Learn The First Important Step To Achieve Financial Freedom (Part-2)

Financial Security

Financial security is achieved when one person’s total passive income is able to cover all his basic expenses. Passive income is defined as income earned even you don’t actively work for it, while active income is income earned that requires active involvement in the income generating activities. People who live within financial security can live the most basic lifestyle without earning an active income, for as long as he/she wants – indefinitely.

Examples below are some of the very basic expenses need to be covered by total passive income in order to live a basic lifestyle:

1. Home and car loan plus interests
2. Transportation related cost like petro, car maintenance cost, insurance cost, public transport cost, etc
3. Food, groceries and basic home suporting items
4. Home utilities include water and power.
5. Satellite TV subscription fee. If it is your basic need, then you should include that as well.
6. Children expenses like school and tuition fees.

Of course, with a longer expense list and higher cost, it will naturally take a higher passive income to achieve financial security.

Action Plan to Financial Security

In order to achieve financial security, we need to come out with a plan on how we can build additional income streams. In order to build additional passive income, we need to be constant look out for income opportunity. Below are some examples of high level description of income stream you can start building:

1. Look out for business opportunity and build a part time business during free time.
2. Internet business opportunity. Start a internet business selling your own product or other peoples products
3. Write blogs to earn advertising income
4. Invest in high dividend stocks to earn dividend income, however to earn decent income through stock dividend usually require very large investment capital – approximately few hundred thousands.
5. Invest in real estate such as condominium, apartments, and shoplots to earn rental incomes. However real estate investment usually require high upfront capital as well. Zero downpayment purchase that provide positive cash flow are difficult to acquire but not impossible.
6. Fix deposit. Due to economic outlook, the FD rate is no longer attractive, at least for another 1 or 2 years. If one truly commited to achieve financial security, this method is not recommeded.

The above are my ideas of generating passive income and it is not limited to just above. If you have some better ideas, do write it down into action plan list, list down as many income stream ideas as possible. For each of the idea it is also important to state; the steps you need to take, targetted income amount for each, how long required to achieve each income stream objective, deadline, etc. When you have listed down all your income streams ideas with all mentioned inputs, total up all the targetted passive incomes. Are the total passive income streams enough to cover your basic expenses? If yes, then congratulation, you have just finished your very first action plan to become financially secured. You may immediately start taking the step one-by-one.

The next part is on financial freedom, which is the ultimate goal in our action plan…