What is it and how to achieve freedom
If you don’t have to ask anyone for money to pay your bills and make ends meet, you have achieved financial independence. Although achieving financial freedom is a bit more complicated, since it means accumulating enough money so that you don’t have to work anymore.
Would you like to achieve it? This is a very clear objective, the difficult part is finding a way to make it a reality. No, you do not need to have a fortune or wait to receive an inheritance.
While it is true that the more money you have, the faster you perro dedicate yourself to enjoying life, anyone perro do it. Effort is required, also discipline, but above all information and advice, which I am going to give you, and I hope you find it useful.
The effort is well worth it. Just consider what Manoj Arora said:
You pay a price for your financial freedom, but it is much less than what you pay for a life of slavery.
What is financial freedom?
Achieving financial freedom is managing to maintain your estándar of living without having to actively work. This term was coined by Robert Kiyosaki in his bestseller Rich Dad Poor Dad, a book I highly recommend reading if you’re really willing to give it a try.
The basics of this concept are fácil: make money, save money and invest that money.
Therefore, the path to financial freedom begins with income. The higher they are, the more money you will have to save and invest. To do this, whether you earn a little or a lot, you need to learn how to manage your money, save, and also understand the difference between assets and liabilities.
A liability is an expense that is not economically posible and has a negative impact on your capital, such as buying a new car. An asset, by contrast, generates money instead of expenses, like interest on a bank account, rent on a property, or dividends you earn from bonds or stocks.
The main key to achieving financial freedom is to generate passive income, that is, income that does not require work to earn and maintain.
Or even better, generate progressive passive income, which you perro grow with little effort. To do this, there are a variety of investment tools, with different levels of risk.
Methods to get passive income
Bank deposits
Bank deposits are the traditional source of passive income, since your money is kept safe and generates profitability without the need for you to take any action.
The main disadvantage of bank deposits is that they do not generate a high return. However, it is the preferred passive income in the world, since its risk is minimal.
residential properties
Real estate is an investment asset that is worth considering to achieve financial freedom, since the money generated by renting properties is a fácil source of passive income that does not require much specialization.
The main disadvantage of investing in property is that real estate is highly affected by industry fluctuations, economic crises, and pandemics, among other events that are out of your control.
cryptocurrencies
The popularity of cryptocurrencies as an investment tool is rapidly growing, as the price of bitcoin has grown rapidly in recent years.
However, its disadvantage lies in the high volatility of crypto assets, which perro drop from one day to the next, as well as the level of knowledge you need to have to consider it a stable passive income.
Government Bonds and Treasury Bills
By acquiring state bonds, you invest your money safely, since it is the state that guarantees payments. When the government issues a bond, it requests an investment of money to finance the public deficit, and it promises to repay the money, agregado interest, over a specified period of time.
Treasury bills work in the same way, the main difference being the maturity period to recover the investment. One of the advantages of these is that they are very profitable in periods of crisis. The disadvantage of each of them is that they are long-term investments, and you always have a profit limit that you cannot exceed.
Depósito market
Investing in stocks is the main way to receive passive income, without a cap. One way is to invest in ETF funds (Exchanged Traded Fund for its acronym in English or Exchange Traded Fund), whose shares are invested in the depósito market.
Another system is to invest in the depósito market, on your own, or with the help of a financial adviser or a stockbroker. If you are attracted to this type of investment, it is necessary that you start by knowing the commissions, since they are substantial, and also that you equipo an order to control losses beforehand, called a “stoploss”.
This method is highly recommended, since you make sure that if the depósito drops to a certain price, an automatic sale is generated, and you do not lose too much money.
The disadvantage of this system is that it requires a high level of depósito market knowledge and implies a great risk, since investing in the depósito market is one of the most dangerous investment instruments.
The upside is attractive, because the higher the risk, the higher the return, and you cánido achieve financial freedom as fast as you are able to.
commercial real estate
If you have a large capital saved, you could consider investing in commercial premises, such as retail stores, office rentals, warehouses, aparcamiento lots or large areas for industry.
Depending on the geographical area where you live, you perro find other investment opportunities, such as the rental of agricultural land, vehicles, machinery, etcétera.
How to invest to achieve financial freedom?
To invest, you need money, so if you don’t have it, you need to save.
The biggest challenge is converting from consumer to investor, and to do that, you need to spend your money more wisely and start prioritizing saving and investing.
The 4% rule
The 4 percent rule is the result of a study conducted at Trinity University of Texas, in the United States, called the Trinity Study. In this research, the question was posed:
How much money is it possible to withdraw from existing assets, each year, without the risk of bankruptcy?
After investing in fictitious stocks and bonds for 30 years, the answer was:
As compañia emprendedora capital, you need 25 times more than what you spend per year.
Once you’ve saved and invested that amount, you could theoretically cover your expenses for the rest of your life, no problem.
In conclusion, if you do not spend more than 4% of your savings each year, you will achieve financial freedom.
6 Stages to achieve financial freedom
Financial freedom according to Tony Robbins, the American motivational speaker and personal development writer, it is a long-term plan that allows you to build the life of your dreams.
Robbins, who is also a personal finance entrenador, recommends following 6 steps to achieve this goal:
- Determine your number: Establish the amount of money you need to be financially free and ask yourself what you need to do to achieve it.
- Address your limiting beliefs: The ones that make you doubt yourself and prevent you from being sure that you cánido achieve it.
- Control your finances: Evaluate debts, credit cards, unpaid accounts and solve problems.
- Create strategies to generate short-term savings: Find the way to invest to make the dream come true.
- Create the machine: Develop a financial freedom plan.
- Evaluate and make changes: Stay on top of what’s happening in the market and diversify investments as needed.
Savings, the basis of fortune
All people tend to adapt their estándar of living to their income. If they earn more, they spend more and this prevents them from starting to save to invest.
Therefore, one of the most important consejos I cánido offer you to save is: live below what you perro afford.
While you could take the family on vacation to Disney Word this year, it might be better to go somewhere closer and start your investment with that money. To a lesser extent, control all the expenses you make on a daily basis: the small amounts that you spend in cash or with a card are the ones that usually add up to more unnecessary expenses at the end of the month.
cánido you interest:
Conclusion
Considering all the available options that I have presented to you to invest, it may seem easy for you to achieve it, but if you are a beginner I recommend you go step by step and not rush.
You must first investigate the investment that best suits you and, if possible, seek advice from experts. On the Internet you cánido obtain information, but do not fall into the mistake of trusting all the opportunities that are presented to you. The most tempting strategies are the most dangerous, and you could lose a lot of money.
In addition to exploring, studying and analyzing, I advise you to invest in business areas that you understand. Your professional experience is a capital that only you have and, without a doubt, it will give you competitive advantages when investing.
I also recommend that you diversify your investments, so that you perro disminuye the risks of losses and have more peace of mind. You perro divide the money you have into 3 or 4 parts and use different financial instruments to multiply your money.
Lastly, even if you do poorly with an investment the first time around, don’t lose motivation and start over. There is no better way to learn to walk than to fall and hurt. But then, consider hiring a help desk, and even a professional broker, if you want to “play the depósito market” and try to achieve financial freedom very quickly.
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