How Anyone Can Become Financially Independent
You are financially independent if your assets’ income is greater than your costs. Three examples:
You turn over your practice to your office manager and associates and stop working. You earn $10,000 profit per month as the owner. Your taxes and living costs are $9,999 or less per month.
You work until you are 66. You saved nothing, but you receive $2,800 per month in Social Security. You are financially independent as long as you spend less than $2,800 per month. But $2,800 does not go as far as it used to.
You have $5 million in savings. Your investment income is $200,000 per year after taxes. You are financially independent if your annual costs are $199,000 or less. Of the three, this is obviously the ideal.
If you are like most people, you hope to be financially independent, with a decent standard of living, while you are young enough to enjoy your wealth and freedom.
You can improve your financial condition and move toward financial independence with these steps.
Ten Steps to Financial Independence
1. Constantly learn new skills. The more you learn, the more you earn. For example, an employee who can skillfully do each non-technical job in the office will never be out of work. A practice owner who does twice the required continuing education can handle bigger cases. Employees and practice owners who learn business management skills have a wider path to financial freedom.
2. Provide a valuable service or product. Everyone produces a product or service: a full schedule, an accurate billing cycle, a satisfied patient. To achieve financial independence, your product or service must include quality that is much higher than average.
3. Promote your service or product. If no one knows what you can do, you do not get ahead. Doctors who can honestly, openly and tastefully brag about their work will never lack new patients. Employees must also make their good work known or they never get raises, bonuses or promotions.
4. Produce your valuable services or products in high volume. For example, a brilliant singer achieves financial success only if he or she sells massive numbers of CDs. This requires marketing knowledge and skilled delegation to several sharp business people. Physicians must make many bodies healthy. Dentists must correct many mouths. You can’t do it alone.
5. Collect a fair exchange. Unfortunately, just providing a great service in high volume is not enough. You must also force in the money. Collections, persuasion skills and contract negotiations are part of this step.
6. Control your costs. Financial management includes overhead control and intelligent spending. For example, an expensive car that requires constant service is not on the road to financial success. An expensive staff member, associate or piece of equipment that makes you more money than it costs is on that road.
7. Build your savings. Spend less than you earn. Save at least 10% of all you make. If you skip this step, you will have no wealth, regardless of your income.
8. Invest wisely. Shovel your savings into boring investments and let your money work for you. Unless you are a full-time knowledgeable investor, do not play the trader game. Buy passive investments and forget about it.
9. Keep your taxes low. Taxes are your biggest expense. Learn how to actively dictate your own tax strategy. All independently wealthy people use the tax code to their advantage.
10. Protect your assets. As your wealth grows, so does your risk of deep-pocket lawsuits. Protect your wealth by actively preventing trouble, buying adequate insurance and using appropriate legal structures.
Have A Great Week! Brian Rakestraw, Managing Partner