What is Financial Freedom?
From childhood, most children are advised to get fully qualified and then get a 9 – 5 job. After landing an solid job, we are advised to plan for retirement and place a percentage of our paycheck for 40+ years until the retirement age hits us.
The assumption for we should follow this path from primary school until we die, spending the majority of our lives at work, trying to get better jobs, to get more money and to buy bigger houses and fill them with more stuff that is just clutter and not even usable. Only after retiring, is the time to go and explore the world or relax and take is easy.
Some people call this the time-money paradox. A lot of people on the western world trade their time for a paycheck and then spend most of their paychecks on depreciating objects like cars. As the spending gets more, many people desire bigger paychecks which requires longer hours or more responsibility. This become a vicious cycle that in most cases spirals in perpetuity.
I saw this in my minds eye, when I got approved for a £150,000 mortgage. I placed an offer on a house and retracted it as I chose to have freedom, rather than possessions. Freedom that allowed me to start a new business, work the hours I chose and travel the world. In my world it is not about what I choose to do, it’s about having the freedom to choose.
Different types of Financial Freedom:
Financial freedom, means that you can have the lifestyle that you desire without having to work and replying upon a regular paycheck. In other words, financial freedom is the early retirement in the 21st century.
Instead of defining financial freedom as a single thing, I will break it down for you in stages:
Stage 1) No Freedom
Most people are conditions and start the journey at this point, relying on a payckeck every month. At this stage we rely on the paycheck to pay bills and spend on possessions that we don’t really need. We even get into debt to afford these possessions and without the ongoing paycheck, our possessions could be taken away from us, such as houses and cars.
Stage 2) Temporary Freedom
To go into temporary freedom, you must spend a lot less than you create, generating a pool of savings. Otherwise, you will be forced to continue working indefinitely because your lifestyle depends on your employment income. As you to start to save, you may start investing into assets or diversified investment portfolio to produce a regular stream of income. Or, you may start up a business that you are passionate about, that generates a extra income.
As well as your savings your freedom grows. Eventually you will feel comfortable and enough money saved for starting a business, traveling for a year, or any number of other activities that are impossible to achieve while working a 9 – 5 job. These can be life changing, however they are not permanent. Your freedom is only temporary until your income exceeds all of what you spend.
Stage 3) Permanent Freedom
At this stage, your non-employment income exceeds your expenditure and you no longer need a monthly paycheck. At this point you will side business or a profitable portfolio producing extra income.
A side business is still labor income and you are trading your time for money. However you are doing something that you love and are passionate about. So in this sense you are doing something fulfilling and meaningful to you.
Fulfillment is a crucial point. Unless you desire to retire early financial freedom does not require this and about having independence and control of your daily routine. Financial Freedom allows you to design a better life for yourself and spending your time, money, and energy in a more meaningful way. If that included staring your own business, that is brilliant. Doing meaningful work whilst getting paid is a great feeling.
Stage 4) Luxurious Freedom
This last stage is rarely discussed or achieved. I define permanent freedom if your income exceeds your expenditure. For example, if you know that you require $1,500/month to live a nice lifestyle, and you can safely withdraw between $1,500-$1,600/month from your passive income. You have achieved financial freedom. But have you?
What if the withdrawal of $2,000 per month would give you better satisfaction? Perhaps the additional $500/month could be used for interest, hobbies, socializing and travel. All of which makes for a better lifestyle, however you’re headed in the wrong direction (back to temporary freedom).
The trade-off is clear…. You have to keep working in order to make more savings, which will creat more income and flexibility in your life. Or you can live within your means and have more time. It is all about finding the right balance which you desire.
When you have enough passive income to spend how you want to, this is what I call luxurious freedom. It is when you income passes your expenditure with a comfortable margin for you to spend on the lifestyle you desire.
How I create my financial freedom:
I mostly use white-label websites for my affiliate marketing. This is where the site is produced by a company and I re-brand it, to make it appear like mine. Once a customer converts into a sale, I will receive commission. Affiliate marketing is great method to use to generate passive income.
I research trends and investments, then decide what stock I am going to invest in and include into my investment portfolio. I tend to stick to cryptocurrency, even though it is volatile, I invest for the long term not the short. Checking my portfolio monthly, maximizes free time.
I provide mentoring and consulting. Whether it is marketing, design, content creation, I can assist! Offering consulting on branding and online marketing, helping companies find niche markets and deliver brands in an authentic way to generates traffic, sales and business growth.