Over the last few days we’ve looked at the possibility of living a life of true freedom whilst existing in the modern world we find ourselves inhabiting. I think we grudgingly agreed that we might have to accept the way things are in the world and that this would mean dealing head on with the challenge of living a life of freedom in the Capitalist world and that this would require us to address the big question of money.
To do this, I suggested that you take a leaf out of the Capitalist’s book and that you should seek to create assets from which to generate income and build a cushion of cash so that you can enjoy your life of freedom.
After a bit of pre-ambling to set the scene, over the last two days, I finished yesterday on a practical note; considering what the nuts and bolts of creating such a lifestyle would be.
In my experience the important points are as follows:
- freedom from debt
- to get over the Capitalist obsession with stuff
- generating income from activities you enjoy
- setting up a business to handle all of your income and expenses
- setting up a simple accounting system
Lets take these apart a little.
Living beyond one’s financial means has become the norm in the western world, encouraged by Governments, corporations and the media. This is essential for the system to work properly, so you shouldn’t feel bad or duped in any way…it’s the default position for most people. Its real power is in the way that it keeps you tied to your 9-5 job in order to keep up the repayments.
So, you got yourself in a deep debt hole? How to deal with it? There are two main ways:
- If you own your own home (mortgage) and don’t see any alternative to that, then you have to pay down this debt as quickly as possible. Hint: you won’t do this easily by keeping things as they are as far as income and expenditure are concerned. There are techniques you can use such as dead on last payment (DOLP), which is a good credit card and loan pay off strategy…but slow if you are in deep. I will elaborate on some debt reduction strategies in a future post, but for now it’s good enough to agree that you need to cut out the luxuries and pay down the debt faster. You might want to start setting up other income streams in advance of your break for freedom too. I call this digging a tunnel…you know, like in The Great Escape.
- If you rent your home or can change to renting your home without incurring a large financial loss from losing your current (mortgaged) home, then bankruptcy is an excellent route to financial freedom. This is especially so if you have major credit card and loan debts with high street banks and finance companies. I talked about this in an earlier post called reset. There is no stigma attached to this if you prepare well and get all of your ducks lined up before pressing the reset button on your finances, which is essentially what bankruptcy is. You need to grasp that Capitalism is just a big game invented by rich people to keep themselves rich and as such is just like any other game…you can press the reset button; and it’s easy. Don’t jump straight in, figure out all of the options and make sure you are fully prepared before you press the button.
Next and firmly attached to the above, is getting over stuff. You don’t need to wear a horse hair shirt or grow all your own food or recycle your toilet contents but it helps if you take the opportunity to live a bit more frugally, at least for a while. This is more about changing your mindset than it is about just money, as in time there is no reason why you can’t enjoy luxuries, but you’ll find that the uber consumerist lifestyle just doesn’t fit with a life of freedom.
As an aside to this, in case you’re getting worried now; we now have satellite TV, 3 cars (one each and a jeep…all old ones) and most of the gadgets and gizmos we had before…but, we don’t ever buy new stuff. If the flat screen TV breaks, I can pick another one up at an auction for under £50, as opposed to £400 for a new one that’s only warranted for 1 year anyway. Same with most big purchases.
The key point here is that we have all of the stuff we need, but we never take on anything that generates a monthly payment…stay free of monthly payments and you will stay out of debt. Also, another good reason for going the bankruptcy route is that nobody will consider you for credit for a while afterwards. I have absolutely no debt now.
The best approach to living a life of freedom whilst being sufficiently supplied with cash to live in the modern world is, as previously discussed, to make your life your living; in other words making money from the things you already want to do.
This is a strange concept for many as it means that you turn your life into a business of sorts. Don’t worry, it doesn’t need to be weird, but you might have to adjust your ideas about what constitutes business activities and dump the concept of work/life balance; it all becomes one big enjoyable mashup.
By taking this approach to life and income generation, you can also legitimately consider a lot of your living expenses as business costs and save tax. Here’s a couple of examples to help you get a feel for what I mean…(please don’t leave when I reveal this) I love old Volvos; there I said it. At certain times I like nothing better than being up to my elbows in old Volvo grease…servicing, restoring or just sitting behind the wheel with an inane grin on my face. So now I have 2 old Volvos, I buy and sell parts and cars…meaning I get to indulge a passion for free and make a profit. My Volvos are just passing through the business…slowly.
I also love to go fishing and I have a penchant for old fishing tackle, so I have a website and eBay account where I sell old fishing tackle which I pick up at auctions (another keen interest of mine)…so my fishing is financed and equipped by part of my patchwork business and all of that enjoyment is a legitimate business cost, as I am researching and writing about fishing tackle.
Here’s a third example in case you need it; I love antique auctions and old sales. I pick up fishing tackle, sometimes old Volvo parts and on the way I see a lot of interesting furniture and collectables so I now have a website that sells architectural salvage and furniture.
This means that a lot (but not all…yet!) of what I like to do, is legitimately considered as part of my business and as such it is perfectly lawful and cash efficient to consider expenditure on these interests as business expenses. I can’t stress enough how easy this is to do, but of course you do need to be scrupulously straight and honest with this stuff or you’ll just feel bad.
You need a vehicle (not a Volvo this time) to help you keep all of this in order and the best way is to set up a basic general trading Ltd Company or Corporation. If you’ve chosen bankruptcy as your route out of debt, then you will need to make arrangements for your partner or a trusted acquaintance to be the Director of this to start with as you will be banned from this role until you are discharged from bankruptcy. It’s easy to set this up and relatively simple to manage it once you have it up and running. There are certain commitments you will need to fulfil, but a good accountant will keep you right with this. By the way, if you commit to keeping some simple financial records for this yourself you will not need a bookkeeper or incur any major costs for accountancy other than a basic fee for preparing year end accounts and a small payment for the annual return…it really is easy.
If you commit to keeping simple accounts up to date yourself, you can avoid bookkeeping costs and all but the most basic of accountant’s fees for your company or corporation.
This can be as simple as a spreadsheet for recording income and expenditure and a folder file to store receipts and invoices in. I will expand on this and supply templates at a later date.
The most important thing right now is to just start.
Just grab yourself a pen and paper and make a Mindmap of what you could bring to this type of arrangement and you will quickly find that you have the basis of a very happy, fulfilled life of freedom doing all of the things you love to do and avoiding the daily trip to the hamster wheel of doom (I need to get a voice over done for that phrase!..bruhahaha!)
Tomorrow, I’ll show you such a Mindmap and dissect it a little to show how this can quickly get very interesting and even exciting…FREEDOM!