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Published 13 September 2012 05:03, Updated 17 September 2012 09:43
Love your partner, cut up your credit cards, manage your tax liabilities, insure your income and health, and don’t get greedy because divorce, excessive spending and poor risk management are the biggest destroyers of wealth, according to Financial Freedom on-the-go, by Andrew Jevon.
Although this book promotes itself as a personal finance title, it reads as more of a spiritual self-help book.
If you approach it as such you won’t be disappointed, but you may be disappointed to learn that not everyone can achieve financial freedom.
Further, there’s no easy, fast way to increase wealth. Instead, wealth creation is generally a slow, bumpy journey.
But this is no bad thing. As the old investment maxim goes: “The best way to make money is slowly.” Far better to make a steady 4 per cent return every year than to shoot the lights out with double-digit annual returns for a couple of years followed by a spectacular crash and burn that takes years to recover from, if ever.
In his first book, Jevon shows readers how to attain the essential mindset of financial freedom, followed by a strategy to attain financial freedom, and finally the specific actions required.
Resist the temptation to bypass chapter one, which focuses on getting the right mindset to attract wealth. It’s essential background for chapters two and three, which outline the strategies and implementation of financial freedom.
“Even if someone gives you money to clear all your debt now, without the right mindset you’ll get into debt again,” Jevon says. Let that be a warning to anyone tempted by those “consolidate all your loans” ads.
Despite stressing that wealth is a much broader concept than money and can be found in simple things such as a smile or a kind word, Jevon also admits that physical wealth is inextricably linked to financial independence.
He defines financial freedom as a state in which your multiple passive cash flows from income-producing assets are enough to cover your controlled regular and occasional expenses, leaving you with the freedom of your quality time.
So the key is to develop multiple passive income streams and to have a clear understanding of what “quality time” means for you. Above all, he stresses that financial freedom is not the same as being rich.
But before investing in shares or property, first invest in a notebook.
Jot down all your goals, ideas, fears and hopes, as well as any assets and liabilities. The second step is to create time to deal with financial matters, for example, 30 minutes a day to read finance books, talk to successful people, budget and plan ahead.
In chapter two, Jevon introduces the concept of “always pay yourself first”. In a nutshell, always spend less than you earn and when you get paid, before you do anything else, save a percentage. Invest that money but make sure your decisions are educated and devoid of emotion because “emotions have no place in the investment world”, he says.
As a starting point Jevon recommends you save a minimum of 10 per cent of earnings but, the bigger the percentage, the faster your journey to financial freedom.
It may sound like commonsense, but so few people do actually save.
The book recaps many of the basic investment principles but Jevon isn’t afraid to challenge conventional strategies at times. For example, regarding risk and returns he says, “You’ve heard it before. Risk generally equals return. High risk, higher return. But in this case, you must minimise risk and maximise your return.”
Parts of this book are insightful, other parts are fruity and we can’t help feeling that the author’s agenda is not only to help readers financially but also to convert them into born-again Christians.
There are almost Biblical allegories, such as: “If a granary is kept filled with food and the food is never taken out, the food will turn rancid and destroy the granary itself. But if there is a cycle of giving and taking, there will be a need for a second granary.”
Jevon writes that “embracing spiritual laws of wealth is the only way to get wealthy”, adding that gratitude will guarantee continued success, provided that your gratitude is directed at God “the creator” and not some “void”.
However, given the unhealthy sprinkling of spivs and charlatans in the investment industry, this emphasis on spirituality and a higher power might be no bad thing. There’s a lot of wisdom in the book – but those pearls could be compressed into a short pocketbook.
All in all, it is well worth reading, and has an elegant design with plenty of clear headings and checklists.