Who has not ever heard of financial freedom? Of course you all must have often heard the term. And most people who work must crave, desire in order to achieve financial freedom. But does that really mean financial freedom?
Financial freedom is where a person reaches saving quite a lot and is relatively safe, and the results are sufficient for her to live a desired lifestyle. Financial freedom can also be defined as the phase when we are in peace and the option to not work anymore for the money, because money that works for us (passive income). The definition of passive income is the money coming here without having our work.
Savings can be achieved by various means, such as by savings deposits, time deposits, but to get better results then that is above the inflation rate, combined with compulsory saving as investing in mutual funds, stocks, property, etc..
The revenue generated from the active income is the income earned for work and wages are paid or received and if it does not work will not earn a living. Just a note if we work as a general employee salary increases (income) obtained under the inflation rate, so that purchasing power to decline with increasing time. To cope with these conditions then it would be wise if we have a growth-oriented assets in the works.
If not then we have the potential to work continuously, the following differences in orientation to work is:
1. Work => active income output => lifetime work;
2. Work => asset => passive income output => financial freedom.
Phase in order to achieve financial freedom, would have done saving & investing activities, namely:
a. Saving & investing = Consumption This is the ideal condition where the savings & investments are in proper balance with expenditures, that is income received only 50 percent is used for consumption, while the rest for savings and investment. Usually this pattern is suitable for young unmarried which the liability (liability) / debt does not exist. To reach it we must work smart, how our money can work hard for us and generate passive income.
b. Saving & investing = Consumption - Debt
In this pattern of saving and investing less due to debt obligations (debt), on indeed under ideal conditions but still reasonable. This stage usually occurs for those who are married. The times and the financial industry, encouraging the growth of debt instruments, this led to the use and attempts to get the debt becomes easier. Now more and more found debt-based consumption (credit card, or credit without collateral, etc.).
Because of this, just keep a balance between saving, Investment & consumption alone is not sufficient, but must be coupled with a get around so we can get out of debt. Debt is the primary freedom killer. Want financial freedom? The first thing you should do is get out of debt. That is priority number one.
c. Saving & investing = Consumption - + Debt Protection
This pattern is most wise for those who have married and had children, although saving and investing is not for the previous stage but the cause is the allocation of funds for protection (risk management) is usually in the form of insurance premiums.
Along with the development of the insurance industry and an increase in education funding would also affect financial freedom. Because we have to meet the element of protection for himself and family in the form of insurance and investment funds for education.
There are several stages before reaching financial freedom (financial freedom), namely:
1. Financial Protection is a financial condition where we have enough money to meet the minimum monthly expenses for 2 months to 24 months without working.
2. Financial Security is a financial condition where we have quite a lot of investment is relatively safe, and the result can meet the above minimum requirements without having to work again, unless we choose to work.
3. Financial Vitality is a financial condition where we achieved quite a lot of investment is relatively safe, and the result is not only at a level sufficient for Financial Security (above the minimum) but also can meet secondary needs without having to work, unless we choose to work.
4. Financial Independence is a financial condition where we achieved quite a lot of investment is relatively safe, and the results are sufficient for us to live exactly with our current lifestyle. In other words we are free not to work.
5. Financial Freedom is a financial condition where we achieved quite a lot of investment is relatively safe, and the results are sufficient for us to live the lifestyle that we want (better than the lifestyle now).
Had reached the stage where you are?
Another important factor in achieving financial freedom for you is largely determined by your lifestyle today, tomorrow and the future. Some people prefer the simple life, and will always want to live like that, then this type will achieve financial freedom faster rate than in those who have the luxury lifestyle. In the end, financial freedom is about control of expenditure against ourselves. Financial freedom is a choice rather than chance.