Financial Freedom
What is Financial Freedom:
Imagine
a off day like today (15 Aug 2014) when you are enjoying something like photography
on the lush green outskirts of your city or, if you are little more
adventurous, then in the deep jungles of Tadoba. Imagine if everyday is like 'this day' in your life. You are no more working for your employer. Still your wife is as
relaxed as you are. Children are 'on to' their routine. Family does not have to compromise on their needs. This 'State of Life' or 'Stage in Life' is termed as 'Financial Freedom'.
A
person does not have to work for money. He might still be working, but
may not be for money. He might still be earning money from what he is
doing, but not for living. In our example, father might be earning from
his hobby of photography but that's the income just coming to him, he
may not need that money.
Myths:
Financial Freedom comes after retirement at the age of 58
Fact- A person aged 35 can be financially free if he is not working for money.
Financially free person doesn’t work at all
Fact- Not necessarily, but he doesn’t work for money- for sure.
Financially free means being Rich
Fact- Not at all.
Financial Freedom comes only when you are born to rich parents
Fact- Absolutely false. He can born as normal as any common man.
How does it spell out in Financial Terms:
When your per month earning -without having to work -is more than your expenses, you are financially free.
In other words, it means, you have created a Regular & Passive
source of income from your assets. This passive income from your assets
is more than your expenses. This is applicable for today and for years
to come. So the future passive income should consistently beat the
inflation.
Passive Income > Expenses = State of Financial Freedom
Factors affecting Financial Freedom:
Evaluate current cash flow. Earning minus expenses.
Find out the deficit
Check your income generating assets
Check if the income from these assets will grow in future to beat inflation
Check if your Future Expenses will Increase or Reduce (As a result of increasing or reducing liabilities)
Find the ways to reduce Expenses
Link your Assets, Income from assets and Expenses to Time
More on Income Generating Assets in next article. Do get back on unmesh@bonvista.in and let us know your feedback.