Today, we are talking about how challenging some mainstream beliefs can help you achieve what 90% of the population fails to obtain: financial freedom! Stay with us and learn what common truths out there are, in fact, financial traps, how paying off your mortgage can slow you down, and why maxing out the 401K shouldn’t be your priority.
What You Will Learn About 10 Financial Freedom Lies that Are Slowing You Down:
- What it takes to make money
- Why you should focus on cash flow rather than cash itself
- Why debt is a great tool for reaching the financial freedom
- How paying off your mortgage can slow you down
- Why your emphasis should be on earning a buck rather than saving a nickel
- How maxing out on your 401K affects your financial freedom
- What good investing is
- What the Bible says about money
- Why you should not trust the advisors who use the words “always” and “never”
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Matt Theriault: All right, so today I’m going to lift the veil on 10 financial freedom lies that most people believe, and follow; and many of these are actually keeping them financially enslaved. They’re hostage to these myths. And once you know these myths for what they really are, myths, you can then modify your actions accordingly to speed up your journey to financial freedom. And a real quick disclaimer, if you’re happy with where you are financially, then don’t listen to me. Don’t listen to me today. Keep doing what you’re doing. Because the last thing I want is to interfere with your happiness.
And here’s what I mean: The big frustration for most people around financial freedom is that they’re doing what they’ve been told to do to be financially responsible, thinking that it’s in their best interest around attaining their financial freedom. Yet the results, they just don’t seem to come fast enough for them, if they ever come at all. And this is most people, 90% of them, per the Department of Health and Human Services. I didn’t make up that statistic. It’s what most people do. They get what most people get, and that’s financial dependence.
90% of today’s 65-year-olds are financially dependent on something other than their own resources: church, family, state. That’s the opposite of freedom. But if you dare to challenge some mainstream beliefs and actions, you can change your outcome entirely and achieve what 90% of the population fails to do: financial freedom. And mainstream beliefs like saving money, it sounds good. But is it? Maxing out a retirement plan. It sounds good, but is it? Having a house paid off, free and clear. Now that one sounds good, but is it?
These are time-honored financial ideas that have been passed down from generation to generation that have become accepted as unequivocal truths. Truths that as the society we just embrace them and hold them dearly, very close to our hearts. Truths that, when challenged, we get insulted. We get offended. The same truths that we defend, and often we defend them very passionately. But they’re also the very same truths that trap people and hold them hostage financially. Or at the very least, it slows down their progress so much so that three-fourths of their life, it’s behind them by the time that their plan has panned out if it ever does.
So again, if you’re happy where you are, don’t listen to me. If you’d like to improve your situation a little bit, or a lot, I’m going to request that you push your emotions aside. Put your emotions aside for a moment, and just listen with logic. Listen with your math. And consider: What you may hold as absolute truth, right now, is anything but. Consider some new ideas and consider some new actions to take with regard to these new ideas. And if you don’t like what you hear, that’s okay. When this video is all over, you can have your old life back. Guaranteed. Alrighty? So let’s begin.
Ten financial freedom lies that are slowing you down.
Financial Freedom Lie Number One – It takes money to make money. It doesn’t. It takes value to make money. And value is the result of an idea, an idea that solves a problem. If you can solve a problem for the marketplace, the market will pay you for it. And in my world, that looks like alleviating financial or personal distress for property owners. You know, problems like death and disease, divorce, drugs, job loss, and any other number of life events and happenings that can cause financial distress. Distressed property owners, they give me equity, money, in exchange for me providing them peace of mind around these types of problems. And I don’t need money to do that. And neither do you. You see, it’s never a money problem, merely an idea problem. You don’t need money to make money. You need an idea to make money.
Financial Freedom Lie Number Two – Cash is king. No. Cashflow is king. The number-one fear of today’s retirees is running out of money. That’s the number-one fear. Because most of them are focused on the cash, and not the cash flow. If they were focused on the cash flow, they wouldn’t fear running out money, because it wouldn’t. And they should be concerned because cash is finite. You’ve got what you’ve got. And when it’s gone, it’s gone. Cash flow has done right, however, is infinite. It keeps replenishing itself.
