Most working professionals are familiar with the concept of financial independence, especially the nurse practitioner entrepreneur since it is one of the final goals of starting a practice, but many do not understand what it takes to get there. You need to understand the 4 pillars of financial independence if your goal is to break free.
You also need to understand that it takes time to get there… We are talking 10 years of focused and dedicated work, unless you get massively lucky and create a million dollar practice. So, we will focus on what the MAJORITY of nurse practitioners will have to do to become financially independent and this starts with understanding the 4 pillars of financial independence.
You will have a difficult time reaching financial independence if you do not maximize the aspects within the 4 pillars. If you neglect just one, then your journey to financial independence could be delayed by YEARS. With that said, it is very important you become equally knowledgeable of each pillar and give each one its respective time and focus.
While you read about the 4 pillars, I want you to keep in mind that out of all of them, the most important one is Income. You must have money coming in to reach financial independence. This is the predominant reason why you follow The Elite Nurse Practitioner: you want to maximize your earning potential as a nurse practitioner. So, let’s start there.
Pillar #1: Income
Your income will be the fuel to your financial independence. You cannot invest, save, pay off your debt, build a business, or practically do anything in life without money coming in. It is part of our reality. You must have an income to survive. This is why it is the most important pillar and is the foundation towards building a life of financial independence.
Your primary income source as a nurse practitioner will be through a job until you can get your first practice up and running. This will be the reality for most of you. Your first job will help build your clinical foundation and provide you the monetary resources necessary to start your own business.
Your job is to MAXIMIZE your earning potential through your primary employment and business. Put simply, the more money you make, the more you will have to invest, NOT SPEND. The first step in your journey to financial independence is to utilize money as a tool to give you time and energy, not to spend on garbage consumer goods you don’t even need. This is done by transferring that money into INCOME GENERATING assets that do not require your time (such as rental real estate, stocks, etc.). This is passive income and will result in financial independence. Focusing strictly on active income activities will not result in financial independence. That is exchanging time for dollars.
You need to actively work now, so you can invest that money which will allow you to passively work later. I hope that made sense, if not, reread it until it does. You will fund your life when you “retire” through your passive income streams.
You maximize your earning potential by negotiating a proper salary and being on a production model for compensation as an employee while also generating wealth through a side business, or two, or three, or four… The more the better! Multiple income streams and being as financially redundant as possible will strengthen your financial well being.
You maximize your passive income by investing your active income into income generating assets. The more you invest now, the greater your passive income will be in the future. Therefore, pillar #1 is the most important. You should do everything in your power to increase your income as fast as humanly possible if you want to reach financial independence. The best way to do this is to own a couple cash only niche side practices, in my opinion.
Pillar #2: Investing
The only way to reach financial independence is by investing your money for the future. Did you know that 25% of Americans have nothing invested? That is right, 1 in 4 people have absolutely no investments… What is even scarier is that the average baby boomer only has $150,000 saved for retirement. If you look further into the average retirement savings of Americans, the numbers are very grim. To sum it up: the majority of Americans are not investing their money in any meaningful way. They are blowing it and forever being slaves to debt. Don’t be this way…
Investing your money is essentially transferring your present time and energy into the future. You are investing into your future happiness and freedom when you invest your money wisely. This is the essence of financial independence friends: investing in your future happiness.
Pillar #1 provides you the means to invest into your future self… which is hopefully drinking a margarita on the beach somewhere, enjoying watching your children play sports, gardening, fishing, or just sitting in a hammock in your font yard reading a book.
Many people are intimidated by the thought of investing. They think it is complicated and requires an MBA or finance degree. You know what? Nothing could be further from the truth, investing is simple. Some of the dumbest people I know have an MBA… (think about hospital administration). You think the nurse practitioner market is saturated? Look at the MBA market. They are a dime a dozen.
Regardless, the trick is to stick to your plan and be consistent with your investments. You will see the magic of compound interest work after a couple years of consistently investing into your portfolio. If you invested $1,000 a month into a total market index fund with a 10% average rate of return for 30 years, you would have turned the $360,000 you invested total into almost $2,000,000 thanks to compound interest. This happens because all the returns are reinvested, and the positive interest continues to compound itself. This was just off $1,000 a month folks, now imagine if you were investing $10,000 a month!
You invest predominately in 4 ways: your business, stocks, bonds, and real estate. You do not have to cherry pick various stocks to do this either. All you do is throw your money into a few different index funds and be done. You do not need to check your investment account every single day. In fact, you should only be checking it 2-4 times a year.
You should also strive to have a few rental properties. This will generate a passive income stream to your future self. How nice would it be to make $2,000 a month off 3-5 rental properties? That is my plan. The tax advantages are numerous as well.
