Financial Freedom Has A Price
To Have Financial Freedom It’s Not Just About Spending Less, Here’s Another Thing You Can Do
Financial freedom has a price: the amount you can save each month. If that number is lower than you would like and can delay reaching your goal, why not do something about it?
When we talk about savings and finances, most people think of spending less. Is this really the only way to achieve financial freedom?
Not really; I doubt very much that just saving money will allow you to achieve financial freedom. It is essential in the early stages and is another piece in establishing a passive income strategy, but the key is to increase income and not so much to reduce expenses.
But without the ability to save, you won’t be able to do anything. I can save because I have a different income. Otherwise, I couldn’t.
Are we too attached to the concept of salary?
Ultimately, people get stuck in the idea that when you have a salary, you have already earned it, and therefore you don’t do more.
People think that with a salary, it gets harder to go further, while I see the salary as a base that gives me peace of mind when it comes to implementing my passive income strategy. In the beginning, it seems vital.
The goal is to be able to get off the salary when you have more income that allows you to live and continue to save outside of your salary.
There are many ways, but the funny thing is that the people I know who are salaried do not consider this.
The salaried person has the same strategies available to them as the non-salaried person. However, I think it is more difficult for the non-salaried person to get started, but the non-salaried person succeeds in a higher percentage.
I would start by looking for a way to generate my second line of income with a hobby. It is the easiest way to start.
The Active Income
And what do you want to be when you grow up? Surely you have been asked this question at some point in your life, whether you remember it or not, and certainly, the answer is in line with gainful employment.
From an early age, we are brought up with the need to be productive and to have a job. So it is not uncommon that when we reach adulthood, we identify having a job. But the reality is that there are other alternatives to having a quiet life and earning an income that it is important to know.
In a regular job, you exchange your time for money, so simple and sometimes so complicated.
If your contract is $1,500 per month for 40 hours per week, your salary is approximately $50 per day and $9.37 per hour.
If you work more hours, you will earn more money; if you work less, your income will decrease. And if you don’t work, you will receive nothing unless you are entitled to unemployment. Precisely because of this relationship, when you have a job you are active.
The money you receive for your ‘normal’ work is what is called active income because it requires more or less constant attention to be generated. At this point, it doesn’t matter whether you are a freelancer, a freelance writer, or a web designer. If you have to work constantly every day as if it were a job, you will have an active income. Passive income is something else.
Most Repeated Mistakes When Trying to Generate Passive Income
For me, passive income is income that occurs regardless of my available time. My goal is to have a passive income for at least one year. I believe that creating a source of passive income is only difficult at first and what it takes is the personal work that has to be done; this can take months or even years.
This preparatory work involves changing your mindset and is time-consuming. Once this is done, execution requires very little time.
Thinking about how much money we need to invest seems like a mistake to me because it will only limit us, in the sense that since I need such an amount, or investors or whatever, I don’t move. As I mentioned a few lines above, getting started takes time and a lot of effort, but once you get started, everything happens very fast.
Last year I launched my second constant income line, and now I am creating the third one. Of course in the latter, everything will be very fast.
It’s easy for most passive income systems you can imagine to be related to something you like. Many mistakes can be made, but the main one has been to avoid personal work. This is the main and most important work, and not doing this work is the main mistake. In this sense, to want is to be able, and if others can do it, so can you.
The first thing I have to decide is what problem I am going to solve, establish a business model, and then the execution strategy.
Right now I invest in stocks, but it is only 23% of my income. Now I am building the first $100,000 fund I need for my business. After I reach that goal, my next goal is to build a next fund to “Invest in real estate”.
If you have to dedicate more time, it will not be something so passive. A passive income consists of “creating a system that generates money and that system is managed as automatically as possible.” The more time you have to invest, the less responsibility the income or business will have.
The classic example of passive income or business is renting an apartment that, for example, you received as an inheritance. With very little effort (renting the apartment, doing some interviews, and at most making an arrangement), you will receive money every month.
But things are not always so easy. Effortless systems, like inheritances, are scarce. What is possible, as with buying an apartment to rent, is to make an investment from which you later get a return.
All passive businesses or formulas for generating this kind of income require an initial investment of labor, time, or money. In the case of the apartment, the money to buy it, even if it is only to pay the down payment if you decide to take out a mortgage.
However, after that initial contribution, your system will or should be able to generate an income without having to spend a lot of time on it. One of the great advantages of passive income is that it has no ceiling. There is no limit to what you can earn — logically, the business model will set a limit.
With active income, 24 hours a day marks the maximum you can get for your efforts, something that doesn’t happen with passive income because they keep working without your attention.
According to the previous example, if you lived only for work and your hours were 16 hours, you would earn $4,500 per month if you didn’t even rest on the weekend. The advantage of passive income is that this limitation disappears.
Why is Passive Income So Important?
Passive income is not only attractive but also important for several reasons, starting with achieving financial freedom.
They Allow You to Save More
A passive business is an additional source of income that will allow you to save more upfront and therefore achieve your financial freedom faster. You don’t have to be a mathematician to realize that if you save $500 instead of $200 a month, you can reach your goal sooner.
And if you add the power of compound interest and investment to that, the difference is even greater.
They Are Your Plan B
In the investment world, there is a maxim: diversify to avoid risk. This advice also holds in the workplace and professional setting. For this reason, a self-employed person has, to some extent, more stability than an employee, since if you have several clients, it is difficult for you to run out of income overnight. An employee does not have this advantage.
Passive income can act as a cushion in case you lose your job. They are a net that ensures that money will continue to flow into your checking account even if you are fired from the company. In addition, you can always upgrade them if the company you are hired by lays you off.
They Allow You to “Not Work”
It is easy for most passive income systems that you imagine to be related to something you enjoy. It’s harder, especially at the beginning, to succeed in an area you don’t like unless you really have a lot to contribute, in which case you’ll end up ‘experimenting’ when you get feedback from people.
And as Confucius said:
“Choose a job that you like and you won’t have to work a day of your life.”