My Secret to Financial Freedom
The “4 Quarter Rule” to Financial Freedom
Today I’m going to share with you my “secret” to financial freedom.
It’s so simple that anyone with a little discipline can follow it flawlessly.
But before we dive into my strategy, I want to put something in perspective. There are A LOT of folks out there who live beyond their means, and those folks will never be able to “keep up.”
If you earn $1M per year, but you spend $1.1M per year… you go broke. Your lifestyle exceeds your income capacity, and that’s a big no-no!
Wealthy people don’t get wealthy by spending more than they earn. They get wealthy by strategically growing their net worth.
This is why I’ve been able to pay off all my debts, own my home outright and secure a stream of “forever income” at the age of 35.
I’m going to give you the recipe to do exactly the same.
At 25, I had 4 mortgages and millions of dollars in debt. I knew if I didn’t knock it out quickly, it would run my life rather than me running it.
So I laid out a plan for financial freedom. It required A LOT of work, some refined trading skills, and, of course, living well below my means.
Without further ado, here it is…
My 4 Quarter Rule:
25% put aside for my adjusted tax rate. Now of course I’m in a higher tax bracket due to my income, but my deductions adjust my actual tax rate down to approximately 25% of my gross annual income.
25% to live on. This sustains my expenses and lifestyle. All my consumables, my home and auto expenses, clothes, food, cell phones, health insurance and deductibles, etc.
25% cash savings. Money I can access for large purchases, unexpected expense cushions, etc.
The remaining 25% is the money I leverage to make more money. This quadrant becomes divided among a few different vehicles: Stock market holdings, real estate holdings, annuities, retirement accounts and trading accounts.
I’ll tell you right now: Most people are not willing to live on only 25% of their annual gross income. They’re not willing to drive a Toyota instead of a BMW. They’re not willing to live in a modest home when the bank says they qualify for the big luxury home. They’re not willing to live debt free when they’re able to have access to so much leverage.
It comes down to the life you want to live. Most people care so much about what others think of them, when at the end of the day only you have to care what you think of yourself.
Financial freedom is more important to me than caring what my neighbors — who I have no relationship with beyond a friendly wave — thinks of me.
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