Your Money Your Rules: Craft Your Financial Independence E-Book

Daniel B. Smith

• Herausgeber: Daniel B. Smith
• Kategorie: Fachliteratur
• Sprache: Englisch

Veröffentlichungsjahr: 2024

Beschreibung

The education system doesn’t prepare you to know what to do with money, only to work for it. In the rush for money for the family, parents strive to provide everything possible for their children in the hope that they will do better. They want their child to be healthy, smart and educated and they prepare them for the system from an early age: to finish college and get a well-paid job that has other perks too.
There’s nothing wrong with that, it’s just that they’re losing sight of financial education. 
The book invites you on a journey in 12 chapters that take you closer to financial independence and, by extension, wealth: 1. From lower class to upper class - 10 secrets; 2. Money flow; 3. Buy assets; 4. Banks and insurance companies; 5. Taxes and corporate power, inflation and currency; 6. Investor’s mindset; 7. Work to develop yourself; 8. Start my own business?; 9. Don’t give up - personal resilience; 10. Start now, one step at a time; 11. Old age; 12. Educate your child. 
Enjoy!

Leseprobe

Your Money Your Rules:

Craft Your Financial Independence

Daniel B. Smith

All rights reserved. No part of this publication may be reproduced, distributed or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the author, excepting the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law.

Copyright © 2024, Daniel B. Smith

Table of contents

Introduction

Chapter 1: From lower class to upper class – 10 secrets

Chapter 2: Money flow

Chapter 3: Buy assets

Chapter 4: Banks and insurance companies

Chapter 5: Taxes and corporate power, inflation and currency

Chapter 6: Investor’s mindset

Chapter 7: Work to develop yourself

Chapter 8: Start my own business?

Chapter 9: Don’t give up – personal resilience

Chapter 10: Start now, one step at a time

Chapter 11: Old age

Chapter 12: Educate your child

Introduction

The education system doesn’t prepare you to know what to do with money, only to work for it. In the rush for money for the family, parents strive to provide everything possible for their children in the hope that they will do better. They want their child to be healthy, smart and educated and they prepare them for the system from an early age: to finish college and get a well-paid job that has other perks too.

There’s nothing wrong with that, it’s just that they’re losing sight of financial education. But how can they offer that when they don’t know what to do with their money? The world around us has changed, but the “way to follow” has remained the same: education, job, bad decisions, poverty.

Don’t get me wrong. Education is always at the cornerstone of being successful and rich, it just has to include financial education – there has to be a mix between university education and financial education, which the education system doesn’t give you. Otherwise, you’ll always have money problems, you’ll spend your money poorly and you won’t invest in money-producing assets for the security of fairytale old age.

Notice the difference in thinking and behavior: the poor man works for money all his life; the rich man works for money just a part of his career, but as soon as he gets his salary, he invests in assets regularly.

You’ve been thinking wrong until now when you’ve said “I can’t afford it” so many times and this book will teach you how to ask yourself “How can I afford it?” and find a solution.

It will also change the way you think and relate to money, income, expenses, wealth. You have followed the wrong path: when it came to money, you didn’t take risks; you think the apartment you live in is your biggest investment and your biggest asset; you think that the government takes care of you; you work for money and you think it is not that important. I invite you to follow the path to financial independence: learn to master the risks of your decisions; the apartment you live in is a liability; the government doesn’t take care of you, you are just a number in statistics and the factors affecting the government and the economy are volatile; the money I get I put to work for me, because money is power.

The book invites you on a journey in 12 chapters that take you closer to financial independence and, by extension, wealth: 1. From lower class to upper class – 10 secrets; 2. Money flow; 3. Buy assets; 4. Banks and insurance companies; 5. Taxes and corporate power, inflation and currency; 6. Investor’s mindset; 7. Work to develop yourself; 8. Start my own business?; 9. Don’t give up – personal resilience; 10. Start now, one step at a time; 11. Old age; 12. Educate your child.

What is the wealth limit? How much do I need? How much is enough? The objective of this book is not to achieve happiness and spiritual fulfillment. You must discover your own balance and what makes you happy. Some people believe that owning an airplane can make them happy. Some people reach that goal, but find they’re not happy. Others are happy once they achieve it. Happiness is subjective.

I am not an advocate of austerity or a modest lifestyle. I believe in accumulating wealth (assets) in a balanced way and with long-term responsibility. This process requires patience, discipline, perseverance, balance and clear goals.

Financial intelligence is about life, habits, decisions and long-term vision. If you want to get rich quick, this book won’t help you.

Chapter 1: From lower class to upper class – 10 secrets

Generally, there are 3 social classes when it comes to money: lower class (55%), middle class (35%) and upper class (10%).

Lower and middle class people (90%) work to make money. The remaining 10% put their money to work for them.

No matter where we are born, we follow social patterns from a young age. We go to kindergarten, then school, high school and maybe (the lucky ones) college. In this state-controlled educational cycle, the individual is educated to learn in order to work for money. Why? Because the state has an interest in society prospering, not the individual and every society needs lawyers, teachers, medical doctors, mechanics, cooks, sales agents, police officers, firemen, soldier etc.

Have you ever felt that school doesn’t encourage creativity and forces uniformity? Bravo! You were right. Educational institutions are designed to produce good employees – yes-men. Educational institutions don’t educate you financially to your benefit.

