Financial Freedom: The Passive Income route
Hello everyone, it’s a privilege to be here today. I specially want to thank the organizers of this program.
Thank you so much and may God bless you for having the initiative to Organize an Event such as this.
My Name is Victor Ijomah, I’m a content curator, blogger, SEO analyst, web designer and a brand strategist.
I always forget to add this one, maybe because I dumped my certificate somewhere while pushing for something more!
I’m a graduate of Delsu from the department of Mathematics since 5years back.
Let’s start proper….
From my calculations, I’ve been given 30mins to educate you on a topic that takes even a life time of exploring to understand 😅
Don’t mind me, I’ll be sharing briefly what I know and understand to be “Passive Income & some Financial freedom Tips“.
Notice I included a disclaimer “What I know and understand“
This is intentional, I want you all to pay attention with an open mind.
Feel free to object or disapprove whatever I have to say today.
Because in doing so, you will learn and understand better than just agreeing to anything I will say.
I believe even the Bible probe us to test the words of preachers in alignment to the scripture to be sure if what they preach is true or not.
So be my Guest! 😇
Let’s dive in proper…
Being financially free sounds really good to all of us, doesn’t it?
The thought of financial freedom sounds like a whole lot of stress is gone for good and having a lot of money in our bank account each and every month is a plus.
As much as we think of a life like that, Have you all thought about if it’s possible?
Well, anyone can achieve financial freedom, if you ask me.
So what exactly is financial freedom?
What is Financial Freedom
It simply means having enough money in savings and investments that you can go about your daily life without being worried about money because you’re prepared for absolutely anything at all that may come your way.
This includes emergencies, a potential job loss or inability to work, and/or even retirement.
Although, there’s a point I need to stress out and that is;
The total amount in your bank account is a useless number without the proper context to help you understand what it means for you to have financial freedom.
Yes, yes I know you are wondering what if I have ₦10,000,000.00 (ten million naira) in my account, is it useless or is that not financial freedom enough.
Alright, let me explain.
A ₦10,000,000.00 (ten million naira) net worth means a lot more to someone who spends ₦100,000.00 (hundred thousand naira) per year compared to someone who spends ₦1,000,000.00 (one million naira) per year.
Do you understand now?
The one who spends ₦100,000.00 (a hundred thousand naira) per year will value it compared the one who spends ₦1,000,000.00 (one million naira) per year.
It will take less than 10 years for the second person to go broke.
So before you begin this journey of financial freedom you need know what your own type of financial freedom is.
Keep in Mind: The point at which a person is financial free is different for everyone, so figure out what that point is.
STEPS YOU NEED TO TAKE TO FINANCIAL FREEDOM
Step 1: Evaluate Your Current Financial Standing and Spending Habits.
You can’t know where you’re headed if you don’t know where you’re starting from.
So, the first step to achieving financial freedom is to evaluate your current financial standing.
Do you know how much money you have coming in and, more importantly, how much you have going out?
Where is the money you have going exactly?
The Modern banking apps has made it extremely easy to see your transactions at any given time.
So, sit down and go through all of your debit and credit transactions.
Analyze the areas where you are spending your money regularly.
If you already have a budget, this should be easy, but that doesn’t mean this step doesn’t apply to you.
Where in your budget is there room for improvement?
Is there anything you can eliminate to get closer to financial freedom sooner?
Whether this is the first time you’ve looked at your transaction history, or you’re budget-savvy, ask yourself if you are spending your money wisely.
Are you saving a portion of your income each month?
Do you transfer funds to your a separate savings account?
Or, are you racking up monthly debts?
In order to become financially free, you have to gain knowledge of where you are financially at the moment;
in order to set attainable goals and take control of your finances for good towards financial freedom.
Are you with me?
Step 2: Set Goals for Your Financial Future
Now that you know where you’re are at the moment, you can now set goals that will pave the way to your financial freedom.
This is the fun part, please stay with me😋.
Now envision your financially freedom, free of charge, where and how do you want to be.
Yes, think about where you want to be 5 years from now. What about in 10 years?
Now, what do you need to do to get there?
Do you need to allocate more money to pay off your fees or debt?
Are you trying to save for a down payment for goods?
Or do you need to invest more of your cash so it has the chance to grow?
Not sure where to start? We’ll go proper into this another time.
However, while your 10 years goal may be big,
It’s important to create smaller goals that are stepping stones to reaching your final objective
Achieving these smaller milestones will help you see progress and stay the course.
