Investing is an important part of your Financial Freedom, because it’s what fuels your Freedom Generator. Unfortunately, most people–maybe even you–invest without knowing what they’re doing. Maybe you invested in artificial intelligence companies so you can impress your pals with your cool new investment. Or you bought stock in a Fortune 500 company because your third cousin twice removed who just so happens to be filthy rich told you that’s the stock that made him the big bucks. So… how do you learn how to invest for real?
Reddit Threads And Penny Stocks
You think you’re supposed to invest in whatever will build your net worth, because that’s what everyone else is doing. But investing in what you’re supposed to leads to frustration, very little success and in the worst case scenario, financial ruin. That’s not the way to reach Financial Freedom.
You don’t have to go far on the internet to find investing horror stories. From Reddit threads to dying husbands leaving behind shoeboxes of penny stocks they think will provide for their widows, they’re everywhere.
Here’s the thing, though: you don’t have to be a horror story. As you move from the 96% to the wealthy 4%, you’ll learn how to make wise investment choices that provide for you and protect your family on a regular basis. We call it investing for Cash Flow.
Invest With The End In Mind
What’s the right way to invest? You can start by quoting our mantra: Start with the end in mind. This approach applies to everything from your Freedom Number to your Emergency Buffer to your investment strategy.
But when it comes to investing, starting with the end in mind is crucial. Ask yourself, what is the end goal of my investments? If you’ve completed Financially Fit Bootcamp, you know your goal should be to create Financial Freedom. Every financial decision you make should be informed by whether or not the result will put you closer or further away from Financial Freedom.
Start With Your Freedom Number
And where does Financial Freedom start? Again, you could probably say this in your sleep. But repetition aids learning. Financial Freedom starts with your Freedom Number.
Before you make any moves toward Financial Freedom, you need to determine your Freedom Number. We’ve written before on this topic, but in short, your Freedom Number is the amount of money you need coming in each month to live. This number includes monthly expenses like housing, groceries, utilities and insurances.
Your Freedom Number gives you your Financial Freedom Blueprint. Once you’ve worked through the rest of the Financially Fit Bootcamp steps like setting up the Perfect Account Structure, automating accounts, setting up an Emergency Buffer, and terminating debt, you’re ready to invest.
But you can’t throw everything you’ve learned out the window when it comes to investing. You have to consider your Freedom Number every step of the way.
Invest For Cash Flow
So what does your Freedom Number have to do with investing? Again, each of your investments should move you closer to Financial Freedom by generating a monthly income that will eventually reach your Freedom Number.
For example, if your Freedom Number is $4000 a month, your investments need to generate $4000 a month in Cash Flow. That doesn’t mean each investment needs to generate that much income. All your investments together need to equal $4000 a month.
Once the income from your investments matches your Freedom Number, you’re no longer trading time for money. The money you need every month to support you and your family comes from your investments. You no longer have to work to live. You don’t have to wait until retirement or some far off day in the future to live your dreams. You’re Financially Free!
Community Question: Are you investing for Cash Flow? How close are you to Financial Freedom? Share with us in the Financial Foundations Community!
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Dr. Tony is the co-founder of MindShift.money and the best-selling author of three books on personal and business finances. Having achieved Financial Freedom at 27, Dr. Tony believes that through Financially Fit Bootcamp and Cash Flow Cure everyone can get there. He has made it his life’s mission to help others live a life where their money works for them—not the other way around.