Most people finish high school and stop learning, experimenting, developing. They settle for a job of some sort, receive financial support from their parents and will soon be buried in debt. Some even graduate college and keep repeating this diabolical pattern. This way, they will always feel the strings controlling them: the boss, the parents, the bank. The boss will always be interested in you producing as much value as possible for his company and therefore for him. He’ll offer you a decent salary, but never too high. The boss knows that every man has his weaknesses and can be partially bought because of his fears and desires – above that, everyone is replaceable.

Parents can become toxic at any time if you allow it. By helping you financially, they might be tempted to put certain conditions on you, to make certain recommendations, to dictate your life and not in a good and healthy way.

The bank will always be interested in you, because you have to pay back the money you borrowed to buy a luxury car, which realistically speaking you cannot afford and do not need.

Of course, I dramatized it a bit, but you have to understand that nobody guarantees that thing will go well for you. Man has only one guarantee in this life: death.

How to break the pattern? Are you feeling afraid? That’s good!

In the first phase, fears make you learn to work for money. Examples: fear of not being able to pay your bills; fear of not being fired; fear of not having enough money; fear of not having to start all over again. So these fears mobilize you and are often enough to keep you stuck in a rut. There fears provoke negative thoughts, negative thoughts provoke negative emotions and these will lead to behaviors that solve the perceived problems. I repeat, in the first phase, this whole cycle causes you to learn to work for money. Most people don’t make it past this phase – they work for fear management and the money they produce is spent on that. These people think that work is the solution. In fact, having a job is a short term solution to a long term challenge – wealth, 10% of the population membership.

The need for progress and evolution is deeply rooted in human nature. It’s normal to want a better phone, a better laptop, a more powerful car, a more spacious apartment, vacations to exotic destinations, diamond jewelry etc. How long does the joy of spending money on such things last? A little, because soon you will need more money to maintain these things that are more and more expensive, and you will end up in a spiral of pressure to work for money.

Have you ever thought that it is very easy to fall into this trap? I guess not. Remember: your fears and desires, if not controlled and financially sustainable, will make you a contemporary slave who works for money.

Today’s societies and economies are based on consumerism and indebtedness. The pattern of behavior that encourages this can be identified at the level of the average person: the house is falsely perceived as an investment (it doesn’t make you any money!) and a higher salary means more “opportunities” to spend more: a bigger house, a better car and any other desire. This way, the average Joe is not buying any assets!

How do the rich succeed? Theoretically simple, practically hard: upper-class people don’t work for money, whether it’s dollars, euros, pounds, rubles, yuan – they mobilize the financial resources they’ve acquired through work to work for them.

The rich are aware of 10 ideas and apply them in their behavior. Don’t be scared, at the beginning of the process they weren’t informed either, but this is individual development and financial education about.

1. Money flow

The main culprit for your financial situation is not the state, because it doesn’t tax the rich more, it doesn’t increase the minimum wage or pension. Your employer is not to blame either because they don’t pay you more. There is no global conspiracy to keep you poor. The first secret to financial independence is how you spend your money.

The poor have incomes that only cover daily expenses. Middle class people have incomes that cover their expenses and provide for the purchase of liabilities (car, phone, laptop, house). The rich have incomes that cover their expenses and they invest the difference in assets that generate other incomes. Only then do they buy liabilities, if they really want to.

2. Investment in education

Your ability to evaluate investment opportunities will improve through education and experience. Over time, your decisions will be better, more relevant to your portfolio and your objective. Continuously invest in education because your wealth is built on two components: human capital and financial capital.

People focus too much on financial capital to get rich. This mindset is limited and insufficient: financial capital can grow faster by improving the quality of human capital. This is achieved through education, certifications, training and a quality professional environment.

3. Wealth perception

The problem is that people report their wealth in comparison with others (neighbors, friends, colleagues, acquaintances) and often take into account liabilities and property owned, which is wrong. Each individual has unique circumstances regarding their family’s financial situation. We tend to copy what we observe in our entourage without realizing if we can really afford to purchase liabilities.

Report your wealth correctly using the question: How long can I live on the money produced by my assets? By answering, you will realize what level of financial independence you have reached.

I thought for many years that the rich had high incomes or had accumulated a lot of property – I was always missing something: the debt generated by high, irrational spending. Accumulating property is not wealth if it doesn’t produce returns that ensure your financial independence. Example: those who don’t own the house they live in, but have investments that produce sufficient income to live on, have a much higher degree of financial independence than others who own 5 houses that are not rented by anyone or that they cannot sell.

4. 30-50-20 Strategy

The 30-50-20 strategy is one of the most popular financial planning that puts you on the right path to financial independence. It implies that 30% of your income goes into some form of savings: diversified financial investments, education, early repayment of debt, a reserve fund. 50% of your income can be used for day-to-day expenses: housing, transportation, shopping, utilities etc. 20% of your income can be used to satisfy your desires: vacations, gadgets, clothing, entertainment etc.

The order in which money is allocated is not random: savings and investments, satisfying needs and finally desires/wants. If you haven’t applied similar strategies before, I recommend that you analyze your spending for 6 months to see how your money flows. After that, apply the 30-50-20 strategy step by step and if you are not used to saving, you can start with lower percentages to avoid getting frustrated.

A month without saving or investing is a wasted month.

5. Be the first on your expenses list