Breaking Free from Conventional Financial Wisdom
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Chapter 1: Challenging Mainstream Financial Advice
For many years, I adhered to conventional financial guidance. Sound familiar?
“Complete your education, secure a decent job, purchase a comfortable home, contribute to your 401(k), avoid debt, and hopefully, you'll retire before it's too late.”
While I followed this standard path, my outcomes were just average. My salary was satisfactory, but long hours in a high-stress job severely impacted my health and family life. We invested in a large house, viewing it as a crucial investment, yet I frequently found myself short on funds at the month's end. I was automatically saving in my 401(k), but my net worth barely budged.
It became increasingly clear that maintaining this lifestyle for 40 years would likely diminish both my health and happiness, leaving me with little to enjoy from any potential retirement savings at 65.
After several years of reflecting on my financial sacrifices for a high-stress job, I began to question if a different approach might exist.
Fortunately, I discovered one.
Change in Mindset
My transformation began, like many others, with the book "Rich Dad, Poor Dad" by Robert Kiyosaki. This book illuminated the mechanics of money and offered insights on escaping the rat race that entraps so many.
Some of Kiyosaki's teachings struck me profoundly:
- "The poor and the middle class work for money; the rich have money work for them."
- "The poor spend what they earn and invest the leftovers; the rich invest first and spend what's left."
- "You must distinguish between an asset and a liability; invest in assets. An asset generates income, while a liability incurs expenses."
- "Wealth comes from assets, not just money."
- "Incorporating passive and portfolio income into your life can transform it."
- "Most individuals only know how to work hard for money."
I realized I was trapped in a "poor" or "middle-class" mindset regarding finances. My approach focused solely on hard work and promotions, while I spent on liabilities like a house and cars. My outcomes were mediocre due to following flawed (mainstream) advice.
Change in Actions
Once I recognized my misdirection, I immersed myself in financial education. I consumed countless books about wealth building, investing, and personal finance, learning from various authors beyond Kiyosaki.
I explored real estate, the stock market, entrepreneurship, and side hustles, studying works by renowned figures like Buffett, Robert G. Allen, John Schaub, and John Bogle.
Through my readings, I understood I needed to overhaul many aspects of my life:
- Reduce liabilities and prioritize accumulating assets through real estate and stock market investments.
- Reassess my job's significance in my financial journey, balancing employment with investing endeavors.
- Recognize that my house was a liability rather than an asset due to its low return on investment.
- Explore investment avenues beyond a 401(k) to reach my financial goals more swiftly.
To initiate change, I modified my actions.
I shifted to a role offering a better salary but limited upward mobility. My focus transitioned from climbing the corporate ladder to maximizing cash flow for outside investments. This adjustment allowed me to reclaim evenings, weekends, and holidays for family time and investment opportunities.
We downsized from our large home, converting it into a rental property. This transition transformed it from a liability into an asset, enhancing our equity's return and generating cash flow for further investments.
While I continued to contribute minimally to my 401(k) to secure the company match, I opted not to contribute beyond that, redirecting those funds into external investments.
Following these structural changes, we experienced improved personal cash flow, enabling us to save and invest. My focus shifted toward real estate, beginning with single-family rentals.
We began purchasing properties, entrusting management to a company, thus creating a source of passive wealth. With experience, I learned to acquire properties below appraised value, increasing my profits.
Change in Results
Over the years, we accumulated seven single-family homes and one commercial property (shared with a partner).
These assets significantly enhanced my wealth compared to my previous traditional approach, bringing me closer to financial independence.
I now earn more from my investments than from my "good" job. At this stage, I’m contemplating how much is sufficient before I retire. I'm also focusing on converting equity into cash flow, as property values have risen faster than rental income.
Conclusion
Had I adhered to mainstream financial advice, I would likely still be in that large house (possibly with a pool and a boat), grinding away at my 24/7 job, watching my 401(k) grow incrementally—hoping to avoid a heart attack before I could retire at 65.
That scenario doesn't align with my dreams.
Today, my family and I enjoy financial security, and I aim to retire by 45 with a six-figure passive income, all while raising four kids.
This achievement was not serendipitous. I had to shift my mindset and actions to achieve different results.
By minimizing liabilities and focusing on acquiring quality assets, we built substantial wealth. By moderating my career focus and investing more time outside my 401(k), we’re nearing financial freedom.
Through financial education, I discovered a path that worked for me, leading to the success I aspired to.
The journey isn’t over; once I leave my day job, my new life will commence, and I eagerly anticipate where it will lead us.
And I look forward to seeing where your wealth journey takes you as well.
In the meantime, best of luck with your investments, and let me know how I can support you!
Building Arks
After struggling to create wealth early in my career by following traditional financial advice, I committed to learning about investing. Over a decade later, I'm financially secure and pursuing complete financial independence through real estate and the stock market. I've successfully constructed my financial ark to withstand any storms that may arise.
I founded Building Arks to assist busy professionals like you in bypassing mainstream advice and establishing genuine wealth. Click here to join me in building your ark today!
Here are additional insightful articles on wealth building and investing that you might find beneficial:
- How (And Why) I Built 4 Streams Of Income
- What Mainstream Financial Advice Won’t Teach You About Financial Security
themakingofamillionaire.com
- How To Create Wealth
- The framework I am using to achieve early retirement.
themakingofamillionaire.com
- How I Make 20% Returns On Single-Family Rentals
- My last purchase and the 4 rules to success in real estate.
medium.datadriveninvestor.com
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