I’m 22 years old. I have a paid off house, two paid off cars, and $10,000 in the bank. I have zero debt, I’m married, and I have a college degree.

 

When I was 16 my dad bought me my first car, for $500.00, and I went to work part time at McDonald’s. It was a crappy car, to put it politely. Anyone who has bought a car for $500.00 probably knows exactly what I’m talking about. It started when it wanted too, smoked all the time, and broke down twice a week. It had two colors on it – red, and rust.

 

Anyway, that old used car was all that I got. No gas money. No free college. Nothing. Unlike some people, I wasn’t born with an “automatically pass go – get all your stuff for free” card. When I graduated from high school, all I had was my car. In three years I bought a house, paid it off, bought another car (paid cash), graduated from college, and stashed a small amount of money into the bank.

 

Now this isn’t something to be proud about. I’m not here to try and increase the size of my ego. Quite frankly, I don’t even consider this an accomplishment. Neither should you. I’m only sharing this to prove a point – that you can do the same thing, if you want to. You can rid yourself of your stressful job, the long hours, the money problems, the debt collectors, and all the worries, fears, and stress that go along with ‘money’.

 

Seriously. Imagine a life without debt. I mean, no debt at all. No car payments, no credit cards, no student loans, and no mortgage. Imagine a life where you make 3-4 times the amount of money that you actually need. Sounds nice, right?

 

Now imagine that this is your life.

 

…

 

Now imagine that this is completely possible for you to accomplish. Because, well, it is. It’s dangerously simple, also. In fact, I bet you can do it in half the time it took me, if you really put your mind to it.

 

What’s the catch? Nothing. This article won’t cost you a dime. It won’t even cost you a penny. This is completely free. I’m writing this because I can, and I enjoy writing. That’s it.

 

It will take some time to read, though, so feel free to bookmark this site and come back later. This is also a multi-phase system, so as you progress you may want to come back and visit again. Of course, next time I may want cookies…mmmm…cookies.

 

CPR – The Practical Guide to Financial Freedom

 

C.P.R., in this context, isn’t a method of bringing people back to life. At least physically, that is. This is a method to bring yourself back to life financially, and to achieve financial freedom. It stands for Cash flow, Passive income, and Retirement. Thus, C.P.R.

 

The goal of this system is to achieve financial freedom, or literally, the freedom from money. The goal isn’t to amass a large amount of money. The goal isn’t to be cheap, or to worry about money all the time. The goal is simply to come to a place where money is not an object requiring your thought or attention.

 

Cash Flow

 

In every business, there is something called cash flow. This is just what it sounds like, the flow of cash. Where is the money coming from, where is it going, and how much is left over every month. What you have to do, is get a healthy amount of cash flowing in your direction.

 

You can do this in two ways. Either you can divert some, or most, of the cash flowing towards other things back to yourself, or you can increase the amount of cash that is flowing in. Of course, you can combine these approaches as well if you wish.

 

Redirect the Cash Flow

 

The first approach is the easiest approach, I think. It goes something like this; stop spending money on crap you don’t need.

 

This may be the hardest concept for you to grasp, so I’ll repeat it here. If there is something that you do not need, then it does not benefit you to spend your hard earned money on it. In other words, if you don’t need it, then don’t buy it.

 

In a business setting this is called “being lean” and it is considered a good thing because it improves the efficiency of the business while simultaneously improving the bottom line (profit).

 

In a personal setting this is called “being cheap” and is considered bad, especially from people who derive pleasure from driving new sports cars and living alone in large houses. Or people who derive their self-esteem by how much money they have in their bank account. The “I’m rich, you’re not” mindset. Methinks they are trying to compensate for something.

 

In reality, of course, not spending money on stuff you don’t need is a good thing. It shows you that you can be happy without having so much stuff, it shows you that you are not the stuff that you own, and it shows you that you do not need stuff to be confident in yourself.

 

Oh, and it also saves you a shit ton of money too. Did I forget to mention that? Oops. Here are some pointers for how to redirect your money back into your bank account where it belongs.

