Today is the fourth installment in our freedom series. We’ll focus on financial freedom.
Financial freedom … can you imagine it? To use the lingo from our last couple of posts, it means freedom from money worries or, even better, freedom to choose how we spend and live.
Financial freedom is just one piece
We’ve defined bigg success as life on your own terms. There are five elements of bigg success – money, time, growth, work and play. Bigg success comes faster when these five elements work in synergy; that’s part of the bigg idea behind bigg success.
So while financial freedom is a worthy goal, be sure you’re looking at it as part of the bigg picture. What does life on your own terms mean to you? Only you know the answer that’s best for you.
Framing financial freedom
You are the entrepreneur of your own life. As the entrepreneur, you need to understand the two basic financial statements: your Income Statement and Balance Sheet.
The Income Statement shows how much money you brought in the front door and how much money went out the back door. Financial freedom means more income and less costs.
The Balance Sheet shows how much you own (your Assets) and how much you owe (your Liabilities). Financial freedom means more Assets and less Liabilities.
6 ways to define financial freedom
- Debt free
There are variations of this. You may consider yourself free if you don’t carry a credit card balance forward from month to month. Other people want everything paid off except their house. For some, they want no debt period.
You focus on the Liabilities side of the Balance Sheet with this path. You want to minimize what you owe. Better yet, owe nothing.
- Low standard of living
Some people take this to an extreme, but they’re the only ones who have to be happy with it. This is a very simple, yet proven path. Focus on spending less so you’re free to spend the excess money however you want.
Obviously, this path focuses on the Expense side of your Income Statement. “Low” is a relative term; it means low relative to your Income.
- High salary
Conversely, you can focus on making a lot of money. Make a lot more than you spend and you’ll feel free financially.
We called it “salary” but it can be active income from any source – commissions, business ownership and the like. Obviously, we’re on the Income side of the Income Statement here.
- Cash in the bank
If you have an amount equal to three to twelve months of living expenses in the bank, you may feel a sense of financial freedom. It doesn’t have to literally be “in the bank.” For example, you may have the money invested in a money market mutual fund.
This is a Balance Sheet strategy focusing on Assets, specifically Cash and Cash Equivalents.
- Retirement nest egg
Here you get that sense of financial freedom by having enough money stored up to allow you to live comfortably, without working, for the rest of your life. Your focus is on building up the Asset side of your Balance Sheet. Unlike our third definition, this path is about building passive income from these Assets.
For some people, financial freedom means being wealthy enough to buy anything they want. There are a lot of degrees here. “Everything you want” doesn’t have to mean a jet or a yacht, but it can if that’s what you really want!
This is a complex path. You’ll probably need to manage both sides of the Income Statement and the Balance Sheet. You may not try to minimize Liabilities; instead, you’ll focus on having Liabilities that have paid for Assets that make you money.
It’s important to define financial freedom so you can determine your goals. With your goals in mind, you can develop strategies to achieve them. That leads to bigg success!
What does financial freedom mean to you?
Share that with us by leaving a comment below, calling us at 888.455.BIGG (2444) or e-mailing us at firstname.lastname@example.org.
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Please join us next time as we wrap up this series on freedom. We’ll talk about being a free agent. Until then, here’s to your bigg success!
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(Image in today’s post by svilen001)