Most of us learn about money at home,that is mainly from our parents. They simply say "Stay in school and Study hard so that you could get a good paid job". Thus, we may graduate with excellent grades but with a poor financial mind-set.
That is why so many high-income professionals,doctors,lawyers,athletes and even accountants are basically broke. From outside they may look very rich and "expensive" but in reality they are highly in debts and could not afford to loose their job.Their income could not catch up with their "expensive" living life style and therefore they are basically broke if you add up all their assets minus their liabilities (ie,negative net worth). [read Rich Dad, Poor Dad]
The problem is Money is not taught in schools. We are not taught in schools how to manage our money with a goal to achieve financial freedom. Most of us grew up being programmed that we "have to work hard for money" but not the other way round "money work hard for us".
So, how do we get started?
The financial freedom model is not complicated. In his book Secrets of the Millionaire Mind T Harv Eker laid out four simple elements in the financial freedom model:
(3) Investment (to generate more Passive Income)
Income comes in two forms - Working Income and Passive Income. Working income is the money we earned through our active work, for example our pay check from our day-to-day job.
Working income is important to most of us without which we will not have Savings to generate passive income. However, since working income need our physical involvement we should not totally forcus on it. Passive Income is money that earned without us actively working. In other words, passive income is being earned while we are sleeping or watching our favorite TV programmes.They include dividend income from our stocks, interest income from time deposit, rental income from real estate etc.. We should pursue Passive Income earnestly, as this is when our Passive Income exceeded our living expenses we attained the Financial Freedom.
Savings is so important. Without savings we can't go to the next stage - Investment. You can earn a lot of money but if you don't keep any of it, you will never create wealth. Financial Freedom is not how much money you have but is more about how much money you could keep and grow. Delay your immedaite gratification to achieve long term financial goals.
Invest your savings wisely so that to grow your money. Every dollar in your bank is your employee so make sure they work hard for you. Generally, the better you are good at investing, the faster your money will grow and generate a greater net worth (I will show you how in my future postings, so stay tuned).
Simpliciation in my own words is having a cost of living that substainable by our Passive Income. Remember, our utlimate goal is to be financially free and have time to do things that we always like to do. Thus, if you want to have three vacation homes then go out to find enough passive income to support this financial committment. If you can't stay put at where you are first, but do not forget your dream of having three vacation homes.
Harv's book Secrets of the Millionaire Mindis a good book to start to get our mind-set ready to be financially free. I hope you will benefit from his book and get ready to be financially free, it is easy and sometime is fun just like a football game.
To your success and happiness.