And it’s an integral part of your financial freedom equation. With that equation being, you just want more automated cash flowing in on a regular basis than the cash that’s going out, over here to your expenses. Just want this one higher than this one. And the amount of cash that would have to be accrued to create financial freedom for the rest of your life is out of reach for most people. But the amount of cash flow that can be created by most people is well within the reach for most people, and in a fraction of the time that most people realize. So focus on creating the cash flow first, to set you free. And then if it’s still more cash that you want, you’ll be free to pursue it without petty little, outside distractions like food and water and shelter and healthcare. Cashflow is king.
Number Three – Debt is bad. No. Debt is a tool. It’s a resource. Now if you’re an idiot with money and you use debt to acquire things that you don’t need, or for things that don’t pay you more than it costs you to use the debt, then yes, debt can be bad. But debt used to better yourself, to better your business, or better your investments, debt can be a great tool for that. Financial freedom simply just comes down to doing the math. Look at every action that you take as merely a plus or a minus in your financial freedom equation.
And ignore the labels that society has given to the pluses and the minuses. Actually, let me clarify. Ignore the meaning society has given to the labels of the pluses and minuses. For example, words like “penalty” or “taxes” or “fees” or “interest.” Labels like those, they all have negative connotations to them. They’re all minuses. That’s all they are. They’re more than just minuses in our financial freedom equation, but they play a role in making the freedom happen. We just have to make sure that we get more pluses than we have minuses.
Specifically, we assign a negative meaning to a word like, say, penalty. So we avoid penalties, as it feels like we would be breaking a rule. And we were raised to all play by the rules, right? At the very best if we broke the rule, taking a penalty feels like at least you took a step backward. It wasn’t the right thing to do. But often in life, a step backward is necessary to take your next two steps forward. Debt is a similar word with a negative connotation to it. But if using debt increases production, if it increases sales, or it increases the return on investment, or it increases your cash flow, then debt is indeed a good financial freedom tool at your disposal. Debt is merely, it’s a resource that you’ve got access too. And it’s a very powerful tool when used correctly. Ready?
Number Four – Pay off your mortgage. Now I could talk about this one for a very long time, as I’ve done so several times here on the show and on the podcast. You can refer back to episode number 262 of The Epic Real Estate Investing Podcast for an entire hour of facts and figures that justify this. But for the purpose of how paying off your mortgage is slowing down your journey to financial freedom, let’s just look at this. Although there’s so much more to look at, let’s just look at this.
When you pay off your mortgage, what you’re doing is you’re locking up valuable capital inside your house that could be used elsewhere to create more cash flow to achieve your financial freedom and do it faster. When you pay off your house prior to achieving your financial freedom, what you’ve done is you’ve essentially retired your money before you, yourself, are retired.
Also, paying off your mortgage, most people don’t realize, it carries a terrible amount of financial risk. Market prices change. They go up and down. You could pay off a $300,000 house and have the market crash five years later, and now it’s worth $200,000. You just lost $100,000, plus all of the potential interest earned, or the cash flow you could have created from using that money elsewhere. So paying off your mortgage, it’s one of these myths that people are so emotional about that … the flat-out, ignore-the-math-entirely, the math that proves paying off a mortgage is the wrong thing to do … they’ll just ignore it.
In fact, buying your primary residence, at all, is a bad idea for most of the people; let alone, paying off the mortgage. But that’s a conversation for another time. It’s probably worthy of a video like this all and of its own. And if you’d like me to actually create that video and run down the math, and all the reasons buying your primary residence is a bad idea, let me know in the comments below. I’ll be happy to do that.
But with all that said, if the idea of a paid-off mortgage still sounds so good to you that you just can’t resist, like you’ve just got to do it anyway, just consider just moving it down. Consider moving it down a couple notches on the priority list. Paying off your mortgage, it can be a part of your financial freedom plan. But if you make it “the” priority of your plan, you are really slowing yourself down.
