MONEY Master the Game: 7 Simple Steps to Financial Freedom (35 page)

DREAM 4:
FINANCIAL FREEDOM

Once you’ve freed yourself from the need to work for the rest of your life, how about freeing up your lifestyle?
Financial Freedom would mean you’re independent, you’ve got everything you have today, plus two or three significant luxuries you want in the future, and you don’t have to work to pay for them either.
To get there you need to ask yourself, “What annual income would I need to have the lifestyle I
want and deserve
?” What do you want the money for? Is it for the freedom to travel? To own a bigger home or a second vacation home? Maybe you’ve always wanted a boat or a luxury car? Or do you want to contribute more to your community or church?

Let’s go back to Ron and Michelle. They were already living the lifestyle they wanted for $350,000 a year. So, I asked, what would make them feel financially free? Would it be a bigger home? A condo in Aspen? A boat?

You know what Ron said? He’d feel financially free if he could donate $100,000 a year to their church—and maybe throw in a small Bass fishing boat and a ski vacation condo in Steamboat Springs for his family.

It was an awesome answer. I was so moved by his goal to contribute, I couldn’t wait to help them find a way to make it happen. I pointed out that Ron made about $500,000 a year in income, and spent only $350,000—he could already set aside that kind of money for the church if he really wanted to. But how great would it feel if he and Michelle could make that kind of contribution without working? Just from investment income alone?

After adding the costs of financing the boat and condo, along with his contribution, for Financial Freedom they would have to add $165,000 a year to their number for Financial Independence. In other words, they would need $515,000 a year (× 20), or $10.2 million in their money machine. But remember, this number represents an even better lifestyle than he has today!
It’s a lot, but still roughly
half
of what Ron had thought they needed
just to be independent.

The world that Ron and Michelle wanted was so close—they just didn’t know it. But once you figure out the price of your dreams, there are ways you can get there faster and for less money than you ever imagined.

What would it take for
you
to be financially free?

What items would you add to your total: A sports car? A second home? Or a big donation, like Ron and Michelle? Whatever they are, write them down, and add the cost to your total for Independence. That’s the price of Financial Freedom. And if it seems too steep, just wait. You’ll learn how to tame that number in the coming chapters.

Here’s how Ron calculated his Financial Freedom numbers:

DREAM 5:
ABSOLUTE FINANCIAL FREEDOM

How about
Absolute
Financial Freedom?
What would it be like if you could do anything you wanted, anytime you wanted? How would it feel if you and your family never had to want for anything again?
If you were able to give freely and live completely on your own terms—not anybody else’s—and all without ever having to work to pay for it. The money you make while you sleep—your investment income—would provide for your unlimited lifestyle. Maybe you would buy your parents the home of their dreams, or set up a foundation to feed the hungry or help clean up the ocean. Just picture what you could do.

I asked Ron and Michelle to tell me the biggest dreams they could dream. What would Absolute Financial Freedom look like for them? Once again, I was deeply moved when Michelle told me her paramount dream was to buy a ranch and turn it into a church camp. What would it cost? Ron figured about $2 million to buy it, and $1 million more for improvements.

I could see the excitement build in them when we ran through the numbers.

If they borrowed the money to buy the ranch, they would need about $120,000 ($3 million at 4%) a year to service the debt. And that was already within reach!

So what else? Ron loved adventure and travel, and owning his own plane was an ultimate dream. So I walked him through the same exercise I did with my young would-be billionaire friend, and convinced him that renting a jet would give him a lot of the same convenience and satisfaction at a fraction of the cost of owning and maintaining a Gulfstream or a Cessna Citation. Do you follow me? You don’t have to own the jet to have the lifestyle. You don’t have to own the sports team to sit in the sky box. And you don’t have to pay for the whole team to be an owner—you can be a partial owner and get all the privileges. That’s what my friend Magic Johnson did when he was part of the group that purchased the Los Angeles Dodgers, along with my friend Peter Guber and several other partners in Guggenheim Baseball Management, which spent $2.15 billion to get the team and stadium. I can promise you Magic didn’t put in $2.15 billion—but he still gets all the joy, the pride, the excitement, the influence, and the fun of being an owner.

This thinking can create the quality of life you want for yourself and those you love.
What makes most people just dreamers versus those who live the dream is that dreamers have never figured out the price of their dreams.
They make the number so big they never begin the journey. There isn’t a dream you can’t realize if you’re committed enough and creative enough, and if you’re willing to find a way to add more value to other people’s lives than anybody else.

