Episode 13: Financial Freedom
The relationship between happiness and wealth
We continue the discussion around FREEDOM, the cornerstone of any planning in your life and business, and the guiding line for anything that you want to do.
In this episode, host Niel Malan discusses the relationship between happiness and wealth as we take a look at the first of the five freedoms: Financial Freedom.
From contributing to quality schooling for your children, to healthcare and being able to retire comfortably, Niel examines how money relates to freedom.
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Hey, everybody. Welcome to the Elite Entrepreneur show, show number 13, where we are going to continue discussing the topic of freedom.
In case you are just tuning in or in case you missed the previous episode, episode number 12, I highly encourage you to go and watch that episode or listen to that episode first, because we are addressing a really important topic: that topic is freedom. That really is a very important cornerstone of doing any kind of planning and it should guide all the questions about why you do whatever you do.
Today I’m going to talk about one of the five freedoms – I’m going to talk to you a little bit about financial freedom.
First of all, as a preface, when I was a kid, I always felt like we were really poor. The reason is because –I don’t think we were poor; to be fair, we were probably middle class – but I always had to wear my brother’s clothing that he already wore to school. I was one of three siblings and I got the mattress that everybody else already used for years and there was like this coil that stuck into my back. I hated it.
I just absolutely hated not having financial means. I was embarrassed, to be honest. I was embarrassed that I felt I always had to wear second-hand clothing, we never had enough money really to do anything as a family. There was a lot of fighting and there was a lot strife in the home as a result of finances. As a kid, I think I just learned that financial struggle and financial constraints is just not a good thing for a family. It just leads to strife. It leads to all sorts of bad things.
Early in my life, I decided to create wealth. I decided to pursue a path that allows me to actually create a level of financial independence. I worked really hard. I became a salesman. I’ve already told the story on previous episodes, but I will just tell you real quick.
By the way, if you guys are listening to this and there is background noise, I’m actually at the coast. I want to encourage you to go and check out the scenery. It’s absolutely exquisite. Go to www.eliteinc.com/13 and you can actually watch the videos as opposed to listen to the audio file.
I worked very, very hard to try and create wealth. I learned to sell, I learned to run business and I was very fortunate to be able to buy my first company when I was 23 years of age. When I was 26, I became physically a millionaire. I had a million in my account, which in today’s terms is not a lot of money. But as a young kid with very little means, it felt like quite a big accomplishment.
The interesting thing is I was miserable. I really wasn’t a happy person. I think it’s because at that point I understood happiness to equal wealth, which of course it doesn’t. But it doesn’t mean that it doesn’t play an important role in overall freedom.
It took me many years to try and figure out what is the role of finances when it comes to your own freedom and your own personal happiness.
A lot of research has been done on this topic where they try to find out what is the statistic with the relationship between wealth and happiness? What research has found in the United States, up until about $70 000 a year in earnings, there is a relationship between happiness and wealth. Your happiness levels do improve as your financial well-being and earning capability improves up to about $70 000. Beyond that, there isn’t really a relationship between happiness and financial well-being.
I think what happens then, a lot of people think well, it’s not really worth pursuing wealth; it’s not really an important goal to have financial freedom.
However, it goes beyond happiness. There are a couple of very functional reasons why I think we should look at our finances a little bit differently. I’m hoping to give you guys a couple of thoughts to consider when it comes to the way you approach your own finances.
I want to talk to you today about money as it relates to your own freedom. Forget about happiness for a second. I suppose the two are linked. But I want to talk to you about freedom.
We talk about financial freedom. Why is it called financial freedom? It’s because we perceive that finances can kind of help us to achieve certain kinds of freedoms.
So, like what? Well, if I have the ability to buy quality schooling for my kids, for example, it contributes towards financial freedom. If I have really good healthcare, medical care, it contributes towards freedom. If I have the ability to save for retirement and I can one day retire comfortably and walk the golden beaches of this world, then certainly that contributes towards financial freedom. So I think it’s pretty obvious how it contributes.
The question is, how much money do I need? Like, what am I aiming for? Do I quantify it in wealth or do I quantify it in cash flow? There is no answer to that question. There is only a personal answer to the question. My view is that most of us need to make a lot more money than what we think we do. The reason is because there is only 3% or 4% of the people on the planet that can retire financially without financial aid. Many of us can’t travel because we don’t have the financial resources beyond paying the bills. We don’t want to live a life of pure survival. There is no point in that. You want to live a life of freedom.
I’m not suggesting that you are going to spend your life traveling and that you necessarily are going to stay in five-star resorts and travel first class all the time. Some people aspire to that and that’s great. There is nothing wrong with that. But I think as it comes to freedom, that’s not necessarily the goal. I think it’s the freedom of constraints.
