Before reading further kindly take a moment and ask yourself “What is Financial Freedom?”.
Is it only about money? For me it’s not! It’s the freedom for, to be who you really are and to live the life the way you wish to. However to lead the life the way you want to, Money is the necessary tool. In this episode let me explain you financial freedom with respect to money.
Good news is, whenever your passive income exceeds your expenses, money wise you have attained the financial freedom! Income which you generate, without you doing the work is called as Passive income. Income which is earned by working, is called as Working income or Active income. When it comes to active income, we have to leverage our time , where as to earn passive income we have to leverage our Money. Passive income generation is it only a money game? Answer would be Yes to many, but not for every one!
No need to get confused about above statement. Let me explain you in detail, to nurture your mind with critical knowledge to understand the game and to realize your dreams.
1)When your investments are generating the income its called as Passive income
2) When services created by you, which don’t demand your active work are giving regular income, those are qualified for passive income.
In first case your money is working for you and in the second case your idea is working for you! Isn’t it great to have same options available to you to explore?
Many people want to get serious about, being good about money matter, but they don’t know how to start.Now lets see 3 Steps to Financial Freedom
First step to Financial Freedom: Calculate your expenses
“If you can’t measure it , You can’t Improve it” ~ Peter trucker
Since we know that, our passive income should exceed our expenses, to attain Financial freedom(FF). So its evident that, we should know exactly whats our expenses are. Since Expenses varies depending on the individual lifestyle, I am not mentioning the categories of expenses.
Let us assume your Expenses per month = Rs.10000 , that means you have to generate minimum Rs.1,20,000 Passive income per year to attain the stage of FF.
2nd step to Financial Freedom: Determine the opportunities required to generate the above Passive income
Few of the Options Generally considered by people are
Fixed Deposits :
In India interest rate is yearly 7% per annum (PA)
If you choose this option, you need Rs.120000/7%=Rs.1714285 as investment capital
Rental income from Real Estate investment:
As per the survey by Global Property Guide, in metropolitan cities rental yield of apartment ranges from 3 to 4% PA.
In this case, one needs to invest Rs.30-40 Lakhs as initial Investment
Dividend income from stocks:
As per historical data available in NSE india, average dividend yield ranges from 4-5% PA
In this case, one needs to invest Rs.24- 30 Lakhs as investment.
Interest yield from Bonds:
As per RBI data, average bond yield ranges from 5.5-6.5% PA
In this case, one needs to invest Rs.18.46 – 21.81 Lakhs as investment.
Mutual fund investment:
Depending on the type of fund and mode of investment, one can expect average returns of 11-15% PA
In this case, one needs to invest Rs.8 – 11 Lakhs as investment.
We have explored few of, “Money working for you” as a source of Passive income and it reveals Huge corpus as a necessity to realize the dream through these options. Some of the risk factors associated with the above products are not described in this article. However one should not abandoned them for this reason and some of them should be part of overall financial planning.
Second option is, generating passive income through your “Ideas put into actions”. To name the Few
Setting up online business via Website.
Developing mobile apps.
Signing up as commission agent.
Success on the above ideas or any other ideas, depends on many variables, hence return expectations per annum is not covered in this article.
3rd Step to Financial Freedom: Grow your investments and enjoy the effect of Compounding
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”~Albert Einstein
Rs.100 per day, invested for 30 years, at the rate of 12%PA, can give you 1.05 Crores!
You may be thinking, how tiny amount of Rs.100 can make me Crorepati. This is the power of compounding.
Once you have Saved and Invested, its critical to Reinvest and stick to your investment plan.
“The number one reason most people don’t get what they want is that they don’t know what they want.”-T. Harv Eker
If you are looking for Passive income generation opportunities and looking for guidance for Financial Planning, I can help you to Realize your dreams.
If you are interested to give me an opportunity to help you, I am available on 9741413571, firstname.lastname@example.org
Key here is you have to Learn to manage your Money well. I wish you Financial Freedom!