At LATAM Capitalist, we believe it's always a good idea to have options. Regardless of your opinion on the current political climate around the globe, you need to be diversified in order to protect yourself against the unpredictable. Financially, this means diversifying your investments. However, more importantly, you need to diversify your life. This means multiple residencies, citizenships, passports, and foreign properties.
In this guide, we will go over the steps to take in order to achieve Personal and Financial Freedom.
The first step to achieving personal and financial freedom is saving. In order to achieve personal freedom, you first need to achieve financial freedom. Whether you're an entrepreneur or a working a regular job, it doesn't matter, you need to save. You'll see many internet gurus spewing nonsense such as "saving is stupid, just make more money." This is horrible advice.
While making more money is certainly ideal, you can't achieve financial freedom by saving nothing. It doesn't matter if you make 6, 7, or even 8 figures, if you're saving none of it, you'll never get anywhere. Our recommendation is to shoot for a 50% savings rate. For example, if your after tax take home is $1,000,000, aim to save $500,000. Obviously, a higher percentage is better, and if you can't quite save 50%, anything is better than 0%.
Why do we recommend saving 50% of your take home income? 50% is the point in which the effects of saving and then investing really start to compound. Mr. Money Mustache explains the math behind this idea on his blog here. Saving 5, 10, even 15% isn't enough to get you ahead, you need to more aggressive.
There's only two ways to increase your savings rate. Earn more or spend less. Which side you decide to attack it on is your choice, however we recommend working on both sides of the equation.
Once you have savings, the next step is to invest those savings. Financial freedom means you have the ability to choose what you do with your time as your decisions don't depend on the need to make money. The best way to ensure that you have this freedom is through investments.
Now you hear a lot about passive income, and I'm not against passive income. However, you need to understand that most passive income sources require a lot of work upfront. Then you have to take into consideration how passive these sources really are. Generally, they do require some maintenance.
This is why we prefer to stick with traditional investment vehicles, which are truly passive. I discussed my investment philosophy a few months back in this post. You should definitely take a read if you haven't already, but the gist of my investment philosophy is to buy low-cost index funds with the intention for holding for long periods of time and not reacting to short term fluctuations.
Once you have saved a sufficient amount, these investments will then provide the funds to cover your living expenses. Once you've reached this point, you have achieved financial freedom.
Diversify and Protect
The final step is diversifying your life to achieve personal freedom and protecting your finances in order to remain financially free.
In order to achieve personal freedom, we like to obtain multiple citizenships and therefore passports. This gives you the freedom to move freely around the world in the event of political problems in your home country. A second citizenship also gives you the option to leave your home country in the event of unreasonable laws and taxes such as a wealth tax.
Many European countries have already implemented wealth taxes. There have also been instances of countries restricting travel on their own citizens. Having options is key to avoiding these scenarios.
In order to protect your finances, we like to diversify in assets that are difficult, if not impossible to repossess. This may include gold, cryptocurrency, and properties in multiple countries.
We still stay the course with our traditional investments as described in the previous section, however diversification is key, especially once you've already achieved financial freedom. You need to protect that position.
As stated above, owning foreign real estate is a key component of achieving personal and financial freedom. Owning properties in multiple countries gives you the flexibility to move quickly if problems arise in one country and provides diversification. If you'd like to read more on purchasing foreign property, we wrote an article on how to do that in Mexico here.
If you'd like to learn more about cryptocurrency, another key component of maintaining personal and financial freedom, here's an article explaining its importance for the aspiring LATAM Capitalist and how to obtain cryptocurrency. The main advantage of cryptocurrency is that you have complete control over your holdings. No person, organization, or government can take your cryptocurrency away from you if set up correctly.
We recommend Coinbase for first time buyers. Click the banner below to receive $10 of free bitcoin with your first purchase.
The information on this website and in this article is provided for informational and entertainment purposes only. This article is not intended to be investment advice. LATAM Capitalist offers no guarantee on the effectiveness of the advice given on this website. Accuracy of the content cannot be guaranteed due to the ever changing nature of its subject.