Frequently we are quick to put a price on which financial freedom way to us. Many people say “I desire to be a millionaire – so I need one million dollars in the lender “.Or, “If I made $200,000 a year, I could be financially free.” So take the time and think: what’s our financial freedom figure?
Wikipedia defines Financial Independence as “a term generally used to spell it out the state of experiencing sufficient personal wealth to reside indefinitely and never having to work actively for basic necessities.” (Note that Wiki doesn’t define Financial Freedom – it will take one to its Wealth definition.). Perhaps you have actually sat down and really figured out just how much wealth you would need to reach financial freedom? Does it mean a specific amount in the lender? Does it require a certain income monthly? Well, the clear answer varies for anyone, and will certainly depend on your own stage of life. Read on for a few things to ponder when attempting to come up with your Financial Freedom Figure.
Let’s look back at two areas of the meaning: having sufficient personal wealth to reside indefinitely and never having to work actively.
By enough time you’re 65, you might be earning enough government pensions not to actively work until your last days on earth comment avoir la liberté financière. Even in your twenties, you can 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 based 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 people might have their month expenses taken care of, but unless they have some dough reserves as well, they are limited by 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 have a spouse to care for. But then again, they could have huge medical expenses and care-home expenses. So unless the senior has a good net worth, he may not be financially free.
The twenty-something who’s on disability will probably have a tougher time saying he’s financially free. He may be single now, but whenever a spouse and children come his way, so does the mortgage payments and credit card bills. And the notion of living the following 50 years on a group, minimal income is not all that appealing. Again, he will be forced to spend only what his disability pension brings in. But, technically, he has reached financial independence.
Is this what you thought financial freedom would seem like? Well, for a lot of it could; as long as your entire basic needs – food, water, shelter – are met, shouldn’t you be happy? Or are you currently on one other end of the spectrum, thinking about boats, cars, vacations, and fancy clothes whenever you dream of financial freedom?
For individuals who are leaning towards the “fancy” side of financial freedom, I ask you this: Could you not have those nice things when you work? Of course you can. Do you’re feeling rich whenever you accumulate those things? Probably, but this will depend on if you used debt to acquire them, or you taken care of your luxuries with cash. You could feel rich by paying cash, but if you still have to work the following year to save up enough to get another luxury, are you currently really free? And if you used credit to purchase your items, then you might feel rich while using the item, but not too rich whenever you sit down to pay for your credit card balances.
Being financially independent is more of a lifestyle quality than it is a quantity. You need to determine what quality of life you need to attain first, and then you can go about calculating a figure to support your chosen lifestyle. And your lifestyle quality will change through-out your life. You could consider yourself financially free throughout your child-raising years if you’ve managed to either save enough in cash or earn enough in passive income every year so that you don’t need to visit a job everyday throughout your children’s first five years of life. Or maybe your freedom arises from getting the wealth accumulated so 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 can be as simple as renting out your residence for $2000 monthly for a year, and moving to a foreign country to reside on less compared to the $2000 monthly your passive income rental generates.
Did you think of any of these scenarios when you considered financial freedom? Many people do not – they simply think of retirement at age 65, or winning the lottery. A lot of people expect that they can always work until retirement, and few people think of generating passive income outside of these jobs.
Why can’t we do both? And why can’t we be financially free for only a year, five years, as well as six months? We can, but we are programmed to consider “forever” and “never work again “.I would sure be happy and feel wealthy and free if I were to say “Yes, I stayed at home with the youngsters while they spent my youth, because I was financially free” or “I spent a year in Costa Rica learning Spanish, because I was financially free for the entire year “.So I go back to work after those events in my 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 any amount of time, your appetite to generate more passive income will be ferocious: more passive income means more freedom.