The secret of Financial Freedom and passive income

What is financial freedom?  It’s a very good question.  Financial Freedom is a term I hear thrown around so much.  The freedom to, as Tim Ferris says, have a 4 hour work week.  As his podcasts are longer than 4 hours between the various shows, I’ve always wondered how he does that.  But how do you and I reach Financial Freedom?  Us every day people who don’t have massive fame.

So what is true financial freedom?

Financial freedom is the ability to choose your life.  Do you want to work?  Or do you have to work?

In money terms, it’s having a passive income that matches your current salary.  So if you make the choice not to work, your money comes in each month regardless of what you do.

What is a passive income?

A truly passive income is when the income from your investments pay into your bank account each month.  So you aren’t physically having to clock into the work place to get your money paid into your account.

In reality, the only passive income I know about is trust fund or parental income, and you may need to do Sunday lunch to earn that!

Why?  Because rental properties are alot of work when the geyser’s burst.  And investments should be tracked regularly – you should do at least half an hour of reading a week to educate yourself.

The real deal on passive income

The real definition of passive income in my mind is that you don’t sell your time as a direct exchange for money.  Think of a doctor.  They sell time.  For each 15 minute slot of time to see a patient, they get paid a sum of money.

The minute you can earn revenue without needing to physically be present somewhere, that’s when you start to experience freedom.  Because you can choose to work from the beach in Hawaii and not need to clock in physically at work.

It takes work to build those revenue streams

So the biggest misnomer of passive income is that you don’t need to work for it.  It’s huge work to build those revenue streams.  And it takes time.  But it follows the good old fashioned bell curve – slow to start, but builds up speed as you go.  No matter what you choose to do to build passive income streams, it all has a compounding effect which needs time.

Want to build a property portfolio?  It will take time to build the number of properties in your portfolio to substitute your salary.  And time to fix the geyser.  And time for the rental income to increase, while the amount you owe the bank stays flat – building a profit gap.  Revenue from investments?  Time to let the growth compound.  Time to research the investments.  Time to track the performance.  Sell a product?  A lot of work and time to build a loyal customer base of repeat buyers.  Time to build a supply chain.  Time to build a distribution network.  Sell online training courses?  Again, building repeat buyers and your list to sell to is hugely difficult and takes time.  Time to answer questions, do live facebook sessions.  Time.

The big secret?

Don’t spend a cent of the revenue.  Invest it back into your business, so that it can help accelerate the growth curve.  What happens too often is that people start a second income business, and then start using the income to buy more stuff.  The key to it is to pretend that money isn’t there, and keep re-investing it for growth.  It’s goal is to one day replace your day job income.  It becomes a bigger task if you keep spending more money – you have a higher mountain to climb to replace it.

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