So, number five. The Financial Freedom Lie Number Five – Save your money. So there’s some great reasons for this also which we could go very deep into. Some of these reasons overlap very much with the previous myth of paying off your mortgage. But let’s just focus from the standpoint of you creating your financial freedom sooner rather than later. We’re just going to focus on this part.
So, the first part of this is, instead of trying to save a nickel, shift your focus to making a buck. Because there’s just too much emphasis on sacrifice and saving, sometimes to the extreme of sacrifice, sacrifice, sacrifice; and save, save, save. And there’s just a very little conversation on living a decent life, like right now, while working on ways to invest in yourself and invest in your future earning potential and invest in your future earning possibilities. So remove any focus on saving a nickel and shift it all to earning a buck.
And then, with the bucks that you do make, instead of then thinking “save,” think more along the lines of “stash and deploy.” Stash the money that you make and then deploy to a cash-flowing asset. Saving money, it alone is not going to create financial freedom. The average income earner … in fact, most people that earn an above-average income … just can’t save enough to pull freedom off.
Show me the retired 30-year-old driving a Lamborghini that saved their way to it. Doesn’t exist. The only way they could have saved their way to it by that age would have been by placing a heavier emphasis on earning a buck than saving a nickel. Saving didn’t do it. So if you want financial freedom, while you’re still young enough to enjoy it, it’s a game of offense. Earning. If you play not to lose (saving), that’s exactly what you’re going to do, lose. So play to win. Don’t save your money. Stash it and deploy it.
Number Six – Max out your 401K. Now, this is a strategy based on saving, so a lot of what I just said would have justified this. But the thing is, you just can’t save enough in a 401K to create financial freedom. And, yes, even if you’re fortunate enough to have your employer match your contributions. The government, it puts too many limits on what you can deposit as well, making saving money here even more difficult. And if the planets just happen to align perfectly and you start early enough, here’s the thing, three-fourths of your life it’s behind you by the time you get to enjoy it anyway.
So, here’s the deal about the 401K: 401Ks were built for business owners so that they no longer had to pay out pensions. And the idea came from Wall Street. And it came from Wall Street to alleviate the financial pressure from business owners while increasing the available money your Wall Street hedge funds could invest for their profits. 401Ks, they weren’t built for you. They were sold to you under that guise, under the guise of greater potential than a pension. And I guess a 401K, it’s better than nothing. But the true beneficiaries of the 401K are the employers that provide them, and Wall Street that then uses them.
So, with that one right there, let me pause there for a second. How are you feeling about that one right there? Because a good third of the people that will watch this video will be enraged by comments that I just made. But remember what I said earlier about meaning. What meaning are you attaching to my words? What emotions are coming up for you, based on the words that you’ve attached the meaning to? The point being that there’s no room for emotions in investing. It’s math. Math only.
This right here, this 401K, it’s another subject I could talk about forever and forever, but I’ve done it here before several times, all with much, much debate. Again, let’s just put it this way: Show me the retired 30-year-old 401K millionaire driving a Lamborghini, and I’ll change my tune on this. But until then, there are much better options when it comes to creating financial freedom. The vast majority of people just don’t make enough money to be able to save their way to freedom, whether inside of a qualified retirement plan or not. Don’t get mad. It’s just math.
Certainly, there’s room for a 401K, or the like, inside of a financial freedom plan. I’m not saying they’re bad, all bad. But very much like paying off your mortgage, consider knocking it down a little bit on the priority list for a bit. Because if financial freedom is important to you, and it’s indeed a priority, and you want it sooner rather than later, retire yourself through cash-flowing assets before maxing out your 401K.