Are you with me??
Step 3: Research Your Investment Options
Truly, investing can be an incredible and powerful tool to meeting your financial goals.
There are many different types of investments, but nothing else has the power to grow your money by as much or as quickly as investing in assets.
A critical component of being able to actually grow your money, is thoroughly researching your investment options,
NOT just throwing your money in the latest investment option that comes your way.
When it comes to investing
Investors live by a set of qualifications I like to call the finance ladder.
These are the boxes a product or service has to check in order to be worthy of investment by you or me.
- Is it risk free?
- Is it a get rich quick scheme?
- What are my personal advantages if i venture into this?
- What’s my safest exit plan if this fails?
All these are discussions for another day.
Stages to Financial Freedom
Level 1: The Rat Race
A lot of people live from salary to salary.
They accumulate one debt or another every month and are basically always one step away from a great financial ruin if there’s an unexpected calamity or emergency.
The first step towards becoming free is becoming a financial solvent.
It simply means that you don’t have any high interest debt, and you have at least 3 months of expenses stashed away for emergencies.
It is worth knowing that a lot of responsible people are hanging around at this level but they will never move up to higher degrees of freedom.
It’s not a swear or a curse, it’s just basic facts.
Most people in one job or the other are living the rat race kind of life.
If for any reason, they miss going to work or they are laid off or in fact; they don’t get paid for that month.
They will go completely broke.
Although it mostly depends on their paycheck, many times, people at this level have their life put together but they still have money stress, and don’t have significant retirement savings.
A job loss would be a disaster, as would any major unexpected expense.
Stage 2: Financially buoyant
The next stage occurs when you have about 6 to 12 months of savings stashed away, and a growing income.
You may still have some debts a few times, but these debts are very minimal.
At this stage, a job loss would be just a problem, and you can start spending from your stacked up savings until you find another job.
Stage 3: Financially Independent
This is where you’re pretty much free, and at a very comfortable place.
You’re basically independent of any particular job or source of active income.
You have many years worth of savings stashed away, and a big retirement plan.
You can even go 10 years without a job if you want.
In fact, you might have multiple income streams, like a side hustle.
If you were to lose a primary source of income, like a job, you might not even have your net worth go down; you could trim your expenses so that other household income streams could still support your daily needs.
Any debt you have at this point is purely for investment purposes, like properties.
Stage 4: Financial Freedom
Now the stage you’ve all been waiting for.
Financial Freedom stage, you never have to work again if you don’t want to.
Your portfolio is large enough that just 3% of it could support your basic annual expenses forever.
This brings us to the steps to financial freedom.
One huge addition but greatly underestimated is what is called passive income.
What is this passive income that the rich and wealthy are always talking about?
What is Passive Income
Passive income is simply that money that flows in regularly without a considerable amount of time, energy, or additional money.
I like to think of passive income as making money while you sleep.
You can really only get few bonuses from work, give so much effort, and spend so much time working to make money.
At some point, your resources: your time, talent, and energy cap out, so you NEED to create passive income streams to experience true financial freedom.
Passive income is the only effective way to increase your assets without correspondingly increasing your workload.
When you can make more money with less labor, you can reach financial freedom and financial independence easily.
Having passive income streams is critical to creating generational wealth.
I’m sure you’ve come across many people talking about Generational wealth.
In fact you’ve even seen some examples of Generational wealth.
What is Generational Wealth
This means you’re building wealth that lasts longer than your own life as it extends to the lives of your children, and your children’s children, and so on.
Further into passive income,
Passive income is exactly what it sounds like: Money that comes in whether you’re actively working or not.
It may sound strange at first, but it really does make a lot of sense.
There are two main ways to make passive income:
1. Investments working for you
The first major type of passive income is an idea most of us are familiar with already:
These investments generally create monthly income with a fixed or standard rate of return attached to them.
During the covid period is when I got to understand that there are three major investments that are the life blood of every other investment you can think of.
This is a top secret but I’ll disclose however.
- Health and
Think about it?
People need to move.
People can not be healthy throughout their lives, truth be told and the last part.
People need to feed, I don’t need to stress much on this.
2. Business(es) working for you
The second type of passive income is the one that’s harder for most people to wrap their heads around:
The passive business income.
Many people assume that running a business means you need to be constantly working in order to achieve any real success.
