How I Stopped Being A Slave To Money

Turn money into your ally by understanding the difference between cashflow, income, new worth, passive income and financial freedom.

It took a deep dark look in the mirror one night to make meaningful changes.

One of the most shameful moments of my life was December 31st, 2004.

I was at a New Years Eve party but I couldn’t celebrate the previous year or look forward to the year to come.

I vividly remember locking myself into a bathroom while everyone else was partying.

I was stressed out and had reached the brink of bankruptcy because years of poor money habits and living outside of my means had reached the breaking point.

I had racked up over $100k in credit card debt and every month that balance was growing and soon I wouldn’t be able to keep up with the payments.

A ‘friend’ told me to simply default on the debt and said that there was a loophole that they couldn’t ‘prove’ that I signed on for all that and I would just have to bear years of credit collectors calling me but little they could actually do.

It was at that point that I became so disgusted with myself for letting it get so out of control, and I didn’t like the person I saw in the mirror.

But it was a turning point for me because I committed to getting myself out of that and paying back every cent, even if it took the rest of my life.

Within a year, I had built my first 6 figure online business and paid off every cent of that debt and have never gone back.

It’s been over 20 years since then and personal, corporate and government debt levels are at all time highs.

I was once a slave to money but now I use money as an ally to help me live a life of freedom and my goal is to help others avoid my mistakes.

The Importance Of Financial Literacy

One of my mentors in my journey has been Robert Kiyosaki, author of the best selling book Rich Dad Poor Dad.

While I’ve never personally met him, I feel like I know him through his books and he’s taught me the importance of ‘financial literacy’.

In his books he talks about the education system and how it lacks teaching people about how money works.

I’ll be forever grateful for him for helping me understand the difference between things like cashflow, passive income, income, net worth and financial freedom.

Perhaps the most important thing that I learned was the power of passive income.

Not the hyped up ‘get rich quickly’ type that influencers portray, or the ‘create an ugly $7 PDF and put it on Gumroad’ I read about so often here on Medium.

It’s the kind of income that takes years or decades to create but gives you more freedom and security than you can imagine.

The two financial terms that people understand the most and focus on are income and net worth.

Looking back, that night was a defining moment of my life.

Get These 6 Financial Terms Right

1 — Income- Most people know what this is, it’s the money that you bring in through your job, business or later in life when you start tapping into your retirement account.

2- Net Worth — This is the sum of your assets combined, minus your liabilities.

3- Cash Flow — This is the flow of money coming in and out of your bank account, whether it be business or personal.

4 — Profit — This is money left over after you sell something (a product or service), basically the sale minus things like shipping, manufacturing, warehousing, marketing, R&D.

5- Passive Income — this is effort or money invested up front that creates ongoing income with little to no effort after the initial investment.

6 -Financial Freedom — this is when you create either enough passive income that it exceeds your ongoing living expenses — or — you’ve build a big enough ‘nest egg’ (net worth) that you will have enough to live on until you die.

Most people only focus on Income and Net Worth.

Why Most People Become A Slave To Money

Most of us are taught from a very young age to chase the wrong thing.

Work your way up the ladder and get a high paying job (income) and put your money away into investment accounts and hopefully by the time you retire you have a big enough nest egg to not outlive your money.

While I don’t want to spend too much time talking about it here, retirement and the ‘4% rule’ is a dismal failure for most people.

The 4% rule is the idea of creating a big enough nest egg that you could withdraw 4% per year and not run out of money before you die.

What most people don’t realize is just how big that nest egg must be to live comfortably — we’re talking $2.6 million to be able to have six figures to live on for 30 years.

The Leaking Bucket

The mistake most people make is the never STOP being the asset.

The way I like to look at cashflow is that it’s like a bucket (net worth) with a hose pouring water into it (income) and hole in the bottom (expenses).

We are taught to have a high income, which is like having more water pouring into the bucket.

If we are smart, we keep the hole in the bottom manageable so that it isn’t leaking faster than the water coming in.

Cash flow is both the water coming in from the hose and the water leaking out the bottom.

If water leaking out is less than the water coming in, the bucket starts to fill up, your net worth starts to grow.

The problem is most people ARE the hose that is filling up the bucket and the second you stop working, the water in the bucket starts to deplete at a rapid rate.

The 4% retirement rule is basically a bet that you can fill up the bucket enough that you can time it correctly and the water won’t leak out the bottom before you die.

Passive income is creating more hoses (streams) that pour water into the bucket without you having to be the main hose.

If you have enough passive income streams then even though the bucket is still leaking at the bottom, it doesn’t deplete as fast because there are more streams coming in (even if the hole in the bottom is the same).

Financial freedom can be created in more ways than just filling up a really big bucket. By using passive income, it will deplete slower or ideally never even deplete.

Why I Don’t Focus On High Income Or Net Worth

Once I really understood how passive income and cashflow worked, I stopped worrying about having a high income or high net worth.

My biggest focus is on creating multiple passive income streams.

I no longer worry about my active income (money made from trading my time for it) or how big my net worth is.

It’s simple, create passive income streams (multiple hoses pouring into the bucket) and the goal is for those streams to exceed the amount that is coming out the bottom.

For me that number is $300k per year. Not $300k in money I make from a job or money made combined between job & passive income. $300k per year in passive income alone.

At that point, the bucket keeps filling up at a faster rate than it is depleting and it doesn’t matter how much water is in the bucket or if I have to work or not to pour water in the bucket. The passive income streams are doing the work for me.

Stop Being The Asset

Any of those hoses that pour into the bucket are ‘assets’, meaning they produce the water that pours into the bucket.

The problem is most people ARE the asset and when you remove that asset the water stops flowing into the bucket.

Instead, I focus on creating assets that pour water into the bucket without me having to be there.

Types of assets that do this can be things like real estate, your audience, intellectual property, dividend paying stocks or digital products.

Where My Bucket Currently Stands

If I were to stop working today, my bucket would still be depleting but since I have multiple streams that I’ve build over the last several years, it will deplete at a much slower rate.

At one point my ‘job income’ was as high as $420k per year but the problem was it required me to be in a highly stressful sales job, and I was still a slave to money.

But since I’ve added multiple streams, I was able to let go of that highly stressful job and let money do some of the working for me while I now do what I love most (consulting & strategy).

Twenty years ago, I was sitting alone in a bathroom on New Year’s Eve wondering how I had managed to create such a financial mess.

Today, I’m still on the journey, but I no longer view money as something that controls me.

The shift happened when I stopped focusing exclusively on income and net worth and started focusing on assets, cash flow, and passive income.

I’m not financially free yet, but every year I become a little less dependent on trading my time for money and a little more dependent on assets that work for me.

If that’s a goal you’re working toward as well, I recently put together my **Passive Income Playbook**. It’s a practical guide that walks through the same principles I’ve used to build multiple income streams through digital products, audience monetization, affiliate income, investments, and other long-term assets.

The Passive Income Playbook goes into greater detail of the streams that I’m using to fill up my bucket.

It’s not a get-rich-quick scheme.

It’s a roadmap for building assets that can continue working long after you’ve created them.

No matter where you’re starting from, remember this:

You don’t need to become rich overnight.

You just need to create one asset, then another, then another.

Eventually, the assets begin doing the heavy lifting.

And that’s when money stops being your master and starts becoming your ally.

Simon

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