Benjamin Franklin also embraced it in a slightly more secular form, and amongst other things praised hard work as a human virtue. In the beginning, the state of dependent employment that came with it was seen as only a temporary goal – as a way to save money for other life goals such as buying a piece of land or starting a small business. Happiness was largely defined by self-determination. With the rise of industrialization, however, such opportunities became increasingly rare because more workers were needed. It was now in employers’ interests for all workers to stay with the company their whole lives. Appreciation of craftsmen and other self-employed people disappeared, and dependent employment increasingly became the norm.

Today we still live in a world influenced by this Protestant work ethic. We hardly even question it anymore, even though the Protestant rationale is no longer the motivating factor. Over time we’ve become far removed from the idea that our work will please God, and I don’t think many of the people slogging away in offices believe their efforts will be rewarded in the afterlife. We work simply because everyone else does and because we want to keep up with our consumption-driven world. Then there’s the question of identity – it’s just cooler if we can say at parties that we’re a CEO, lawyer or fireman.

Could unemployment be the solution?

Lots of people are excluded from the process of exchanging time for money and status. Unfortunately hardly any of them can enjoy it. Our society is fixated on working for money. Only those who offer up the requisite eight hours every day can hope for recognition by society, appropriate compensation, appreciation and a sense of belonging. Unemployment is dishonorable and reinforces everyone else’s fear of becoming unemployed themselves. So they cling to their work even more – even if it’s mindless, stressful or even downright damaging to their health.

I’ve come across the odd exception here and there among the long-term unemployed. People who’ve adopted the appropriate mindset and developed a thick skin for appointments at the job center can live a life of relative freedom. Unfortunately not with the typical level of recognition from society, but at least with time to feed their own curiosity, work on their own projects and look after their own children or children whose parents are off working for money. Sadly, such people are very rare among the many thousands living on welfare. Normally the humiliation of not belonging becomes part of their lives and they too come to see themselves as failures.

How about a basic income for everyone?

I’m curious as to whether I’ll live to see the introduction of a basic income in Germany and Europe. Not because I don’t want to work anymore, but because I see how much the nature of work is changing and will continue to change. As work processes are becoming automated and digitalized, we’re going be able to make the same products with less and less effort. Unless we want to keep on producing more and more things that no-one needs, we’ll need to adapt. A basic income for everyone could be a solution here. I think it would fundamentally change the world of work. I’d be very curious to see it in practice. I’d be interested to see whether a friend of mine who’s a technical supervisor would really give up the job he’s always complaining about. I think that if he looked more closely, he’d find a lot of value in it too. Maybe he’d negotiate with his employer so that he’d only have to be in the workshop on Mondays, Wednesdays and Fridays, and a second person would be there on the other days. Of course we’d have to spend more money on important things like taking care of children in kindergartens or looking after our elderly relatives in care homes, because probably significantly fewer women would still want to do these demanding jobs for the shamefully low salaries currently on offer. Maybe neighborhood initiatives would look after vulnerable people instead. Not to make money, but out of charity. Because a basic income would enable people to devote themselves to such work because they feel that it’s important.

As yet far too little research has been done into how our working lives are going to change in future. As far as I can tell, there will be less and less need to work on an employed basis. On the contrary, as a result of digitalization fewer and fewer jobs will be advertised. So we’ll need to start looking for a new identity and a new purpose in life. Our identities in particular will surely not be as closely associated with our work as they have been in the past. Maybe also because – or possibly even precisely because – time will become the more important currency for people. Many people ask themselves what they’d even do with the piles of money they would earn if they had to work 60 or more hours a week for it. What about quality of life? We can only have quality of life if we also have time. Time for our own activities and time to do nothing.

Most financially free people live on similar amounts of money to a basic income. The difference is that they don’t get the money from the state, but instead generate it from their rental or investment income. This provides for their basic needs. Since most of them have a very frugal lifestyle, this basic income means that they no longer need to work. At least not as employees, not permanently and not full-time.

What Would I Do if I No Longer Had to Work?

