How to Make a Plan to Achieve Financial Freedom, Part 2
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Last week, I post the first part of how to make a plan to achieve financial freedom. Inside there, I share some of steps that you can test and find out what your current financial status is. You will have an overall picture on your current finance and hence know the main problem that you must take care at this moment. This will be your first steps to achieve financial freedom too. There is another biggest decision you have to make where you must decide whether you should pay off your debts before doing anything to achieve financial freedom. In order to help you on this, I shared some tips inside the first part of this series that you should read through.
Anyway I wish you have a good idea over your current financial status and let us move on to the next part of this series, how much Passive income we need to achieve financial freedom?
How much Passive income you really need?
Passive income is an income you get without any physical hard works or spending most of your time on it. For those who don’t know, in order to achieve financial freedom, you must build some kinds of passive income which can support or exceed your monthly expenses. After financial free, you don’t really have to bother about your job and you can spend most of your time to do whatever you want to. This is an ultimate lifestyle that a lot of people dream about for their life.
However, the question is how much passive income you must build in order to be financial free?
Right now, as you read this article, we actually on our way to make a plan to achieve financial freedom. In this plan to achieve financial freedom, the amount of passive income will be the biggest goal for you. Without a goal, it is hard for us to come out a plan and then take action to achieve it. So first we must set a goal on how much of passive income we need.
There are a lot of factors that you must consider in order to decide how much passive income you need. I have listed down some of the most important factors that you must consider below:
- Decide the living style that you want after financial free. First you must decide what kind of living style you want to. Maybe you prefer to live frugally or live like a “millionaire next door” whose lifestyle is just like a normal people even though they are wealthy. Or maybe you want to travel around the world after this and spend your days leisurely. There will be different level of expenses and requirements with different life style you opt for.
- Decide what you want to buy after financial free. I believe most of us have a dream to buy something. Maybe you want to buy a Ferrari for your life or you want to buy a bungalow with personal garden and swimming pool in it. Whatever you want, just decide and write it down in this plan.
- Decide what you want to contribute back to the society. If you are financial free, you are really free in terms of time and financial. So at this time, you really can do something for our society. You have plenty of time to help people and you also can leverage on your wealth to do this too. I believe if you want to get more from your life then you must contribute more to the society. This will balance your life and you also will live happily and wealthy.
- Decide and plan for the future of your family. Yes, it is easy to achieve financial freedom if you are alone and without any family or financial burdens. However, the story will be different if you are married and you have your own family to support or maybe you want to prepare some income as your children’s education fund. You must very clear what you and your family need in future. This is part of plan for your most of the retirement planning.
- Decide your investment plan after financial free. Financial free is not the end of your personal finance. Instead it just a stepping stone for you to retire rich and wealthy. So even you achieve financial freedom, your job is still have to look for profitable investments, assets and businesses to build up your wealth. Besides that they also will be your tools to generate money for your retirement and future. So write an investment plan is very important.
PS: You may feel like you cannot afford most of your dreams. Maybe your inner voice keeps telling you that stop dreaming and you are hard to writing down your dream. Don’t bother about it and just decide and write it down. Write down your goal will not spend you millions of dollar, so don’t limit your dream. Just write down what you dream about all the time.
What is next?
Now, I bet you have a list of dreams and goals that you want to do and fulfill after you achieve financial freedom. Next, you have to do some research to find out what is the true cost to own everything you want. I found that the first problem people make in their plan to achieve financial freedom is they never know the price of their goals or dreams. For example, I heard from my friend that he wants buy his dream car in future. But when I ask him how much the car is, he just keeps quiet because he never do any homework for his dream car.
do some research about your dream and get the figure or price for them. Now what you have to do is just set the level of passive income which can afford your dreams and goals.
For example, I will be financial free if I can make a passive income of $3000 per month. This money will help me to support my family which currently has 5 members in it. I’m not married and I know my family burden is slightly lower than others. Besides that, I have a dream to travel around the world. Of course, this amount of passive income is not enough for luxuries travel. But for budget or middle-class style of travelling, this amount of money is enough. But anyway this is not a problem as I always have a plan to shoot up my passive income by owning more profitable investments and assets. I believe one day I can afford more.
I have a budget plan to use my passive income and I set a ratio of 50:20:20:10. 50% of my passive income will be used to cover my family’s living expenses and also others funds such as emergency funds. First 20% will be my investment modal then the other 20% will be my travel fund and last but not least 10% will be my charity fund.
Conclusion
You know what you want, you set a goal and you must do some research about it. From my experience, the more you know about your dream, the higher motivation you will get. Trust me, this is my own experience. This is also a way to train your mind about your goal. The more you know, the better your goal and dream accepted by our subconscious mind. Then you will believe it and your body will take action to achieve it.
So spend some time, maybe in your spare time, do some research about your dreams. Then open a text file in your PC or take out a piece of paper and write them down. 1 more thing that I want to remind you is revising your goal every 5-10 years. Well, everything in this world is changing and so as your dream. So revise it and change your plan accordingly.
Coming up next: Since you know what you have right now and set what you want in future. Next, I will talk about the actions plan that will bring you to your dream – financial freedom.
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Comments
5 Responses to “How to Make a Plan to Achieve Financial Freedom, Part 2”
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Making a retirement plan, as you so correctly point out, requires that yo establish goals and objectives that are appropriate for you. Many of those approaching retirement, however, may think too narrowly and fail to consider real options which could lead to a far more fulfilling life.
My wife and I, setting a goal of lots of travel, expecially in Europe, expanded our opportunities dramatically by purchasing a small apartment in the south of France and utilizing home exchange to trade for apartments and homes in places we want to visit.
You can read about our adventures at our blog … http://www.patandlewtravel.wordpress.com.
LEW WEINSTEIN
It great to hear your goal. I also have a goal to travel around the world. At this moment I want to first conquer Asia country such as Singapore, China, Taiwan and Japan. Hope our dreams can come true soon…..
Harrison
Harrison -
What are your thoughts regarding investments in something like prosper.com to build passive income?
Hi Vic,
Yes, I think prosper.com is a great way to build passive income.
You can check my another post by clicking the link below:
http://www.finandom.com/blog/2007/05/25/review-on-prospercom-%e2%80%93-can-we-leverage-on-it-to-achieve-financial-freedom/
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