In the final analysis, the ultimate value and essence of wealth is freedom. Wealth is all about Financial freedom; freedom from financial worries.
What Is Financial Freedom?
Financial freedom is the point where your passive income exceeds your expenses.
Passive income is cash flow from your assets which requires little or no effort from you to maintain.
It is the point where money flows into your pocket whether you work or not. And if you work, you work because you want to not because you have to.
The other side of the coin is Active Income, where you actively exchange our work for money.
“If you don’t find a way to make money while you sleep, you will work until you die.”-Warren Buffett
Your goal is to get to a point in your financial journey where the assets you have accumulated over time generate enough passive income for you to maintain your lifestyle.
We all have living expenses; bills that must be paid. Your task is to find a way to cover your expenses without the need for active income.
This is financial freedom indeed.
Basically there are four main asset classes you can choose from to help you attain financial freedom:
- Real Estate
- Stock (and related paper assets)
Two principal ways to benefit from an asset:
- Capital Gain.When the value of your assets goes up, there exists an opportunity for you to make money. For example, If you bought an asset, let say a house for $20,000 and then over time the value of the house went up to $30,000, you have an opportunity to make profit on your investment. This kind of value appreciation is called capital gain.
One of the great strengths of assets is that they grow in value along with inflation.
- CASH FLOW. Similarly, you can buy a house and then rent it to provide you with money every month.
The fastest way to achieve financial freedom is to invest in assets that produce consistent cash flow.
What Is An Asset
For a thing to be classified as an asset it must have the potential to generate capital gain or the ability to appreciate in value while at the same time generate continuous cash flow.
The flip side of this is a liability, which is anything that depreciates in value and incessantly takes money away from you in order to service or maintain it.
In conclusion, a good asset should appreciate in value over time while giving you cash flow in the present.
In your quest to achieve financial freedom, you must make acquisition of assets your priority.
You can either buy or create assets; the choice is yours. But by all means you must acquire assets from which you will generate the passive income that would facilitate your achieving financial freedom.
It’s a new day for you!
To Your Prosperity
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