Still confused with what financial freedom is? The simplest definition is that it’s the state wherein you or anyone in your household can maintain a specific, desired lifestyle without the need to work hard for a living. Anyone has the capacity to achieve financial freedom given the right tools.
To get to where you want to go, you have to know where you are. It’s surprising to note that many people do not keep track of their finances — at least nothing more detailed than balancing their checkbooks and keeping tabs on their savings account.
To be financially literate, you must know how to create and read a financial statement. The first step is to track all your sources of income and your expenses. Once you have identified these, you can take the steps necessary to secure your finances.
Gaining Passive Income
Passive income is the key to financial freedom. This type of income is money you earn, whether your work or not, that exceeds your expenses.
Sources of passive income include interest from cash deposits or rental income from real estate investments. The main point is this is money invested and earned from without the need to work on it daily. Once your passive exceeds your expenses, you earn the capacity to choose whether to continue working or not.
A Simple Cycle
Start the process by investing. Find the right investment vehicle for you by finding a mentor or financial adviser who can help you learn more about your appetite for risks. Some may find it safer to invest in a single detached rental home, while others might prefer to buy a hot dog franchise. Study your choice well and stay focused on a single vehicle first before diversifying.
Though it is a common piece of advice, diversifying is generally best if you don’t have the time or energy to study your chosen investment. It is also a common strategy to avoid losing rather than one to win. Once you get the ball started, continue investing to grow your passive income and get to the top of your financial goals.