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What is Financial Freedom? – Formula, Types, and More

What is Financial Freedom

Financial freedom consists of having enough financial means to cover all your needs in a specific time, without depending exclusively on a salary.

The concept of financial freedom refers above all to the feeling of not being tied to a job, simply because you need the money your boss pays you to be able to live.

The Formula of Financial Freedom

 

You could say that people who have achieved financial freedom have been able to cope with the biblical curse of earning their bread with the sweat of their brow.

But they have not done it because they are rich or have understood the definition and meaning of entrepreneurship better than others. Because they have managed to save and generate a series of income that allows them to dispose of their lives want.

Here we can see two basic elements that are essential to obtain financial freedom:

1. Savings

2. Passive Income

What are the Types of Financial Freedom?

What are the Types of Financial Freedom

 

To achieve financial freedom, we have to assume that a process must be divided into phases or financial independence types.

Unless you are a millionaire from birth, it isn’t easy to achieve financial freedom without first going through the following types:

1. Financial Security

2. Financial Freedom

How does Financial Freedom Works – for Beginners

If what you are reading appeals to you, we will show you how financial freedom works because we are sure that you are not familiar with this concept.

Keep in mind that this is something that not achieve in a few months. You have to work hard and be frugal and conscientious for many years.

Anyway, suppose you want to live a better retirement – without depending on state pensions (which will sooner or later reduce) -, or plan to “fire” your boss in the medium or long term. In that case, you must follow this plan aimed at achieving freedom financial for beginners :

1. Analyze

How Much

  1. If it is a large amount, do not panic since we have written this post so that you learn how to pay it all later.
  2. Suppose it’s a small amount, congratulations! Feel free to share your financial freedom tips in the comments at the end of this article.
  3. Take a look at all the money you’ve saved below.
  4. Make a list of all your current funds: cash, bank accounts, stocks, treasury bills, outstanding debts, retirement savings account, or other retirement plans. Then add the monthly payments you receive like your salary, the income you receive from other jobs, etc.
  5. Keep these statistics in mind as we work through the following tips to achieve your financial freedom.

2. Write your Goals

3. First, Financial Security

4. Create a Passive Income System

Although you will see that it is imperative to save in the next point, you must also generate this income type. Because as long as you do not articulate this income-generating system, you will be wasting your time (since in a job, you sell your time to your boss, and the time available to work is limited).

Start rational about how you are going to generate income like these periodically:

Interest

  1. A good investment generates returns in the form of interest or dividends. If you buy shares, prizes are distributed from time to time.
  2. And if you buy treasury bills, the state agrees to pay you some interest to remunerate you periodically.

Rents

  1. If you are a property owner, you can rent them to obtain economic returns in the form of rents.

Recurring Income

  1. There are many ways to earn additional money that you can exploit. For example: if you sell affiliate products or have a membership.
  2. It will receive amounts of money from time to time as payments for the service offered in the membership or commissions for the sales you make through your website.
  3. Analyze what your competitive advantage is and take advantage of it to get more recurring funds.

Copyright

  1. If you write a book, you will entitle to a percentage of that sale as copyright each time it sells.
  2. The same happens if you compose a song, since Spotify’s reproduction, for example, generates royalties.
  3. And if you sell a course, every time someone buys you access to that course, you will be making money without doing anything.

5. Save Everything

How to get Financial Freedom?

 

You have already seen what financial freedom means and how economic freedom achieve when you are a beginner.

We’ve even given you a little plan to get you started. But maybe you find yourself a little lost and don’t know how to start saving and generating that first income.

So now we are going to give you some examples of how to achieve financial freedom. Examples and ideas to achieve financial freedom:

1. Invest your Savings

2. Buy Experiences, not Things

3. Pay your Debts as soon as Possible

               Snowball strategy: pay the smallest debt first.

                Avalanche strategy: you pay off the debt with the highest interest rate first.

4. Create Additional Sources of Income

If you want to have financial freedom, it will cost you blood, sweat, and tears.

If you don’t have enough with your regular job, you should find money by doing more jobs in the time you have free. Some experts recommend having seven sources of income.

We never tire of repeating that if your income base on the time you work, you limit by the hours of the day. We give you some ideas to start a profitable business with which to obtain additional income:

And remember: you do not need to start with all seven simultaneously; you can develop them over time.

5. Move to a Poorer Country

6. Invest in the Stock Market

7. Invest for the Future

Calculation of Financial Freedom

Now that you know it let’s do a calculation to find out how to achieve financial freedom and how to answer the question of “how much money do I need to live without working?”

This financial freedom calculator base on three elements:

1. Find out How Much Money you Have

2. Calculate your Monthly Expenses

3. Calculate your Financial Freedom

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