Buying Freedom or Building Wealth?

Instead of building wealth, I learned to buy freedom.

What is your primary goal when you invest? Or another way to ask the same question might be what are you trying to achieve with your investments? Should you buy freedom or build your wealth?

This is an important consideration because your answer(s) dictate how you should invest.

Some people may respond to this question as follows: “I am trying to build my net worth to $x,000,000.” These people are trying to build wealth through their investments. They are targeting a specific net worth number and typically invest for appreciation. They want their investments to increase in value in order to hit their target net worth.

Others may respond to this question as: “I am trying to generate enough income from my investments so I don’t have to work anymore.”  These people are investing to “retire” from work. This group of people want time freedom. They typically aren’t concerned with a specific net worth amount and are more concerned with investment income. They don’t need investments to appreciate in order to accomplish their goals.

When I was younger, my goal was to build wealth. I accumulated numerous properties with financing. Since the properties all had mortgages there was very little, if any, positive cashflow after vacancies, repairs, and maintenance. The plan was to hold these properties long-term allowing them to appreciate in value.

My specific net worth goal was $5,000,000.

I was 3/4 to this net worth number on paper when the real estate market crashed in 2008. Prior to the market crash, I had worked 70 hour weeks building two businesses and investing in dozens of real estate investments. I took numerous financial risks and assumed a significant amount of debt on these various investments.

From 2008 to 2010 my paper net worth did an about face and went negative. I owed more than my assets were worth. I went from having a $3,000,000 positive net worth to having a negative $1,000,000 net worth as the property values dropped by 60 to 70%. In addition, the value of my businesses dropped by 80 to 90% too.

This process was extremely educational for me and I’m incredibly thankful for the market crash. The crash improved my life dramatically. The biggest benefit from the crash was that I completely changed my approach to investing.

Instead of building wealth, I learned to buy freedom.

I slowly but surely began selling my properties. This process included several foreclosures, several short sales and several deed in lieu situations where I simply gave the properties back to the lenders.

As I was going through this process, I began to buy mobile homes and single-family homes for cash at bargain basement prices. My entire focus was on buying monthly income in order to have time freedom. I was no longer concerned with appreciation of my investments. If an investment appreciated it was simply going to be a bonus.

Today, I have a brand new real estate portfolio. This portfolio was engineered to provide monthly income. The best part is there are no mortgages on any of my properties. My net worth is nowhere near where it once was and I couldn’t be any happier. The reason why is because the income from the new real estate portfolio has provided time freedom and I no longer have to work for money.

This doesn’t mean that I don’t work. I certainly do and would be completely bored out of my mind if I didn’t. I simply don’t “have” to work and there is something magical about putting yourself in this position. Your life becomes so much better.

Depending on where you are on your journey, I’m hoping that you think seriously about what you’re trying to accomplish with your investments.

Time is our most valuable asset. It is far more important than money.

If you’re investing to build wealth, my suggestion is for you to reconsider this approach.

Instead focus FIRST on buying freedom. Once you’ve acquired your time back and no longer have to work for money, then (and only then) begin investing to build wealth. Imagine the wealth you can build once you have more time.

One more thing…

When you invest in order to buy freedom, you’re no longer impacted significantly by market crashes. The rise or fall of the value of your investments will have no impact on you, because you’re not investing for appreciation. What matters is the income produced from your investments. In fact, the next market crash will open up amazing opportunities for you because you’ll have monthly income flowing that can be invested to build your wealth.

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