There are many different interpretations of financial freedom. Try asking your family and friends what it means to them to be financially free and they would likely be giving you different answers. Some people define financial freedom as being very rich. To some, it's a state where one can afford anything that he or she desires. Then there are those who think that being financially free is to be totally debt-free. Still, others see financial freedom as having sufficient money to retire. As you can see here, financial freedom means different things to different people. What does it mean to you?
What is the real meaning of financial freedom? To me, you'll be financial free when your passive income exceeds your expenses. Even if you quit your job today with no more salary going into your bank account regularly, you'll still have passive income to cover your expenses. This is a situation where you'll never worry about money again. You now have no fear even if you lose your job. You work because you want to and not because you need to.
Importantly, note that it is passive income that I'm talking about here, not active income. What is the difference between active income and passive income?
Active income is the income you get for performing a service. The salary paid to you by your employer is active income. It requires your active participation. Simply put, you get paid when you work and you'll be paid nothing if you don't work.
By contrast, passive income is the income that you get on a regular basis without your active participation. An example of passive income is the rent collected from the tenant on an investment property.
Being wealthy and being financially free are entirely two separate things. While it is common for one to assume that those who achieved financial freedom are rich financially, the truth is that being financially free has absolutely nothing to do with whether you're wealthy or not. Therefore, even millionaires are not financially free if their total incomes are unable to meet the expenses arising from their rich lifestyles. Thinking of becoming a millionaire can be daunting but financial freedom is certainly achievable. Many people actually became financially free first before they moved on to become millionaires!
Have you been chasing after money without knowing exactly why or how much is needed? I hope that knowing the real meaning of financial freedom would help change your perspective and ultimately your life. Why? Because you're in control of your expenses and the passive income that you intend to pursue. You can start your journey towards financial freedom now by controlling your expenses. At the same time, begin saving more money to invest in assets for multiple streams of passive income.
So, when will you be financially free? You call the shots!
Kelvin is a millionaire investor, landlord and author. He held senior management positions in multinational corporations before retiring from corporate employment in 2007 to manage his own investments. An active investor in real estates since 2000, Kelvin now owns several properties in Singapore and Australia worth millions of dollars. Kelvin has achieved financial freedom by 39. A Dean's List graduate in the top 5% of the university's cohort, he holds a Bachelor of Business degree in Marketing & Management Science and a Diploma in Business Management.