Oct 31, 2011

Financial Freedom is an achievable goal. But what exactly is it and how does making financial freedom your goal differ from more traditional financial goals? A common approach to personal finance goes something like this:

MAINSTREAM ASSUMPTIONS ABOUT PERSONAL FINANCE

• the goal of personal finance strategies is material wealth and comfort;
• the method is getting a secure job;
• the measure of how well you are doing is your salary;
• debt should be used, with caution, to obtain consumption items (mortgage for a house, loans for a new car etc.);
• provision for the future should be made through a pension.

A approach aimed at financial freedom is completely different in every way:

ASSUMPTIONS WITH FINANCIAL FREEDOM AS YOUR AIM

• the goal of personal finance strategies is financial freedom (the level of wealth is optional);
• the method is entrepreneurship;
• the measure of how well you are doing is how long before you have to work again, where passive income - expenses > 0
• debt should not be used for consumption items, but might optionally be used with caution to further entrepreneurship and value generation;
• provision for the future is made through creating passive income streams.

Thoughts on how to adopt financial freedom as your goal are provided in the podcast. The views expressed are only my opinion about this subject and I am not any kind of financial advisor.