To be financial free means to have enough passive income to afford the lifestyle you choose to live. Notice that it doesn't mention about any specific amount of money. It is all about the individual lifestyle you choose to live. If you chose to live in a trailer and keep your bills to a minimum, you can achieve financial freedom with a much lower amount of money than if you want to travel to exotic locations and buy a luxury car. It will work for either individual, but you'll need more money to have more luxuries.
Passive money is just what it sounds like. It is cash that you get without having to work for it. This doesn't necessarily mean you don't ever work, just that whether you work each day or not, the cash continues to come in. Some good examples of passive income would be royalties from a book or song, or interest on an investment.
In order to know just how much passive income you need for financial freedom, you need to think and determine just how much your desired lifestyle costs. If you aspire to live just as you do today, this is an easy calculation - you need just about as much as your present income. If you are willing to scale back a little, you can cut out unnecessary expenses and reduce the amount you need to have.
For those who wanted a more luxurious lifestyle, then you'll need more. Let's begin by looking at where you are now. Take a blank piece of paper and write down all of your current monthly expenses, and be sure to add in the irregular expenses like car registration or property taxes by taking the annual cost and dividing by twelve.
If you are like most people, you will find that your list doesn't cover nearly everything you spend money on each month. Small expenses go undetected such as a starbuck coffee on your way to work, add up over the period of a month, but you may not be counting these into your total. Go back and figure out correctly where all of your money goes.
Once you have done your homework, you may find that there are some very obvious expenses that should be cut, and there may be others that don't mean that much to you that you can also cut. Obviously, some will almost inevitably be tied into your job, so those may go away if you quit after reaching financial freedom. Work out this budget diligently until you are fairly certain you have it as close as you can to what you really want.
If you had chosen the luxurious lifestyle, now is the time to start adding in the car payment for the luxury car, or the higher mortgage for the more expensive house. Never be shy about this, it really your own future life we're budgeting for right now.
Once you have finished breaking down your expected monthly expenses, you will have an idea of how much monthly passive income you need. The sole purpose from there is to find a way to reach that financial goal. Be alert for investment that pay a reasonable return of around 8% to 10% or higher. If possible, brain storm some ideas for financial freedom with your close friends. Investing are a good choice and so are businesses that can be set up and then require little if any maintenance, or that you can hire someone to do the work for you.
Quotes for the day:
"No one is born hating another person because of the color of his
skin, or his background, or his religion. People must learn to hate, and
if they can learn to hate, they can be taught to love, for love comes more
naturally to the human heart than its opposite."
"Confidence is contagious. So is the lack of confidence."
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