by Susantha Nanayakkara

Created on: October 15, 2009   Last Updated: October 18, 2009

A person who enjoys financial freedom explained how he feels it. According to him, the lifestyle, which persists with financial independence, is much better than when he was working. Furthermore, he has a gift of time. His financially free period allows him to travel more, read more, exercise more, and create more. The benefits of financial freedom also extend into all his family. After he chooses to retire early and not to employ his efforts to work hard for money anymore, he can further continue his active lifestyle in a better manner.

Majority of us spend daily to maintain our living standards. We cover up our expenditure mainly by earning from our employment. It is an active income. Sometimes, our main worry is shortage of our income from the salary or from any allowance from the government before the death. It is a very frustrating mental state.

On the other hand, Investors use income from their asserts to support their expenditure. The revenue from an investment is passive because the investor is not working to earn money but his invested money is working hard to generate money. Even when, the investor is at home or in a vacation, income produces from his investments.

As a result, investors achieve financial independence when passive income is more than adequate for the expenses of living. Advantage of financial freedom is, when you finish with your employment earning, still, money is draining to your pocket from your investments.

Our investments will work hard to provide us with revenue in the forms of interest, rent and capital gains. The main categories of investments are real estate, business shares, saving deposits and commodities such as gold, oil, sugar in the commodity market. They all generate a passive income.

In contrary, we have products and services that take out money earned from other income sources. Probably, we spent almost all our salary by next salary day. They are predominantly on our debts in a form of bills, mortgage installments, credit card payments and a car loan. If we stay in a rented out house the rent is added to the list. Our expenses are like a load on a horse cart.

Analyze your situation

Take a paper and write down your amount of expenses in past months. Categorize them to loan and bill payments, food and lodging, education, medical and entertainment etc. Then write all income for the same period. Although it is a simple exercise, it is not done by most of us. Then subtracts expenses from income and get the balance.

We

• 1
• 2
• Next Page >>