Build Your Life To Order ™

This article is going to be very practical, detailing a method for acquiring financial independence. Most ‘How to’s’ when it comes to getting rich deal only with teaching the mindset of a rich person with no practical steps on how to actually pursue it (e.g. ‘Rich Dad, Poor Dad’/‘Secrets of the Millionaire Mind’). While it is extremely important to get the context internalised first (and I believe this is the true cause of attaining wealth), it’s also nice to be given an idea of the different avenues that can realise your monetary goals. Note that most of the figures here are in UK pounds so you can almost double them to get their US equivalent.I believe that anyone can get financially rich.

Obey this law; Find a way to truly serve people and the money will come. Adding value to other people’s lives will guarantee your success, Zig Ziglar says, “You can have everything in life that you want if you will just help enough other people get what they want”. However, in a practical sense, can everyone be rich? and at the same time? I have developed a theory whereby everyone can be rich in his or her lifetime. Every single person won’t be rich at the same time, however, their day will come. Imagine a world where you would leave school at 18-21 years old to enter the workforce knowing that you would be back out of it in 10-20 years being financially free. I think it’s very possible and I’d like you to consider it too.

Invest

It involves investing but don’t worry you don’t need to be an expert to do this, there are many advisors and services that will provide all the information needed for a relatively small fee. In my opinion, the stock market provides the safest, most reliable long-term gains of any investment vehicle - bar none. An historical analysis of UK shares between 1969 and 2000 showed that:

• Stocks held for a period of 1 year yielded positive returns 75% of the time
• Stocks held for a period of 5 years yielded positive returns 89% of the time
• Stocks held for a period of 10 years yielded positive returns 100% of the time

That’s right, when holding money in the market for 10 or more years you virtually have no risk of loss! (The US market has historically outperformed the UK’s). Couple this with the fact that I recommend that you invest in mutual funds/investment funds because they serve to reduce the risk of loss even further by spreading investment over many different sectors of the market. These funds are an amazing place to put your money long term. The following is from a book called ‘The 100 Best Mutual Funds You Can Buy, 2001′ by Gordon Williamson:

“Funds are the best investment vehicle that has been developed in the 20th century. When properly selected, these vehicles combine professional management, ease of purchase and redemption, simple record keeping, risk reduction, and superb performance, all in one type of investment.”

The Plan

In a nutshell, the plan is to decide on an annual figure or a percentage of your income that you are willing to invest for x amount of years (I recommend 10 or more) without touching it, this allows the money to compound on itself. You can get an average 20% and higher annual returns on your money fairly safely by investing in mutual funds (Paul Sutherland from Fast Track Education has returned on average +33.6% over the past 8 years). If you compound your annual figure over 10, 20 or 30 years you can see just how wealthy you can become. Try it here and fool around with different figures.

I heard Tony Robbins explain the power of compounding this way. He said to imagine 2 golfers betting on an 18 hole round of golf. They decide that 10 cents a hole would be fine and that they would double the amount every hole. So:

• the first hole is worth a dime,
• the second is worth 20 cents,
• the third is worth 40 cents,
• the fourth is worth 80 cents,
• the fifth is worth $1.60,
• the sixth is worth $3.20,
• One third the way through and it’s only $3.20 - how do you think it will end? $12?, $15. Let’s continue
• the seventh is worth $6.40,
• the eighth is worth $12.80,
• the ninth is worth $25.60 - half way there
• the tenth is worth $51.20
• the eleventh is worth $102.40
• the twelfth is worth $204.80
• the thirteenth is worth $409.60
• the fourteenth is worth $819.20
• the fifteenth is worth $1,638.40
• the sixteenth is worth $3,276.80
• the seventeenth is worth $6,553.60
• the eighteenth is worth $13,107.20! - Pretty big bet!

Just look at the last three holes. From 15 to 18 we go from $1,638.40 to $13,107.20 - it explodes; this is the magic of compounding.

OK, so how much are you going to put away annually for your abundant future? I recommend £7000 as this is the maximum amount you can invest in the UK (ISA) that will allow you to make tax-free gains (however,you can start as small as you like). So let’s say that you invest £7000 annually for 15 years at an interest rate of 25%, you will then have £1,158,711.80, all tax-free. The following year, assuming the same interest rate, you will make £289,677.95 - not too shabby.

This is when you can start to withdraw a certain percentage annually and live like a king. At even just 7% a year, that would give you an annual tax free income of £81,109.83, all while your invested capital is still growing. Every year, as your invested capital continues to grow, so too will your annual disposable income. To be conservative, if you were getting 12% annual gains and withdrawing 6% as income, this is how things would shape up over a 5 year period:

Invested Capital

1. £1,297,757.20
2. £1,366,278,80
3. £1,438,418.30
4. £1,514,366.70
5. £1,594,291.60

Annual Income - Tax-Free

1. £77,865.43
2. £81,976.73
3. £86,305.10
4. £90,862.00
5. £95,657.50

Bear in mind that this is working with only 12% returns. As you can see, your annual tax-free income increases every year and it is increasing at a continually higher rate. From this you can deduce that not only will you be rich but ALL future generations of your family can be too if the skills of investing are taught to them.

The Future

I can foresee a future where Government pensions are a thing of the past and people will be forced to look into investments as a means of supporting themselves. It’s a future where everyone CAN be rich and retire quite young (30 - 40 years of age). A society where kids are investing from an early age. They leave school at 18 knowing that their life as an employee will only last as long as it takes for their invested capital to return an annual income that they are happy with. People will then be financially abundant and will be able to live the life that they want.

Wouldn’t This Cause Problems?

Do you think society would collapse? I don’t. We would have a young workforce serving our food, selling us clothes and delivering our mail while they wait on their day. Automation would handle many of our most menial tasks (read Steve Pavlina’s article on this). The world is already becoming more computerised. I always say that if we can send a man to the moon we can definitely find a way for machines to pick tea leaves. Besides, we all want different things. Upon achieving financial independence some would travel the world, some would cook, some would open their own businesses, some would still choose office work, some would start charities, some would open centres of learning, the list goes on. One thing’s for sure, there would be plenty of disposable income being spent being to boost the private sector economy of our countries and our world.

Conclusion

We don’t all need to own our own successful businesses to reach financial independence and have a prosperous lifestyle. We can, however, invest in those that do. Armed with this knowledge, the only question that remains is, what are you going do with it? Believe me, time spends itself; 10 years will pass while you’re doing other things. The question is, will you be rich when it does? It’s all up to you and the power of your decisions. It can be yours and, even better, it can be tax-free.

Note: I know a lot of people are going to email me and ask about financial advisors so that they can look into this. I don’t know all of them but I personally recommend Fast Track Education because they really are getting results and they publish them too. It’s all open and transparent. Their results from 1997 to 2006 (9 years) have been +1015%. I know I couldn’t do that on my own. Until next time friends, think abundantly!

Mark McManus

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