Now, as you can tell, for most people, this category is mostly for fun. In my seminars, I do this exercise only with people who have really big dreams and want to know the price of them. I understand that most people will never achieve Absolute Financial Freedom, but there’s power in dreaming and unleashing your desires. Some of these high-octane dreams might excite you and make you want to earn more, and help you reach your goals faster. But there’s another reason to do this exercise. You might achieve financial security without working, and then by working part-time at something you enjoy, you could be financially independent. Or it’s possible you could achieve Financial Independence through your investment income and part-time work, allowing yourself to experience the luxuries of Financial Freedom with that income.

So go for it! Write down what you would put on this list or in your app. You never know what you could create if your desires were truly unleashed!

Here’s how Ron calculated his Absolute Financial Freedom numbers:

1. A ranch for church camp that costs $3 million, financed at 4% = monthly payment of $10,000 per month

2. A Beechcraft Bonanza plane that costs $300,000 financed at 5% = monthly payment of $3,181 per month

3. Monthly income number for Financial Freedom: $42,910 per month

4. Total monthly income for Absolute Financial Freedom: $56,091 per month

5. Now multiply that by 12, and you’ll have the annual amount you need for Absolute Financial Freedom: $673,092 per year.

So for a 20-foot fishing boat, a $100,000 yearly donation to their church, a ski vacation condo, a plane, and turning a ranch into a church camp, plus the lifestyle they have today without having to work, Ron and Michelle would
need an income of $673,092 per year. Multiplied by 20, they would need to achieve a critical mass of $13.5 million. Still a third less than the number they thought they needed for mere security or independence!

There is only one thing that makes a dream impossible to achieve: the fear of failure.

—PAULO COELHO

How do all those numbers you’ve written down look to you now? I hope that you’ve seen how the price of your financial dreams can be much smaller than you ever thought, and that you’ve picked out three to aim for, including at least one short-term goal and one long-term goal.
Which of these dreams are your Three to Thrive?
The most important for most people—the most common “musts”—are Security, Vitality, and Independence. Or for those who want to reach higher, it’s Security, Independence, and Freedom. If you haven’t already done it, pick three and write them down. Make them real and put them in your app; key reminder messages will be sent to keep you on target.

If you’re a baby boomer who’s had a tough time since the meltdown of 2008, which one of these dreams is the absolute must for you? Security, right? Here’s the good news: you may not have as many years to build your savings and investments to a critical mass, but you can absolutely have Financial Security, and I’ll show you how. Maybe you’ll never get to
Independence, but maybe you will if you make it a “must.” If you’re starting younger, you’re way ahead. You might be able to go for Freedom or even Absolute Freedom and not even be stressed about it. But it’s important to decide what matters most to you and know your numbers. Why? Because in a few moments, we’re moving on to the next chapter, where you’ll be able to calculate how many years it will take for you to achieve these dreams based on how much you are saving at a reasonable average annual rate of return. And then we’ll make a plan to get there. This is where the rubber meets the road. I’m going to walk you through each step, and everything will be automated for you. It’s absolutely critical that you keep moving forward.

I want you to feel empowered and excited by the journey you’re on.

I want you to know that you’re the creator of your life, not just a manager.
Sometimes we forget how much we’ve really created in our lives. I don’t care who you are, I know there are aspects of your life today that once were just a dream or a goal, or seemed impossible. It could have been a job or higher-level position you wanted that at the time seemed beyond your reach, or a car that you were obsessed with, or a place that you always wanted to visit. Maybe you even live there now. Maybe there was somebody in your life, someone you never thought might even go out with you, and now you’re married to them. Instead of being back in those days of dreaming, wondering if this person would ever make love to you, perhaps they are beside you now. If so, reach over and give them a kiss right now and remember this relationship once seemed impossible, and you created it.

What’s in your life today that was once a dream? What was a desire you had in the past that at the time seemed difficult or impossible to achieve—but now it’s in your life today? If you’re going to remember that you’re the creator of your life and not just the manager of your life’s circumstances, first, you must reconnect to the things you have created consciously. Take a moment and jot down three or four of those things. And take note, your list does not need to be made up of all giant accomplishments. Sometimes the little things that seem difficult or impossible, when conquered or realized, provide us with essential lessons on how to achieve the big things. Also, there may be some things in your life today that once seemed difficult or impossible, and now you have them, but you take them for granted. The law
of familiarity says that if we are around anything (or anyone) long enough, we tend to take things just a little bit for granted. So awaken to your appreciation, and jot down your list now.