Want to be successful? You have to prepare. Success isn't accidental. It's the combination of preparation, focus and opportunity. When these three things overlap, like the Venn diagrams you learned about in school, amazing things happen.
To stay focused on preparing for the future, I think about a quote from Robert Herjavec: "I don't think anyone wakes up and says, 'I want my life to suck today.'" I've witnessed and personally experienced both success and failure. We all have. But, what sets the winners apart is that they focus their efforts, down to the minute, on a singular goal.
Take action towards your goals. If, like me, your goal is to become completely financially independent, then you need to do the following:
1. Create Multiple Streams of Income
Talk to any financial adviser. They'll tell you that the key to long-term growth in your investment portfolio is diversity. Things go wrong, but if you have alternative streams of income to rely on, you can bounce back without crashing. Think of diversification as a type of insurance.
For those of you killing it in your 9-5 job, with benefits and a reliable salary, you need to focus on how you're spending your time outside the office. Your diversification is what you do in your "off-time". Or, more accurately, making your "off-time" your "opportunity time".
During the height of the Great Recession, U.S. News published an article outlining 10 Reasons to Have Multiple Income Streams. This was written at a time when the unemployment rate in the United States was soaring towards double-digits. There was genuine panic that the world was shifting in a way that would leave millions without a reliable source of income. Even today, the psychological effects of the Great Recession are still rippling their way through our daily lives.
The number one suggestion during this time was to start focusing on finding more ways to patch together an income. I still remember a dinner party I attended that year. I crossed paths with Robby Du Toit, the Founder of Fast Sale Today. He told me, "You know, my business was built on providing an exit strategy for distressed properties. Before the crash, that was less than 4% of the market. Today, that's more than 50% of the market. People just don't have back-up plans, besides pulling cash out of their homes. Property today has become the emergency fund of yesterday."
It was a sobering thought. To think that millions of Americans didn't have an emergency fund. If their primary source of income was lost, they could lose everything.
Key Takeaway: Use your leisure time to identify opportunities to earn more. Creating multiple income streams will save you from disaster if something goes wrong (which is a matter of when, not if). In addition, you need an emergency fund that can last up to 6 months in case total disaster strikes (illness, family emergency, etc.).
2. Defend Your Future Wealth
Aside from economic disaster, there are other things you need to think about in terms of building and protecting your wealth. As Benjamin Franklin once wrote, "In this world nothing can be said to be certain, except death and taxes."
Tax liability is a critical part of building real-wealth. Take advantage of tax-deferred programs:
• Individual Retirement Accounts (IRA's)
• 401(k)'s (preferably with employer matching)
• Government Bonds
• Exchange-Traded Funds (ETF's) with lower portfolio turnovers.
• 529 Plans for Educational Purposes
• Incorporation of Business Entities to Provide Tax Advantages
If you're going to follow the advice laid out in part 1 of this article, building a diversified income stream, you'll need to meet with a tax professional, as well as a good attorney to discuss the benefits of structuring your income streams within a corporation.
It's important to understand that many expenses incurred in the pursuit of new income streams can be tax-deductible. Every business, big or small, has a silent partner: Uncle Sam. Don't let him take more of your hard-earned money that he has to. There's a reason major corporations hire lobbyists. FactCheck.org reports: "As the New York Times and others have well documented, GE has employed a number of aggressive (and legal) strategies that have greatly reduced the company's corporate tax burden."
Key Takeaway: Think of yourself as a business, with multiple income streams and opportunities to cut-costs. Use every legal mean at your disposal to reduce tax liabilities and improve the legal protections of your wealth.