Learn The First Important Step To Achieve Financial Freedom (Part-3)

Financial Freedom

Financial freedom is achieved when one is able to live in his mean without earning an active income. In other word, one’s passive income is more than enough to support his desired lifestyle. Passive income is defined as income earned without one actively involves in the income generating activities, while active income is income earned that requires active involvement in the income generating activities. A person who is financially freed, can choose to work or not as long as he wants but still live in his desired lifestyle - indefinitely.

In the Action Plan to Financial Security (Part-2), action plans are defined to come out with income streams that could support one’s basic lifestyle. In order to be financially freed, one needs to come out with higher passive income streams that can support their desired lifestyle, freely. To be able to spend freely, one usually don’t need worry too much on his spending habits and the amount he spends. However this is very subjective, to some people, to be able to spend freely, he wants to be able to buy luxuries and still have abundance of money left to support his lifestyle. While for some other people, to be able to live and spend freely don’t require that high of a cost.

Action Plan to Financial Freedom

Since to be able to live and spend freely are subjective and depend on the person’s desired lifestyle, in your action plan, you need to list of the desired items and state the costs involve, such as below:

1. Upgrade to a higher range car with a monthly commitment of 1,500 to 2,000. Totally around 18,000 to 24,000 per year including higher insurance cost and maintenance fee.
2. Buy a home/condominium in a good neighbourhood with monthly instalment of 2,500 to 3,500. Totally 30,000 to 42,000 per year, including miscellaneous costs.
3. Buy the luxury items you always wanted like jewelries, watches, handbags, clothes and etc. Try to give an estimated lump sum total for these item, say 20,000 per year.

Total expense in above 3 desired items = (18,000 to 24,000) + (30,000 to 42,000) + 20,000 = From 68,000 to 86,000

These are my ideas of luxuries. If you have more desired items, you may list it down into your action plan and add to the total expenses, after all, the definition of financial freedom is very subjective from one person to another. Since this is the extra from your basic lifestyle, it also means you need additional income streams that could generate as much as 68,000 to 86,000 per year.

The same steps you need to follow in drawing out an action plan to become financially free; list out as many income opportunity ideas you can come out with, the step-by-step descriptions, targetted income for each, deadline to realize each income stream, etc and then total up these passive incomes. It is also make sense to expand the same passive income streams that provide you the financial security. Since you have the experience and also the know-how, it will be easier to think of innovative ideas to expand the existing passive incomes. Below are some general ideas to improve the existing income streams:

1. Part time business – Look out for expansion business opportunity. Look for greater innovation for higher business income, or improve business efficiency and reduce cost. If the business is easily duplicated, it will be easier to expand (open new branches).
2. Internet business – open to more internet business opportunity, there are a lot of ways to improve internet business revenue. Upgrade your existing web site in appearence. Improve sales letter effectiveness. Optimize internet traffic so more people get to know your product. Create more intellectual properties/product.
3. Blogging – Enrich the content of your existing blogs by providing more informative and unique contents to attract more audience. Besides, one also can use other third party services to improve the blog’s viewing traffic such as article submission to reputable sites, press release, link exchange, etc.
4. Dividend – top up to existing stock ownership, one also can increase the return in stock dividend. However, in order to largely increase the dividend return to support the desired lifestyle, investment capital is also huge, approximately half to a million.
5. Real estate rental income – acquire more positive cashflow income. Again, in order to largely increase the rental income to support a different lifestyle, one needs to acquire many more of such assets thus require more intensive upfront investment capital and time to raise the capital.

If you have successfully completed the action plan to become financially free – total additional passive income that is more than enough to cover your desired lifestyle expense. Then congratulation! you have made the first of a thousand steps to achieve financial freedom. You may start to work on the steps defined immediately. Along the journey, you need to constantly review your progress by referencing the action plan. For easier review, it is also a good idea to come up with an exhaustive check list of steps or items that are done or to be done. To end this article, I wish the best of luck to our financial freedom!

There is a saying…

~~ A journey of thousand miles starts from a single step ~~