Financial Freedom?
Financial freedom is quite a famous term, but do we really
know the real meaning of it? It is used widely by people intending different
meanings. However, there is a recognized definition for it.
The Common
Misinterpretation
The common
misinterpretation on financial freedom is having a lot of money. This can be
disproved by examples of people who make abundance of money yet having huge
financial constraint due to high consumption. On the other hand, there are also
people who has an average income who consider themselves to be financially
free. It is possible as this people might have fewer needs, thus, having less
constraints financially.
The Definition
Why strive for Financial
Freedom?
- Enables you to pursue what makes you happy
- Boosts your confidence
- Able to be the curator of your life
- Helps to foster healthy relationships
- Peace of mind
Robert Kiyosaki (A
prominent figure who strongly advocates "Financial Freedom")
- A Japanese American investor, businessman, self-help author, motivational speaker, financial literacy activist, financial commentator, and radio personality
- Author of Rich Dad Poor Dad series of motivational books
- His book series ‘Rich Dad Poor Dad’ is an international bestseller
- He talks a lot about the importance of financial freedom, which concept is even included in a game he invented called "Cashflow"
Passive Income
The simplest example of a financially free person would be
someone who has a passive income which exceeds the total expenses. In this
example, the person is now free to do whatever he/she loves to do since there
is no more responsibility of working to cover the expenses. This is what we
call freedom. To be specific, financial freedom.
Passive income:
Wikipedia : Passive
income is an income received on a regular basis, with little effort
required to maintain
it. It is closely related to the concept of "unearned income".
Investopedia: Earnings
an individual derives from a rental property, limited partnership or
other enterprise
in which he or she is not actively involved.
Examples of
passive income:
· -
Earnings from royalties
· -
Rental income from Property
· -
Interest earned (e.g. fixed deposit)
· -
Revenue from Internet advertisement
· -
Pension
· -
Stocks
· -
Bonds
Steps one can take
to be closer to financial freedom
Step 1 : Visualise your goals and write them down
·
How old do I want to retire?
·
What kind of lifestyle do I want to live in the
next 10-20 years?
·
What will make me truly satisfied and happy?
·
How much money will actually satisfy me? (topic
of concern as ultimately money by itself will not bring you happiness)
Step 2 : Think about where you are currently at financially
·
How many streams of income?
·
Am I spending within my means?
Step 3 : Educate yourself
·
Books
·
Seminars
·
Workshops
·
Internships
·
Part-time jobs
Step 4 : Track your expenses
·
Writing them down
·
Phone apps
Step 5 : Plan your finances
·
Leaving aside a fixed amount every month for
certain reasons
Step 6 : Accumulate assets
·
Property
·
Paper assets
·
Commodities
The Crossover
Point
The crossover point is when your passive income/returns from
investments is more than your expenses. By achieving this you have just bridged
a huge milestone. For some, the journey will end here. For others, it would
have just begun. This is when the fun begins! Learn to play the game and play
it wise. Don’t forget what/who you are doing this for and your purpose along
the way.
Peace.
Credits to:
Dhivyamaaran Anparasan @ A.D.Maaran
Nelson Liew
Fabian Au
Jeanne Chong
Tan Shen Tze
Credits to:
Dhivyamaaran Anparasan @ A.D.Maaran
Nelson Liew
Fabian Au
Jeanne Chong
Tan Shen Tze
