Financial Freedom
What is financial freedom? In all honesty, I think it is different for everyone. In short, you need to reach a state where you are completely comfortable with your financial situation and able to live life the way you want it. My version of financial freedom is more traditional where my goal is to have my passive income exceed my living expenses by 1.5 times. At the time of my writing this, I have not achieved this goal yet but have made tremendous progress. I see light at the end of the tunnel and I will soon escape rat race prison.
Financial Freedom
You need to figure out what financial freedom looks like for you. Maybe you enjoy your job but just want one less thing to worry about? Maybe you hate your job but are completely trapped because to change jobs would mean less income? Once again, the reasons and personal situations of all the people who have found themselves here are infinite…
I do know this… Financial freedom means less financial stress. In order to have less financial stress, it needs to be relatively easy to cover your monthly expenses by means other than a job. No matter how much you love your job, it is not permanent, even if your goal is just to retire one day.
Creating passive income is hard, especially in an amount that will make a difference in your life. Focusing on reducing your expenses and the amount of money it takes to run your household will have a direct impact on your ability to create enough passive income to sustain you and your family.
Lets say you earn 10% annually on your income producing assets, this could be dividend paying stocks, real estate, what ever you choose. If your monthly expenses are $8,000 per month ($96,000 per year), you would need $960,000 worth of incoming producing assets to generate your income needs (10% of $960,000 is $96,000). On the other hand, if your monthly expenses are just $3,000 per month ($36,000 per year), you would only need $360,000 worth of incoming producing assets to generate your income needs (10% of $360,000 is $36,000). This quick and dirty math that doesn’t take into account taxes, inflation, mortgages on your income producing real estate, etc… but it does illustrate that it is not about what you make but instead about what you spend!
Financial freedom is achievable but you need to have a plan to get there. You need to have a complete understanding of what your expenses are and what is required to run your household. You need to reach a state of positive cash flow, this may require you to change your life style and to stop keeping up with the Joneses. You need to research and educate yourself on the various avenues that you can take in regards to income producing assets. This will all take time and sacrifice but if you truly want to escape from rat race prison, you need to stay focused on your quantifiable goals, and you will ultimately reach your version of financial freedom.
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Rich Dad Poor Dad: A Tribute
Rich Dad Poor Dad I read this book in 2009 having been married for roughly 2 years with a newborn baby boy and twins expected in April of 2010. The plan was for my wife to go back to work after our first born was a little older. However, with the twins...
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