Working Towards Financial Freedom
Copyright (c) 2007 CashFlow Avenue
Financial Freedom seems to be the buzz word ever since
Robert Kiyosaki made his book series "Rich Dad Poor Dad"
famous. While financial freedom has been on the minds of
numerous people, not many individuals understand how to
achieve it. The constant routine of getting to a 9 to 5
job is all too common.
So, what is financial freedom? There are of course many
definitions in various publications describing financial
freedom. Financial freedom is not wealth beyond your
imagination. It is not about living in a big mansion or
driving around in a flashy sports car. It is certainly not
being a multi-millionaire. Financial freedom is the really
dependent on the individual. It is to be free of the
constant stress of paying installments, mortgages, and
bills. Financial freedom is achieved when you know you no
longer need to be in the rat race – the need to work for
money. Of course, you may opt to continue working (well,
you define work) but working for fun and your passion.
Financial freedom can be achieved even though you are
driving a beat-up junk or still living in a trailer home.
So how does one achieve financial freedom? Mentioned
earlier, it really depends on the individual. Your
lifestyle dictates your pace. If your lifestyle expenses
are high, you have 2 options.
One way is to scale down on your lifestyle through the
reduction of living expenses. This is difficult for most
as it involves plenty of sacrifices. Moving to a smaller
house or downgrading to a smaller car is drastic but
extremely effective in reducing your expenses. There
challenges of course in these because you or your family
may not be able to adapt. Then there is the social
pressure that you will face. Unfortunately, in this
materialistic world, you will likely lose your status among
your peers. Whatever it is, this is a difficult route to
take.
The second approach is easier to "swallow" but will take a
longer time before you can achieve financial freedom. You
can maintain your current lifestyle but you need to
continue working. At the same time, you need to save. If
you are working just to pay off your monthly bills, you
need to take a long hard look at your belongings and decide
to cut off items that are not necessary in your life today.
As a rule of thumb, you should not be spending more than
30% of your net worth on luxury items.
Once you have done that, you should have some savings every
month. Let's say you manage to put aside $1000 a month as
savings. It is not much but it is a good place to start.
Your saving fund should be divided into several components.
As an example, you can divide your savings for investment,
for rainy days, and for an item of your desire. How you
allocate your savings is up to you. The lesser it is for
the last component the better. Delayed gratification is a
must. Sacrifice today to enjoy these desires later when
you are better financially prepared.
Assuming that you maintain your expenses and your current
income with some savings, you should be on the right track.
To achieve financial freedom, the key is in your saving
funds – the investment portion. Choosing the right
investment will determine how long it takes for you to
break free from the rat race. As long as you continue to
save, with steady monthly increment year on year, you
cannot stray too far from achieving your goals.
