What is financial freedom?
To put it in simple words, financial freedom is when your assets pay for your lifestyle. And what does this mean ? It means that by making investments and creating several income streams for yourself, money does the work for you. This is the principle in reaching financial freedom.
How to become financially free?
Now let’s take a closer look on how to actually reach financial freedom. Is it by working harder? Is it by making more money ? That is not the case. Absolutely not. You can work more and make more money, but all you achieve is trading your time for money. In order to be financially free you need assets. Assets are the key in setting you free.
Assets vs. Lifestyle
So we have now established that having assets, pays for your lifestyle and sets you financially free. Now let’s think about how much money you want in order to be free and how much you should invest. For example you want a monthly income of £2,000 or any other amount you want. Great, now that you have your monthly income to be financially free, let’s see what kind of assets, what size of assets you need, assuming they will generate 5% per year. For a £2,000 income per month, your assets need to be worth £480,000. Those assets are there working for you and delivering a 5% return per year. Of course there are instances they will generate more than 5%, but let’s say we work with basic assets that their return is 5%. You also have instances the money stays in your account. That will leave you with half of a percent return, which by the end of the year you will have less due to expenses, inflation and so on.
Assets, assets, assets
If there is anything to retain after reading this post, it’s this: ASSETS, assets are very important. Having several income streams, is vital in setting you financially free. Not working harder or by saving.