Each and everyone’s most important and unachievable dream is financial freedom, but most of us fail to achieve the same. This is because we used to angle it in different dimensions. In someone’s definition, financial freedom will be,
- Earning more.
- One of the top 100 richest men in the world.
- Becoming rich.
- Having 9 digit bank balance.
- Debt free.
- Building more assets, etc.
- Owning a private jet, guest house, bungalow, etc.
What is Financial Freedom?
It is defined as the process by which we live our lives without any financial struggles or burdens until our last breath and transfer the same legacy to our future generations. In simple terms, it is free from the problems associated with finance, even for our generations.
In this subject, we shall go through a few phases, how to achieve financial freedom
- Learning on Assets and Liabilities.
- Converting Liabilities into Assets.
- Time and Skill – The real source of Income.
- Increase your Income, not your expenses.
- Get out of your Comfort Zone.
By the end of this small topic, we all will be on the same mindset of becoming financially free, but it’s not a single-day BELIEVER SONG. We have to implement every day of our life. Until you clear all your debts, financial freedom will be like “writing your dreams on water.”
Asset and Liabilities:
Asset: In simple terms, An asset brings income or puts money into your wallet. The asset has to create income, or it must grow on its own, like gold, shares, etc. For example, if we rent a house that brings us a monetary benefit, an income will be an asset.
Liabilities: Liabilities are things that take money from our wallets and don’t bring it back at any time. For example, the house we built for our residential use, even though it’s an all-time need, is just consumption and doesn’t make any income unless we rent a particular portion of it.
Note: The above differentiation on house renting vs owning is just for an understanding of assets and liabilities; it is not a debate.
Have a look at our article on Basic Habits to develop in financial planning
Converting Liabilities Into Assets:
This is an interesting topic, where we shall learn how to use liabilities to earn assets.
- If we have two residential houses, use one to stay in and rent another house for rent, which will bring you monthly income.
- If you own a car that is often in your parking without any use, it can be used as a taxi to generate income in your free time. There is nothing related to our pride in earning through taxis being in financial burdens.
- Sell the unused and unwanted things at home and generate income as an asset.
- Money in hand or in the bank is a liability; invest it wisely and convert it into an asset.
- If you have a portion of your house vacant, like you live in a 3BHK house, and you are enough with 2BHK, you can rent 1 BHK for tourists who visit your area. This is commonly used as a source of income in foreign countries.
Time and Skill – The Real Source of Income:
Have you ever thought about the source of income? Commonly many people use to say job, business, etc. Ideally, it’s not the source of income, it’s your time and skill that will be converted as your income.
- First, you must calculate your one-hour income and then one-minute income. For example, if a person earns Rs. 60000 monthly and works 24 days a month for 8 hours a day, the person’s one-hour salary will be Rs. 312.5, and the one-minute income will be Rs. 5.2.
- When you are a beginner in your career, you will also be a beginner in your skills. That’s why your pay will be limited, and while you increase your skills to the master level, you will be paid in the same proportion.
- Learn new skill sets that will be the future of your career or that will boost your business ROI (Return on investment).
- While you understand that time and skills are your source of income, hold your day with productive time management. You must be able to realize that spending your 3 hours in the movie is a waste and it makes a loss of Rs.1000+.
- You must invest your time in learning new things which will lead you to update your skills.
Note: Most people use to say that they don’t have time. We all have to understand that “Only dead bodies don’t have time”
Find out the Steps to Financial Independence for Women.
Increase Your Income, Not Your Expenses
To achieve financial freedom, the most valuable part that everyone should learn is, how to increase our income, not the expenses. Most of us are in the 97%, i.e people who spend a lot more than earning. If you want to become one among the 3% i.e people who earn a lot more than spend, you have to change your mindset as well as have to work very hard to achieve it.
- The moment when money starts to fill our wallets, our underlying pride sprouts out to establish how wealthy we are to society and live to please others’ eyes.
- The aim of your financial life will not make you financially free. Instead, Plan your dreams and goals and work towards achieving them.
- You might have a goal to build your dream home in the next 10 years with the current income, when you increase your income, the same dream can be achieved within 5 years, and you can start investing in other dreams.
- In the same way, you might have planned to be financially free within some years. It’s not that you to achieve it on your deadline, never the less you can achieve it before, by using the formula.
- Increase your income as much as you can but stick to the same expenses that you spend till the present day to make you happy.
- Find all the ways and means to increase your income, which most successful people are doing.
Check out our article on the 7 Ways to Invest 10 Lakhs for Monthly Revenue.
Get Out of your Comfort Zone:
The crucial part of everyone’s life is being in a comfort zone. This is the biggest problem that no one knows. Even our parents guide us to get government or bank jobs, they think these are the only means to be comfortable. The real danger zone is sitting in a comfort zone.
- Smart work is the hardest of the hard jobs.
- Create an income source that will have potential in the long run, even if it doesn’t yield any income at present.
- Sitting on the same job with the same skill sets never looking for any updates, and living in the 9-6 rat race will never make you financially free.
- When you come out of your comfort zone and ask the universe to work for you, it will help you get more solutions and services to become financially free.
Conclusion:
Work for building assets and not for liabilities. Differentiate properly the assets and liabilities.
Work on how you can shift all your liabilities into your assets. Understand your time and skills are your real income. So, before wasting your time in unproductive ways think twice that you are losing some income.
Increase your income and not the expenses, while you do this way the chance of attaining all your dreams and goals will be faster. The weakest zone of our life is sitting happily in the comfort zone, it can backfire at any point in time.
It’s time to develop all these attributes and qualities in our lives quickly and implement them in our daily lives. Make sure that we will be shifting ourselves to attain financial freedom.
This subject is completely taken from a practical sense from most of the successful financial leaders and even from my mentors and myself.
If you have any thoughts or comments please do share with us. Also, if we need to cover up on any specific topic please let us know. We will work together in bringing valuable content to enhance the wealth of your life.