The Concept of Financial Liberty

Financial freedom is a term gaining a lot of acceptance, but it is among many concepts not commonly discussed in schools and other institutions of learning. Although this idea is familiar with the younger generation of people, specifically millennials, many are indeed striving for this. In this article, I will explain what financial freedom is and why it’s at the heart of so much debate.

What is Financial Freedom?

Financial freedom, otherwise referred to as financial liberty, is defined as the status where one does not require earned or generated income to pay for his or her own and family expenses.

The Value of Time

Firstly, as a matter of fact, time is the most valuable resource of mankind. Most careers make us exchange our time for some cash and once that time is used, it is gone forever.

Consider thinking about a situation in which you can spend most of the time on the things which interest you, be close to the people you care about, and progress in your abilities without worrying about the exchange of time for money. This scenario can become a reality when one is financially free.

From these words, one can hear the voice of a man who became a millionaire not chasing money but having some other aims. “If I have earned so much money it has been because my goal has never been to earn money.” – Amancio Ortega

The Process of Building Wealth

I will tell you the process of building wealth and how you can also establish this process for yourself.

Substitute the word “Secret” with the word “Key”

In context with the main topic, the word “Secret” should be replaced with the word “Key” because it refers to how one can gain success in managing or creating plans for the money that a person earns.

Thus, besides political and cultural freedoms, we are admitted to the opportunities to progress in the financial aspect in the present epoch more than ever. The first fundamental key is the aim of achieving residual income, thus ceasing to rely on active income for daily expenses.

Understanding Active and Passive Income

It is now time that you asked yourself what it is that separates active income from passive income? You are not the only one who kind of has this question; it is posed frequently. This is quite an important factor, and once you are able to grasp this concept, you are halfway to wealth.

• Active Income: The income that the recipient receives for the specific work done in exchange for the money they received or will receive.
• Passive Income: The revenue derived from a one-time action that is not repeatable- you can make money while you are asleep.

Thus, it is not shocking that, for instance, rich people are genuinely interested in generating passive income. If you would like to know more about active and passive income, together with the examples, I have explained it in one of my articles.

Thanks to the Internet and new technologies, requests for content creation and willingness to use social nets, we are closer than ever. Such a connection has created a lot of possibilities for creating other streams of income obtainable to every person.

Steps to Achieving Financial Independence

Through listening to the experiences of others who have achieved financial freedom, I have identified several common steps they all share:

• Establish a Financial Target: Define what financial freedom means to you.
• Save a Large Portion of Your Wage: The more you save, the faster you can achieve financial independence.
• Look for Multiple Ways to Achieve Passive and Residual Income: Diversify your income sources.

Setting Your Financial Freedom Goal

Before a person starts making financial changes, they have to define a financial goal as the first measure in working for financial freedom. Recall that financial freedom is when your passive income is higher than your essential expenses so that you do not have to worry.

Define Your Annual Expenses

Using the 4% rule, you can calculate your financial freedom goal:

This calculation gives the basic figure that must be met for one to attain financial independence. Nonetheless, it should be pointed out that the 4% rule is not an absolute one presented without regard to certain peculiarities.

Again, this amount is the minimum you should strive for in order to get financial freedom; you will not be rich, but you will not have financial problems. This choice depends solely on your goal; ensure that the amount you want to locate is clear as it serves as the basis for the next step.

Spend a Considerable Part of Your Income

Whether you will be able to find financial freedom in 10 years, 20 years, or not at all depends on your savings. The tighter the belt is, the quicker the buck gets to the intended destination, that is, retirement savings.

Savings are not a walk in the park, but they can be achieved. The process of saving begins with basic knowledge of your spending and your ability to save. If you start evaluating where your income disappears every month, it is easier to make conscious decisions on how to handle present and possible future possession of money.

I have written several articles on how to establish a budget, learn to save, and quick savings techniques that will be helpful in this process.

Engineering Several Streams of Recurring Cash Income in the Long Run

This step is very important in the process of getting to financial freedom. To sustain a certain kind of lifestyle without engaging in any economically productive work, one has to have a number of streams of passive income. These can vary widely. Some examples include:

• Leasing an apartment, garage, or business premises for use as a house, storage, or office respectively.
• Earning interest and/or dividends on investments.
• Employing others to run the business that you own.
• Selling pre-recorded online courses.
• Selling products online.
• Making money from a website either through adverts or the affiliate system.

Ideally, one source of passive income is not secure enough, and this means that one needs to have several sources of passive income. These income sources should be diverse and independent meaning that if one fails, the others should not be affected.

For instance, if your earnings include dividend income from stock, a poor stock market might reduce dividend earnings while a house that you rented out will not suffer a similar fate due to market conditions.

Conclusion

Financial freedom is possible and within grasp if only people shall be willing to undergo some change in the way they manage their money; by setting up a definite financial goal and saving accordingly, and perhaps most importantly, investing in companies that generate residual income. Speaking about a state when a person is financially free, it is necessary to note that lifestyles are no longer dependent on active income after achieving such goals and values as: goals, savings, and various miscellaneous incomes. This freedom enables one to spend their time on what they love most without having to constantly stress about how to make ends meet.