An addiction may be defined as continued involvement with a substance or activity despite the negative consequences associated with it. More complex definitions refer to problems associated with brain reward and motivations. Addictions come in many forms sex, pornography, food, gambling, drugs, alcohol and are worth mentioning here because addicts very often have poor financial habits. People with addictions frequently have a problem with lying. They lie to and delude themselves, and they lie to others. Liars tend to make poor financial decisions.

Gambling is a massive problem in Australia, and is an obvious example of an addiction that can destroy finances. The government appears reluctant to tackle the gambling issue, presumably because the industry generates massive revenues.
In my opinion, this is unethical. Casinos operate in the full knowledge that a very significant proportion of their profits are generated from problem gamblers, and yet rather than tackling the problem, our laws seem to make it extremely easy for punters to blow their cash. The gambling industry continues to literally destroy the lives of thousands and thousands of people each year.

Some people may simply be addicted to spending or credit cards, sometimes known as ‘retail therapy’. Again, the financial effects of an addiction to spending are fairly obvious. What is perhaps less obvious is that hidden addictions to alcohol and other substances can also cause personal finances to be severely impacted. Indeed, being constantly in debt and in financial turmoil can sometimes be an indicator of substance abuse or addiction. In The Millionaire Next Door, the authors noted that smokers and alcoholics are poor accumulators of wealth, with seemingly small ongoing purchases adding up to a phenomenal expenditure over the long term.

If you have an addiction, it is vital to take steps towards overcoming it. Addictions control you and your behaviours. To be financially and spiritually free, you must nor be controlled by an addiction.

When I first saw references to health and fitness in investment books I thought it seemed a little incongruous. You read finance blogs to learn about finances, right? I have since learned that health, fitness and nutrition have a definite role to play in being a successful investor.

A successful investor needs to have a clear head, to be free from stress and anxiety and to feel lit, alert and in control. Author and share trader Stuart McPhee notes how going for a run helps him in his trading endeavours, and it is well documented how exercising for around 30 minutes each day can have huge benefits for our physical and mental health. Exercise releases endorphins to the brain, which helps us to be happier people.

Part of being wealthy is about feeling great and looking forward to springing out of bed each morning to get on with living life. Modern-day dietary habits are generally very poor, and consist of a lot of junk food, a normal day commencing with a high-sugar or high-cholesterol breakfast washed down with half a gallon of caffeine. This is a poor way to start the day. Caffeine is not required to get you started in the morning!

If you want to feel energised, there is no better way to kick off your day than with a freshly made fruit juice with some vegetables blended in: both nutritious and delicious. So much modern-day food is poor in its nutritional content, and often unnatural. Don’t even get me started on aspartame and chemical sweeteners; these are truly evil inventions, and may be carcinogenic. Nature has given us, in fruit and vegetables, delicious food naturally, and food that is perfectly designed for your body to process.

I’ve been a vegetarian for some time now, and although it is sometimes extremely difficult, I try to live by vegan principles as far as I can. As a former meat-eater, I would never pretend to preach on the subject, but I would urge people to at least consider the benefits of a vegetarian lifestyle. Excessive consumption of meat is dreadfully unhealthy for you personally, being a major cause of heart disease and cancer, and the animal industry is also destroying the planet. The breeding and slaughter of tens of billions of animals each year, quite apart from being inhumane, is also the cause of a shocking amount of needless carbon pollution and water shortages. Millions are starving every year because of our misuse of resources.

Consider committing to exercising for at least 30 minutes each day. Everette does wonders for your mental health, and the old cliché is true: healthy body, healthy mind.

Many people believe that the way in which they will retire will be to build up a lump sum in a superannuation fund that they will withdraw when they are around 65 years of age. Hopefully, the amount they have built up will last longer than they live. Some of those who have the option to do so consider downsizing their place of residence or using a reverse mortgage to free up some capital.

To me, this is a flawed thought process, and a very risky one for obvious reasons. The risk of the cash running out can be mitigated through selecting an appropriate annuity product, whereby actuarial percentages dictate the level of your annual income based upon your life expectancy. This mindset shows why most people are unable to be financially free at a young age. The numbers simply don’t stack up.

If you want to retire at 65 the amount you will need as a lump sum is approximately 13 times your desired retirement income. Therefore, if you want to retire on $100,000 per annum, a lump sum of $1.3 million should be your goal for age 65. But what if you want to finish working full-time younger than that? Well, naturally, your life outside of the full-time workforce will run for a longer course, so the required multiple of your desired annual earnings increases.