 

1. If you do not need it, do not buy it: In general a human being requires water, basic food, and air to survive. Unless you have some sort of medical condition, you shouldn’t be any different from the rest of us. Of course, you get to decide what you think you “need”, but remember that if it doesn’t fall under one of these categories, then you’re living in imaginary land. And your money will disappear in imaginary land.

2. Use Substitution: Almost everything can be substituted for something else that provides 90% of the value at 10% of the price. A new car will cost you $20,000. A decent used car will cost you $2,000. A new pair of jeans will cost you $20. If you go to a garage sale, you may have to pay $2 dollars, max. A bottle of pop will cost you a dollar, a bottle of water will cost you a dime, and a glass of tap water will cost you a tenth of a penny. Use Substitution. Save Money.

3. Shop Around: Do you know who invented the saying, “you get what you pay for?” Yea, I’m not sure either, but I do know that he worked as a salesman and specialized in ripping people off. There isn’t always a correlation between price and quality. If the same product costs twice as much at store B than it does at store A, this doesn’t make it twice as good at store B, it just means that store B is ripping you off twice as much. Don’t fall for the tricks of the salesmen. Shop around.

4. Calibrate your budget: Track your expenses, and see where you’re spending the most amount of money. Every month, find a new way to save money in these categories. Refer to steps 1-3 in order to accomplish this. If you do this long enough, one day you’ll wake up and discover that you have a lean budget and a fat bank account.

5. Don’t carry cash around: Little things add up. Five dollars here. Ten dollars there. Ten dollars over there. You just spent twenty-five dollars. Leave your money in the bank, where it belongs.

6. Think before you buy: If you want to make a big purchase, take a note of it, and wait five days. Talk about it with other people. Think about how this will impact you in the long run. Think about whether or not it’s worth it. Nine times out of ten, you’ll realize that you didn’t really need it to begin with.

 

Increasing the Cash Flow

 

On the other hand, many people argue that you should focus on making more money, instead of spending less money. This approach requires more energy and effort on your part. But in theory, you can increase your income infinitely, whereas you can only decrease your expenses to zero. So it stands to reason that this can be a quicker path to financial freedom. In reality, of course, people normally combine the two approaches.

 

Increasing your income is simply about creating and delivering more value to society. There’s nothing else to it. You don’t have to go to school for business in order to be rich. You don’t need to read a lot of books, or work all the time. You just need to focus on creating and delivering something of value to others. That’s all.

 

The important thing to understand is that it isn’t about creating what you perceive to be valuable. It’s about creating what other people perceive to be valuable, and it’s about supply and demand.

 

For example, society pays football players millions of dollars a year to put on helmets and smash into each other for entertainment purposes. This seems kind of absurd when you first look at it. We’re paying them millions of dollars to play a game. But I assure you there are reasons for this absurdity.

 

First, people like football. Especially males. We will sit and watch football for hours. And we will watch tons of paid advertisements along with it. We will pay for tickets to go to football games. While we’re there we will buy nachos, hot dogs, and over-priced shirts with our team name on them. Then we’ll go place bets on our team to win. The point? Society sees football as valuable. And we will pay accordingly.

 

Second, the supply of professional football players is quite low. There just aren’t that many 7 foot tall 300 pound guys in the world to begin with, then you have to weed out the guys that can’t throw, catch, run, tackle, or coordinate their activities with a team. And then you have to weed out the guys that, while they may be able to do these things, can’t do them very well.

 

What you have is a low supply of football players, a high demand for football players, and a high social or perceived value for football. The result? Professional football players get paid a shit ton of money. That’s the way it works.

 

So in order for you to make more money, you have to create and deliver more perceived value to others. Here are a few tips to help you accomplish this:

 

1. Invest in yourself: Certain occupations, such as becoming a nurse, doctor, engineer, etc, have a high barrier to entry. Because of this, there is a low supply of workers. Furthermore, many of these same occupations have a relatively high social value. The result is that the worker can demand a higher salary.

