Financial Freedom

by Dennis Perry on September 23, 2011

When discussing a rich life, the conversation nearly always comes around to finances and, more specifically, financial freedom.  So it becomes necessary to answer the question, just exactly what is financial freedom?

Wikipedia defines financial independence or financial freedom as “the state of having sufficient personal wealth to live indefinitely without having to work actively for basic necessities.  In the case of many individuals whose financial circumstances fit this description, their assets generate income that is greater than their expenses.”  T. Harv Eker, who has done extensive work with the mental side of money, defines financial freedom as passive income that exceeds expenses.

Harv Eker’s definition requires a bit more research.  What, exactly, is passive income?  Again referring to our friend Wikipedia, passive income is income received on a regular basis requiring little effort to maintain it.  One of the more frequently cited examples of passive income is rental income from investment property.  I can tell you from personal experience, there is very little passive about rental property income.

This is not to say that there are not truly passive income streams, because there most certainly are, but all of them require effort, oftentimes considerable effort, to get them up and running.  The effort is well worth it, to be sure, but you must be prepared to work hard to make it happen.

The definition of financial freedom that I prefer, and the one that I use in my own life, is the one offered by Michael Masterson of Early to Rise and Agora Publishing.  He defines financial freedom as multiple streams of income; each one providing revenue that exceeds your expenses on a monthly basis.

Now, that one I like!  With the difficult economy that we find ourselves in worldwide it is not always wise to put all of our eggs in one basket.  There are a great many people whose retirement plans have been placed on hold, or have been forced back to work because the stock market was not kind to their 401(k) s.  I know many others whose net worth (which we will discuss in a future article) was based largely in their real estate holdings.  We all know how that has been affected in most of the US for the past 3 or 4 years.

When you have all of your “passive” income tied to one asset class and something happens to that class, you are at great risk for losing your financial independence.  However, if you have multiple revenue streams, especially if there is little to no correlation between them, if something happens to one of them, you still have the others to protect you.

It is my belief that there has never in history been such opportunity available to all of us to build one or more business than we have today.  The internet provides everyone with a computer and access to the web, the opportunity to build a substantial business, often with very little startup capital required.  Real estate is at multi-year lows in many parts of the country.  Even the stock market provides opportunity for those who know what to look for.

The task in front of you right now is to find and clearly define your passions, your gifts, and your talents.  Once you have that, there are golden opportunities for you to put those passions and gifts to work creating for yourself and your family, true financial independence.

Sit down with a pad of paper and a pen and just start writing.  Brainstorm your gifts and passions.  What do you love to do?  What are you good at?  What do you do so well that other’s would pay you for it?  What do others tell you that you are good at?  What do you want?  Most importantly, why do you want it?  Do this today!  Don’t put if off.

Feel free to post your comments.  Tell me how you feel about this topic.  What is holding you back from reaching for your dreams?  The time is now to begin creating your rich life and I am here to help you.

 

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{ 15 comments }

Dating Again After Divorce Dads Los Angeles September 25, 2011 at 6:12 pm

Hi Wealth Doctor,

Passive income. Do you believe that there is really any such thing where it is 100% passive? Or do you have a word or phrase that you use more instead?

Happy Dating and Relationships,

April Braswell
Your Internet Dating Profile Is Not Like a LA Lakers Game

Dennis Perry September 26, 2011 at 8:57 am

I believe that investments can become passive but most require a bit of work, sometimes substantial effort, up front to get it running. An example would be an eBook. It takes work to research, write, edit, and market your book but once done, it can go making money for you many times years in the future. At that point, once the work is done, it becomes passive.

Great question and a future post to be sure!

Eva Palmer September 24, 2011 at 6:24 pm

Dennis, I have loved your post today.
It is very clarifying and I am waiting to learn more of how to be more organised finnancially.

Clare Delaney September 24, 2011 at 2:39 am

I agree, there’s very little ‘passive income’, it all takes work (and rental income definitely isn’t passive!) – perhaps inheriting money is passive income. I too like Masterson’s insights. Having multiple income streams seems like the best way to go – particularly in different asset classes. And it does seem to be the perfect time to be able to set up new businesses easier than at any other time in history. Thanks for the article!

EcoExpert
Is your pet eco-friendly? 12 great tips to green your pet

Neil Dhawan September 23, 2011 at 11:11 pm

This is a fantastic article with a great definition of financial freedom and useful tips for starting down the path of financial freedom!

Stay Extraordinary and Do Great Things, Neil
http://geneflora.com/you-didnt-just-anything/

The Knowledge Stylist: Music, Photography, Travel, Gadgets and More! September 23, 2011 at 8:36 pm

Nice discussion of passive income streams and ways to think about generating them. Thanks for the information.

TKS

http://theknowledgestylist.com/music-genres-of-dance-electronic-music/

Kevin Bettencourt September 23, 2011 at 7:34 pm

Financial freedom with a passive income is the goal. It’s great when someone can love what they do and be compensated well for it.

Las Vegas Air Conditioning Service & Repairs

Andrew Miner September 23, 2011 at 7:28 pm

“Multiple streams of income” and “Passive Income” are music to my ears. Great advice for someone looking to free themselves from the debt cycle.

Andrew

http://www.andrewminer.net/four-easy-ways-to-prepare-yourself-for-the-new-diet-plan-you-are-implementing/

Dennis Perry September 24, 2011 at 9:06 am

Stay tuned Andrew. I will have much to say about debt in the coming days and weeks. Thank you for reading and commenting

Cherie Miranda September 23, 2011 at 6:26 pm

Michael Masterson is a great person to follow. Your brainstorming suggestion is excellent. I think I’ll give it a try again soon. It’s amazing how your perspective changes over time.

Cherie Miranda

Holistic Health Expert

Body Language September 23, 2011 at 5:47 pm

What causes someone to get motivated enough to start working towards financial freedom?

Looking forward to more

Mark Hogan

Dennis Perry September 24, 2011 at 9:08 am

Mark,
That is a great question. The simple answer is that it as to come from within…your Why! must be big enough to overcome the obstacles in your path. I will have much more to say about this in future posts. Thank you for reading and please keep following.

Michael D Walker September 23, 2011 at 4:20 pm

Glad to meet another Michael Masterson fan!

Michael
The Masters of the Mind

Sonya Lenzo September 23, 2011 at 9:55 am

I am at that point, where I am working at a project that I just love with folks I enjoy working with and it is just AMAZING, like living a dream! It is almost impossible to describe the difference between a JOB and working at what you really love!
Sonya Lenzo
http://www.sunnyincostarica.com/transportationinsunnycostarica/

Dennis Perry September 24, 2011 at 9:09 am

Sonya,
It is said that when you do something you truly love, you will never work a day in your life again. Congratulations for finding your Soul Purpose!

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