We all know the common scenario. Going to work, have all energy drained, face nervous situations (shoutout to all introverts), and finally get some money at the end of the month. It is equivalent to us being used as a form of subscription – getting paid to get the work done. With the money we get as our ‘subscription fee’, which we adorably call salary, we tend to spend it on several things that look towards us to pay them (you know, bills and bills). And if one understands the value of money, they tend to save some for the next month, while others tend to invest for a better future.
In the current economic and political situations, it is hard to see or predict whether there will be an improvement in life after all the chaos. It is more like a speck of light in an ocean of darkness. Yet, amidst this ocean of darkness, there lies some hope in securing a future for us and for our next generations. It is all thanks to financial freedom.
What is financial freedom, exactly? Is it just working hard, paying the bills, and saving money, hoping that they will be enough to fight the inflation? Or is it to have assets which will bring in the money and have fewer liabilities (and the headaches they bring along) to deal with? If you go with the second option, then you are on the right path. According to Robert Kiyosaki, financial freedom is a stage in life when passive income exceeds expenses. It is when assets and investments bring in passive income at such a level that working becomes optional.
There are 4 main levels before getting into the fullest form of financial freedom. The first level is survival, where meeting ends become a hassle and there is an absence of emergency savings. Secondly is stability. Here, bills become manageable with some emergency funds existing and the beginning of investment. Independence is the third level where investments generate income, the presence of multiple income streams, and work becomes optional. Finally, freedom is when time ownership becomes an emphasised matter, the ability to choose meaningful work, and less stress and dependence.
U.S. Senator Elizabeth Warren popularised the 50/30/20 rule in her book All Your Worth: The Ultimate Lifetime Money Plan. The rule is laid out in such a way that many entrepreneurs and business gurus look into it as a type of holy grail. After the deduction of taxes from one’s salary, 50% should be set for needs, 30% for wants, and the remaining 20% should be kept for savings and investment. The needs is defined as the essentials needed for living. As per Abraham Maslow’s Hierarchy of Needs, the most essential needs for human survival are water, food, shelter, clothing, sleep, and warmth. The needs, in this case, have to go for the first four elements. The wants is defined as those extra things needed to beautify (or modify, if you want to call it that way) life and lifestyle. It is the wants that are considered to be expenses and drain most of the money. The reason why I say this is that the needs are meant for long-term usability, while the wants are meant for short-term usability purposes. Finally, we have investment and savings. This will eventually grow and, in the long-term, with the perfect execution, can bring in substantial amounts of money.
Some forms of great investments are bonds and real estate. Land prices tend to rise with the progression of time. There is little to no margin for the prices to drop below the purchasing price. Bonds, on the other hand, are more liquid. This makes them harder to predict when the prices will rise or fall. There are other forms of investments, but they need to be looked at and studied thoroughly, keeping in mind the outcomes in the future.
Despite all such information, why is it that many people do not want to walk in such a path? Fear is the main obstacle that keeps one away from achieving such a dream. There is a constant fear of whether the money invested will bring a generous and handsome outcome. Many workers think that the salary is some sort of secured money and that a salary is enough to keep life flowing. It is such a case if you ignore the fact that we are heading into the inflationary turf. Kiyosaki, in an interview, said financial freedom starts psychologically before heading mathematically. The fear of salary as security money should be overcome. It should be noted that sacrifice brings in an outcome, while fear obstructs us.
So, if you are looking forward to achieving financial freedom, it’s not too late. It is never too late. You just have to keep an eye out for where the opportunities lie. If one can strike while the iron is hot, he/she may become a blacksmith and carve out a beautiful scimitar meant for victory.
The writer is a sub-editor, Daily Times of Bangladesh
