Time Freedom, Geographical Freedom and Financial Freedom

Many people say they “need” a lot of money to solve their financial problems/needs.

I quoted the word “need” above because I think the more appopriate word to use is “want”.

How much is “a lot of money” to you? 500,000 ? 1 million ? 5 million ? The more the merrier ?

I say, we don’t need millions to get by our days.
(Matthew 6:26 :
Look at the birds in the sky. They don’t plant or harvest or gather food into barns, and yet your heavenly Father feeds them. You are more valuable than they are, aren’t you?)

Money is an idea, wealth is a habit. To further illustrate, let’s see some case studies.

Case Study 1:

If we have $1,000,000 in assets, but don’t know how to wisely invest and just put in savings account that gives us 3% annual interest (i.e. 3% ROI), while maintaining high monthly expenses at $10,000, the money will be spent around 8 years.

Capital Amount: $1,000,000
Annual Expenses after Retire (current value): $120,000
Estimated ROI: 3%
Inflation Rate: 5%

Case Study 2:

If we have only $500,000 in assets, but know how to wisely invest into financial products that gives us 10% annual ROI, while maintaining only $2,000 in monthly expenses, even the initial value is low, we will be financial free forever.

Capital Amount: $500,000
Annual Expenses after Retire (current value): $24,000
Estimated ROI: 10%
Inflation Rate: 5%

From above illustration, you may not have the ability to earn high income, but you definitely have the ability to manage your expenses.

So, define your exit strategy first , which is how long you can survive without working (i.e your monthly inflow > outflow) if you are looking for financial freedom.

In summary, 3 key points that determine a person’s financial independance are:

1. The number of money he has at the moment

2. Ability to manage his investment

3. Annual expenses (i.e. the lifestyle he choose after retire)

This entry was posted on Tuesday, February 3rd, 2009 at 2:43 pm and is filed under Freedom. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.