investment
Independence
Day Crack the code to financial freedom, and you’ll never have to rely on a pay
cheque from your boss again
By brendan els
I
’m on a quest for the Holy Grail. I’m
trying to crack the ultimate code. I’m
searching for the answer to an age-
old question that could unlock untold
wealth and a lifetime of true freedom.
That question: how can I become
financially independent?
As a wealth and risk manager, I think
of financial freedom simply as having more
than enough money, but not needing to trade
all my time for it. Having money without
having enough time to live life and enjoy
what you love doing is, in my opinion, use-
less. Financial freedom is about independ-
ence, accumulating wealth and never having
to rely on a payslip from your employer ever
again. And in today’s uncertain job market,
it’s a case of being less financially reliant on
your employer and more reliant on yourself.
Here are the secrets I’ve uncovered – and
how you can use them to find your own finan-
cial independence.
Make money and hold onto it
Yeah, yeah. I know you’ve heard this before.
But the truth is, unless you have the funda-
mentals in place, you can make as much
money as you like but you will never be truly
financially independent. Unless you master
the principles of money you will never hold
onto it for very long.
This is what you need to know: debt is a
disease. Understand this, and you’re halfway
there. Get rid of your debt as quickly as you
can. Stop buying stuff for the sake of it. If you
really need things in your life to boost your
self-image, spend some money on seeing a
shrink and get your issues sorted out. Your
reckless spending habits will get in the way
of your ability to make and hold onto money.
And that’s the whole idea of becoming finan-
cially independent, isn’t it? Make money, hold
onto it and then make more money.
m e n ’ s w e a lt h f e b r u a r y 2 0 1 0
Retired multimillionaire Curtis Goetz,
who made his money investing and climbing
the corporate ladder once said: “It ain’t about
how much money you make, it’s how much
money you don’t owe. I lived by these words
my entire life and I have reaped the rewards
of personally applying this philosophy.”
Every successful business in the world
works with a budget, and you should too.
Spend less than you earn, and you’ll have
money left over at the end of the month.
That’s money you can use to make smart
investment decisions.
Work less and make more
Why is it that our cultures still reward
personal sacrifice instead of personal produc-
tivity? More hours at the office means more
sacrifice. More sacrifice, we assume, means
more self-worth – and in our mind this
allows us to justify working ourselves into
the ground and never actually getting ahead
in the money game.
The problem is, we are trading our time
for money. And if you’re employed, you are
trading your time for a flat pay cheque every
month. Therein lies one of the biggest obsta-
cles to becoming financially independent: not
knowing how to successfully trade time for
the maximum amount of money.
The bottom line is that if you’re going to have
extra money at the end of the month, you have
to make more than you need to break even.
I’m going to let you in on a little secret.
The truly financially independent don’t trade
time for money. That’s what makes the very
wealthy so very different to the rest of us.
If you run your own business, start auto-
mating your processes at the office, sell to
better qualified prospects and let other people
handle the non-critical issues that fill up
your inbox. Start working on your business
and be less involved in your business.
Justin Hawes, managing director of Scan
Display Solutions, suppliers of exhibition serv-
ices, says: “Running your own business may
be a step towards financial independence.
Putting structures in place and having a good
business model will allow you flexibility dur-
ing your workday. This will free up your time
to pursue other interests. As long as you are
simply trading eight to 10 hour days for a sal-
ary, you will never get there.”
If you are employed, then start investing
in yourself – whether that’s furthering your
studies, expanding your skill set or even
improving your health. This is as important
as investing in hard assets or currency.
Become the best at what you do. When
you have the skills to pay more than the
monthly bills, making money will never be
an issue – and if making money is easy for
you, then becoming financially independent
will be even easier. Kristen Hawken, senior
recruitment consultant at human resource
and recruitment company Search RSA,
advises: “Stay ahead by skilling yourself up
with current industry courses or by taking
on extra responsibilities at work. Start tak-
ing a proactive approach towards your own
professional development.”
You get the idea. Before you can become
truly financially independent you need to
know what your time is worth – and then
trade top dollar for it.
Make money while you sleep
This is the ultimate Time versus Money
trade-off: the ability to have little or no input
with maximum monetary reward. Consider
Google: it’s the perfect example of a business
that allows its founders to collect money over
and over while they sit on a beach all day.
The way I see it, there are only two ways
that you can make money while you sleep.
