Achieving Financial Freedom - Part 2 - What Is Financial Freedom?
How much income do you need to have achieved financial freedom? When you are asked this question, what is the first figure that comes into your mind? Say this figure is $1m a year.
Now, ask yourself why you need $1m a year to be financial free? Do you really need $1m a year to be financial free? The amount of income you need to be financial free depends on your perspective and the kind of lifestyle you would like to live.
To some people, $1m per year may not be sufficient.
Yet to some other people, $50,000 per year is more than enough.
So, how do we know how much income we need to be financial free? There are two parts of this equation - the reality and the dream.
The reality portion looks at how much income we will need to meet our daily living expenses as of now.
This may include, for example, food, gas, utility bills, insurance, vacation, etc.
The dream portion looks at how much income we will need to live the lifestyle we would like to have.
This may include, for example, vacation overseas flying first class airfares once a year, visiting a top restaurant once a week, etc.
Once you have worked out the figures for living out the life of the reality and the dream, you will realise how much income you will need to be financial free as this figure will fall in between the reality and the dream.
By now, you will also have a vision of the kind of life you want to live and this is the goal you will be striving to achieve.
Without this vision, you will not have anything to aim towards.
When I was fresh out of college, my aim was to make $1m.
I had no idea why I wanted to make $1m except that being a millionaire sounded nice and I thought that having $1m would allow me to be financial free.
Within a few years, I turned a saving of $60,000 into $500,000 by trading in the stock market.
To a 24 years old guy who was earning $40,000 a year, $500,000 was a lot of money.
You may have guessed it, I lost most of the $500,000 I made in an attempt to double it.
In hindsight, I realised I did not know what financial freedom meant and I did not have a vision of the kind of life I wanted to live.
Having $1m sounds good, but how many years would $1m last? How would I keep making good returns from the stock market? It was not easy to turn $60,000 into $500,000 and I was working very hard to make it.
If I had thought about what financial freedom really meant, I would have approached it very differently.
Now, ask yourself why you need $1m a year to be financial free? Do you really need $1m a year to be financial free? The amount of income you need to be financial free depends on your perspective and the kind of lifestyle you would like to live.
To some people, $1m per year may not be sufficient.
Yet to some other people, $50,000 per year is more than enough.
So, how do we know how much income we need to be financial free? There are two parts of this equation - the reality and the dream.
The reality portion looks at how much income we will need to meet our daily living expenses as of now.
This may include, for example, food, gas, utility bills, insurance, vacation, etc.
The dream portion looks at how much income we will need to live the lifestyle we would like to have.
This may include, for example, vacation overseas flying first class airfares once a year, visiting a top restaurant once a week, etc.
Once you have worked out the figures for living out the life of the reality and the dream, you will realise how much income you will need to be financial free as this figure will fall in between the reality and the dream.
By now, you will also have a vision of the kind of life you want to live and this is the goal you will be striving to achieve.
Without this vision, you will not have anything to aim towards.
When I was fresh out of college, my aim was to make $1m.
I had no idea why I wanted to make $1m except that being a millionaire sounded nice and I thought that having $1m would allow me to be financial free.
Within a few years, I turned a saving of $60,000 into $500,000 by trading in the stock market.
To a 24 years old guy who was earning $40,000 a year, $500,000 was a lot of money.
You may have guessed it, I lost most of the $500,000 I made in an attempt to double it.
In hindsight, I realised I did not know what financial freedom meant and I did not have a vision of the kind of life I wanted to live.
Having $1m sounds good, but how many years would $1m last? How would I keep making good returns from the stock market? It was not easy to turn $60,000 into $500,000 and I was working very hard to make it.
If I had thought about what financial freedom really meant, I would have approached it very differently.
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