First Steps into Financial Independence

Woman Set Free

Before we start, I want to tell you what this article is not about. It is not another article that promises you that fancy lifestyle on a yacht in the French Riviera, nor a collection of Ferrari cars in your garage.

However, it will change the way you perceive your income. It will give you the tools to reach your financial goals without the need to actively work for them. It will get you familiar with different types of income-yielding assets (we’ll get to know what they are).

# Firstly, what Financial Independence actually means?

Financial Independence is when the cash flow from your assets is equal to or greater than your monthly living expenses. This is when you don’t have to work for a living.

This is the time when you will become FREE.

Notice that I didn’t quantify the amount of money you need to get before you become “Financially Independent“? That’s because each of us has different expenses, lifestyle and desires.

All of these should be considered when we determine our monthly-passive-income for our Financial Independence.

Now it’s time for your first task for this article.

Task 1

Write down your expenses in the last 3 months.

Does one of these months have extraordinary expenses? Maybe because of an expense you didn’t expect?

We should be considering these unexpected expenses because we don’t know when they’ll arrive, but we’ll get to that soon.

For now, ignore this month and get to a value which represents the average of your month’s expenses.

Got a number?

Great. Write it down.

Congratulations! This was your first step in the long road becoming Financially Independent.

Financially Independent

It seems today that everyone wants to work less and earn more, and we all came across ads which promise to teach us how to generate huge amounts of money without effort, with a workshop of 3-4 hours.

Now, that’s wrong. The search for passive income has been growing in recent years – and for a good reason:

There are much more opportunities today than were ever before, But it DOES require us some effort, will, and motivation. The good news are that IT IS possible today than ever before, and you must take advantage of that.

If you have all of these, you’ve made half the way. The other half is right here, in front of you. This site will provide you everything you need to know, it will awaken your hunger for more- More knowledge, more motivation.

# It all starts with the right State of Mind

You should consider passive income as a way of life, and not just a goal to reach. If you are a salaried employee and you want to earn more $2000-3000 a month – It’s nice, but it won’t allow you to quit your job, becoming financially independent who lives without the need to work again.

You should consider it as a state. A state in which you have income-yielding assets (we’ll get to know them) which generate enough money to cover up the expenses we wrote down in Task 1.

# Can I get to Financial Independence in 5-10 Years?

The answer is absolutely yes.

BUT, it depends a lot on your current situation today, your destination and especially – your motivation. Even though your current situation is not shining, but your motivation is sky rocketing and so is your determination- you definitely can make it.

What matters the most, is your saving rate.

Task 2

Create a new WORD sheet.

Write at the top:

“I will get to Financial Independence at the age of ___”

Calculate, how much months from now you wish you’ll become Financial Independent?

Underneath it, write the monthly passive income you need. This is the number you reached in Task 1.

Below that, write the amount you currently save each month.

Now, if you keep saving this amount each month until the retire day you decided for yourself,

How much will you have?

*Calculate the amount you’ll have in your retire day, assuming 5% return on your savings, and there is no inflation.

Take that amount, divide it with the months from your retire day until the age of 90~.

Is it enough?

I assume it is not.

Don’t worry, we’ll explain how to take care of that.

# It’s not enough! What can I do??

First, calm down. It is totally normal, and this is the situation of more than 90% of the population.

The most immediate thing you can do and that will most certainly increase your fund at your retirement day by the most – is to save more each month. I know it seems troublesome, impossible, imaginary, but that’s the truth. You must. This is the only thing which is absolutely up to you, and to you only.

Next, you should get some passive income to help you out.

# Passive Income… Simply Explained

In reality, the phrase “Passive Income” can be deceiving.

The meaning of it is that the investments you made will generate you income streams, that will require little to no maintenance to keep the money flowing. This passive income can be achieved by acquiring some income-yielding assets.

# What exactly are those “income-yielding assets”?

These are Assets that in the future will generate passive income straight to your pocket. Meaning the money you invested in those assets, will actually create you some income in the future. Meaning you will not have to be near the cashier, actively serving clients, or making money for other individuals like your boss.

Take some time, and learn how you can  earn from each of these income-yielding assets :

  • Equity – Buying shares of companies. Although there is no capital guarantee when buying shares of companies, the returns can be extremely attractive. S&P 500 has generated returns of 54.37%  over the past 5 years.
  • REITs – Real Estate Investment Trusts. REITs provide a way for individual investors to earn a share of the income produced through commercial real estate ownership – without actually having to go out and buy commercial real estate.
  • Internet Assets – Blogs, Ecommerce shops (dropshipping), affiliate marketing, creating your eBook, selling your self-made products (Society6, Shutterstock, Caffepress, Amazon, etc.).
  • Bonds – Another type of fixed-income security in which an issuer (or borrower) is required to pay you periodic payments of a specific amount (or specific rate), at regular intervals.
  • Commodities – When the stock market begins to slump, people usually prefer to put their money in gold. But besides gold, you can invest in many types of commodities. From Crude oil and natural gas to rice and coffee.

 

# Summary

  • Financial Independence, or financial freedom if you’d like, is when the cash flow from your assets is equal to or greater than your monthly living expenses.
  • This amount varies between individuals.
  • Want to know yours? Know your average monthly expenses.
  • When do you wish to retire? Calculate the months from your retire day until the current average life expectancy. How much money do you need? Does your savings cover it? I assume not.
  • What can you do to reach that retirement day with enough money?
    • Save more.
    • Invest in income-yielding assets, so you’ll have a passive income even when you retire.
    • What are those? Scroll up and take a look.
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