Become Financially Free in 5 Simple (Not Easy) Steps

By Daniel DiPiazza

Today, I want to touch on the concept of financial freedom. This is a topic that is near and dear to the hearts of many entrepreneurs because it’s what many of us are working so hard for.

What does it mean to become “financially free”?

In this case, I’m specifically talking about exiting the “work for money” system that we’ve all grown to know (and hate).

See, we’re trained to associate our time with money. Even at the highest levels of respected professions, there is a dollar-per-hour or salaried maximum amount of money that you can make.

And even if you’re getting paid millions for your work — if you stop working, the money stops. Just look at high-paid celebs with money issues (1 in 6 NFL players go broke after retirement).

Financial freedom doesn’t mean that you’ll never work again. You’ll probably still want to do work that interests you. 

It means you’ve created enough momentum that the money works for you to create more of itself.

If you’re the only person working for your money, it’s a slow slog. The key is to build a money machine that produces income and is self-sustaining. You have to make your money, make money.

Nelson Nash has a great book called Becoming Your Own Banker: Unlock The Infinite Banking Concept and this really blew my mind a few years ago when a client recommended it to me. This book is all about how to leverage life-insurance as an asset that you can use as tax-free collateral and source of capital.

Since then, I’ve become obsessed with understanding the basics of the market and learning to utilize my parked cash more effectively.

So with that in mind, here’s my 5 step formula for becoming financially free. I’m probably missing some nuance here and I’m clearly not a professional, but this hits the basics you need to understand to get started.

Become Financially Free in 5 Simple (Not Easy) Steps

This process for creating financial freedom is “simple” but in no way “easy”. And it will take many years.

Remember, this is a long term plan with a moving yardstick for success. Everybody has different needs. Shape your plan accordingly.

1️.) Understand the basics: The stock market returns an average of 5-10% year over year, even through the worst of times. This is an interesting visualization of the US market over 200 years.​ Focus your mission on creating cash with a business and stash excess money in the stock market over the next 10-20 years.

2.) Accelerate your cash flow: If you want to speed this process up a bit, create something incredible, sell that business and secure an exit for a big number. (Here’s a good book on that process.) Put that money into the market.

Make sure you understand your numbers and KPIs very well. Get The Sales & Systems Toolbox to assist. 

3.) Put your money to work: The vehicle for putting your money to work in the market can be index funds or ETFs. These essentially track the market. For instance, the S&P500 tracks the 500 biggest publicly traded companies in the US. One of my favorite ETSs is VOO. It’s a Vanguard ETF that tracks the S&P. Currently trading around $300. I use tools like Acorns and Robinhood to invest.

There’s also cryptocurrency, like Bitcoin, which is surging right now. It’s going to make a lot of people millionaires. A whole new asset class is being created right in front of our eyes. Don’t sleep on it. 

4.) Stack it up: Let’s say you accumulate and invest $10MM over your career + a nice exit. Assume a 5% return to be ultra conservative. That $10MM will spin off $500,000 every year, without touching the principal. Pretty rad, huh?

5.) Keep more money: Federal income tax for working a “regular job” is about 40%. That means you pay nearly half of the money you get from working a job back to Uncle Sam. Investment income (called capital gains) is taxed at a lower rateSee current US rates here.

Capital gains taxes on money invested is much lower than standard income tax you pay for working a job. Anything over roughly $500k is taxed around 20%, so on that $10MM principal ($500k net per year) you’d pay $100,000 and take home $400,000 per year without ever working again or touching the principal $10MM.

If the stock market returns 10%, that number would be about $800k after taxes.

And that’s it, folks!

Adjust to suit your needs. Do the math with less capital invested, play with interest rates.

That’s how you break the Matrix.

Much love,

D

PS — are you working towards financial freedom? Leave a comment below and LMK!

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