Frequently we are quick to place a price on which financial freedom methods to us. Lots of people say "I desire to be a millionaire - so I need one million dollars in the bank" ;.Or, "If I made $200,000 a year, I would be financial free." So set aside a second and think: what's our financial freedom figure?
Wikipedia defines Financial Independence as "a term generally used to explain their state of experiencing sufficient personal wealth to live indefinitely and never having to work actively for basic necessities." (Note that Wiki doesn't define Financial Freedom - it takes one to its Wealth definition.). Have you ever actually sat down and really figured out just how much wealth you will have to reach financial freedom ? Does it mean a specific amount in the bank? Does it require a certain income monthly? Well, the clear answer varies for anyone, and will surely depend on your stage of life. Read on for many items to ponder when wanting to develop your Financial Freedom Figure.
Let's look back at two parts of the meaning: having sufficient personal wealth to live indefinitely and never having to work actively.
By the time you're 65, you could possibly be earning enough government pensions never to actively work until your last days on earth. Even in your twenties, you might be become disabled, and government assistance and disability insurance could cover your basic necessities for life. So, seniors and people on disability support technically are financially free. Their financial freedom number is dependant on a specific amount of money monthly in government and disability pensions. But realistically, we know that anyone on a government pension or disability would hardly jump up and down and say "I'm free, I'm independently wealthy, and I'm rich!" These individuals could have their month expenses covered, but unless they have some money reserves as well, they are limited to spending only what their pensions bring in. For a person inside their 80's, this can be just fine - their expenses are low, they aren't providing for a household anymore, and may not really have a spouse to care for. But then again, they may have huge medical expenses and care-home expenses. So unless the senior has a good net worth, he may possibly not be financially free.
The twenty-something who's on disability will most likely have a tougher time saying he's financially free. He may be single now, but each time a spouse and children come his way, so does the mortgage payments and bank card bills. And the thought of living the next 50 years on a collection, minimal income is not all that appealing. Again, he'll be forced to spend only what his disability pension brings in. But, technically, he has reached financial independence.
Is this everything you thought financial freedom would seem like? Well, for a few people it might; so long as your entire basic needs - food, water, shelter - are met, shouldn't you be happy? Or are you on one other end of the spectrum, thinking about boats, cars, vacations, and fancy clothes once you dream of financial freedom ?
For many who are leaning towards the "fancy" side of financial freedom , I ask you this: Is it possible to not have those nice things while you work? Of course you can. Do you're feeling rich once you accumulate those activities? Probably, but this will depend on in the event that you used debt to get them, or you covered your luxuries with cash. You could feel rich by paying cash, but when you still have to work the next year to save up enough to get another luxury, are you really free? And in the event that you used credit to purchase your items, then you may feel rich when using the item, but not so rich once you sit back to cover your bank card balances.
Being financially independent is more of a lifestyle quality than it is just a quantity. You need to determine what quality of life you wish to attain first, and then you can certainly start calculating a figure to support your chosen lifestyle. And your lifestyle quality will change through-out your life. You could consider yourself financially free during your child-raising years if you've were able to either save enough in cash or earn enough in passive income annually in order that you don't need to go to a job everyday during your children's first five years of life. Or maybe your freedom comes from getting the wealth accumulated in order that in your 40s you are able to take 5 years off to go back to school and obtain a university degree. Maybe financial freedom is as simple as renting out your residence for $2000 monthly for a year, and moving to a foreign country to live on less compared to $2000 monthly your passive income rental generates.
Did you consider these scenarios when you initially looked at financial freedom ? Lots of people do not - they simply consider retirement at age 65, or winning the lottery. Most people expect that they will always work until retirement, and few people consider generating passive income outside of the jobs.
Why can't we do both? And why can't we be financially free for just a year, five years, as well as 6 months? We could, but we are programmed to think "forever" and "never work again" ;.I would sure be happy and feel wealthy and free if I were to express "Yes, I stayed at home with the children while they grew up, because I was financially free" or "I spent a year in Costa Rica learning Spanish, because I was financially free for the year" ;.So I return to work after those events in my entire life - big deal. At the least I really could say I reached financial independence before my meager government retirement pension kicks in, and my hips or heart gives out. And you are able to bet your savings account that if being "free" for just about any period of time, your appetite to generate more passive income will soon be ferocious: more passive income means more freedom.
So, what's your Financial Freedom Figure? Don't focus on the numbers, but with your heart. What lifestyle do you really want to live?
Just how to Save Your Finances is an internet site providing information, products, and insights into the journey of increasing your net worth, and attaining the goal of financial freedom. Please interact the conversations at https://www.centerforworklife.com/.
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