You either have to have a large investment
m e n ’ s w e a lt h f e b r u a r y 2 0 1 0
 investment
Getting rid
of your debt.
that’s your best
investment
portfolio that simply ticks over and only
requires that you manage your money, or you
need to create income streams that run on
autopilot. Here I’m talking about a business
that operates without you getting involved in
its day-to-day running, and provides you with
enough income to keep you satisfied while
giving you time to explore other opportunities.
Create your buffer
If you’re going to bail on your day job and hit
the beach with your surfboard instead, you’ll
need a large amount of capital. In most cases
it takes a lifetime to accumulate enough
wealth to achieve this end goal. But we’re
talking about you becoming less reliant on
your employer and more reliant on yourself
for money – so the idea is to start investing
immediately in some form or another.
The more money you can save, the less
you’ll have to rely on somebody else. Start out
by getting rid of your debt. That’s your best
investment because it will allow for better
cash flow month to month. Cash in the bank
is the safest option to begin with, but because
investment is based on a risk and reward
scale, you aren’t going to be earning very
much return on a safe investment. But a cash
account is fairly liquid (it gives you easy
access to your money), which does allow you
to act quickly if you see an opportunity. Simi-
larly, if you’re retrenched suddenly, a cash
account will let you draw an income from the
By ARTHU R J O N Ewithout
S
investment overnight having to worry
about foreclosure letters from the bank.
A unit trust investment will give you
more access to other asset classes like equi-
ties and property. Unit trusts are easy to
manage, low-cost and flexible. Alternately,
a share portfolio is also a great investment,
provided you understand the risk of investing.
Look for companies that offer value, and hold
on even when the going gets tough.
Property is a good, solid investment
because it offers capital growth (the value
of your property increases) and it also offers
income streams through rental. Just remem-
ber that, as with any investment, there are
pros and cons. Fluctuating interest rates,
m e n ’ s w e a lt h f
SeEb
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municipal rates and taxes, ongoing mainte-
nance and tax can dent your hopes of becom-
ing a property mogul.
My advice? Hedging yourself in more
than one asset class is the best route to go.
The object of investing is to create a situa-
tion in the medium to long term where you
become less reliant, and then completely
non-reliant, on your guaranteed pay cheque
from your employer.
Write your own pay cheque
There is no greater reward than doing it for
yourself because, if you’ll pardon the cliche,
the sky really is the limit. The question is,
how do you start up something while you’re
still employed? And how do you buy yourself
enough time to get established before you
can give up your corporate shackles?
Start by looking at what you’re passionate
about or what you’re really good at. Build
that into a business plan. If you’re mad about
mountain biking, look at starting up a busi-
ness in that area. Forget the hype about try-
ing to become the best at everything. Stick
to what you’re good at, and combine that with
what really gets you ticking. If you’re great
at selling stuff, don’t start an accounting
business; stay with selling and hire an
accountant to count all the money you make.
A full-time job is going to limit the
amount of hours you can put into a small
venture, so look at a business with low over-
heads. Start a home-based business and
take advantage of technology. Look at a busi-
ness that you can manage yourself and build
it up slowly. You need a small business that
doesn’t require a full-time, eight-hours-a-day
effort. You need something you can work on
in your evenings and weekends.
Be careful that you don’t infringe on your
current employment contract.“Persons in for-
mal employment often have a written contract
of employment containing an express provision
regulating outside work,” warns Rob Perrott,
director at specialist employment law firm
Perrot, van Niekerk, Woodhouse, Matyolo Inc.
“This is particularly true in larger enter-
prises where an employee is prohibited from
any other work or activity that might interfere
with his or her current employment. Even
if there is no contractual or policy provision,
employees embarking on a second career must
consider and reflect carefully on an activity that
might create a conflict of interest.”
Once you start generating a small revenue
stream, ramp it up slightly or get more involved
until you reach a stage when your small ven-
ture is starting to look like a full-time job that
can pay the bills. Then jump in, quit your day
job and never look back.
“I used my expertise to set up a number
of Web-based businesses,” says Gareth Daniell
of Webphase Marketing. “The Internet is
. c o mg a l l er y sto c k , i sto c k p hoto . c o m
exploding and there are opportunities every-
where. My current project, www.insurance-
hound.co.za, allows visitors to get online
comparative quotes. It’s a great business model
– once all the work has been completed upfront,
the business is automated and pretty much runs
itself with little or no human intervention.”
l l aert/
The bottom line
p hoto
If there’s one thing I’ve learnt as a wealth and
sta
risk manager, it’s that financial independence
urtc k
P H O T O G R A P H s iksto
is not an exact science. But there is a trend.
If you become money smart, if you keep
investing in yourself and if you keep looking
for opportunities, you’ll soon be on the road
towards complete financial self-reliance.