But that’s actually not true at all.
Instead, what you need to do is actually to create a business that has the potential to be systemized so that it can work with or without you.
That way, come rain or come sun shine, money will continue to flow in whether you’re putting in the hours or not.
The reality is that you want to have BOTH investments and business always working for you.
I know what might be going through your mind.
How Much Money Do You Need To Become Financially Free?
Now that you know what passive income is…
How much money do you need to be earning passively in order to be financially free?
The first step is to take a look at your expenses…
Step 1 — Ask Yourself: What Are Your REAL Expenses?
Of course, passive income is only part of the puzzle.
If you have passive income pouring in, but it doesn’t add up above and beyond your expenses, you’ll still never reach a state of financial freedom.
The other part is understanding your expenses and what is actually essential in your life.
Why? Well, when we are talking about financial freedom, there are two ways to go about it.
The first is being free just to be free. This is when your passive income pays for only your basic needs, but not much extra (like all the extra luxuries in life).
Then the other way is where you are able to get whatever you want, when you want, and still not “have” to work.
The ultimate goal is the latter of the two, however, it’s a great first step when you have all your basic needs taken care of.
So it’s best to create a list of your expenses that are necessities and a list of “nice to haves.”
You’ll notice when you do this, that it’s much easier to simply cut or simplify the non-essential expenses.
You’ll begin to question whether you truly need them in your life or not.
Remember, even better than passive income, the best way to make money is to manage your money well.
Step 2 — Calculate Your “Financial Freedom Number”
It comes down to simple mathematics then.
The simplest way to do this is…
- Get a pen and paper.
- List out your expenses (the necessities).For example: rent, utilities, food, debt/loans, phone bills, car, (if it’s necessary), etc.
- Add up all your expenses
There you have it — you have your financial freedom number!
You’ll need to earn more than [INSERT YOUR EXPENSES NUMBER HERE] in passive income to be financially free and have all your basic needs met.
Here’s a hypothetical formula for you.
Financial Freedom = Passive Income > Expenses
Financial Freedom= (Passive income + income from work you love) > Your living expenses
I have said a lot already, let’s talk on Financial freedom Tips
Financial Freedom Tips
The truth is absolutely nobody knows it all, but having this basic understanding allows us to see opportunities in the best areas to become financially free.
No body can say for a fact that if you enter this busines you will become rich in 5years.
I stand to be challenged. (lol, I’m actually sitting down)
See ehhhn, most of the wealthy people you know were lucky to become wealthy.
Allow me rephrase what I mean by luck.
My definition of luck is being at the right place at the right time.
Having the right skill needed at the right time.
Undergoing a massive learning process to grab as much high paying skills in anticipation for the future.
That’s my definition of luck.
Write now there are high paying skills you can learn in other to be ready for the monster called trend.
You should know that when something starts trending, it has already started failing.
The ones that started with the trend has already made the bulk of the money.
That is why you need to understand time and season like the Holy book says.
Allow me drop some tips quickly, I wish to stop soon, it seems the lecture is rather too long already.
Financial freedom tips
- When ever you run into extra expenses, increase your income to cover them.
- Always keep your savings rate high. Start at a comfortable amount, then start increasing it gradually till you’ve become a beast at saving uncomfortable even when it pains.
- Actively seek out more responsibilities and you’ll stand out. More jobs will be handed over to you. Remember More jobs = more pay
There’s an old quote that goes,
most success achieved is just showing up
which is true.
- A lot of people just focus on their own projects quietly, so if you actively seek out responsibility, you’ll stand out and it will often be given to you.
- Focus, listen and Smart work. You need to be determined, focus on your goals and most importantly listen.
I usually stay late at night when necessary to make sure my work is always submitted on time and in good order. I listen to friends discuss problems in my community and volunteer to do what was necessary to solve them.
I became the default “go-to” person in the technology when people weren’t sure who to go to.
Hence, the reason for this blog.
- Be Passionate about finance: By actively growing your income, keeping your savings rate high, and investing wisely, you can start drastically increasing your financial independence from any job or individual source of income.
- “Reverse” passive income: This is actually playing a better trick with your financial income. You simply reduce your rate of expenditures to as low as possible.
Remember, a penny saved is a penny earned.
Thanks for having me.
Feel free to drop comments or questions, I’ll do my best to answer. If I can’t answer in a short sentence,
I will do my best to write an article that cover and explains the solution to your question.
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