Whenever I told people about my book project, the first question they asked was about the lack of work. People were sometimes curious, sometimes aggressive. Especially when people were aggressively dismissive I always asked myself why they reacted that way. I still don’t fully understand it. Maybe the idea that we have to work is so deeply rooted that merely planning not to is enough to provoke some people. Maybe it also scares people because they themselves don’t know what they’d do with all that time. They start to worry about boredom and lack of purpose. I don’t know exactly. In any case, lots of people ask themselves the question: What would I do if I no longer had to work? By the way, people who are already on the way to financial freedom don’t ask this question. On the contrary. The time without paid work hangs in front of them like a promise, and not because they want to sit on the couch and watch TV. They have lots of ideas that range from travelling to restoring farms to writing blogs and books. The questions instead come from people who haven’t thought about the idea at all yet. And who don’t want to think about it either. Why? I can only guess. But maybe this dismissive reaction stems from the fact that people put a lot of effort into their day-to-day working lives. And then along comes someone who wants to opt out of the whole thing. Just like that. To write a book. In peace. And to grow vegetables in their garden. That then gives rise to envy, anger and many other emotions. To avoid having to deal with these emotions, people respond rather dismissively. “I wouldn’t want to do that, to stop working. I like working and anyway my life would be meaningless if I didn’t do anything anymore.”

How did our ancestors live?

Neither of my grandmothers worked. My mother-in-law didn’t either. They raised children, sometimes with the help of nannies. They did a lot around the house and in the garden. They fixed things, sewed and made things. They picked, cooked, preserved and dried fruit and vegetables. They wouldn’t have understood the question as to what you do if you don’t work. Because they worked a lot. They just weren’t in paid employment in the sense we know it today. I’m not trying to say that in future women should go back to the kitchen sink, but I feel that we should think more about freedom of choice. We’re allowed to think about how we want to live. It remains to be seen whether we choose the historical model with a very strict division of labor between men and women, paid employment and housework, or whether we come up with new, creative solutions. I just find it interesting that there are probably lots of people out there who knew women who lived completely differently, but who dismiss that way of living for themselves as absurd.

The historical description in the last chapter also shows that in the past people pursued lots of alternative activities and found them more interesting than working. What could you do? Any number of things – wherever your curiosity takes you. Whether it’s writing a computer program, running a marathon or learning DIY skills, the world offers endless numbers of challenges. And as a side note, lots of discoveries possibly wouldn’t have been made if people hadn’t followed their curiosity – without paid work and without intending to make a profit.

There’s more to work than making money

In today’s society, choosing a different way of life has a certain stigma attached to it. Our society is so heavily influenced by paid work, preferably full-time, that other ways of life are at best met with surprised admiration. To be recognized and noticed and to feel a sense of belonging are basic human needs.

Our current environment may deny us this recognition if we say we’re opting out. As a former managing director I too can say that while no-one knew what I actually did, my title automatically afforded me a high level of recognition in society. In my eight years as a coach I’ve never experienced that again. And when I was a managing director no-one ever said to me, “Oh, you can make a living from that?” That’s not the kind of recognition and appreciation one hopes for. People who don’t have to work for a living used to be widely referred to as being “of independent means”. Today no financially free person would use that phrase. If they did they would be met with surprise, but surely very rarely with admiration or appreciation.

What Could an Ideal Life Look Like?

This question is very, very individual. If you’re working towards financial freedom yourself, you’ll need to spend some time thinking about what your ideal life would be like.

If you’re still deep in the rat race, your first thought will probably be to get out as soon as possible. That’s ok. First of all you’re probably going to need a long break. Some time out. A sabbatical. Time to take a good look at your life from the outside. Time to figure out what’s really important to you. Time to rest and catch up on your sleep. If you decide not to return to work after this break, eventually you’ll find yourself wondering what you should do now. As humans we have a natural creative drive, a natural curiosity.

While all the people I interviewed were really glad that they didn’t have to do so much anymore, they were still very active. The difference was that they themselves decided what to do. They weren’t driven by the expectation of making a profit. At least not always.

What would you do if money were no longer an object?

Maybe my credit card exercise will help you imagine your ideal life. I sometimes use it in my coaching sessions. I give my coachees a credit card and explain to them that they can use this card to withdraw as much money as they want for the rest of their lives. Then I ask them to describe their typical day in about five years. How exactly would they spend it? Why in five years and not right now? Well, most people imagine first of all taking an extended break. They picture themselves on a round-the-world trip, a tropical beach or a cruise ship. But everyone knows that even the most exciting activities get boring after five years. A kind of monotonous routine sets in. Interestingly enough, only very few people dream of unbounded luxury. Instead people tell me that they dream of restoring an old farm, running a small guesthouse, helping homeless people or finally spending lots of time with their own children. What about you? Imagine that you don’t have to do anything to finance your life. On the contrary, you even have enough money to make that investment you’ve always dreamed of. What does this life look like? How do you spend your days? With whom? What do you do? What do you do for your personal development? What brings you the most joy? And what gives your life purpose?

This first exercise gives you an insight into how your life could be if you no longer had to work for money in the traditional sense. Unless, of course, you saw yourself continuing to work as an employee even with the credit card; that’s also possible.