Is Financial Independence Within Reach?

 
My parents are my biggest role models

My mom always taught me, that It doesn’t matter how much you make but how much you save that make a difference.

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

However, most parents, just like mine, will tell you – Go to school and finish college so that you’ll have a good paying job. I’ve already learned a lot from them but there is still something missing.

Does finishing higher education guarantee financial success?

The answer is a big NO. In fact, you don’t even need to finish higher education 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.

Generally speaking, finishing school and have a degree isn’t a bad thing. I am forever indebted to my parents for pushing us to finish university. However, it’s definitely 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?

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 or work income (single income) vs. (multiple sources of income) that separates the average individual to achieving financial independence sooner.

Earning an Active Income

You trade time for moneyBut 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 taxes you pay. Employees are often taxed the most – up 40%.

Middle class is no different

Middle class on the other hand may have a regular and steady paying job. However, become driven to accumulating liabilities: huge houses, cars, expensive home furnishings, designer clothes, and frequent holidays. All maybe paid by using credit or borrowed money.

How wealthy individuals remain rich?

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

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

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

To become successful, they don’t work hard for the money but the exact opposite. Money is working hard for them. On the whole they are focus on numbers and constantly on a lookout on how to improve their cash flow.

Finally, business owners and big investors 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?

Absolutely! By living within our means, being frugal, be a minimalist, minimize our liabilities, and getting out of debt are some habits that we can develop to have a greater chance of achieving financial freedom.

What do I consider assets?

Assets – simply mean putting money inside our pocket. Once these assets are inside our pocket, we don’t have plans of taking it out. They key is to build different assets (multiple sources of income). 

Making 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!

Building my sources of passive Income

1.  Dividend 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 one of primary 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 started investing with mutual funds for my kids’ education but eventually I am now focused in common individual stocks.

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 can be bought 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 but also making money at the same time.

8. Leveraging or OPM – Borrowing other peoples money to invest. One very common example is taking a mortgage from a bank or lender to buy either as a rental property or part of your home is rented with someone thereby generating cashflow or passive income.

 

My Final Thoughts

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

To sum up, I have learned the concept of passive income later in life. However, I have been frugal all my life and the best investment I’ve considered to myself was financial literacy. Therefore, becoming financially independent still within reach.

 

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Richelle Sunico
Richelle Sunico (@richelle)
2 years ago

Congratulations on your new blog! Well done!

Yaser Ababneh
Yaser Ababneh (@yababneh)
2 years ago

Great kickstarter for your journey in Financial knowledge sharing.
I like the pay yourself first concept. I read “Richest Man in Babylon”, it talked about golden financial rules including baying yourself at least 10% of total income before paying any thing else.

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