The Income Snowball & Funding Your Freedom: A Four-Part Guide

[If you read nothing else in this article, read about the income snowball. It's halfway through this article.]

If you have built castles in the air, your work need not be lost; that is where they should be.  Now put foundations under them.
-Henry David Thoreau

Most of my articles focus on the “inner game”? of personal liberation (from traditional work environments and lifestyles). That’s because I — like a million other people in the personal development space — believe that change usually manifests on the inner plane before it manifests on the outer plane (see Socrates, the Bible, Thoreau, Stephen Covey, etc.).

But it’s hard to leave even a horrible situation and begin re-envisioning your life if you don’t believe you’ll be able to support yourself. Because if you can’t get around the money issue then what’s the point?

Here are two reactions to my last post . . .

Go ahead, tell the government to fuck off, go live in cardboard box if that is such a great improvement on your career.
-Ufia

I think many of us "real" people would happily become "unreal" if we could figure out another way to get money. Homeless people would fit into this "unreal" category, but I don’t want to resort to that to simply shed the title.
-Disillusion

In addition to the money issue, people also hold the self-limiting belief that all this lifestyle design stuff is for those who don’t have to financially support children. I usually hear guys making “the kid argument”? — it probably has something to do with our urge to provide). On the other hand, I’ve spoken with several women who are living creatively with children. (They believe that if you feed a child, love them, and spend time with them, that they’ll be OK. I couldn’t agree more).

I’m doing a series of profiles of parents living incredibly adventurous lives (e.g. traveling the world, working from home, etc.) so stay tuned for that if you want more proof that this stuff can be done.

But I digress.

So this article is about how to think about funding your freedom. It won’t be exhaustive. It’s not going to tell you how to start an internet business or start making money with e-books in about 5 days. (By the way, if you do want to start making money with e-books in about 1 month, I’d check this out. I picked up Alexis’ book about a month ago and it’s been worth every penny).

But I digress even further.

Here’s a four-part guide to financing your freedom:

1.) Start With Some Baselining

The process of baselining involves writing down everything you don’t have to have, be, or do, to live a ridiculously happy and amazingly fulfilled life (for more on this, see here).

For example, I don’t have to own nice furniture (thrift store furniture works just fine) or a house. I don’t have to eat out every week (I actually love rice and beans and see no shame in eating the basics). Additionally, I don’t have to be able to tell a coherent story about how I make money.

If you’re serious about doing a thorough job of baselining, you’ll create a spreadsheet and write down each thing you’re willing to give up. Next to each baselined item you should also write note how much money and time you’ll eliminate by doing away with the listed possession, obligation, self-image, or future purchases.

When it comes to baselining, my advice is to “dream”? big by eliminating everything you possibly can and then calculating how much your baselined life costs you.

After you’ve done the baselining, it’s time to . . .

2.) Do Some Dreamlining

Timothy Ferriss’ dreamlining process can sometimes be useful. Dreamlining involves writing down what you would have (e.g. a motorcycle), be (e.g. a professional tennis player), or do (e.g. take a trip around the world) if you couldn’t fail, and then determining the costs of these dreams (for a better description and a great tool for implementing, see here).

Most people think they can’t afford long-term world travel, a weekly massage, a half-time job, or three weeks at home with their children. Dreamlining is meant to challenge that assumption.

Ultimately, you want to arrive at a weekly price tag for your ideal lifestyle.

I encourage you to think in terms of time and freedom. Want to travel the world with your children? Want to work half-time and spend the other half working on a writing project? Want to start a community organization? Want to hike the Appalachian trail? Want an extended vacation so you can feel sane again and start worrying about the next step? Put that stuff on your dreamline.

In my opinion, one of the best ways to fund your dreamline is by implementing what I call . . .

3.) Start an Income Snowball

We’ve all heard of the debt snowball, right? No worries if you haven’t.

The debt snowball idea asks you to apply ALL extra money to your smallest debt until it’s paid off. Once you’ve paid your smallest debt, you start working on the next biggest debt, and so on until you’re debt-free. The primary benefit of this “smallest-balance plan”? is the psychological benefit of seeing results sooner.

The debt snowball works because, as Dave Ramsey says, “while the math seems to lean more toward paying the highest interest debts first, what I’ve learned is that personal finance is 20% head knowledge and 80% behavior; you need some quick wins in order to stay pumped enough to get out of debt completely.”?

So onto the Income Snowball . . .

The income snowball is like the debt snowball, but a little but more tricky to explain. Here goes…

Most people know how they’d make money in an ideal world. The problem is that most of these “ideal”? schemes require lots of time, planning, risk taking, etc. On the other hand, most of us have skills that we could implement tomorrow to make money independent of an employer (this could be anything from doing landscape to hiring ourselves out as a consultant).

So the first step in creating an income snowball is to write a list of things you can do to make money in ascending order of difficulty and speed of implementation. The list should start out with the “smaller sooner”? income items and move to the “larger later”? items.  My actual list, which I created six months ago, goes something like this:

• Make websites
• Do social media and SEO consulting (I love doing this)
• Write e-books
• A bunch of top secret stuff I’m not ready to talk about
• Start “Project Liberation”?
• Become a published author and speaker
• Other top secret stuff

The challenge here is to only write down sources of income: my list, for example, doesn’t include plans to bike across China or hike the Lake Superior Trail.  Those lifestyle plans are on another list.

Like the debt snowball, the income snowball works because of psychological factors (as much as anything else). It has you making income from day 1. And once you’ve become confident that you’re capable of making money WITHOUT your job, you’ll have the courage to go for your next most ambitious goal. The income snowball also works because it imposes organization on the sometimes anxious, nerve-wracking, chaotic, and disorganized process of hacking together an income after you’ve quit your job.

In addition to the above, the income snowball helps you focus your energies. Indeed, for most new business owners and lifestyle entrepreneurs, the next actions aren’t always clear. There are thousands of directions you can move in at any one time and it’s more than a little easy to become schizophrenic when considering all the options.

It’s also important that you . . .

4.) Hang Your Shingle Up

If you’re good at something, chances are people approach you all the time for advice on your area of expertise. The thing is, your friends, or whoever is asking you for advice, wouldn’t dream of actually paying you unless you hang up your metaphorical shingle.

At some point after I started this blog, I become inundated with questions about social media: how to optimize for it and how to properly leverage Digg, StumbleUpon, etc. to get hits. And at some point I made this website and started charging for social media consulting. Social Media consulting is now one of my top 2 sources of income.

My "shingle" isn’t fancy at all, but it’s not meant to convert new website visitors into clients. It’s meant to declare that I’m open for business and that social media marketing is a servic
e for which I charge. That’s all.

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