Alrighty. Let’s pause for a sec. I cover these six first because, although you might have heard a version of these before, and you might even have agreed with them before I even shared them with you. But ask yourself this: Are your actions in alignment with these beliefs? For example, are you stuck because you don’t feel you have the money to make money? Are you focused on the cash that you make from a transaction, as opposed to focusing on how you can turn a transaction into cash flow?
Or are you currently on a mission right now? This is the year you’re going to pay down all your debt? Is that what you’re up to? Or, are you avoiding using your available credit because you don’t want to create any new debt? Or are you on a 15-year mortgage plan because you want to pay off your home? Or are you sitting on a bunch of equity in your home because it feels good? Are you maxing out your 401K because it feels good because it feels financially prudent? Feels financially prudent.
There’s no room for feelings in your financial freedom plan. It’s just a math equation. If your financial freedom is important to you, then ignore your feelings and look at the math. Alrighty. So what are you noticing about your beliefs and your actions right now, so far? Are they in alignment? Go ahead and comment below, and tell me what you’ve noticed up to this point. What have you learned? But, let’s continue.
Number Seven – Delegate your investing to an expert. No, don’t do that. “Financial advisor” does not equal “expert.” If you want to be financially free, you owe it to yourself to listen to and work with people that are financially free. Warren Buffet said, “Wall Street is the only place in the world where people drive a limo into town to get advice from people that took the subway to get there.”
In 2007, we had a ton of financial experts. There was one at every corner at our disposal. Didn’t we? Yeah. And they lost it all for us. Didn’t they? Yeah. Those experts lost it. Oh, sure. Much of it has bounced back. And so we forget because it feels good now. But what people miss is the math. Although many fortunes have been restored since, they still missed out on almost a decade of growth. When you lose 50% of your fortune, you have to earn a 100% return just to get even. So, we’re even now.
So, good investing is not sending your money to someone else, hoping that they know what to do with it. Good investing is getting people to send their money to you. It’s really pretty remarkable how important people’s financial freedom is to them, but how little they know or care to know about it. So if your financial freedom is a priority to you, doesn’t it make sense to make your knowledge about attaining it a priority as well? Yeah, it does. Doesn’t it?
Financial Freedom Lie Number Eight – Money is the root of all evil. Wrong. It actually says, “For the love of money is the root of all kinds of evil.” Very different. That’s what the Bible says. 1 Timothy 6:10. That’s from King James. And it’s funny how often bible quotes are misquoted and are taken out of context to support someone’s belief or argument. And why is it always the negative ones? If you’re going to take quotes from the Bible out of context and then base your life around them, why not go positive? There’s plenty of those. Like, “A feast is made for laughter. Wine makes life merry. And money is the answer to everything.” Yep, the Bible said it. Ecclesiastes 10:19. You get what you focus on. And if you’re focused on money being evil, financial freedom will never be yours.
Number Nine – Live below your means. Now, I’m a bit of a walking contradiction on this one. I’m not an advocate for frivolous, unproductive spending. That’s certainly going to slow you down. But I’m not about sacrificing life’s pleasures, either. And I’ll leave this one to your discretion. I just say, “Don’t be dumb. But don’t miss out on life either.” Alrighty?
My final note on this and this isn’t really a myth or a lie, but rather a warning. Be wary of advisors that use words like “everybody” or “nobody.” Or they use words like “always” and “never.” That typically is going to lead to trouble. When it comes to answering questions about the best way to achieve financial freedom, most answers should start with, “It depends.” There are countless variables involved when providing perfect financial advice if there is such a thing. And those variables will change as the world changes. Because the only thing in life that doesn’t change is that everything is going to change.
So, that would be number 10 on this list. Be open and be flexible. Be willing to challenge your own beliefs as well as society’s. And lastly, just don’t get mad. Just do the math. Take action on the answers to your math equations. And then financial freedom is going to be yours before you know it.
All right! If you have any questions about these 10 financial freedom lies, share them below. And I’ll be happy to respond. In fact, I’m actually looking forward to it. Alrighty, that’s it for today. I’ll see you next week for another episode of “Financial Freedom Friday.” Take care.