So far, so good, for at least this gives us a target figure. The flaw in this idea, though, soon becomes clear. If you want to quit work entirely at the age of 40 with an annual income of $100,000, you Will need a lump sum balance of around $2.5 million. This is fine in theory. The problem as I see it is that if you are a person who has the financial capability to build a balance that runs into the millions by age 40, you are highly unlikely to be satisfied with an annual income of $100,000.

I hope to demonstrate that the goal of financial freedom is not nearly as difficult as most people believe. The problem for most of us starts when we are young, as the current school system barely educates us financially at all. When you consider that money and finances affect every single one of us, it is curious that the school curriculum fails to recognise the importance of personal finance.

At the age of 21, my now wife bought a two-bedroom house for the princely sum of $72,000 (which at the time equated to around $200,000) that had been repossessed and looked like an opium den inside, with wiring hanging from the ceiling and mould in the bath. She then suffered a string of itinerant lodgers for years, and for half a decade it was decorated with borrowed or second-hand furniture and rugs. A perception that things were far easier for previous generations is misguided and unhelpful. I was a fair few years older when I bought my first property, and although it was very spacious and cost a lot more ($500,000), I can tell you, it most certainly was not my dream property.

It is often said that it is ‘impossible’ for young people today to get on to the property ladder. Not true. It is unquestionably difficult, but it is not impossible. We should be wary of the language that we feed to our brains, for if we tell ourselves that a goal is impossible, we will subconsciously not even attempt to achieve the goal, and we will surely fail. Firstly, it needs to be accepted that we do not buy our dream home as our first property. That has never happened for any generation, and it certainly won’t happen today. My parents’ first house, for example, cost $4,250. Two years before they bought it, they looked at one in a far superior location for $2,500 but they felt it was far too expensive (and then, of course, over the following two years values boomed). There was nothing much wrong with the house they bought, but it certainly wasn’t their dream house.

Property in Australia is unquestionably expensive, but it seems that often, my generation (Generation X) and the younger generations are totally unrealistic in their expectations of life. It appears that because someone was perhaps the clever kid in school or did well at university, they expect to walk into executive roles without doing the hard yards to get there. Often, people want to believe that because they have the title Manager or Director, which makes Mummy and Daddy proud, they have some kind of divine right to live like James Packer.
Quite simply, this is not the way of the modern world, and it was not the way of the old world either. The wealthy are those who own successful value-creating businesses, big share portfolios and multiple properties. Often, the wealth has been passed down and inherited from previous generations. Average middle managers and single-income executives on highly taxed salaries are destined for the average suburbs. They may not like it, but that is the reality? Only those people who add the most value get to own the finest houses in the best suburbs.
If you want to live like a multi-millionaire, you have to somehow add millions in value. It is very, very difficult to add millions in value as an employee, because your own time is limited, and each day you have to go back to work afresh. Your income is linear.

It is noteworthy that I have not once met an Aussie in London who planned to buy a luxury pad in Mayfair or South Kensington as their first step on to the property ladder. Not once. No, mostly they head to Earl’s Court, perhaps later relocating a step or two up the property ladder from there. The world has moved on, and Australia is no longer a poor relation to the mother country. Australia is ideally located in the Asia-Pacific region to capitalise on the growth of China and the shift in power from West to East. With the mineral wealth located on this continent, there is no reason why Australia cannot become a major economic powerhouse over the next few decades. The term ‘The Lucky Country’ was once partly used ironically; now, Australia may well truly be the lucky country.

Due to the low yields of these types of higher-end properties in Australia, it is perfectly possible to rent them for far less than it would cost you in monthly mortgage payments if you bought them. It is also possible to buy perfectly good investment properties in parts of the country for less than $100,000 with a deposit of $5,000-$10,000. We do not have to invest in the suburb, or even the state, we live in. 

Others will say that they cannot afford to invest at all, but we can start investing in shares with as little as a couple of thousand dollars. Indeed, we can begin investing with even less than that. We can take an evening job to earn some extra dollars. I used to wash dishes, and then when I was old enough I worked as a barman, and then I worked for 12 months in a timber yard, before returning in my university holidays to push timber through a machine on and off for a further three years. Warren Buffett was once a paper boy who ran multiple rounds and began investing the proceeds.

If you are not prepared to entertain the idea of a couple of extra shifts, then this may be an indication that this is not the plan for you. Every investor started somewhere. Success involves some sacrifice, and nothing that is worth having comes easily. The key is to associate pleasure with the achievement of saving towards your goal, and pain with frivolous spending on unnecessary items.

