Where i am at.

Over the last several years I have tried to get educated about basically how money works. The more I read the more I realized that I needed to start doing something to try to achieve financial independence. Having read Rich Dad Poor Dad by Kiyosaki and many other books I have started to look at money in a whole new light. While RDPD does not provide any concrete advice on how to get rich or reach financial independence it does provide a framework for understanding how money works. And I believe without that framework it is a losing battle to attempt to secure your retirement or reach financial independence. The reason is that many of the myths bandied around as fact are detrimental to your financial future. But that is a discussion for another day.

As a result of my education one goal of my life is to become financially independent. First what do I mean by financially independent. Well in my case I mean that I have enough passive income coming in every month to cover all my expenses and to provide me a comfortable life (basically the lifestyle I have now + a little bit more free cash). What do I mean by passive income? Well I mean income that I do not have to work for. As a simple example a stock dividend or rent on a building you have professionally managed are examples of passive income. It is income you did not work for. It is income that comes from your money working for you. One thing to note that in some ways a beggar that get's enough to live on is independent, but his income is not passive. If he does not go to work (begging) he makes no money.

If you think about it we all are trying to be somewhat financially independent by retirement. We try to have enough saved so that we no longer work, but have enough income coming from stocks, bonds, and investments to live on. The one catch is that we also hope for social security which makes us very unindependent.

So back to my goal of being financially independent. This is a great goal, but the question is how to do it? Well one thing I have learned the hard way is that this is going to take some time and it is not going to be easy.

One of my first attempts at this was to invest in Oil and Gas Joint Partnerships. Basically companies put together a group of investors to fund the drilling, completion, and production of an oil or gas well. In this case I have had some success and some failures. One interesting note is that I have been left with some concrete assets in the process. I still have two ventures that I do absolutely no work with, but which I get a check every month. This is the definition of passive.

The problem with O&G Partnerships is that they are very hit and miss. You really need to invest large amounts of money spread over many projects to reduce risk. I do not have enough money to do this right. It also will not make you rich. This is my key discovery. The returns of some projects can be huge, but because you need to spread out the money the net returns of your overall investment is much less.

If I had a lot of money sitting in a pile I would invest 20% of it in these projects as net overall I would make a decent return on my money. But earning 20% does not get you financial independence. Also to do it right you either need to hire someone to find and invest or you need to do it yourself which then is a job.

What I have learned is that I need more control over my money. I cannot just hand it to someone and expect them to make me money. There just is no incentive for them to do well with my money.
As a result of this experience my conclusion is that to achieve financial independence I need to start my own business. But what business and how do I do it? Well more to come in my next post.
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