Is Financial Independence Within Reach?

My parents are my biggest role models

It doesn’t matter how much you earn but much you save that make a difference claimed my mother.

While my father on the other hand, bought some residential and farm lands and told me that these investments will eventually grow in value over time.

Most’s parents, just like mine, will tell you – Go to school and finish college so that you’ll have a good paying job.

Does finishing school guarantee financial success?

The answer is a big NO. In fact, you don’t even need to finish school to achieve financial freedom.

Yup! You heard it right. School will not make you rich and I’m sure this is not the first time you heard about it.

Our educational system and perhaps, anywhere around the world don’t teach financial literacy. (or at least to my knowledge!)

They teach us, how to work hard, get a degree and earn money but doesn’t teach us how money works. Oh! well, If schools taught us the latter, then there is no point going to school. Right?

I didn’t necessarily say that finishing school and have a degree is a bad thing. Certainly it’s not the only way to achieve financial success and independence.

You probably already know well-known individuals and successful people that didn’t finish school who become ultra-rich and billionaires such as Microsoft’s Bill Gates and Facebook Mark Zuckerberg to name a few.

Do wealthy people have a secret formula?

The affluent few is always the envy of the average individuals. Why is that?  Do they have a secret formula of achieving it?

Except to those lucky individuals who were born rich, there is none actually!

You don’t even need to be a genius, a doctor, a lawyer or have a degree in mathematics and accounting to become wealthy.

What separates the average individual to becoming financially independent?

It is simply the values that we were not taught at home and in school – financial literacy. It is the concept of earning active income vs. (multiple sources) passive income that separates the average individual from the wealthy.

Earning an Active Income

After finishing school, you find a job and get hired as a regular employee. You get paid for the hours that you do. This is called earned income. 

You trade time for money. Did you even realize that there is only 24/7 or 4 weeks in a month? – That means that time is limited and there is only so much you can do.

At times, you work overtime or taking a second job hoping to bring more money home but this also counter-intuitive as the more hours you work the more tax you pay. Employees are often taxed the most – up 40%.

As a result you are basically working hard for your money.

Middle class is no different

The middle class on the other hand also have a regular paying job, but accumulate more liabilities such as a house, cars, expensive home furnishings, designer clothes and holidays. All these by using credit or borrowed money.

They worked even harder, have two or triple jobs to pay for bills and other liabilities. They try to keep up with the Joneses.

How do the wealthy and rich do it?

They are creative, passionate and risk takers. These are some traits of these individuals.

They have entrepreneurial minds and start their own business. To be your own boss and not working for others is very rewarding.

They build not ONE but multiple sources of income. They accumulate assets not liabilities.

To become successful, they still need to work hard, know their numbers and constantly on a lookout on how to improve their cash flow.

Business owners have better tax advantages as they have some costs that are deductible before they pay taxes unlike regular employee, they get taxed first before paying all their bills.

As an employee, do we have a chance in achieving wealth and financial freedom?

Living within your means, being frugal, be a minimalist, minimize your liabilities and getting out of debt are some habits that you can develop to have a greater chance of achieving financial freedom.

You must pay yourself first and build your assets.

What do I consider assets?

These are multiple sources of income that puts money inside my pocket. Once these assets are inside my pocket, I don’t have plans of taking it out. Only, when I am ready to retire and extreme emergency.

Earning money through Passive Income

These assets that I’m building are my passive income streams. Passive income is simply earning money with little or no effort at all.

You need to create multiple sources of passive income as early as you can, if you want to achieve financial freedom and success.

I will not rely solely on my work pension or state benefits. If I reach pension able age, then I consider these benefits a huge bonus!

Your money should be working hard for you!

Building my sources of passive Income

1.  Stocks – A stock is a share in the ownership of a company. Historically annual return on stock market is 7-8%. Investing in individual dividend growth stocks is my number one source of passive income.

My goal is continuing to build and increase my holdings on my individual dividend growth stocks so that I can live off by its dividend income without touching the principal.

2. Index Funds – An index fund is a type of mutual fund with a portfolio created to match or track components of a market index, such as Standard and Poor’s 500 index (S&P 500). I invested in with mutual funds for my kids’ education.

3. Real Estate Investment Trusts (REITs) – Is a company that owns and operates income- producing real estates. Instead of owning physical rental properties, you buy shares or units with these companies and in return you receive monthly dividends.

REITs are bought and traded in the stock market.  The advantage of this type of investment is you can start only a small amount of money (unlike buying a rental property that needs a big down deposit) and don’t have the same headache as a landlord.

4. High Interest Savings Account (HISA) – I set aside an emergency fund with online banks that earns better interests compared to any of brick and mortar big banks.

5. Credit card cashback and reward points – Using my credit card regularly instead of debit card or cash and paying its full balance monthly. I redeemed and received  checks every few months which I add more to my stock investments.

6. Online Cashback websites – Online shopping now almost replaced physical shopping. It has a two-fold advantage as I earn cash by going through these websites and at the same time, I earn cash or points by using my cashback credit card.

7. Facebook Marketplace – I am sure just like me you have lots of items that you no longer use at home. Some of these items are still new and still have price tags attached to it. You are not only clearing any of your unwanted items consequently also making money at the same time.

 

My Final Thoughts:

Achieving financial freedom and independence cannot be achieved solely on your earned active income. It’s only through creating and building multiple sources of income that you can truly achieve financial independence, the chance to retire early and live the life that you fully deserved.

I learned this concept of passive income later in life, but I have been frugal all my life. Therefore becoming financially independent still within reach.

Did you find some of the passive income sources similar to yours? What other sources of income you are currently working on?

If you enjoyed this post, I’d be very grateful if you would help it spread by emailing it to a friend or sharing it on social media.

Let us know in the comments

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