Before we talk about financial freedom, we first have to talk about Wealth. What is Wealth?
My definition of Wealth comes from Robert Kiyosaki.
"Wealth is NOT a measurement of how much money you have but how long you can live without working."
In other words, wealth is a measurement of Time, not Money.
Having financial freedom means being able to live infinitely long without working.
There are two ways to achieve financial freedom.
#1 - Make a lot of money, so much that you can't spend it all in your life.
This is the most straight-forward thinking of achieving financial freedom.
It is what most people have in mind.
The question is,
How much is enough?
How long does it take to make those money?
How much effort is needed in the process?
What are the opportunity cost, in terms of health, family etc?
Too many people work too hard to make money, only to realize that they have lost their health and family in the process. When they are old with money, it may be too late.
Fortunately there is another way to achieve financial freedom....
#2 - Make monthly passive income, such that your monthly income is more than your monthly expense.
Let's say your total monthly expenses is $10,000.
If you can generate a passive income of $10,000 from businesses, property rentals, stock dividends and/or bond interest, then you've technically achieved financial freedom.
It may sound difficult because I've set a high target of $10,000. If you start with a target of $1k monthly passive income, it's not that hard to achieve a few hundreds from each of the sources above.
If you can achieve $1k of passive income, achieving $10k is just a matter of scaling up and time.
Like training your body fitness, your financial fitness will improve as you work on it.
Method #2 is more practical and achievable, and you are more likely to achieve financial freedom at a younger age.
If you are quick enough, you may have already noticed that there are two sides of the equation.
One side is your monthly expenses. Another is your monthly passive income.
If your home and car are fully paid for, you may be able to reduce your monthly expense to perhaps $5000. Then you just need $5000 passive income a month to achieve financial freedom.
But bear in mind that using Method #2, there is no permanent financial freedom.
During economic crisis, your passive income is likely to shrink significantly, but your expenses are likely to stay the same.
So it is important to keep a reserve and keep your expenses reasonably low.
Also bear in mind that any form of passive income will still require 'work'.
But this 'work' is not an 8 to 5 job, and ideally, it is something that you love doing.
I regularly ask myself this question:
"What will I do when I retire?"
If my answer is,
"I'll do what I am already doing!"
then I know I am on the right track!
Build a business around what you love doing and work towards building your passive income while keeping your expenses reasonably low. Achieving financial freedom is just a matter of time.
To your success, Kenneth