Alan Donegan: Rebel Business School Co-Founder, Rebel Entrepreneur podcast host, Rebel Finance School co-founder and Queen's award winner. Marvel movie fan fanatic, breakfast lover and financial independent traveller
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After recording a podcast together Katie and I decided that we needed to get some energy. So we headed out for a walk in the forest on a grey August day in England. As we walked and talked about the podcast we had just recorded, the conversation turned to the question “how quickly could we get back to financial independence if we started again?"
If we lost everything, but kept the skills, the knowledge, the attitude we have today, how long would it take us to get back to financial independence?
With the skills that we have and the opportunities that we have created over the last few years we felt that it would only take us about five years to get back to Financial Independence from scratch! So why do most people never get there?
If you were to take all of the money in the world and equally divide it amongst the entire global population would you change the planet forever? Or would it end up back in the pockets of the same few people in a matter of a few years if not months?
There are 7 billion people on the planet and according to recent data from the Credit Suiss Global Wealth Report there is around about $399.2 trillion! If you took all of the household wealth from the billionaires and millionaires and people around the globe and then pulled it together and distributed it equally; each person would receive roughly $76,984.
As a thought experiment let's imaging doing this right now. Imagine all the people you know were given $76,984. If you give your average person $76,984 what would they do with it?
Will they have any of it left after a year?
Recently Katie and I ran a course entitled Take Control of your Finances. As part of this course we have been thinking through the skills, mindset and abilities that you need to have to create a bright economic future for yourself.
Lottery winners give us an incredible case study when thinking about finance. You are taking an average person and thrusting millions of dollars or pounds upon them at the click of a button. How does your average person react to extreme wealth in an instant?
70% of lottery winners have nothing left after 1 to 2 years! They win millions and millions of dollars and have nothing to show for it after only 1 to 2 years. This shocked me when I found out. I shouldn't be shocked, but I was.
Worse than that 30% of lottery winners not only waste all the money but go bankrupt. They buy things they can’t afford to maintain and upkeep and are forced to declare bankruptcy!
Which brings us back to the general population. If you gave your average person on the street $76k what would they do with it? Would they spend it on a car? Would they spend it on alcohol? Would they spend it on a new house? Big Screen Television? New iPhone?
My belief is that money would very quickly flow to the people that are the creators in the world not the consumers. Most people are consumers of other peoples products and services.
There is a small subset of the global population that are creators. Creators of content online, creators of products like cars and clothing and food. Creators of services that are sold to other businesses and people.
It is the creators that you spend your money with. Which is why I believe if you completely re-distributed the wealth around the global population within a matter of a few short months or years that money would end up back in the pockets of the people that have built the businesses that sell them things.
Most people don’t want money they want things. If and when they get money they spend it.
When I was at Chautauqua in Portugal last year I got chatting to the barman who served me my coffee overlooking the Douro river every morning. We chatted about finances and money. At the end of our week, I asked him if there was anything that I could do to support him.
With a cheeky grin on his face he looked at me and said "you could give me €1 million?"
I smiled and said "what would you spend it on?"
He replied by saying that he would go on holiday, buy a new car, buy a new house. I smiled at him and told him “if I gave you €1 million you would have nothing to show for it in under a year.“
How much of the money that has flown through your hands have you kept? Does all of your money disappear on buying stuff? If you want to know how much of the money we've kept that we've earned read this article.
In my first 11 years in employment I ended with absolutely nothing to show for it! I had nothing left at all. I worked hard for 11 years and kept nothing! That is a depressing thought.
Do you ever end up wondering where your money is going? Do you ever think about what you’re spending your money on?
My challenge to you
My challenge to you is to buck this trend that is so prevalent in the consumer driven culture that we operate in. I want to challenge you to take a portion of your money and invest it so that you can buy your freedom back!
Buy your freedom first not stuff. Stuff isn't going to lead to long term happiness!
My challenge is for you to create a gap between your income and your expenditure and then take that difference and invest it into assets that produce a return for you. Katie and I invest in broad based, Vanguard Index Funds.
If you do this you will be buying assets that generate a return. Your money will start to work for you instead of you working for your money. If you do this over a long enough period of time you will eventually own a bunch of assets that will create money for you even when you are sleeping!
Katie and I have been working at this for years and we now have enough assets to be able to never work again if we don't want to.
The thing that makes it even more interesting is that our money has been used to purchase shares in the companies that produce the stuff that every one else buys.
Every person that goes out and buys a huge flatscreen television, iPhone or stuff from Amazon creates a profit for those companies. Katie and I own a slice of those companies and benefit from that increased profit in terms of dividends at the end of the year.
I used to try and persuade everyone to stop spending and start investing; now I think about it, I might change my tune.
Go buy a HUGE television
Go buy the latest iPhone
Go buy more stuff for your house
Every £ or $ that people spend we benefit from.
If you redistributed the wealth of the world I am convinced that it would end up back in the same pockets very quickly.
Be the opposite
If you can be the opposite of the average person and save and invest, you are on your way to creating freedom in your life.
If you lost all your money how long would it take you to get it back? If you were given $76k how long would it take you to spend it?
Good luck with your finances and if you want help getting them under control then we would be happy to help! Even though it is not in our best financial interest!
If you want to know the date of the next Take Control of your Finances (TCF) course or find out what is in it click on the button below
Have fun with your finances and if you need to start over just do it!