Financial freedom is the point where your passive income exceeds your living expenses or we can say financial freedom is the ability to sustain your chosen lifestyle without ever having to work again. One prerequisite skill required for this freedom is Financial Intelligence. You must be intelligent to arrive at your destination.
These steps show the route to take to arrive at the point called, financial freedom. What to do with these steps? Determine where you are, and then you can get counsel to help you move from where you are to your desired destination.
In our society today we have a lot of people running what is called the RAT RACE simply because they lack financial intelligence and those in this category are either bankrupt or near bankrupt. Bankruptcy is when your expense exceeds your income and you have more expense to make but the cash to sort it out isn’t available.
Now to leave this RAT RACE you need to understand 3 basic things:
- Your current status
- Where you intend to be
- How you want to get there
Briefly I will touch on these steps which define our financial capabilities and measures to take to get to where we want to be.
Step 1. Expense is greater than income – In our society we have a lot of people playing in this category. A man who spends more than he earns is simply borrowing from his future to spend now, when he get to his future he’ll have nothing to spend. You are like an aircraft that is nose-diving; sooner than you know it you’ll come to a halt.
Step 2. Income equals expense – At this stage you are earning to spend, your life is in circus. You are living your future now.
Step 3. Income exceeds expense, but no real savings – This person has savings but what he saves is not safe from him. When a problem arises he falls back to his savings then starts rebuilding his savings all over again.
You CANNOT be financially FREE if you fall within the first 3 categories. You are simply running what is called RAT RACE!!!
Step 4. Income exceeds expenses and an escrow account has been created for reserves (savings). – What you save is SAFE from you in the sense that it goes into an escrow account. Meanwhile, an escrow account is a third party account that is guided by rules and regulations as stipulated by you. Reason for this account is to be financially accountable to someone.
Step 5. Escrow has been funded consistently as a habit. – At step 5 you have an accumulation of savings, represented by C1+C2+Cn, you have built the habit of consistency. The important thing here is not how much you earn but how much is left; you can boldly say you don’t live on the expense column. The several ability we have is based on constant habit to save or managing the difference between our income and expense.
Step 6 & 7. Reserve is used to buy asset(s). – While at step 6 your reserve (which is step 5) has grown, then you can now say “what are the assets I need to invest in”? At Step 7 you invest your money into assets. Asset is an economic resource that puts cash back into your pocket passively. If what you are investing your money into will not yield returns but takes money away from you then you have invested in liability.
Step 8. Passive income exceeds living expenses – At this stage you can boldly say I AM FINANCIALLY FREE! The income your asset generates takes care of your expenses.
Step 9. Passive income is multiples of expenses. – When your asset column has grown significantly you can now do the things you love to do and not what you have to do.
Navigating from one step to the other is not rocket science. It requires some guidance and commitment from your part to succeed.
If you require my help, identify where you are and book a session via email@example.com
Share with your friends and find their levels. Step 0 is no income.
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Be wise, be financially free!!!
Categories: Financial Intelligence