How about gym membership and personal trainers? This is a cost we can easily save on if we want to. During my travels, I discovered that by buying a resistance band and a kettlebell for $100 and using the power of focus in my exercise and nutrition, I can achieve just as good a physique in just fifteen minutes of exercise per day as I ever obtained from spending many hundreds of hours in the gym.

For cardiovascular exercise, if you live in the outer suburbs or the regions, you are lucky you have the great outdoors as your gym. A brisk walk is the most wonderful exercise you can do, better Still if you have a mate or partner to walk with; you can have meaningful conversations that rarely seem to happen in front of a television. lf you live in the inner suburbs of a city, try drawing a 10 km radius around your house on a map and power-walk to some suburbs you might like to invest in. My wife and I have done this for the last seven years. If at first your friends think you have lost the plot, I can guarantee you they will have a different reaction when you tell them you have just bought your tenth property.

Another thing I hear people say is that they do not have time to invest, but we all have 24 hours in a day and seven days in a week, Richard Branson, Bill Gates and George Soros included, so by definition that cannot be true. What this statement really means is that they are prioritising other activities over investing. If that is the case, then that is fine, but it is definitely not the same thing as not having the time to invest.
Set yourself a decent period of time for saving investment capital. People often underestimate what they can achieve because they want results instantly and do not allow themselves time to succeed. If you can save $500 in a month, then over three years you will have saved $18,000 in capital, and if it has been invested wisely, this will have increased in value to significantly more. The government has introduced a savings account scheme for First home buyers whereby the government will add contributions to your account and tax income at a low rate.

I don’t need to insult your intelligence by writing a long list of items, from cosmetics to coffee to Chinese food, on which you can cut down expenditure. Using common sense and identifying where your extravagant expenditure lies should be enough. I’m going to mention one major bugbear of mine, though iPhones.
I often hear people complain that it is impossible to save for a home deposit, but when I ask them what kind of iPhone bill they receive, it is invariably more than $300 a month. That is $3,600 a year coming straight out of their after-tax salary. When I suggest that they use a $29 cap with a basic phone (as I still do), they insist that is not a possibility. At this point, sympathy evaporates. What we are then discussing is not an inability to save towards a home deposit, but a prioritising of mobile phone status over taking responsibility for your financial future. That’s a different discussion. Not interested, sorry!

Why should you escape the rat race early? Only you can truly answer that question. For me, I enjoyed some things about my paid employment, but I did not find it to be at all fulfilling. I probably enjoyed around 80% of my job, but hated the other 20%. The biggest problem of all was that employment took up nearly all of my time.

Many people will tell you that they dislike their job, but they would be bored without it. Again, this isn’t a reason not to strive for financial independence. Of course, you may always choose to continue as an employee even if you are not reliant on the monthly pay cheque. Even some lottery winners do so (but not nearly as many as claim they would before winning).

Even when I wasn’t in the office at weekends, which was far from being every weekend, I was constantly fielding an alarming number of phone calls, emails and text messages. However, my real reason for escaping the rat race was to focus on things that were more important to me such as travel and spending time with family. The motivation will differ for each of us.
Since being freed from the shackles of full-time work, I’ve worked for a short time as a volunteer on the Hurricane Katrina disaster relief, taken an amazing 6 months to travel the world, and spent 3 months in a yoga retreat. I’m eternally grateful that I have been able to do these things. Travel was a major pull factor for me.

I was fortunate in that I realised at a young age that the corporate dream we had been sold was unsatisfactory. I looked at the people who were in the roles and positions I was supposed to be aspiring to and considered whether they looked fulfilled, happy and rich. Most of them didn’t look to be where I wanted to be 20, 30 or 40 years down the track.

Some of my friends and male colleagues who went on to become accountancy firm partners bemoaned that they were actually worse off than they had been before they reached their dream roles. They were expected to buy cripplingly expensive houses in Sydney and cars befitting their positions, their wives wanted to give up work and have numerous children, and the government stripped them of half of their pay packets through taxes before they could even think about paying the mortgage. They talked as if they were caught in some kind of a trap. I guess in many ways they were.

If you want to achieve financial freedom and be young and wealthy, an important step in achieving this is to know exactly why you want to reach these goals and to have a detailed plan for what you will do with your wealth. It is a valuable idea to visualise very specifically where you want to be if you know where you are headed, then you can take specific steps towards your goal. It is sometimes said that if the why is strong enough, then the how will take care of itself.