As you know this blog has been inspired by financial freedom. While there are differing opinions about what financial freedom, this article will present financial freedom from my personal perspective.
What is financial freedom to me?
Financial freedom to me is having enough money to live without ever really having to work again. Now this does not mean you never have to work again. Instead it means that you work on your own terms.
You never have to worry about the stress of losing your job. You don’t have to worry about whether you have clients or not. When you are financially free, work no longer becomes a requirement in life but rather a choice.
How would you get there?
There are a number of ways to achieve financial freedom. The most effective way is by building passive income streams. This is done in a few ways shown below.
Have Your Money Make You Money
The first way to build a passive income stream is to build up enough cash so that it will generate money. Use your cash to purchase dividend paying stocks or bonds which pay you interest. You could also purchase annuities which would pay you over the life time of the annuity.
For example, if you have $5 million in cash right now you could invest in bonds which pay out 5% a year. Just by having those bonds alone, you will generate $250,000 a year in interest income!
Imagine, $250,000 in your pocket and you don’t have to do anything at all! You can accomplish this with dividend paying stocks as well.
Stocks pay a wide range of dividends, and are not quite as reliable as bonds for paying you out every month.
But stocks do have the advantage of appreciating in value over time, so that when you sell the stock you have a chance to make more money.
I don’t have $5 million to put away, what should I do?
Fair enough. Most of us do not have $5 million in liquid cash at our disposal at any time. So what should you do instead?
Create a Business which Produces Cash with Minimal Effort
While I was writing that subheading, it sounded a tad bit scammy. Just like one of those spam emails which tell you how some guy makes $5,000 a day just by clicking a few buttons.
There are people out there with legitimate businesses that do not require much effort on their part.
They do this by doing one of two things
1) They automate their business so they don’t have to do most of the work or,
2) The create a product which they can sell to the masses
In order to accomplish number one listed above you would do a few things. First you would have to build a business up from scratch (if you can’t buy one initially).
Then you would look to hire employees to help do the menial tasks that you don’t want to do. Then finally you would hire a manager to help oversee the employees and take care of the higher level duties that you don’t want to do.
This leaves you to plan for the future and grow, and takes you away from the day-to-day tasks that you would be doing at any typical 9 t
o 5 job.
For the second item, you would create a product that you only need to create once or can be created by others, and sell it to the masses.
Key Point: Learn How to Separate Time From Money
The key to building a passive income business is separating your time from money. Most jobs will pay you for every hour you work.
It has been engrained in us that we get paid when we work and don’t get paid when we don’t.
What if you did get paid when you didn’t work? How would you like to get paid when you didn’t work? When you are sleeping? When you are on vacation?
If you have an automated business, you will no longer trade your valuable time for money.
There are a ton of ideas to help you build up passive income streams. One of the best books to help you understand the different types of business systems is “The Millionaire Fastlane” by MJ Demarco.
In that book he lays out the “Five Fastlane Business Seedlings” which are business systems which produce passive income for the owner. Those five systems are
- Rental Systems
- Computer Systems
- Content Systems
- Distribution Systems and,
- Human-resource Systems
If you want to find out more, check out the book on Amazon. It really is a great resource and I would recommend it to any entrepreneur or wantreprenuer looking to get started.
My Top Three Reasons for Wanting to Achieve Financial Freedom
I have told you what financially freedom is to me. Know I want to elaborate on why it is my goal to achieve financial freedom.
Reason #1: I want to have the freedom to do what I want when I want
If I want to sleep in until 12 I can.
If I want to meet friends for lunch on the other side of town at the last second I can.
If I want to go on vacation at the drop of a hat I can.
I would also have freedom to pursue hobbies that you enjoy but would never really make you money.
For example, I enjoy playing basketball and golf. I am not really good at either one of those. I could play those whenever I want.
Reason #2: I want to explore the world
Many folks don’t have to be financially free to explore the world, but I think it would be pretty amazing being able to travel all over without a timeline to get home like you would when you work.
I have never traveled much, and I think it would be great to be able to see the world.
Being financially free would allow me to travel on my own time, and have the money to do so.
Reason #3: Spend more time with those I love
I am personally not a workaholic. I’ll admit it.
I will work really hard doing the job the needs to be done. Once it is complete I go home and do the things that I want to do.
It’s not even that I am lazy, but I just like to enjoy life and do those things that I want to do.
I don’t want to feel obligated to go into some place five days a week for the next 35 years of my life.
I enjoy spending time with family and friends, and financial freedom will allow me to do this.
Down the road when I have kids, I want have the ability to spend time with them. I want to be a part of their life.
I don’t want to be at work all of the time and come home and be too tired to spend time with my family.
This is what financial freedom is to me. This is why I want to achieve it. What is financial freedom to you? Why do you want to achieve financial freedom?
Photo Credits (in order)
Flickr/Shari’s Berries, Flickr/Phil Whitehouse, Flickr/Kalyan Chakravarthy