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Updated: Jan 20, 2022

Have you ever heard of financial freedom or financial independence? It’s a concept that most people don’t fully understand or know how to achieve.

Put simply, the term financial independence describes when all of your passive income (or non working income) is greater than your living expenses. This means that all of your expenses are paid for by the income that you receive from your investments and not from your work. This allows you to choose how and what you want to do with your time. While you sleep, all of your investments are hard at work for you to make money or cash flow. Sounds great, doesn’t it?

Most people think that financial freedom is what retirement looks like when they get to 65 or 70.

Unfortunately, a lot of people don't even reach that milestone when they get to that age. The old belief is that if I work hard and save for retirement in my 401K, superannuation account or bank savings then I’ll be able to live a free and fun life but that is proving to be a myth more and more today. Instead, what is happening now more and more is that when people get to retirement age they realise that they don’t have the money to retire and have to either keep working or rely on their kids to get by.

According to a study by the Northwestern Mutual's 2018 Planning & Progress Study, 21% of people have zero money saved for retirement. Additionally, a 2019 survey conducted by WalletHub shows that not a single US state achieved a financial literacy score above 70 (on a scale of zero to 100). More than 40% of adult Americans have saved less than $10,000 for retirement.

Planning for retirement and financial freedom is a marathon and not a sprint and has to be planned carefully from an early age otherwise a life of poverty in older age is a statistical possibility.

Many people assume that simply having a lot of money leads you to financial freedom. It doesn't. In fact, you can have a lot of money and still be poor and not be financially free. Many people have a lot of money but live unsustainable lifestyles that leads them to spend all of their cash flow and become broke after a few years.

This fact is the same for anyone with a high income profession such as doctors, lawyers or bankers. These high lifestyle expenses make people run the risk of getting into big financial trouble as soon as their high paying job dissapears. As most people have found out, once you have all these high expenses in your life it’s very hard to cut down and let them go!

In the words of Robert Kiyosaki, the author of Rich Dad/Poor Dad, financial independence is a simple three-step formula:

  1. Buy and create assets that generate cash flow

  2. The cash flow created from assets pays for living expenses

  3. Once the monthly cash flow from assets (passive income) is equal or greater than my monthly living expenses, you are financially free.

Examples of passive income include:

  • Rent from investment properties

  • Dividends from shares

  • Interest from bank savings deposits

  • Royalties from songs being licensed

  • Tracking income from past sales or contracts

What a lot of people fail to work out is how much their lifestyle is costing them right now. This number is essential in order to understand how much passive income you need to generate. The number you need to work out is what you are currently living on and then price up the lifestyle you would want to live. Essentially this is what your current living costs are or what you need to live independently on your own.

Our Fundamentals of Wealth course teaches you exactly how to work out your yearly, monthly and weekly living expenses and how to budget for them. Our course also goes into depth about the three levels of financial freedom to strive for.

Put simply, these three levels are:

  • Level 1: Enough passive income to be able to quit your job for a while

  • Level 2: Enough passive income for a basic retirement

  • Level 3: Enough passive income to retire well

  • Level 4: Enough passive income for your dream retirement

Each financial freedom level is worthy of aspiring to, and we suggest that you plan for each of these levels.

Wherever you are starting your wealth journey, the best action to take is to understand how financial freedom works and take steps to reach your financial goals!

If you enjoyed this blog and want to learn about money skills and the wealth mindset then check out our series of great courses on this link!


These 3 courses are broken up into:

"The Fundamentals of Wealth" ( 8 week course )

" The Wealth Mindset " ( 4 week course )

"Your money plan in 30 days" (4 week course)

Also you can try out our free mini course here!


We look forward to seeing you there! 🙌

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Be wealthy! 👊
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