In the previous episode, episode number 12, I spoke about constraints and how freedom is opposite of constraint. I think financial freedom should be the opposite of constraint. So the way for you to determine how much money you need to earn and how much money you need to have saved and invested is a product of what needs to be removed out of your life so that you are free.
What is freedom to you? What is personal freedom and what do you need to earn to allow you that? Is personal freedom for you the ability to only work half day so that you can spend the second half of the day with the children, if you are a mom or a dad? What does that mean when it comes to finances?
Is it the ability to take off from work entirely so that you can do your thesis or you can spend time running an NGO?
Is it the ability to support your parents that don’t have the financial resources to retire comfortably?
Each one of you guys has your own definition. You’ve got your own needs. There is your own unique formula of things that you need to make you feel like you’ve got total and complete freedom.
I want to encourage you to shift your mindset about money. I don’t want you to try to find a relationship between money and happiness. I mention this because people have this debate about what’s more important, money or happiness? That’s like saying what’s more important, your left arm or your right arm? It’s a stupid question. Have both. Nobody said there is supposed to be the one that’s supposed to lead to the other. It’s a utility. It’s a tool. We need to be aware that that’s one of the cornerstones of freedom. If there is lack in that cornerstone, it impacts everything else.
I do believe that a big part of freedom, personal freedom, starts with financial freedom. It’s by far not the most important freedom, but it’s like Maslow’s hierarchy: You can only advance to the next levels if you’ve kind of almost satiated the lower levels. That starts with planning. It starts with planning and really understanding what is it that I need? What is it that I require so that I’m free?
I want you to think about it like that. Forget about happiness or whether happiness is more important than money. It’s a stupid argument. I don’t think it’s an argument worth having it all. I want you to look at it in the context of freedom.
I can tell you for me, it’s important for me personally that, obviously, I like comfort. I liked you have comfortable surroundings. I’m not a Lamborghini guy. I buy second-hand cars. My newest car is six years old. So that’s not a big thing for me, personally. That’s not important for me. But I like to have the ability to live comfortably. I don’t want to have to count pennies when I go to restaurants. I want to be able to travel and stay in a degree of luxury. So that’s important to me. I always want to have excess finances. So if I do need something, there aren’t any constraints around me.
I’m a really big believer in financial planning. I don’t want to one day realize, oh my goodness, I actually feel like retiring or I actually feel like taking a couple of years off and I can’t because I don’t have the financial resources.
I also want to be able to provide for the people that I care for. So when I do financial planning and I set financial goals, I look far beyond subsistence living, you know, day to day stuff. I look at all the other aspirations that I have and where do I need additional financial resources to contribute towards that, because that makes part of the whole. Then from there, you work backwards. So, how do we get there?
It’s one of the things that I love about a digital business. I know that I keep on carrying on about an online business, but online businesses, if run properly, are very profitable. They are very profitable companies by comparison. The reason is because you don’t have the traditional overhead structural offices and infrastructure and that kind of thing. You know what I mean? You genuinely can run a very, very profitable digital business, very profitable online business. But it’s not the only… I mean, there are many different businesses that are profitable. There are many different businesses that will give you a great life as well. It’s not only digital.
The point is you’ve got to choose the right vehicle. See, I chose the right vehicle to give me the means to have all the freedoms. And it starts with financial freedom.
You have to make sure that you have a vehicle that allows you to do that. Certain professions cannot pay more than what they pay. In fact, they are going to keep on paying less. Then it’s time to change profession. For that, you need new skills, you see. Certain kinds of businesses can’t do better than what they do. They are just at a cycle of maturity where those businesses can’t do well.
I think one of the most important decisions that you have to make and that I have to make is, what vehicle am I choosing, and does that vehicle realistically give me the opportunity to attain financial freedom so that I can get the rest of my freedoms achieved?
I hope this sparked a couple of thoughts for you. I want you to go and contribute. I want you to go to www.eliteinc.com/13, track down the comments box and give me your opinion. What is your take on finances and money as it relates to freedom? How free do you feel financially? How constrained do you feel financially? In what areas do financial constraints lead to other constraints in your life? I would love to know what you think and I really enjoy the comments that you guys make and I enjoy following the dialogue. So please go to www.eliteinc.com/13 and participate. I would love to know your answer to those questions.
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Those of you guys looking for a hand to get going on starting your own digital business, please feel free to have a chat with my team. Just go to www.eliteinc.com/13 and book a complimentary 15 minutes call with my team and we can see if we have a solution that can help you.
That’s a wrap for today. I’m going to chat to you in the next episode, number 14, about another important freedom. I hope you enjoyed it. Thanks for your time. I will see you in the next one.