Why should we start saving now?, How much to save?, Why is saving alone not enough to achieve financial freedom?, How Inflation eats into our savings, How to beat Inflation?, The meaning of different type of income such as active income and passive income. How financial education leads to financial freedom. The 7 steps to financial freedom.
Steps to reach Financial Freedom
Saving is the first step for wealth creation. It is especially important now due to current uncertainty of world economies and massive job loss all around the global. It is the best time now to revisit the important habit of saving. Many corporation and individual are lacking or with little self discipline on saving. Some individual have bad habit to save money on the residual balance left after they have spent most of their pay check. The money left behind for saving will be minimal. The right habit is to set aside of 10% on monthly pay check for saving, then uses the rest of the money on necessary expenses.
It is recommended that we set aside at least 3 to 6 months of our current salary as our sinking fund. On unforeseen circumstances, we can draw money from the sinking fund. The purpose is to safeguard us against some undesirable events that happen to us with little control over the events. This included job loss, long term illness and etc. These events may result in loss of income over short or longer term. This will bring negative effect to us as well as our dependents in term of daily expenses and financial commitment.
However, saving alone is not enough to secure us with a good retirement or to be financially free. You need to invest as well. But what is a safe investment? Investing in yourself of course!
Therefore, we need to invest in ourselves, but what does that mean? To learn more about investing in yourself visit https://www.becomethebanker.org
We need to acquire passive income other than our active income. To be financially free you need a retirement plan and stead money coming in.
Our active income is capped by the number of hours we work. We only have 24 hours per day and not forgetting to deduct hours set aside for our family, friends and recreation activity.
Passive income on the other hand, we do not need to active involved to earn that income which are dividend, interest income and rental income. The best thing about passive income is not restricted by number of hours we work!