Financial Independent or financial freedom is the goal almost everyone is trying to achieve. The question is are you leveraging the right asset to actually get there? we are sure you might come across the word "Passive Income" which is mostly defined as the income streaming that works for you even you are sleeping. The reality is that you might work sleepless nights in order to achieve passive income. This is really completely opposite. The difference is that active income refers to money you get by working for others while passive income is generated for yourself by working on your own stuff. Therefore, since passive income has your ownership it is more valuable and crucial than active income and it will be with you for the rest of your life.
In this blog, we are going to introduce 9 rules of the way to be financially independent. This is just an education and idea and not financial advice or anything. If you have your own rules to practice please keep continuing.
1. Primary Income
The prerequisite of your financial independent journey is your primary income whether it's a business or a nine-to-five job. A stable income is your best initial bet at getting rich. This type of income is stable and predictable meaning that allows you to plan your finances better. once you have a main job, the focus is to supplement the income you derive from. Do not settle. Ask for raise from your employer if you are confident without waiting for your boss to realize your potential, yeah sometimes you have to be the initiator. Another way, you can look for a better-paying job that is worth your talent.
2. Passive Income
Passive income is the income obtained without actively being involved in the income-generating activity, unlike primary income which requires you to be in the office or the field five days a week from nine to five. A passive income stream is generally hands-off. Passive income is a mightly boost to your goal of achieving financial freedom. Dividends are a common way to generate passive income. Many companies offer the shareholders the dividend return on a regular basis and you can use this dividend return to cover your expenses or reinvest to grow your portfolio. Real estate is another passive income leverage you can pull on. if you own a house and rent you will receive significant returns every month. The best part is you don't have to do the heavy lifting if you're not up to it in that case you can seek the services of property management companies.
3. Side Hustle
A side hustle is an activity that supplements your primary income source usually less involvement than your daily job. However, the side hustle can grow with time and you can own multiple of them as long as you're willing to triple your effort. The side hustle can fasten your dreaming of financial freedom because it allowed bringing more money and paying off debt. There are some side hustles you may consider such as flipping cars, tutoring kids, freelance writing, car sharing, etc. You simply need to think of something that comes effortlessly to you and monetize it.
4. Investment Portfolio
The investment portfolio is a consolidated investment envelope that has all of your assets and securities. Investing is a way to hold protect and grow your finance. Your money will decrease purchasing value over time thanks to inflation and investing is one of the ways to beat inflation. Investment is not only negated the effects of inflation but also earns you profits to the power of compounding interest. For example, if you are investing in a broad market index you can earn from five to eight percent annually depending on the market which is likely better than idling your money in the saving account. An index fund can potentially add more money to your pocket. However, please remember there is also risk out there which you need to mitigate by weighting which is better and safer for you.
Budgeting is a critical step in the long bumpy road to financial freedom. A budget helps you separate the chaff from the good wheat. Budgeting allows you to highlight your needs which will be the first to be taken care of then your wants and savings. The budget is a simple way to the equation of income and expense. It's might look easy but you have to carefully check your expense if it's really a mandatory expense.
6. Retirement Plans
Your retirement plan ensures you are financially independent by the time you permanently leave the workforce and can ensure you are not the burden of your loved one. A retirement plan offers you guaranteed income monthly or specified period to ensure your expense are fully covered without a job. There are different ways to save for retirement such as retirement accounts which give you huge tax advantages.
Frugality is similar to the sentence "living below your means". Being frugal can express itself for the effectiveness of your budget. One of the most common but challenging financial crucial of thumb to follow is saving 10 to 15% of your gross income. Furthermore, eliminate your debt unless it's good debt. Bad debt and financial independence are not matched. Good debt and bad debt are explained in this article.
Patience is a virtue in the financial freedom journey. Remember, Angkor Wat is not built in a single day and neither will your financial independence. Financial freedom is a journey with a thousand steps or more which most people take up to ten or fifteen years to arrive. All through your journey ensure your keep improving at all cost of the steps above such as diversify your portfolio, increase your income, invest in a project that will give you passive income and increase your primary revenues. Furthermore, living below your means even though your income stream is increased.
Gratitude might not seem like an important key factor to financial freedom but it is. Gratitude is a powerful catalyst to happiness for what we have into enough. You need to be grateful for the ability to work towards financial independence. Gratitude also allows you to appreciate every stage of your journey and it's vital to take those small steps for granted with happiness. Furthermore, gratitude also allows you to form a positive attitude.