How many people do you know that have achieved financial independence simply through their investments?
Me? Hardly any.
But I do do know countless individuals who have busted their tail to become experts in their field of work, saved a healthy portion of their earnings and then wisely invested that capital and achieved a decent return.
And for many of these people the result of their actions has provided them more income from their investments than what they earned while working.
Key Point: The action that started it all was their realization (either on purpose or by accident) that your career provides your wealth.
I could be wrong but investing alone isn’t going to promote me from the middle class to the upper crust of society. Unfortunately some people fall for this rubbish and end up taking on a level of risk that even a riverboat gambler wouldn’t touch.
What simple and safe investing will do is enhance what one earns throughout their working years. Perhaps you feeling differently but I don’t count on Social Security being there for me when I retire so putting away enough of my earnings is my best path to senior citizen prosperity.
Now for an important question: What to do with the money you are earning from your career?
Everyone Is An Investor
You may not have any money in the stock market but you are still an investor and are making investment decisions on a daily basis.
That was the point explained to me when I first started in the investment business by a popular personal finance author named Venita VanCaspel.
Venita told me that for every dollar you earn, you will make one of three investment choices:
- You can spend your dollar.
- You can lend your dollar.
- Or you can become an owner with your dollar.
Far too many people (hopefully not you) spend more dollars than they probably should. It’s not bad in moderation so long as you still have plenty left over for the remaining two investment choices.
Your dollars are in a lending position when you have your money in a bank savings account. You lend your money to the bank who pays you a small bit of interest. The bank then turns around and lends it out to other customers while charging a much higher interest.
Having your money in a bond or money market account are also examples of lending positions. While lending positions historically have not offered much for long term returns, they are very helpful during bouts of economic stormy weather.
And Finally, Ownership
Examples of ownership include a stock market index fund, real estate, land, precious metals, or even your own business. In other words, ownership is the possession of a tangible asset.
It is also where you and I earn the highest rate of return over the long term but also take on the greatest amount of risk. Since time is on my side and I broadly diversify, the risk is manageable.
This is where I currently invest the bulk of my assets that will produce my future retirement income – diversified across a broad variety of ownership positions in which those assets are earning profits … and those profits are in turn compounding and earning even more profits.
With Me So Far?
But don’t make your investment plan overly complicated so that you either abandon it altogether or spend too much time on it that it takes away from earning more money in your career.
Summarizing, we all want to experience financial independence one day and while I truly believe that the investment markets can help people amplify that possibility, it’s just one piece of the process.
A great source and probably THE greatest source of your future wealth will come from building on the success of your career.
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Updated 2016
Great article, Don.
I’ve told many people over the years that if they spent as much time working on their careers as they do working on their investment portfolios, they would achieve a lot more “bang for the buck”
Interesting that people live under the false assumption that attempting to beat the market will yield more than their ability to earn and save more over time.
So true, Russ. Often it’s our own emotions that get in the way of common sense.
Nice article, but I do have a bone to pick. To achieve financial independence will require investments or an inheritance. Financial independence means not having to work. The career will provide the money to invest, but the independence comes from investing some of that money. The limiting factor is that it takes a large number of years for most people to achieve independence and they are looking for the quick way from here to there.
Hi Tim,
Thanks for your comment. I think your last sentence says it all 🙂