The True Meaning of Saving in Achieving Financial Freedom
Definitions of financial freedom vary from person to person. Some may think it is a living without worry about money. For others it may mean the ability to purchase anything on a whim or worry about money. For me, it is only a way I can gain back the true freedom over my time and also my life where I can plan my time in most cases.
I always believe there are plenty of ways to get started and achieve financial freedom. If you ask me the first basic step you should take to start your journey to financial freedom, I would have to say: SAVE UP SOME MONEY.
The Meaning of Saving in the Journey to Financial Freedom
I would like to discuss 2 reasons of saving to be financial free. The first way and also the hardest way is : Leverage on Saving Account Interest to Survive.
Yes you can be financial free using the money that you generate from your saving account. For example, let’s say your monthly expenses are $3000. You will be considered financial free if your passive income can generate $3000 or more to you monthly. In this case, you need a saving account with a certain amount of money which can generate $3000 monthly income to you. Below is the calculation:
$3000 X 12 months = $36,000 annual income
Let’s consider you manage to get a saving account with 5% interest.
$36,000 / 0.05 interest = $720,000 in saving account!
So From the calculation you will know that you need $720,000 in a 5% interest saving account to generate a $3000 monthly income to you.
So to make it simple, your goal is: Save 1 million in saving account!
However, story doesn’t end here. There are a lot of factors you have to consider and the most significant one is inflation. You must consider whether $3000 is enough to survive comfortable in next 10 years, 20 years or 30 years!
Now let me tell you the second reason which is also the true reason of a saving account in achieving financial freedom – Saving Account as your Stepping Stone to Financial Freedom.
Investing is one of the important topics that I always discuss in my blog because I believe investing is the important element to be financial free. However, there are no free investments in this world, don’t you think so?
You are going to need investment capital. That’s means you have to find some way to collect this investment capital. Whether you earn it, win it, steal it, inherit it and last but not least SAVE IT. So let’s say like most of us, you have a job. You earn your money but do you save it? If yes, then congratulation. If not, then you have to consider cultivating this habit.
I saw and heard a lot of people that they are ready to investment mentally but not financially. Without the first and basic investment capital, financial free, rich is just a dream forever. So you must save some money up for this!
Maybe you manage to save $1000, and then you might invest it in stocks market. You can leverage on stock market for faster capital gain and it doesn’t need too much money to do so. Once you have a bigger capital, then you can invest in real estate which will generate both passive income and capital gain for you. The good news is most of the time; real estate is growing according to the inflation. That’s mean your money is protected! Well properties are also product just like other consumables, which are getting expensive from time to time.
So with as low as $10,000 saving, you can grow it to multiple investment or assets that worth millions.
Conclusion
Now you should know the importance of saving to achieve financial freedom and become rich. So some baby steps that you can take after this is:
- Set a saving goal with a time frame. For example Save $10,000 in 1 year.
- Set a budget to control your income and expenses. This simply a system that make sure you will hit the goal.
- Keep track the results. This will make you motivated.
- Buy some books, read articles or visit blogs that about how to invest your money. Prepare before you invest
- Keep reminding yourself that Take a Baby Steps daily!
Good luck
Harrison