Finally, and most obviously, you should invest your money into your business. The more money you invest into your business, the more money it should generate. It is hard to scale a business without investing money into it. Your investments into your business will compound themselves because it will increase your income which will allow you to invest more and more into other investment vehicles. It is a cycle of wealth creation. This just feeds itself and brings you closer to financial independence!
Remember, don’t forget about investing into your emergency fund! Do not skip out on this!
Pillar #3: Expenses
You simply cannot achieve financial independence if you do not live within your means and get your expenses in check. There is no financial independence story out there where the individual did not lower their expenses. It is a necessity and why it is one of the pillars of financial independence.
The less money you spend = the more money you can invest. Also, the income requirements that you need to meet financial independence will also be lower if you are living frugally!
If your yearly expenses were $80,000, then you would need to generate at least $80,000 a year passively to become financially independent. On the other hand, if you could get those expenses down to $40,000, then you could become financially independent in HALF the time! In reality though, it would even be in less time because you would be investing more of your money while lowering your expenses. A win win!
Another critical component of lowering your expenses is debt elimination. Debt is poison to your financial health and well being. Debt will also delay your journey to financial independence. The first expenses you should reduce are your debt payments by aggressively paying off your debt. This will free up an enormous amount of money that can be used towards investing instead of flushing it down the toilet on interest payments.
Setting up a budget and STICKING WITH IT, is a paramount feature to those that live a life of financial independence. Measuring your spending habits and flow of money coming in will allow you to get a firm grip on your finances. Living by a budget is not difficult and should not be seen as a restriction to your happiness. Rather, look at a budget as a simple set of rules on how you will spend your money so you can break free, not a list of “don’ts” and “cant’s.”
Those that get a handle on their spending habits will reach financial independence much faster than those that don’t.
Pillar #4: Taxes
The final pillar of financial independence is understanding and reducing your tax obligations. Taxes are the largest expense in your life. You will pay more in taxes than anything else… Yet, so many people do nothing to legally reduce their tax obligations.
Don’t be like most people who pay their taxes FIRST before paying themselves. That is a recipe for getting the short end of the stick on your taxes. You want to pay yourself first and then your taxes. This will allow you to take as many legal tax deductions as possible to reduce your tax bill. The less you pay in taxes, the more you get to keep for yourself!
Lowering your tax bill will increase your income, which then feeds into building your investments and accelerating your journey to financial independence. This is why it is so important to lower your tax obligations! It starts with finding a good accountant.
Those are the 4 pillars that you need to NAIL DOWN if you want to become financially independent. Understand them all and begin doing what is necessary to increase your income, increase your investments, lower your expenses, and lower your taxes. This is CRITICAL to your financial health and success.
Do you want to continue the rate race?
Do you want to be a few missed paychecks away from financial disaster?
Do you honestly want to work until you are 65 for some large health organization that doesn’t care about you?
Do you want to rely on just your 401k and social security (if its even around in 20-30 years) for your retirement?
Do you want to do whatever you want, whenever you want?
Do you want to focus your energies on something that you LOVE and WANT to do?
Do you want to take as much time off as you want from your side business instead of adding up your PTO to ensure you are covered?
Do you want to not worry about money and live your best life?
I think most people would want the ladder… It is totally doable when you integrate the necessary steps required to maximize each pillar of financial independence. Thousands of people throughout this country, including a handful of nurse practitioners, have become financially independent in the span of 10 years. Some have done it even sooner…
Reaching financial independence is a REALISTIC and ATTAINABLE goal for any nurse practitioner who wants it bad enough and has the discipline, fortitude, and patience for it.
Here is a simple strategy for achieving financial independence as a nurse practitioner:
- Maximize your earnings by having a couple side practices/businesses, maintaining part-time employment, or if you truly want, scale and maximize the earning potential of a full-time practice. This reduces your financial redundancy though. I never recommend relying on only ONE income source…
- Invest your money into a moderate risk profile. You need to err on the side of risk to attain considerable returns on investment. If you are too conservative, then you will never see the magic of compound interest and what a business can do for you.
- Lower your expenses. Living within your means can be done by anyone. Far too many nurse practitioners live way above their means, and they will forever work and be debt loaded until they are 70 years old because of it. I know a nurse practitioner couple that live in a $800,000 lake house and drive brand new $70,000 SUVs… Insanity.
- Become a tax genius and lower your taxes. The less you give to Uncle Sam, the more you get to keep for yourself!
This is a simple recipe to reach financial independence for the nurse practitioner. Obviously, it will take some planning and a little more knowledge to implement it, but it is relatively straightforward once you understand how to get there. I will break this down in the upcoming Financial Independence and Investment Course where I spend almost 5 hours going over a 220-slide presentation on how to achieve financial independence as a nurse practitioner. Until then, digest the 4 pillars of financial independence so you can begin planning and building a life where you live on your own terms.