Are you working to live, or living to work? Perhaps you’d like more free time to spend on the people and things that truly matter. Maybe you’d like to spend more time with family and friends, more time on your hobbies or other pursuits, etc. Nik Halik amassed large sums of money when he was in his 20s and became financially independent. With his freed-up time and financial independence, he has gone diving to the wreck of the Titanic (where he had lunch, no less), climbed Mt. Kilimanjaro, and even been to space. He’s a famous angel investor, entrepreneur, and member of The Oracles. Here are his tips for how to accomplish your financial goals.
1. Plug the leaks.
Basically, this is the time-tested process of looking over your budget and figuring out where the money is going. Are you overspending on one budget category, or perhaps even multiple ones? Of course, it’s simple to do this with a spreadsheet for categories such as food, entertainment, etc. However, what might not occur to everyone is that 401Ks and IRAs often charge many fees. Investigate these fees and figure out how to avoid them, to fill up the holes in your budget that are causing you to fall short of your financial goals.
2. Pay yourself first.
This slogan is often thrown around, but what does it really mean? Is it just a common-sense, platitude, or does it have an actual, specific meaning? The answer is that yes, it has an actual, specific meaning. Basically, the majority of people get a paycheck. They pay their expenses, such as taxes, rent, food, entertainment, etc. Whatever they have left over, they save (or preferably, invest). However, this is “paying yourself last,” not “paying yourself first.”
“Paying yourself first” means that first, you save. You save as soon as you get your paycheck. Then you live on the remainder. The logic is that it enforces financial discipline. If you have $2,000 to live on this month, you’ll spend $1,500 and save only $500. However, if you’ve already saved $1,000, then you just have $1,000 left to live on. You’ll manage to find a way to live on it. “Paying yourself first” is a key strategy of the rich.
Some people worry about what might happen if you have to pay something really important, like rent or taxes, and you’ve run out of money because you socked so much of it away into, say, a retirement account. This might be somewhat worrisome, but generally, people will find a way to make the payment, in the end, maybe by selling something, maybe by taking a few extra hours, etc. Generally, overall outcomes are better with “pay yourself first” than for “pay yourself last.”
3. Get a side hustle, and gradually build it into a business.
The truth is, many job promotions are basically just you working more hours, and getting more monthly or yearly pay as a result. Although your overall monthly salary might increase, your hourly wage hasn’t increased at all. The way to make real money through work is to be entrepreneurial. Make yourself rich instead of your boss, the CEO, and the company itself. Which entrepreneurial endeavor should you attempt? Try to find someting that you’re skilled at, passionate about, and for which there is actually a demand in the market. Find something that intersects on these three factors, and that’s a good candidate for a side hustle. Once you start making money through it, scale it up. Maybe one day, it’ll be your main job, and you can keep the spoils for yourself, rather than handing more than half to your superiors, which is what most employees do. Another benefit of building seed capital with a side hustle is diversification. If you get fired/laid off from your job, or not recontracted, or just decide that you’ve had enough, you won’t be forced to go there out of economic necessity.
4. Make your money work for you
Again, as with “paying yourself first,” it’s a slogan that is often thrown around, but what exactly does it mean? It means that rather than putting your effort into working by the hour (or week, or month) and selling your time, figure out what you can do with your money so that it will provide return on investment, and generate an income so that you don’t have to do anything; the money rolls in, even while you’re asleep. If you make $20,000 working 40 hours a week, you can work twice as hard (80 hours a week) and make $40,000, but in both cases, you’re working for your money. Now imagine that you invest $400,000 at 10% return. You make $40,000 that way, too, but it takes pretty close to zero hours per week. That’s getting your money to work for you. If you save and invest for enough years, that’ll eventually happen.