2. Align yourself with your job: Do something that you’re good at, and that you enjoy doing. By doing this you’ll almost guarantee that you’ll be able to do a better job, and thus create more value, than the guy next to you.

3. Dig deep: Find a way to create value that no one else wants to do, but you wouldn’t mind doing. For example, did you know that the modern day paper-boy typically makes more than a fast-food or retail worker on an hourly basis? Did you know that a trash man actually makes a decent living with no education? This is because no one wants to do these jobs. Since there is a low supply of workers, they command a higher price.

4. Be powerful: If you’re too afraid to ask for that raise, then you’re never going to get it. If you don’t think you have a chance at getting the job and never apply, then you’re guaranteed not to get the job. If you’re too afraid to start your own business, you may have lost out on millions of dollars. There will be risks involved, yes, but if you’re too afraid of the risks, then you’re guaranteed never to see the rewards. Sometimes you just have to say “what the hell” and go for it.

 

Passive Income

 

The idea behind passive income is quite simple. You make an upfront investment of time or money, and it pays you back without you having to actively maintain it. What constitutes ‘actively’, of course, will vary from person to person.

 

Passive income basically falls into two different categories. You can either invest your time and create something that will make money, or you can invest your money and buy something that will make you money in the future.

 

Investing your money is perhaps the easiest approach. There are plenty of places where you can go to buy stocks in public companies, bonds, and certificate of deposits. You can also buy real estate that you can rent out including houses, apartments, farm land, and even shopping centers if you have the money. All of these things have different risk levels, and different rates of return on your money.

 

Investing your time is a harder approach for many people, but if you are a fairly intelligent person, this may be the way to go. You can write a book, create a computer program, create an income generating web site, start a small business, invent something, etc. The list goes on and on.

 

Of course, the actual method of doing these things is beyond the scope of this article. If you are completely clueless as to where to start, however, I’ll give you a blueprint. First, put some money into a high yield savings account to form your emergency fund. You’ll probably want one of these. They come in handy during emergencies

 

Second, buy a certificate of deposit or two. These are extremely safe investments as they are insured by the U.S. Government up to $250,000.00 (as of 12/08). While they tend to have low dividend yields, you might as well be making some money while you decide what you want to invest in.

 

As far as investing tips go, I think the multi-billionaire investor Warren Buffet summed it up best. He has two rules when it comes to investing:

 

1. Don’t lose your money.

2. Don’t forget rule number one.

 

Considering that he is the richest investor in the world, I would keep his rules in mind while you are building your passive income empire, however simple they may seem.

 

Retirement

 

Retirement is a time when old people spend the rest of their days playing golf and watching television, awaiting their pending doom. It reminds me a lot of sitting on death row actually. All you’re doing is just waiting to die.

 

I don’t mean to paint a bad picture on retirement. That’s all that keeps some people going everyday – the hope that someday they’ll be able to retire. Instead, I’d like to show you a different way to think about retirement.

 

Retirement is a time when you finally get to rid yourself of all of that stuff you hate. Your job, your money problems, hopefully these things go away. Then you can pursue the things you enjoy doing, like fishing, going to the beach, and writing.

 

What’s interesting to note here is that these aren’t things that will only happen in the future. These are things that you can make happen right now. Like going to the beach and swimming? Become a life guard. Enjoy writing? Become a writer. Don’t like your money problems? Get rid of them.

 

Once you’re doing something you truly love to do, once you’re living a life you truly love, then you’re retired. You’re retired from doing what you hate. You’ve retired from your problems. And you’ve retired from all of the shit that makes people not want to wake up in the morning.

 

This is how I see retirement. It’s not a time when you just quit all your activities and retreat into some cave. It’s a time of freedom. It’s a time of joy. And it’s a time where you get to do what you want to do, regardless of whether or not you’re making any money from it.

 

Of course, if you are making money from it, that’s always a plus.