financialtreat – will explain about Financial Freedom or Financial Independence? Which you will get in the following article. Let’s look at this article carefully!
Often, financial freedom and Financial Independence are interpreted the same. But are they indeed one and the same? Or are the two different? Think of a child. When toddlers first learn to walk, they achieve some level of mobile independence. They no longer need an adult to take it from point A to point B. They can get up and drop the cup off the table by themselves now.
However, even as toddlers gain their independence little by little, every parent can tell you about the “I’m tired” whimper while out for a walk. This suggests that, although children have mastered the basics of mobility, they can’t go anywhere on their own. The same basic framework applies to finance. Let’s take a closer look at Financial Freedom vs. Financial Independence.
Financial Freedom vs. Financial Independence
Think of it this way. What would happen to your life if you lost your job today? Do you still have enough income through sources other than your salary to cover your basic living expenses? Have you set up an emergency fund as a backup? What about earning enough to fund your current lifestyle indefinitely?
We are talking about income, not savings. Savings will run out sooner or later, but sustainable passive income will last forever. The income you receive from your job is active income. To gain financial independence and financial freedom, you need multiple streams of passive income, the kind of money you make while you sleep.
No one reaches financial freedom or early retirement overnight. This is a process, and there are many stages along the way.
Stage One: Financial Security
If you lose or quit your job today but still have enough income coming in through other sources to cover your basic living expenses (e.g., food, shelter, clothing), then you will be financially secure.
Sure, you may have an emergency fund that can cover your expenses for a month or two. But what about when the money runs out and you still don’t get a job? This is why additional sources of income are so important.
Financial security is the first rung to financial freedom and early retirement. Financial security gives you the confidence to know that, even if you lose your job today, you can still cover all your important expenses, without asking mom and dad for a loan.
Stage two: Financial Independence
If you have enough passive income to fully cover your current lifestyle, including all the small extras beyond the basic basics you currently enjoy (for example, the latte you get every morning, your Amazon Prime membership, the family trips you do several times a day), then you’ll be considered financially independent.
Being financially independent means you can retire early and move on with your current life without having to work again. To become financially independent, you have to build multiple streams of income. This allows you to continue earning regardless of what you choose to do on a daily basis.
Stage three: Financial Freedom
Many people stop at Financial independents. But what if we take it one step further? Maybe being financially independent is not enough for you. You want to experience true financial freedom.
True financial freedom means that your passive income includes not only your current lifestyle but also the lifestyle you’ve always dreamed of. Fly first class at all times. Get a suite with that sea cloth. Shop in that front row seat. This is true financial freedom. Financial freedom means you have enough passive income to do everything, without having to worry about where the money is coming from.
Once your finances allow you to go anywhere and do whatever you want, without you having to work for it or worrying about it, you will achieve true financial freedom.
Your Path to Becoming Financially Free
Every healthy child who learns to walk starts from the same place and develops on the same path. They went from being helpless at all to being able to roll, able to crawl, able to take a few steps, walk steadily, and then run and jump.
During the journey to financial freedom, everyone may start from a different place. However, the final goal, as well as the stages along the way, are the same. Many people spend their entire lives living from paycheck to paycheck, unaware that they can retire early or achieve the independence and life they dream of.
But you are different. You’re here because you know that there’s something better out there for you and that you have the power to create the life you’ve always wanted to live. A great place to start your journey to create a meaningful life by design is to know your exact passive income goals.
Financial Security Number
Start with your current expenses. Look at your accounts and bills, and take out items related to basic living expenses – food, shelter, clothing, and other basic necessities. What is the average amount you spend on these items per month? That’s your financial security number.
Financial Independence Number
Next, check out all your current finances and lifestyle. Find out your current average monthly expenses for everything – basic necessities, plus all the good stuff you’re currently spending. This is your financial independence number.
Aim to achieve financial independence by building various income streams. When you achieve financial independence, you will be able to quit your job and still bear the costs of your current lifestyle.
Financial Freedom Number
Once you know your financial independence figures, the next step is to think about all the things you want in life. Make a list and find out how much it will cost. This is an important step, as most people overestimate how much it costs to live their ideal lifestyle. Use these numbers to determine your financial freedom number.
Your financial freedom figure is the passive income you need to generate per month in order to not only live your current lifestyle but also your ideal lifestyle, to do all the things you want, to give back at the level you’ve always wanted. want, and to live the life you’ve always dreamed of.
Once you have a financial security number, a financial independence number, and a financial freedom number, you’ll have clear milestones to go to and be able to start building in that direction steadily.
How to Achieve Financial Freedom Through Investing in Real Estate
More people become millionaires through investing in real estate than through any other means. Why is that so? Well, think about all the ways you can generate different streams of income in your life. You can write a book, start a business, create a new award-winning mobile app, or pursue many other ventures.
However, all such ventures require skills, knowledge, experience, connections, and often, significant start-up capital. Okay, now let’s take a look at real estate. One of the simplest ways to invest in real estate is to buy a property and rent it out. Yup, like Monopoly. Sounds pretty easy compared to all the other complicated endeavors, right?
That’s what all those real estate millionaires think too. You don’t need to be a rocket scientist to invest in real estate (although we certainly know some who do). You don’t need a lot of money to get started either.
Investing in Rental Properties
Let’s say you have Rp. 200,000,000 to invest. You put in rp. 150,000,000 to buy a house, and you spend the rest to repair it a little bit. You can make the house with several rooms. Let’s say there are 4 rooms in it. With a rental fee of 500,000 per room, you will get 2,000,000 rupiah per month. One year you will get 24,000,000 rupiah.
Also Read Financial Independence:
- What is a Financial Plan and How to Create a Financial Plan
- How to Set Your Financial Goals Correctly
When calculating the capital of 200,000,000, this is relatively small. But imagine if you have 3 eco-houses like that. Then you will have a passive income of 72,000,000 per year or 6,000,000 per month. The nominal is quite enough to live a middle-class life without having to work.
No miracle will lead you to Financial Freedom instantly. You have to build your own path, step by step. If you really want to achieve it, then you have to be patient and make a mature plan. Most importantly, start now. Good luck!